Project Management - Earned Value Management - Primavera P6

Project Performance
Earned value is used in performance reviews to measure project

performance against the scope, schedule, and cost baselines.
Project Management Professional 5th Edition Cost Management
hema_bhit@hotmail.com
Project Performance
5
Earned Value Management:

1. Budget at completion (BAC):
Its the total budget that you have for your projecthow much you
plan to spend on your project.
2. Planned % complete:
If the schedule says that your team should have done 300 hours of
work so far, and they will work a total of 1,000 hours on the project,
then your planned % complete is 30%.
BAC
Planned %
Complete
Planned
Value (PV)
Project Performance
6

3. Actual % complete:
Say the schedule says that your team should have done 300 hours of
work so far, out of a total of 1,000. But you talk to your team and find
out they actually completed 35% of the work. That means the actual
% complete is 35%.
BAC
Actual %
Complete
Earned
Value (EV)
4. Actual Cost (AC):

Its actual cost you already spend on a project till now.
Project Performance
7
Project Performance
8

5. Schedule performance index (SPI):
If you want to know whether youre ahead of or behind schedule, use
SPIs.
SPI
Earned
Planned
/
Value (EV)
Value (PV)
If SPI is greater than one, that means EV is bigger than PV,

so youre ahead of schedule!
If SPI is less than one, that means EV is smaller than PV,
so youre behind of schedule!
Project Performance
9

6. Schedule Variance (SV):
If you want to know how much ahead or behind schedule you are,
just subtract PV from EV.
SV
Earned
Planned
Value (EV)
Value (PV)
If the variance is positive, it tells you exactly how many dollars youre
ahead. If its negative, it tells you how many dollars youre behind.
Project Performance
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Project Performance
11

7. Cost performance index (CPI):
If you want to know whether youre over of or under budget, use
CPIs.
CPI
Earned
/
Value (EV)
Actual
Cost (AC)
If CPI is greater than one, that means EV is bigger than AC,

so youre Under budget!
If CPI is less than one, that means EV is smaller than AC,
so youre Over budget!
Project Performance
12

8. Cost Variance (CV):
If you want to know how much over or under budget you are, just
subtract AC from EV.
CV
Earned
Value (EV)
Actual
Cost (AC)
If the variance is positive, it tells you exactly how many dollars youre
under. If its negative, it tells you how many dollars youre over.
Project Performance
13
SPI is greater than or equal to 1

and SV is positive.
SPI is less than 1

and SV is negative.
Project Performance
14
CPI is greater than or equal to 1

and CV is positive.
CPI is less than 1 and

CV is negative.
Project Performance
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Project Performance
16
Earned Value Management: Exercise#1

Your project has a total budget of $300,000. You check your records and find that
youve spent $175,000 so far. The team has completed 40% of the project work,
but when you check the schedule it says that they should have completed 50% of
the work. Calculate the following:
BAC = $300,000
AC =
SPI =
$175,000
PV = $300,000
EV = $300,000
50%
40%
= $150,000
= $120,000
SV = $120,000 -
$150,000
= $-30,000
CV = $120,000 -
$175,000
=$-55,000
CPI =
$120,000
$150,000
= 0.8
$120,000
= 0.68
$175,000
Schedule
Budget
Within
Ahead
Behind
Over
Project Performance
17
Earned Value Management: Exercise#2

Youre managing a highway construction project. Your total budget is $650,000, and there
is a total of 7,500 hours of work scheduled on the project. You check with your accounting
department, and they tell you that youve spent a total of $400,000. According to the
schedule, your crew should have worked 4,500 hours, but your foreman says that the crew
was allowed to work some overtime, and theyve actually put in 5,100 hours of work.
Calculate these earned value numbers:
$442,000
SPI =
= 1.13
BAC = $650,000
$390,000
AC = $400,000
$442,000
CPI =
= 1.11
$400,000
PV = $650,000
= $390,000
60%
EV = $650,000
68%
= $442,000
SV = $442,000 -
$390,000
= $52,000
CV = $442,000 -
$400,000
=$42,000
Schedule
Ahead
Behind
Budget
Within
Over
Project Performance
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Project Performance
19
Forecasting:
You can use CPI to predict what your project will actually cost when its
complete by calculating Estimate at completion or EAC.
EAC = BAC / CPI

Exercise: If you have a CPI of 0.7 and a total budget of $20,000, then
you can forecast you final costs by:
EAC = BAC / CPI
EAC = $20,000 / 0.7 = $28,571.4
Project Performance
20
Forecasting:
The three parameters of PV, EV, and AC can be monitored and reported
on both a period-by-period basis and on a cumulative basis.
S-curves
Project Performance
21
Forecasting:
The project managers bottom-up EAC method builds upon the
actual costs and experience incurred for the work completed, and
requires a new estimate to complete the remaining project work.
EAC = AC + Bottom-Up ETC
The most common EAC forecasting approach is a manual,

bottom-up summation by the project manager.
Project Performance
22
Forecasting:
Only three of the more common methods to calculate EAC are described as follows:
1. EAC forecast for ETC work performed at the budgeted rate:

Predicts that all future ETC work will be accomplished at the budgeted rate.
EAC = AC + (BAC - EV)

2. EAC forecast for ETC work performed at the present CPI:
This method assumes what the project has experienced to date can be
expected to continue in the future.
EAC = BAC
CPI
3. EAC forecast for ETC work considering both SPI and CPI factors:
The ETC that considers both the cost and schedule performance indices.
EAC = AC + [(BAC EV) / (CPI SPI)]

Project Performance
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Forecasting:
1. Estimate To Complete (ETC):
2. Variance At Completion (VAC):
ETC = EAT
AC
VAC = BAC -
EAC
Project Performance
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Project Performance
25
To-Complete Performance Index (TCPI) :

It is a measure of the cost performance that is required to be
achieved with the remaining resources in order to meet a specified
management goal.
BAC Based
(BAC - EV)
TCPI =
(BAC - AC)
It is for when youre
trying to get your
project within your
original budget
EAC Based
(BAC - EV)
TCPI =
(EAC - AC)
It is for when you are
trying to get your project
done within the EAC
youve determined from
earned value calculations.
Project Performance
26
To-Complete Performance Index (TCPI) :
The number is greater than

one.
The number is lower than

one.
TCPI is opposite higher = loser.


Project Management - Earned Value Management - Primavera P6

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Project Performance

Earned value is used in performance reviews to measure project

Earned Value Management:

Project Management Professional 5th Edition Cost Management

Earned Value Management:

4. Actual Cost (AC):

Project Management Professional 5th Edition Cost Management

Earned Value Management:

If SPI is greater than one, that means EV is bigger than PV,

Earned Value Management:

Project Management Professional 5th Edition Cost Management

Project Management Professional 5th Edition Cost Management

Earned Value Management:

If CPI is greater than one, that means EV is bigger than AC,

Earned Value Management:

Project Management Professional 5th Edition Cost Management

Earned Value Management:

SPI is greater than or equal to 1

SPI is less than 1

Earned Value Management:

CPI is greater than or equal to 1

CPI is less than 1 and

Earned Value Management:

Project Management Professional 5th Edition Cost Management

Earned Value Management: Exercise#1

Project Management Professional 5th Edition Cost Management

Earned Value Management: Exercise#2

Project Management Professional 5th Edition Cost Management

Project Management Professional 5th Edition Cost Management

EAC = BAC / CPI

Project Management Professional 5th Edition Cost Management

The most common EAC forecasting approach is a manual,

1. EAC forecast for ETC work performed at the budgeted rate:

EAC = AC + (BAC - EV)

EAC = AC + [(BAC EV) / (CPI SPI)]

Project Management Professional 5th Edition Cost Management

Project Management Professional 5th Edition Cost Management

To-Complete Performance Index (TCPI) :

To-Complete Performance Index (TCPI) :

The number is greater than

The number is lower than

TCPI is opposite higher = loser.

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