Earned Value

Analysis (EVA)
A Comprehensive Guide to Project
Performance Measurement
Group Members

Muhammad Umair Khan

01 Fa21-Bse-070
Wajia – ul - ain
02 Fa21-Bse-066

03 Jawad Ahmed
Fa21-Bse-068

04 Salah – ud -din
Fa21-Bse-075
Introduction to EVA

Definition:

Earned Value Analysis (EVA) is a quantitative

project management technique that integrates
scope, schedule, and cost parameters to assess
project performance and progress. It provides a
systematic approach to track and monitor the
work performed against the planned work and
the budgeted cost.
Introduction to EVA
Purpose:

The primary purpose of EVA is to provide project managers and

stakeholders with accurate and timely information on project
performance. This involves measuring how much work has
been accomplished (Earned Value), how much was planned
(Planned Value), and how much it actually costs (Actual Cost).
EVA helps in identifying variances from the project baseline,
which is crucial for proactive decision-making and corrective
actions to ensure the project stays on track in terms of cost
and schedule.
It enhances the predictability of project outcomes by offering
insights into future performance trends based on current
data.
Importance Of
EVA In Project
Management
Importance of EVA in Project Management

Clarity:
EVA offers a clear and comprehensive view of project health by integrating scope, schedule, and
cost metrics into a single, unified system.
Decision Making:
By providing precise metrics on cost and schedule performance, EVA aids in making informed
decisions, optimizing resource allocation, and guiding project direction to meet objectives.

Early Warning:
EVA identifies variances from the project baseline early in the project lifecycle, allowing project
managers to take corrective actions promptly to mitigate risks and avoid potential issues.

Efficiency:
The technique improves cost control and schedule management by highlighting areas of
inefficiency and enabling project managers to implement strategies to improve performance.

Predictability:
EVA enhances the ability to forecast future project performance and outcomes by analysing
current trends and variances, thus helping in setting realistic expectations and achieving project
goals.
Key Benefits of Using EVA
Enhanced Tracking and Improved Schedule
Reporting Control

Objective Performance
Measurement

Informed Decision-
Making Better Cost Management
 Key Components of EVA
Planned Value (PV)
The estimated cost of work
scheduled to be completed by a
specific date, representing the
budgeted amount for the
planned work in the project
schedule.
Earned Value (EV)
The estimated cost of the actual
work completed by a specific
date, reflecting the value of
work performed if it is done
within the budget.
Actual Cost (AC)
The actual cost incurred for the
work performed by a specific
date, showing the real
expenditure spent on
completing the work.
introduction to
EVA Metrics
and Formulas
Introduction to EVA Metrics and Formulas :

 Earned Value Analysis (EVA) is a project management

technique that integrates scope, time, and cost data.
 EVA provides metrics to measure project performance and
progress.
 Key formulas in EVA include Cost Variance (CV), Schedule
Variance (SV), Cost Performance Index (CPI), and Schedule
Performance Index (SPI).
 Cost Variance (CV):
 Definition: Measures the cost performance of a project.
 Formula: CV = EV - AC
 Explanation: Example Question
 EV (Earned Value): The value of work performed.
Scenario:
 ACA (Actual
project has an Earned
Cost): Value
The actual (EV)
cost of $50,000
incurred for theand an
work
Actual Cost (AC) of $45,000.
performed.

Question: What is the Cost Variance (CV)?

Interpretation:
Solution: CV = $50,000 - $45,000 = $5,000 (under budget)
 Positive CV indicates the project is under budget.
 Negative CV indicates the project is over budget
 Schedule Variance (SV):
 Definition: Measures the schedule performance of a project.
 Formula: SV = EV -Example
PV Question
 Explanation:
Scenario: A projectValue):
 EV (Earned has an Earned
The Value
value of work(EV) of $30,000 and a
performed.
 PVValue
Planned (Planned
(PV)Value): The value of work planned to be performed
of $35,000.

Interpretation:
Question: What is the Schedule Variance (SV)?
 PositiveSV
Solution: SV=indicates
$30,000 -the project
$35,000 is ahead(behind
= -$5,000 of schedule.
schedule).
 Negative SV indicates the project is behind schedule
Performance Index (CPI) :
 Definition: Measures the cost efficiency of budgeted
resources.
 Formula: CPI = EV /Example
AC
Question
 Explanation:
Scenario: A project has an Earned Value (EV) of $40,000 and an Actual
 EV (Earned Value): The value of work performed.
Cost (AC) of $50,000.
 AC (Actual Cost): The actual cost incurred for the work
performed.
Question: What is the Cost Performance Index (CPI)?
Solution: CPI = $40,000 / $50,000 = 0.8 (over budget)
Interpretation:
 CPI > 1 indicates cost efficiency (under budget).
 CPI < 1 indicates cost inefficiency (over budget)
Performance Index (SPI) :
 Definition: Measures the schedule efficiency of time used.
 Formula: SPI = EV /Example
PV Question
 Explanation:
Scenario: A project
EV (Earned has The
Value): an Earned
value ofValue
work(EV) of $60,000
actually and a
performed.
Planned Value (PV)
PV (Planned of $55,000.
Value): The value of work planned to be performed.

Question: What is the Schedule Performance Index (SPI)?

Interpretation:
 SPI > 1 indicates schedule efficiency (ahead of schedule).
Solution: SPI = $60,000 / $55,000 = 1.09 (ahead of schedule).
 SPI < 1 indicates schedule inefficiency (behind schedule).
Summary and Importance of EVA Metrics:

Summary:
EVA metrics provide crucial insights into project performance and
progress.
Key formulas include CV, SV, CPI, and SPI.

Importance:
Helps in identifying variances in budget and schedule.
Facilitates informed decision-making to keep the project on track.
Enables better resource management and project control.
Estimate at Completion (EAC):

Estimate at Completion (EAC) is used to forecast the total cost of the project at
completion, based on current performance. There are several formulas for EAC, each
appropriate for different scenarios:
 Standard EAC Calculation:
Example:

Let's assume a software development project has the

Formula:
following baseline and performance data:
EAC = BAC / CPI
Budget at Completion (BAC): $100,000
Use this formula when you expect future performance Earned Value (EV): $40,000
to continue at the current Cost Performance Index Actual Cost (AC): $50,000
(CPI). We want to calculate the Estimate at Completion (EAC)
using the standard formula, expecting future
performance to continue at the current Cost
Performance Index (CPI).
Interpretation:

The CPI of 0.8 indicates that for every dollar spent, only $0.80 worth of work is being completed. This is
below the expected performance (a CPI of 1 would mean perfect performance).
The EAC of $125,000 means that if the project continues to perform at the current rate (CPI = 0.8), the total
cost at completion is projected to be $125,000, which is $25,000 over the original budget of $100,000.
 Considering Schedule Performance:

● EAC = AC + (BAC - EV) / (CPI * SPI)

● Use this formula if both cost and schedule
performance indices (CPI and SPI) are
relevant and you expect them to influence
future performance. Example:

Assume a software development project has the

following baseline and performance data:

Budget at Completion (BAC): $200,000

Earned Value (EV): $80,000
Actual Cost (AC): $100,000
Planned Value (PV): $120,000
Interpretation:

● CPI of 0.8 indicates cost inefficiency, with only $0.80 worth of work completed for every dollar spent.
● SPI of 0.67 indicates schedule inefficiency, with the project progressing slower than planned.
● The EAC of $323,880.6 means that if the project continues to perform at the current cost and
schedule rates (CPI = 0.8 and SPI = 0.67), the total cost at completion is projected to be $323,880.6,
significantly over the original budget of $200,000.
 When Future Work Will Be Performed at the
Budgeted Rate:
● EAC = AC + (BAC - EV)
● Use this formula when you
believe future work will be
performed exactly as budgeted,
without considering current
variances.
Example:
Assume a software development project has the
following baseline and performance data:
Budget at Completion (BAC): $150,000
Earned Value (EV): $60,000
Actual Cost (AC): $70,000

Interpretation:

The EAC of $160,000 means that if the remaining work

is performed exactly as budgeted, the total cost at
completion is projected to be $160,000, which is
$10,000 over the original budget of $150,000.
Application and Benefits

● Early Warning System: These forecasting metrics help in identifying potential budget overruns and
schedule delays early in the project lifecycle, allowing for timely corrective actions.

● Informed Decision-Making: Project managers can make data-driven decisions regarding resource
allocation, scope adjustments, and performance improvements.

● Stakeholder Communication: Clear and quantifiable forecasts provide stakeholders with a

transparent view of the project’s health and expected outcomes.
Practical Application and Examples of EVA

● Real-world examples demonstrate EVA in action

● Step-by-step calculations show how EVA metrics are derived
● Interpreting results guides decision-making
Example 1: Construction Project
$1 million budget, 12-month schedule
Month 6: $400k spent, 45% work complete
Planned Value (PV) = $500k
Earned Value (EV) = $450k
Actual Cost (AC) = $400k
Example 1 Calculations

● Schedule Variance (SV) = EV - PV = -$50k (behind schedule)

● Cost Variance (CV) = EV - AC = $50k (under budget)
● Schedule Performance Index (SPI) = EV / PV = 0.90 (behind schedule)
● Cost Performance Index (CPI) = EV / AC = 1.13 (under budget)
Example 1: Interpretation

● Project is 10% behind schedule but 13% under budget

● Investigate causes of schedule delay
● Budget surplus could be reallocated
● Monitor closely and take corrective actions
Example 2: Software Development

$500k budget, 6-month timeline

Month 4: $350k spent, 80% features Complete
PV = $333k, EV = $400k, AC = $350k
SV = $67k, CV = $50k, SPI = 1.20, CPI = 1.14
Example 2: Interpretation

● Project is 20% ahead of schedule and 14% under budget

● Team is working efficiently
● Consider early delivery or additional features
● Celebrate success and share best practices
Limitations of EVA

Common challenges and pitfalls to be aware of

Situations where EVA may not be suitable
Ways to address limitations and ensure effectiveness
Challenges and Pitfalls

Requires accurate progress and cost tracking

Scope changes can distort metrics
Lagging indicators, not predictive
Over-reliance on metrics vs. qualitative factors
Gaming the system to show favorable results
Addressing Limitations

Ensure consistent, timely data collection

Account for scope changes in baselines
Use leading indicators and forecasting alongside EVA
Consider qualitative aspects like quality and risk
Foster a culture of transparency and integrity
Conclusion

● EVA is a powerful tool for measuring project performance

● Real-world examples demonstrate practical application
● Understand calculations and interpret results for decision-making
● Be aware of limitations and take steps to address them
● EVA continues to be relevant for successful project delivery