Earned Value Tracking
Earned Value (EV) based performance measurement systems “Link Expenditures
to accomplishments”
This review of Earned Value Concept will:
- Describe a simple project and its progress
- Define Earned Value and related terms
- Show how Earned Value defines project performance
Earned Value System
- Can:
- Provide early (Difficult to ignore) performance problem identification
- Improve financial Reporting
- Does not:
- Will not:
Measurement Terminology
Performance Terminology
- Cost Variance (CV)
- CV = EV – AC = BCWP – ACWP
- Cost Performance Index (CPI)
- The cost efficiency ratio of earned value to actual costs (CPI = EV/AV)
In PMPlan, the CPI is used to calculate Estimate at Completion (EAC) (EAC
= BAC/CPI)
- Schedule Variance (SV)
- SV = EV – PV =BCWP – BCWS
- Schedule Performance Index (SPI)
- The schedule efficiency ratio of earned value accomplished against
planned value (SPI = EV/PV). The SPI describes what portion of the planned
schedule was actually accomplished.
- Variance at Completion (VAC)
- The predicted magnitude of possible underrun or overrun at completion
of work package, major task, or project (VAC = BAC – EAC)
Review of Earned Value Concept
- Will
- Describe a simple project and its progress
- Define earned value and related terms
- Show how earned value defines project performance
Sample Project Schedule
Planned Budget
The sample project is loaded with resources which results in an allocated spend
plan.
Time-Phased Spend Plan
This shows the time-phased spend plan if the project proceeds as planned.
Typical Approach of Tracking of Actual versus Planned
- This chart tells us we have spent less than planned to date, but
- We cannot tell if we are behind schedule, nor if the cost for work completed
matches the actual costs.
Using Earned Value Method
- For Earned Value Method to work well you need to breakdown the project into
measurable activities (Note: Cost Budgeting is done at the activity level
not work package).
- It is recommended that your work packages (where you accumulate actual
costs) be one or two levels above the activities.
- The following five scenarios show different performance results of our
sample project.
Sample Earned Value Worksheet
- The project manager enters either a earned percentage or value.
- Actual Cost is also enter. In this worksheet, actual cost can also include
open commitments such as unpaid invoice for equipment.
- The ‘Threshold’ is a percent the AC to BAC, which determines
when the application uses the CPI to calculate VAC. If AC is less than ‘Threshold’,
the VAC equals CV.
- Based on the data entered, this project is both behind schedule and over
budget. Even though the current CV = $3,000, the VAC indicates a potential
overrun of $4,138.
- The next slide shows two other views of this data.
Project has Negative SV and CV
- In the lower half of the graph, the EV is below both the PV and AC
indicating problems with cost and schedule.
- The upper half of the graph shows both CPI and SPI relative to a
value of 1. It is showing that progress is being made to improve the
schedule, but cost problem remains.
- The black EV bars in the Gantt schedule at the right shows that ‘Design’
and ‘Prototype’ activities are behind schedule.
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Why 50% Complete may not be half the schedule bar
- In the above sample, all three activities have earned values of 50% of BAC,
but the black earned bars are not the same length even though the planned
bars are the same.
- Task A is behind schedule, because 75% of the budget was to be spent by
end of December.
- Task B is ahead of schedule, because only 25% of the budget was to be spent
by end of December.
In Summary - Earned Value System
- Can:
- Provide early (Difficult to ignore) performance problem identification
- Improve financial Reporting
- Does not:
- Will not:
Return to Comparison