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Earned Value Management

The document discusses earned value management techniques including formulas and examples for calculating key metrics like budgeted cost of work scheduled, actual cost, earned value, cost variance, schedule variance, cost performance index, schedule performance index, estimate at completion, estimate to complete, and variance at completion. An example problem is provided and step-by-step calculations are shown for a project to build sidewalks.

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Nasin Babu
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123 views12 pages

Earned Value Management

The document discusses earned value management techniques including formulas and examples for calculating key metrics like budgeted cost of work scheduled, actual cost, earned value, cost variance, schedule variance, cost performance index, schedule performance index, estimate at completion, estimate to complete, and variance at completion. An example problem is provided and step-by-step calculations are shown for a project to build sidewalks.

Uploaded by

Nasin Babu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Earned Value Management

© 2011 DaySpring Limited. All Rights Reserved.


DO NOT COPY OR REPRODUCE.
www.dayspringlimited.com
+
Acronym Name Formula
BAC = total budgeted cost of the
BAC Budget at Completion
project
PV Planned Value PV = Planned % complete x BAC
AC = actual cost of the project up
AC Actual Cost
to the measurement period
EV Earned Value EV = Actual % complete x BAC
CV Cost Variance CV = EV - AC
SV Schedule Variance SV = EV - PV
CPI Cost Performance Index CPI = EV / AC
SPI Schedule Performance Index SPI = EV / PV
EAC Estimate at Completion EAC = BAC / CPI
ETC Estimate to Complete ETC = EAC - AC
VAC Variance at Completion VAC = BAC - EAC
To-Complete Performance Index
TCPI TCPI = (BAC - EV) / (BAC - AC)
(BAC based)
To-Complete Performance Index
TCPI TCPI = (BAC - EV) / (EAC - AC)
(EAC based)

© 2012 DaySpring Limited


+
You are the project manager for the construction of 20 miles of
sidewalk. According to your plan, the cost of construction will be
$15,000 per mile and will take 8 weeks to complete.

2 weeks into the project, you have spent $55,000 and completed 4 miles
of sidewalk, and you want to report performance and determine how
much time and cost remain.

Budgeted at Completion (BAC)

BAC = $15000 * 20 = $300,000

© 2012 DaySpring Limited


+ You are the project manager for the construction of 20 miles of sidewalk. According to your plan, the
cost of construction will be $15,000 per mile and will take 8 weeks to complete. 2 weeks into the
project, you have spent $55,000 and completed 4 miles of sidewalk, and you want to report
performance and determine how much time and cost remain.

Budgeted at Completion (BAC)

BAC = $15000 * 20 = $300,000

Planned Value (PV)


PV = Planned % Complete × BAC

Planned % Complete = 2/8 = 25%

So, PV = $300,000 * 25%


= $300,000 × .25
= $75,000

© 2012 DaySpring Limited


+ You are the project manager for the construction of 20 miles of sidewalk. According to your plan, the
cost of construction will be $15,000 per mile and will take 8 weeks to complete. 2 weeks into the
project, you have spent $55,000 and completed 4 miles of sidewalk, and you want to report
performance and determine how much time and cost remain.

Earned Value (EV)


EV = Actual % Complete × BAC

Actual % Complete = 4/20 = 20% (we have completed 4 miles of the 20 mile
project)

So, EV = $300,000 * 20%


= $300,000 × .20
= $60,000
Cost Variance (CV)
CV = EV – AC
CV = $60,000 - $55,000
= $5,000
Remember

A positive CV is good, it indicates that we are doing better on costs than we have planned. Conversely
a negative CV indicates costs overrun.
© 2012 DaySpring Limited
+ You are the project manager for the construction of 20 miles of sidewalk. According to your plan, the
cost of construction will be $15,000 per mile and will take 8 weeks to complete. 2 weeks into the
project, you have spent $55,000 and completed 4 miles of sidewalk, and you want to report
performance and determine how much time and cost remain.

Schedule Variance (SV)


SV = EV – PV
SV = $60,000 - $75,000
= - $15,000

Remember

A positive SV is good, it indicates that the project is ahead of schedule. Conversely a negative SV
indicates we are not performing well as we had planned in terms of schedule That is project is behind
the planned schedule.

© 2012 DaySpring Limited


+ You are the project manager for the construction of 20 miles of sidewalk. According to your plan, the
cost of construction will be $15,000 per mile and will take 8 weeks to complete. 2 weeks into the
project, you have spent $55,000 and completed 4 miles of sidewalk, and you want to report
performance and determine how much time and cost remain.

Cost Performance Index (CPI)


CPI = EV ÷ AC
CPI = $60,000 ÷ $55,000
CPI = 1.09

Remember

• CPI of 1 indicates that the project is exactly on track in respect of budget.


• CPI > 1 is good
• CPI < 1 bad, undesirable and exceeded the budget
+ You are the project manager for the construction of 20 miles of sidewalk. According to your plan, the
cost of construction will be $15,000 per mile and will take 8 weeks to complete. 2 weeks into the
project, you have spent $55,000 and completed 4 miles of sidewalk, and you want to report
performance and determine how much time and cost remain.

Schedule Performance Index (CPI)


SPI = EV ÷ PV
SPI = $60,000 ÷ $75,000
SPI = 0.8

Remember

• SPI of 1 indicates that the project is exactly on planned schedule.


• SPI > 1 is good
• SPI < 1 bad, undesirable and exceeded the schedule

Greater = better
+ You are the project manager for the construction of 20 miles of sidewalk. According to your plan, the
cost of construction will be $15,000 per mile and will take 8 weeks to complete. 2 weeks into the
project, you have spent $55,000 and completed 4 miles of sidewalk, and you want to report
performance and determine how much time and cost remain.

Estimate At Completion (EAC)


EAC = BAC ÷ CPI
EAC = $300,000 ÷ 1.09
EAC = $275,229.36

Estimate To Completion (ETC)


ETC = EAC - AC
ETC = $275,229.36 - $55,000
EAC = $220,229.36

Variance At Completion (VAC)


VAC = BAC - EAC
VAC = $300,000 - $275,229.36
VAC = $24,770.64

* A positive variance indicates that we are doing better than projected.


© 2012 DaySpring Limited
+ You are the project manager for the construction of 20 miles of sidewalk. According to your plan, the
cost of construction will be $15,000 per mile and will take 8 weeks to complete. 2 weeks into the
project, you have spent $55,000 and completed 4 miles of sidewalk, and you want to report
performance and determine how much time and cost remain.

To Complete Performance Index (TCPI ) [cost]


TCPI = (BAC – EV) ÷ Remaining funds
TCPI = (BAC - EV) ÷ (BAC - AC)
TCPI = ($300,000 - $60,000) ÷ ($300,000 – $55,000)
TCPI = 0.98

To Complete Performance Index (TCPI )


TCPI = (BAC - EV) ÷ (EAC - AC)
TCPI = ($300,000 - $60,000) ÷ ($275,229.36 – $55,000)
TCPI = 1.089

© 2012 DaySpring Limited


+ You have evaluated your project and have developed the following earned value management table
from your analysis:

Tasks EV PV AC CV CPI SV SPI


A $10000 $10000 $11000
B $12000 $11000 $13000
C $9000 $8000 $8500
Total $31000 $29000 $32500
Determine the project status by calculating CV, CPI,SV, and SPI for each task
and for the project overall.

© 2012 DaySpring Limited


+ You have evaluated your project and have developed the following earned value management table
from your analysis:

Tasks EV PV AC CV CPI SV SPI


A $10000 $10000 $11000 -1000 0.91 0 1.00
B $12000 $11000 $13000 -1000 0.92 1000 1.09
C $9000 $8000 $8500 500 1.06 1000 1.13
Total $31000 $29000 $32500 -1500 .95 2000 1.07
What is the analysis of how the project is doing from the above indicators?

© 2012 DaySpring Limited

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