Earned Value Analysis

• Earned Value (EV) Analysis: Earned

Value analysis is an integrated
cost-schedule approach to monitor
and analyze the progress in a
project.
Earned
Value • A project management technique
that measures project performance
Analysis and progress by combining scope,
schedule and costs into a single
integrated system of monitoring and
reporting.
 The concept of Earned Value is simple; at any given
point to find out:

• The cost of work you have done in real time

(ACWP).

• The cost of work you planned to do by this

date (BCWS or PV)

The • Budgeted cost of work performed also

Concept called earned value, is the budgeted cost of

work that has been performed in carrying
out a scheduled task during a specific time
of EVM (BCWP or EV).
or the percentage of the total budget actually
completed at a point in time.

• Calculate schedule and budget variances

(SV, CV)

• Analyze causes for major variances and

suggest remedies.
Foundations of modern cost
control
• What’s more important?
• Knowing where you are on
schedule?

• Knowing where you are on budget?

• Knowing where you are on work

accomplished?

• Earned Value Analysis (EVA) addresses

all three:
• It compares the PLANNED amount of
work with what has actually been
COMPLETED to determine if COST,
SCHEDULE, and WORK
ACCOMPLISHED are progressing as
planned.
EVA Terminology

BCWS or PV – Budgeted Cost of Work Scheduled

• Planned cost of the total amount of work scheduled to
be performed by the milestone date. (your original
plan)

BCWP or EV – Budgeted Cost of Work Performed

• The planned (not actual) cost to complete the work
that has been done.
• Also known as “Earned Value”

ACWP – Actual Cost of Work Performed

• Cost incurred to accomplish the work that has been
done to date.
 • Budgeted Cost of Work Scheduled
(BCWS)
• Activity budget at completion
(BAC)

• Activity schedule

• Data date
Information
• Budgeted Cost of Work Performed
Needed to (BCWP)

Compute • Activity budget at completion

(BAC)

• Physical activity progress as a

percentage of its total work

• Actual Cost of Work Performed

(ACWP)

• Each activity’s cost to date

from the job costing system
Earned Value Reporting - Costs
Budgeted Cost of Work Performed (BCWP) = earned value
of project

Actual Cost of Work Performed (ACWP)

Cost Variance (CV)

Difference between earned and actual costs for the
completed work

Cost Performance Index (CPI or CI)

CPI = 1, on budget
CPI < 1, over budget
CPI > 1, under budget
Earned Value Reporting - Schedule
Budgeted Cost of Work Performed (BCWP)

Budgeted Cost of Work Scheduled (BCWS)

Schedule Variance (SV)

Difference between the value of work that was planned for completion
and the value of the work that was actually completed

Schedule Performance Index (SPI or SI)

SPI = 1, on schedule
SPI < 1, behind schedule
SPI > 1, ahead of schedule
Earned Value Reporting

(budgeted)

(earned)

(actual)
Nabil Dmaidi

9
Example 1:
% complete= (1500/2600)=
Total planned per day for 10
0.5769
days= 2600/10= 260
BCWP= 5980x0.5769
For 4 days= 4x260= 1040 sq.ft
=$3450
%planned= 1040/2600= 0.4
BCWP= 0.4x5980= $2392
Or 1500x2.3
Example 2:
•A contractor agreed to build 30 temporary sheds in 90 days at a price of Rs.
10000/unit. Twenty days later, the contractor has finished 8 sheds with an actual
total cost of Rs. 85000. What is the status of the project?

•Solution:
•-Contractor agreed to build 30 sheds in 90 days means
•1 shed completes in 3 days.
•-Price of 1 shed is Rs. 10000
•-So, 8 Sheds complete in 24 days, while contractor take only 20 days means the
project is above schedule.
•-Price of 8 shed = 8 × 10000 = 80,000,
•-while contractor has finished 8 shed with an actual cost of Rs. 85,000 means the
project is over budget.
Example 3:
ACWP or AC= $680000
BCWP or EV= 8 (units completed at 20 days) x $ 80000= $640000
BCWS or PV=
1 unit takes 3 days to complete
Units completed in 20 days= 20/3= 6.67 units
PV for 20th day= 6.6667 (units completed) x 80000= $533336

SV= BCWP-BCWS= ?
CV= BCWP-ACWP= ?
%SV= ?
%CV= ?
SPI= ?
CPI= ?
EAC= ?
ACV= ?
 Example 4:
Compute Estimate At Completion (EAC) and Variance At Completion (VAC) if
both SPI and CPI influence the project work when given variables are
•Budget At Completion (BAC) = $22,000
•Earned Value (EV) = $13,000
•Planned Value (PV) = $14,000 EAC (if the both SPI and CPI
•Actual Cost (AC) = $15,000 influence the project work) = AC
+ [(BAC – EV) / (CPI x SPI)]

Solution:

1.Schedule Performance Index (SPI) = EV/PV = $13,000/$14,000 = 0.93 Since SPI is

less than 1, this indicates that the project is behind schedule
2.Cost Performance Index (CPI) = EV/AC = $13,000/$15,000 = 0.87 Since CPI is less
than 1, this indicates that the project is over budget.
3.EAC = $15000 + [($22,000 – $13,000)/(0.93 X 0.87)] = $26,123
4.VAC = BAC – EAC = $22,000 – $26,123 = -$4,123 The project is experiencing a
budget overrun of -$4,123.
 Important Terms Used in EVA

For detailed explanation of the terminology of EVA see also BS6079-1:2002;

AS4817:2006; ANSI748B and CIOB (2011).

• Percentage complete = EV/BAC

• Percentage Spent = AC/ BAC

• CPI = Percentage Complete/Percentage Spent

 How to Determine Planned Values
WBS is completed in a hierarchical structure to the level of detail required.

At the lowest level of detail are the elements to be monitored.

These elements should be mutually exclusive to ensure that no problems will arise
when allocating costs.

The PV of each construction activity must then be assessed.

This may be determined by simply allocating a proportion of the total PV for the
project to each activity or, where a Bill of Quantities document has been used to
measured the work, assigning specific bill items, or group of items, to the
construction activities.
 How to Determine Planned Values
Each of the construction activities must then be allocated to a schedule that clearly
shows the start and end of each activity. From this schedule it is then possible to
calculate the budgeted cost of work scheduled (BCWS), also known as the PV for
each week/month of the project. This is normally expressed on a cumulative basis. It
is this cumulative PV that is used in the calculations and compared with the
cumulative figures for the BCWP and the ACWP to measure the performance on the
project.
 EVA Calculations and Their Interpretations
Cost Variance = EV-AC

Schedule Variance = EV-PV

Cost Performance Index, CPI = EV/AC

Schedule Performance Index, SPI = EV/PV

%complete = EV/ BAC

% spent = AC/BAC

CPI = %complete/%spent
 Estimate at Completion
Another sought after forecasted values is the total anticipated cost of the project
when it is complete. This is called as Estimate at Completion (EAC). It is also
called the Latest Revised Estimate (LRE). For the purposes of our discussion we
will use EAC.

Formulas for calculating EC range from simplistic to more complex ones.

Following is the simplest version where BAC is budget at completion and CPI is
cost performance index:

EAC = BAC/CPI

It is the most simplest version to calculate EAC. It is used when a sufficient

history of data is unavailable for a more accurate information.

The BAC is the total anticipated cost of the task (or project) as determined when
the baseline budget was established.

It considers anticipated cost performance only and ignores any actual

performance history.
 Estimate at Completion ( from the book
Wayne J DelPico) Page # 133 onwards
A more complex and often more accurate formula considers the amount that has
been spent to date as well as what is remaining. It factors in only the CPI and
ignores any impact that may be caused by the schedule performance index (SPI):

EAC CPI= Actual Cumulative Cost + (Remaining Work/ CPI)

Or
EAC CPI = ACWP + [(BAC-BCWP)/CPI]

Where

ACWPc =AC= cumulative actual cost of work performed

BAC= budget at completion from the baseline

BCWPc=EV= cumulative budgeted cost of work performed

CPIa = average cost performance index

 Estimate at Completion
The last and most definitive approach (some would characterize it an overly
pessimistic approach) considers the impact of SPI, which is excluded in both prior
methods. It is called EAC composite:

EACcom= ACWPc+ [BAC-BCWPc)/ (CPIa x SPIa)]

Where

ACWPc = cumulative actual cost of work performed

BAC= budget at completion from the baseline
BCWPc= cumulative budgeted cost of work performed
CPIa = average cost performance index
SPIa = average schedule performance index

This provides a more accurate model of the EAC by considering schedule

performance as a factor that affects cost performance.
 Estimate to Complete
A second equally important calculation is for determining the amount of money (or
labor-hours) required to complete the task (or project) if conditions remain as is.
This is called Estimate to Complete (ETC). The ETC is represented by this
formula:

ETC = EAC – ACWPc

Where

EAC = the estimate at completion as derived from one of the methods shown
earlier.

ACWPc = cumulative actual cost of work performed.

The ETC allows the project manager to determine what will be needed to
complete the work from a monetary or labor hours perspective. In short, what is
the cash (or labor) requirement to complete the work?
 To-Complete Performance Index
The last factor used in forecasting future performance is an index that reflects the
amount of value each remaining dollar in the budget must earn to stay within the
BAC. It is called the To-Complete Performance Index (TCPI). It is based on a
ratio of the remaining work to the remaining cost and is represented by the
formula:
TCPI is essentially a ratio of the remaining work to the remaining funds. It enables a project manager to
determine the level of performance needed to achieve the cost or time objectives.

TCPI = [ BAC – BCWPc) / ( BAC – ACWPc)]

Where

BAC = Budget at completion from the baseline

BCWPc=EV= cumulative budgeted cost of work performed

ACWPc = cumulative actual cost of work performed

The TCPI is the recommended performance from the status date going forward.
For TCPI greater than 1.00, there is more work remaining than there is budget to
pay for it.
CALCULATING TCPI USING EAC
Formula: TCPI = (BAC – EV) / (EAC – AC)
As you can see, this is basically the same math with
BAC switched out for EAC. Use this version if you want
to work out the cost performance required for
completing the project in line with the EAC.
The same interpretation of the data applies too. Where
the TCPI is calculated to be greater than 1.0, expect it
to be a challenge to complete the work to the estimated
budget with the existing resources. Where the answer is
less than 1.0, you should be OK to bring the project in
because the efficiency required should be within the
capacity of the team.
 Scenario- EVA example
In this illustrative project renovations to a building require structural, electrical,
and plumbing work. The budget for the work is 1,050,000 Pounds. The work
comprises eight work packages that will be completed over a 12-month period. A
work break down structure for the construction to be undertaken is produced to
identify the budgets for each item of work. These budgets are then allocated
across the construction activities. Figure A shows the time schedule for the work
with added budget data.

The updated schedule show progress after 6 months of the project. Activity 1,
Activity 2, and Activity 3 are complete. Activity 4 is only 50% complete and will
require an extra month to complete. Activity 5 is 33% complete. Both these
activities are behind schedule. Activity 6 is 33% complete. This activity is ahead of
schedule. The ACWP at the end of this 6-month period is 430,000 Pounds. For
the overall project:

The BCWS at the end of the month 6 was 460,000 pounds

The BCWP by the end of month 6 was 410,000 pounds
The ACWP at the end of month 6 was 430,000 pounds
project management metrics:
1-Schedule Variance (SV) = BCWP - BCWS SV = 410,000 -
460,000 = -50,000 Pounds A negative SV means that the project is
behind schedule.
2-Cost Variance (CV) = BCWP - ACWP CV = 410,000 - 430,000 =
-20,000 Pounds A negative CV means that the project is over
budget.
3-Schedule Performance Index (SPI) = BCWP / BCWS SPI =
410,000 / 460,000 = 0.89 An SPI value less than 1 means that the
project is behind schedule.
4-Cost Performance Index (CPI) = BCWP / ACWP CPI = 410,000 /
430,000 = 0.95 A CPI value less than 1 means that the project is
over budget.
5-Estimate at Completion (EAC) = ACWP + (BAC - BCWP) / CPI
BAC = 1,050,000 Pounds (budget at completion) EAC = 430,000 +
(1,050,000 - 410,000) / 0.95 EAC = 1,091,579 Pounds This is the
projected final cost of the project based on current performance.
6-Estimate to Complete (ETC) = EAC - ACWP ETC = 1,091,579 -
430,000 = 661,579 Pounds This is the estimated cost required to
complete the remaining work.
7-Variance at Completion (VAC) = BAC - EAC VAC = 1,050,000 -
1,091,579 = -41,579 Pounds A negative VAC means that the project
is over budget.
Overall, the project is behind schedule and over budget after 6
months. The completion date and final cost of the project will need
 Example
Having now explored the formulas for EAC, ETC, VAC, and TCPI, the “four
horsemen of apocalypse,” lets try an example of forecasting trends. The collected
data for Task A is as follows:

BAC = $ 150,000
BCWSc = $ 80,000
BCWPc = $ 82,000
ACWPc = $ 78,000
CV = $ 4,000
SV = $ 2,000
CPIa = 1.05
SPIa = 1.025

Here is how the given data and the previous formulas can be used:
Simple EAC = BAC/CPI= $150,000 / 1.05 = $ 142,857.00
Or EAC CPI = ACWPc + [( $150,000 - $ 82,000)/ 1.05] = $ 142,712.00
 Example
Or EACcom = ACWPc + [( BAC – BCWPc) / (CPIa x SPIa)]

EACcom = $ 78,000 + ]( $ 150,000 - $ 82,000) / (1.05 x 1.025)]

= $ 141,197.00, updated total cost at the end of this project

It is easy to see that all three numbers are reasonably close in value (
approximately 1.1 percent), especially for a forecast.

From the aforementioned data, lets apply the formulas for the ETC, VAC, and
TCPI:

ETC = EAC com – ACWPc = $ 141,197 - $ 78,000 = $ 63,197, additional cost to

complete this project

VAC = BAC – EAC com = $ 150,000 - $ 141,197 = $ 8,803, shows the project will
be under budget by this amount

And TCPI = [ (BAC – BCWPc) / ( BAC – ACWPc)]

TCPI = [( $ 150,000 – $82,000) / ( $ 150,000 - $ 78,000)] = 0.94 <1, surplus funds

at the end of this project
Practice relevant examples of EVM analysis

THANK YOU