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Earned Value Management: 1.rohit Thumma 2.prathamesh Patil 3.satyendra Upadhyay

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76 views13 pages

Earned Value Management: 1.rohit Thumma 2.prathamesh Patil 3.satyendra Upadhyay

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Earned Value Management

1.Rohit Thumma
2.Prathamesh Patil
3.Satyendra Upadhyay
Earned Value Management

EVM is one of the most widely used scientific approach to


measure,analyze,integrate project data to accurately
report on current project performance and forcast the
required performance for completion.
Terms associated with EVM

1.Earned Value Analysis (EVA): This project management technique


is quantitative. It evaluates project performance by figuring out the
likely results of the project. It does this by comparing the progress and
budget of work planned to the actual costs.
2.Earned Value Management (EVM): This methodology measures
project performance with an integrated schedule and budget, which is
based on the project work breakdown structure (WBS).
3.Earned Valued Management System (EVMS): This is the
collection of tools, templates, processes and procedures that an
organization uses to do EVM.
Calculations for EVM

There are calculations that can be done quickly and easily


to execute EVM. To do so, you need to know the
following:
1.Planned Value (PV): Budgeted amount through the current
reporting period
2.Actual Cost (AC): Actual cost to date
3.Earned Value (EV): Total project budget multiplied by the
percentage the project is complete
Progress Measurement Sheet
Variance Analysis
1 .Schedule Variance (SV)
Schedule variance is a quantitative indicator of your divergence from the initial planned schedule. A negative SV indicates that
we are behind schedule, a positive SV indicates that we are ahead of schedule and zero means that we are exactly on
schedule.

SV = EV – PV

In our example, SV at 2 months = $7,500 – $10,000 = -$2,500

SV% = (SV/PV) *100 = (-$2,500/$10,000) *100 = -25%

This implies that we are 25% behind schedule. It’s interesting to note that we aim to understand schedule, a time component,
from the perspective of costs. To arrive at these costs though, we needed to know the scope of work planned and completed.
This is how the three pillars—scope, time and cost come together in EVM.

2.Cost Variance (CV)


Cost variance is a quantitative indicator of your divergence from the initial planned budget. A negative CV indicates that we are
over budget, a positive CV indicates that we are under budget and zero means that we are exactly on budget.

CV = EV – AC

In our example, CV at 2 months = $7,500 – $15,000 = -$7500

CV% = (CV/EV) *100 = (-$7,500/$7,500) *100 = -100%

This implies that we are 100% over budget.


Calculation

1.Schedule Performance Index (SPI): This calculation involves dividing


the EV by the PV to measure progress achieved against where you
expected to progress at a certain point. If you’ve come up with a value
less than 1.0, it means that you’ve done less work than you projected for
this point. While a value greater than 1.0 means you’ve completed more
than was planned.
2.Cost Performance Index (CPI): For this calculation you divide EV by
the AC to measure the value of work completed against its actual cost.
Again, if you reach a figure less than 1.0, your costs are higher than
budgeted. A number higher than 1.0 means the costs are less than
budgeted.
3.Estimated At Completion (EAC): With this calculation, you divide the
total project budget by the CPI value you figured out above.
EVM Is Great, With a Few Caveats

EVM is a technique that you can use to help manage and control your
project, but EVM won’t solve everything. Furthermore, as PMI notes, it
doesn’t always work on your project. It is not a magic bullet that can
pierce all project problems, and it has some pitfalls.

You can’t rely solely on earned value management. Remember, it’s


merely calculating a single objective data point. The earned value on
your project can change and can change fast. Naturally, cost and
progress are seldom reflected in the actual project as they are when
you’re executing the project. So, EVM acts as a safeguard and
provides useful data. It’s best to make these calculations monthly or
more frequently if your project is shorter in duration.
EVM Doesn’t Ensure Quality

There are some things that EVM doesn’t offer a window to view,
such as customer satisfaction and quality of the project. The
project performance as it relates to important factors such as
schedule and budget are tracked with EVM. But a successful
project is not one merely brought in on time and within budget.
If your customer is unhappy or the project or service quality is
poor, there’s a big problem, regardless of meeting schedule and
budget demands.
Without Accurate Data, EVM is Useless

Also, if you don’t include all actual costs in your


calculations then your results are not going to accurately
reflect the progress or performance of the project. If
you’re using a software that automatically makes these
calculations you need to be doubly cautious, as they
might overlook some critical data and give you a
misleading result.
EVM needs Context

Finally, don’t just deliver the numbers to customers,


stakeholders or whomever you’re reporting to. They need
to know what those numbers mean and how you’re using
them. Be clear in your language and avoid the jargon that
we all start using without thinking. You know what you’re
talking about, but it’s important that who you’re talking to
understands as well. Don’t dumb it down, of course; just
speak clearly and simply. Being able to effectively
communicate EVM is as important as being able to
calculate it.
5 basic ground rules for effective Earned Value
Management:

1.Organize the project team and the scope of work, using a work
breakdown structure. Each task should have a single WBS number
and organizational code.
2.Schedule the tasks in a logical manner so that lower level schedule
elements support subsequent elements and the top level milestones.
3.Allocate the total budget resources to time-phased control accounts.
4.Establish objective means for measuring work accomplishment.
Budget should be earned in the same way that it was planned.
5.Control the project by analyzing cost and performance variances,
assessing final costs, developing corrective actions, and controlling
changes to the integrated baseline.
References

Project Management Institute. (2004) A Guide to the Project Management Body of Knowledge
(PMBOK® Guide). (Third ed.) Newtown Square, PA: Project Management Institute

Project Management Institute. (2005) Practice standard for earned value management (PMI
Global Standard) (2005 ed.) Newtown Square, PA: Project Management Institute

Government Electronics and Information Association. (2002) Earned value management


systems Approved: May 19, 1998. Reaffirmed: August 28, 2002. ANSI/EIA-748-A-1998

United States Department of Energy (2005) Earned value management application guide,
version 1.6. January 1, 2005. Office of Engineering and Construction Management.

© 2006, Chance Reichel, PMP


Originally published as a part of 2006 PMI Global Congress Proceedings – Seattle Washington

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