Earned Value Analysis:

A Case Study

he management of complex projects he determined the Earned Value of complet-

T requires adequate monitoring and

control tools. “Earned Value” is one
method of measuring project performance,
ed activities according to the amounts that
had been budgeted and then compared the
Earned Value to the actual expenditure.
An expert in Earned
Value analysis revisits a
by comparing the amount of work planned What should be added to this valuable December 1995
with what was actually accomplished to de- discussion is a quantitative example of pro-
termine if cost and schedule performance is ject tracking employing the Earned Value PM Network article as a
as planned. It enables the project manager to cost management concept that is presented
detect deviations from plan as soon as they in a practical way for automation with mod- case study in the
occur and to take appropriate corrective ac- ern computer software. This article reviews
tions. Due to its importance in project suc- the most common project status indicators
usefulness of this tool.
cess, this subject is well covered in project and describes their use. These utilities are
management literature. (See sidebar.) then applied to the data provided by Ingram
In the planning phase, a project baseline to illustrate how they help to correctly assess
is set. The work completed at each point in the project status at each stage.
time is then compared to this baseline. Flem- Some Basic Definitions. The three basic
ing and Koppelman (1995) described the values used in Earned Value Analysis are de-
process of establishing the baseline and the fined as:
level of detail expected for planning each • Budgeted Cost of Work Scheduled
project stage according to its horizon. (BCWS): The sum of the approved cost
When various milestones are reached estimates for activities scheduled to be
during the project cycle, they become performed.
Earned Value according to the budgeted val- • Budgeted Cost of Work Performed
ue of the completed work. At these points (BCWP): The sum of the approved cost
the Earned Value is compared to the actual estimates for activities completed, or the
expenditure figures. Fleming and Koppel- Earned Value.
man (1996b) discussed project evaluation • Actual Cost of Work Performed (ACWP):
based on the Cost/Schedule Control Systems Total costs incurred in accomplishing
Criteria (C/SCSC). These criteria include work.
empirical findings as well as formulas, or When a project starts, a Time Phased
utilities, that use project data to determine Budget (TPB) plan is developed, which in-
the health of the project. Utilities are also cludes a schedule and a budget with estimat-
used to predict the final project performance ed expenditure allocated for various activi-
results (1996a). ties during given periods. This Time Phased Zeev Barr, PMP
In a December 1995 PM Network article, Budget serves as the Performance Measure-
Tom Ingram presented the interesting case of ment Baseline (PMB) against which the pro-
a project that had difficulties and described ject progress is monitored. At each point in
the way he handled the situation to bring it time the analysis is performed for a given pe-
to a successful conclusion. He explained how riod, usually project-to-date. On the date of

PM Network • December 1996 31

■ EARNED VALUE ANALYSIS: A CASE STUDY

the analysis, called the “Data Date,” the only 40 units were completed (BCWP= are that the additional resources will cost
value of the PMB becomes the BCWS. $40,000) and the actual amount spent the same and display a similar perfor-
The BCWS is compared to the BCWP for doing that was $45,000 (ACWP= mance, and that the particular activity
and to the ACWP, all expressed in terms $45,000), we deduce that (a) the project is has no influence on the implementation
of dollars. The cumulative values for the over budget (CV=–5,000; CVP=–13%) of other tasks.
given period are used in order to estab- and (b) the project is behind schedule Forecasting. The utilities discussed
lish a trend and to avoid periodical (SV=–10,000; SVP=–20%). above provide information about the
anomalies. Performance Indices. Performance project performance until the Data Date.
Variances. To measure the project indices are ratios used to determine the This information can be used to identify
performance until the Data Date, the fol- status of the project. problem areas as well as to forecast fu-
lowing variances are used: Cost Performance Index is defined as ture project performance by using the
Cost Variance is defined as CV= performance indices.
BCWP
BCWP–ACWP, or the Budgeted Cost of CPI = The funds required to complete the
ACWP
Work Performed less the Actual Cost of project are estimated based on the expe-
Work Performed. For the work per- For the work performed, the CPI com- rience gained until the Data Date. The
formed we compare the budgeted cost pares the budgeted cost with the actual. value of remaining work, which is the to-
with the actual. The variance was de- CPI<1 means that the project is over tal budget less the Earned Value, is mod-
fined such that a negative value denotes a budget. ified by the Cost Performance Index.
cost overrun. Schedule Performance Index is de- Estimate To Complete is defined as
Schedule Variance is defined as fined as
BAC - BCWP
SV=BCWP–BCWS, or the Budgeted ETC = ,
BCWP CPI
Cost of Work Performed less the Budget- SPI =
BCWS
ed Cost of Work Scheduled. Here we where BAC is the Budgeted cost At Com-
compare the work performed with what The SPI compares the work performed pletion, as approved in the plan.
was scheduled. A negative variance means with what was scheduled. SPI<1 means The Estimate To Complete figure is
that the project is behind schedule. that the project is behind schedule. useful to the project manager for com-
Percentage Variances. The CV and The two indices may give results that parison with the funds on hand. A sig-
SV show deviations from the plan in seem contradictory; for example, CPI>1 nificant difference will usually trigger a
terms of dollars. Are these deviations sig- and SPI<1. The project is within budget, review of the cost estimates of future
nificant when compared to the project which is good, but it is also behind tasks and a search for corrective actions.
value until the Data Date? To evaluate schedule. The money may have been The funds needed for the entire project
this, the variances are expressed in per- saved because not enough work was can be calculated by adding the actual costs
centages of the baseline. done. Can we come back on budget and incurred until the Data Date to the Esti-
Cost Variance (in percentage): on schedule by increasing the number of mate To Complete. The Estimate At Com-
CV resources employed? To answer this we pletion is defined as EAC=ETC+ACWP.
CVP = ´ 100%
BCWP use the Cost-Schedule Index, which is de- Knowing the Budget and the Estimate
BCWP - ACWP fined as At Completion, we can now calculate the
= ´ 100% Cost Variance At Completion, or its nega-
BCWP BCWP2
CSI = CPI ´ SPI = tive quantity, which is more prevalent, the
ACWP ´ BCWS
and Schedule Variance (in percentage): Projected Cost Overrun PCO=EAC–BAC.
SV CSI<1 is indicative of a problem. This can be expressed as a percentage of
SVP = ´ 100% Example 2. As an illustration, consid- the original budget in order to assess the
BCWP
er a second scenario for Example 1: Af- severity of the situation:
BCWP - BCWS
= ´ 100% ter 50 days only 40 units were complet- Projected Cost Overrun (in percentage):
BCWS
ed, but the actual amount spent was only
PCO EAC
Note that a different definition of the $30,000. This may happen, for instance, PCOP = × 100% = − 1 × 100%
SVP can be found in the literature; for if the cost of $1,000 per unit included a BAC BAC
example, see my letter in the September performance bonus which was not paid The project manager will explain the sit-
1996 Project Management Journal. due to slow delivery. Here we deduce uation to senior management and, if nec-
Example 1. To illustrate the use of the that (a) the project is within the budget essary, will negotiate additional funds.
variances, consider a scenario where (CPI=1.33), but (b) the project is behind Example 3. The Forecast To Complete
$100,000 was allocated in the project schedule (SPI=0.80), and (c) the project in Example 1 is $67,500 and the Estimate
budget for a worker to produce 100 can be brought on schedule and be with- At Completion is $112,500, with a Pro-
units of a certain product in 100 working in budget by employing additional re- jected Cost Overrun of $12,500, or 12.5
days. If after 50 days (BCWS=$50,000) sources (CSI = 1.07). The assumptions percent of the initial budget. In Example

32 PM Network • December 1996

Table 1. Project Data

End WBS Actual Earned PM PM

Date BCWS Wk ID# Milestones cost Value Budget Actual ACWP BCWP
1 2 3 4 5 6 7 8 9 10 11
19-Nov-94 2,000 0 0 0
26-Nov-94 3,500 1 445 350 350 445
3-Dec-94 4,500 2 445 350 700 890
10-Dec-94 6,000 3 10000 Base System Installation 13,600 8,500 445 350 14,650 9,835
17-Dec-94 12,500 4 445 350 15,000 10,280
24-Dec-94 14,000 5 445 350 15,350 10,725
31-Dec-94 14,500 6 11000 Functional Design Specs. 11,000 3,000 445 350 26,700 14,170
7-Jan-95 22,500 7 445 350 27,050 14,615
14-Jan-95 27,000 8 445 350 27,400 15,060
21-Jan-95 32,000 9 12000 Mainframe Download Custom ... 4,200 4,000 445 350 31,950 19,505
28-Jan-95 37,000 10 445 350 32,300 19,950
4-Feb-95 38,500 11 445 350 32,650 20,395
11-Feb-95 41,000 12 13000 Prototype developed 5,950 13,000 445 350 38,950 33,840
18-Feb-95 47,000 13 445 350 39,300 34,285
25-Feb-95 49,500 14 14000 Application developed 7,600 6,000 445 350 47,250 40,730
4-Mar-95 50,000 15 445 350 47,600 41,175
11-Mar-95 50,500 16 445 350 47,950 41,620
18-Mar-95 51,000 17 445 350 48,300 42,065
25-Mar-95 51,500 18 15000 Production Rollout Assistance 2,500 8,000 435 350 51,150 50,500
1-Apr-95 19 16000 Post Production Review 500 1,000 350 52,000 51,500

2 a saving of $25,000 is projected, which

is 25 percent of the initial budget. Figure 1. The Project Plan
In the examples above the indicators
are almost self-evident. However, in real 60
projects that involve numerous activities
and a multitude of resources, these re-
50
sults are less than obvious and comput-
erized tools are required. BAC = $ 51.5 k
Cumulative cost ($000)

40
The Data Performance Measurement
The utilities reviewed above will now be Baseline, or
30 Time Phased Budget
applied to the case study described by In-
gram in his December 1995 PM Network
article, in order to illustrate their utility. 20
The data were presented partly in graphs
and partly in a table; they have been re-
10 Planned completion date:
produced in Table 1. March 25, 1995
Work performance during project im-
plementation is measured against the TPB
plan, which includes all the cost accounts
4-Mar-95
7-Jan-95

11-Mar-95

18-Mar-95

25-Mar-95
19-Nov-94

26-Nov-94

14-Jan-95

21-Jan-95

28-Jan-95
3-Dec-94

31-Dec-94
10-Dec-94

17-Dec-94

24-Dec-94

4-Feb-95

11-Feb-95

18-Feb-95

25-Feb-95

detailed in the Work Breakdown Struc-

ture. Ingram’s budget curve (Dec. 1995
PM Network, Figure 1, p. 22) provides
these cumulative figures. The data read
from the curve have been tabulated in starting on the week ending November The values of Actual Cost and Earned
Table 1, Columns 1 and 2, and have been 19, 1994, with a completion date of Value have been taken from Ingram’s
reproduced in my Figure 1. The project March 25, 1995. The total budget was Table 1 (Dec. 1995, PM Network, p. 24)
was scheduled for 18 weeks (Column 3) BAC=$51,500. for the dates specified with arrows in the

PM Network • December 1996 33

■ EARNED VALUE ANALYSIS: A CASE STUDY

Value (Column 7) and the PM Budget

Figure 2. Graphical Representation of the Project Status on (Column 8).
January 28, 1995 Project Tracking: First Data Date.
On January 28, 1995, the information
60
relevant to Earned Value Analysis was
the TPB until March 25, as well as
50
ACWP and BCWP up to January 28.
These data are plotted in Figure 2. In-
BCWS gram says: “On the surface it looks un-
Time Phased Budget
40
der budget. What else do we need to
Cumulative cost ($000)

Accumulated costs 37000

know?” The Actual is indeed lower than
32300
30
the Budget, but the real test is the com-
ACWP parison of the Actual with the Earned
Value!
20 19950 We are now in a position to answer the
BCWP question posed by Ingram: “Today is Jan-
uary 28. How is this project doing?” The
Data Date

10
utilities reviewed earlier have been calcu-
Earned Value
lated to determine the project perfor-
mance. The calculation results are sum-
14-Jan-95

21-Jan-95

28-Jan-95

11-Mar-95

18-Mar-95

25-Mar-95
19-Nov-94

26-Nov-94

7-Jan-95
10-Dec-94

17-Dec-94

24-Dec-94

31-Dec-94

11-Feb-95

18-Feb-95

25-Feb-95

4-Mar-95
3-Dec-94

4-Feb-95

marized in Table 2, Columns 1 and 2;

Column 3 shows the formulas employed;
Column 4 lists conclusions. The variances
show that the project is over budget and
Table 2. Project Status Indicators on January 28, 1995 behind schedule. When expressed as per-
centages the variances prove to be signifi-
cant. The performance indices confirm
Utility Value Formula Conclusions
the poor performance, and the projected
1 2 3 4 cost overrun is substantial.
CV $–12,350 1 The project is over budget ... Project Tracking: Additional Data
CVP –62% 3 ... substantially Dates. The results of the analysis per-
SV $–17,050 2 The project is behind schedule ... formed for January 28, 1995, revealed
problems. At that point the project man-
SVP –46% 4 ... substantially
ager took corrective action and the pro-
CPI 0.62 5 The project is over budget ject status indeed improved.
SPI 0.54 6 The project is behind schedule Two additional analyses have been
CSI 0.33 7 The performance is poor performed for comparison: for February
ETC $51,081 8,12 Compare to the total budget! 25, 1995, after the milestone WBS ID
14000 took place; and for March 25,
EAC $83,381 9,12 Compare to the total budget!
1995, the original planned completion
PCO $31,881 10,12 Additional funds will be required ... date. The data of Table 1 for these dates
PCOP 62% 11,12 ... a large amount have been plotted in Figure 3. Notice
that now the abscissa extends to April 1,
graph of his Figure 2 (p. 23) and have gram’s Figure 2 (p. 23) that on 25 Mar 1995, and that the curves are drawn to
been reproduced in Table 1, Columns the BCWP was still below the budget and the end of the project. The cumulative
4–7. that activity WBS ID 16000 was not yet Earned Value at the end of the project
The $8,000 budgeted cost of Project performed. It was arbitrarily assumed equals the initial budget of $51,500.
Management and Miscellaneous (WBS that the project was completed on April The utilities have been calculated
IDs 17000 and 18000) has been distrib- 1, 1995. again and the calculation results are sum-
uted evenly over the planned duration of The ACWP at each point in time marized in Table 3. The basic values for
the project (Table 1, Column 8). The Ac- (Table 1, Column 10) is the cumulative the three Data Dates are listed at the top.
tual total cost of these WBS items was sum of the Actuals (Column 6) and the The values of the utilities for these dates
only $6,650. This cost has been evenly PM Actuals (Column 9). The BCWP at are shown below. The figures reflect the
distributed in Table 1, Column 9 for a each point in time (Table 1, Column project situation at the time of each
period of 19 weeks. Why? Notice in In- 11) is the cumulative sum of the Earned analysis. Notice that the value of the

PM Network • December 1996 35

■ EARNED VALUE ANALYSIS: A CASE STUDY

the Data Date becomes the BCWS. The

Figure 3. Graphical Representation of the Data of the Whole plan is defined at the start of the project
Project and the approved budget figures are en-
tered into the computer. This should
60
Total cost at completion: $ 52 k
not be changed. The exception is con-
BAC: $ 51.5 k
tract change orders approved by the
50
BCWS project owner. If a change order affects
the cost or the schedule, a revised base-
ACWP
line is set.
40 The cumulative value of activities
Cumulative cost ($000)

completed by the Data Date is the

BCWP
BCWP. Information about these activities
30
Total Earned Value: can be extracted from reports submitted
$ 51.5 k
by the implementation teams and needs
20 to be regularly entered into the comput-
er. This is usually done by entering the
“percent complete” for each activity and

Data Date
Data Date

10

Data Date
then calculating the aggregate.
The total of the charges to the project
as of the Data Date is the ACWP. Infor-
14-Jan-95

21-Jan-95

28-Jan-95

11-Mar-95

18-Mar-95

25-Mar-95
19-Nov-94

26-Nov-94

1-Apr-95
7-Jan-95

4-Mar-95
10-Dec-94

17-Dec-94

24-Dec-94

31-Dec-94
3-Dec-94

11-Feb-95

18-Feb-95

25-Feb-95
4-Feb-95

mation about these charges comes from

the cost accountant and also needs to be
entered on a regular basis.
The three basic values are automati-
Table 3. Improvement in Project Status cally calculated by most project manage-
ment software products. The project sta-
tus indicators can be calculated from the
BAC $51,500
basic values with a limited amount of
Date 28-Jan-95 25-Feb-95 25-Mar-95 data manipulation. All the utilities dis-
BCWS $37,000 $49,500 $51,500 cussed have been employed in order to
BCWP $19,950 $40,730 $50,500 demonstrate their use. In practice, a sub-
set may suffice, depending on the re-
ACWP $32,300 $47,250 $51,150
porting requirements or the project man-
CV $–12,350 $–6,520 $–650 ager’s preference in collecting the
CVP –62% –16% –1% information.
SV $–17,050 $–8,770 $-1,000 This case study provided a simplified
SVP –46% –18% –2% scenario where only the high-level tasks
have been considered. In practice, a pro-
CPI 0.62 0.86 0.99 ject consists of many more work pack-
SPI 0.54 0.82 0.98 ages, execution of which need to be
CSI 0.33 0.71 0.97 properly controlled. The more complex
ETC $51,081 $12,494 $1,013 the project, the more useful the auto-
mated quantitative methods become.
EAC $83,381 $59,744 $52,163
PCO $31,881 $8,244 $663 fter reviewing the utilities used to
PCOP 62% 16% 1% A track project performance, this case
study applied them to project data in or-
Cost Variance increases from –$12,350 stance, was $83,381 on January 28. It der to assess the performance at different
to –$6,520, and then to –$650. The final decreased to $59,744 on February 25 stages. The quantitative results con-
value was –$500. due to the better project status at that firmed the initial difficult situation de-
The forecasts are deterministic, based time, and decreased again to $52,163 on scribed by the project manager, as well as
on the data available at a particular time. March 25. The final total cost of the pro- the improvements achieved after correc-
The closer we are to the end of the pro- ject was $52,000. tive action was taken.
ject, the more accurate the estimates. Automating the Process. The cumu- The calculations necessary to derive
The Estimate At Completion, for in- lative value of the project budget until the indicators may be automated using

36 PM Network • December 1996

modern project management software.
By recording the Earned Value and the Resources on Earned Value
Actuals on a regular basis, the infor- Barr, Zeev. 1996. A Note on Schedule Variance Expressed as Percentage. Project Man-
agement Journal (September), Letter to the Editor, 3.
mation received from the use of the Duncan, William R. 1996. A Guide to the Project Management Body of Knowledge, 81,
Earned Value Analysis for project track- 109, Glossary. Upper Darby, PA: Project Management Institute.
ing will prove invaluable for project Fleming, Quentin W., and Koppelman, Joel M. 1995. Taking Step Four With Earned
success. ■ Value: Establish the Project Baseline. PM Network (May), 26–29.
Fleming, Quentin W., and Koppelman, Joel M. 1996a. Forecasting the Final Cost and
Schedule Results. PM Network (January), 13–18.
Zeev Barr, PMP, is a project manager with Fleming, Quentin W., and Koppelman, Joel M. 1996b. The Earned Value Body of
Motorola Canada, managing mobile radio Knowledge. PM Network (May), 11–15.
and SCADA projects. He is a Professsional Ingram, Tom. 1995. Client/Server, Imaging and Earned Value: A Success Story, Part II:
The Consultant’s Perspective. PM Network (December), 21–25.
Engineer with expertise in telecommuni-
Wilkens, Tammo. 1996. Earned Value: How to Measure? PM Network (April), Letter
cations, mainly in the public safety and
to the Editor, 4–5.
utility markets.

PM Network • December 1996 37