Earned Value Analysis

to monitor the progress of a project

and to address the project control related
queries
By
Sourav Modak A032
Makrand Kolekar A025
Nandan Parab A039
Pratish Zaveri A056

3rd Year,
PTMBA 2014-17,
NMIMS University,
Mumbai

 What Is It ?

Earned
Value
Analysis

Why Do We Need It ?
How Do We Do It?

 Need for accurate and consistent status

information

Todays
Situation

Numerous
projects

complex

(and

interrelated)

Projects with many WBS (Work Breakdown

Structure) activities
Virtual offices
Diverse
and
integrated
manufacturing
processes

70% of projects are:

Over budget

Theres
Room For
Improveme
nt

Behind schedule
52% of all projects finish at 189% of
their initial budget.
And some, after huge investments
of time and money, are simply
never completed.

How to
answer the
question:
Have we
done what
we said
wed do?

% complete estimating
% of Budget spent
% of work done
% of time elapsed

The Answer
is:

EARNED VALUE ANALYSIS

 EVA is an industry standard way to:

What Is
Earned
Value
Analysis
(EVA)?

measure a projects progress

forecast its completion date and final cost
provide schedule and budget variances along
the way

By integrating three measurements, it

provides consistent, numerical indicators
with which we can evaluate and compare
projects.
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.

 Knowing where you are on schedule?

Knowing where you are on budget?

Why Is EVA
Important?

Knowing
where
accomplished?

you

are

on

work

It provides an Early Warning signal for

prompt corrective action.

 PV Planned Value

Some New
Terms

AC - Actual Cost
EV Earned Value

120000
100000
80000
60000

BCWS

40000
20000
Dec-03

Nov-03

Oct-03

Sep-03

Aug-03

Jul-03

Jun-03

May-03

Apr-03

Mar-03

Feb-03

0
Jan-03

PV
Planned
Value
or Budgeted
Cost of
Work
Scheduled
(BCWS)

Planned cost of the total amount of work

scheduled to be performed by the milestone
date.

Cost incurred to accomplish the work that has

been done to date.
120000
100000
80000
56000

60000

BCWP
ACWP

49000

40000
20000

Dec-03

Nov-03

Oct-03

Sep-03

Aug-03

Jul-03

Jun-03

May-03

Apr-03

Mar-03

Feb-03

0
Jan-03

AC
Actual Cost
or Actual
Cost of
Work
Performed
(ACWP)

120000
100000
80000
BCWP

55000

60000

BCWS

49000

40000
20000

Dec-03

Nov-03

Oct-03

Sep-03

Aug-03

Jul-03

Jun-03

May-03

Apr-03

Mar-03

Feb-03

0
Jan-03

EV
Earned
Value
or Budgeted
Cost of
Work
Performed
(BCWP)

The planned (not actual) cost to complete the

work that has been done.

120000
100000
80000
60000

BCWP

55000
49000

40000

ACWP

20000
Dec-03

Nov-03

Oct-03

Sep-03

Aug-03

Jul-03

Jun-03

May-03

Apr-03

Mar-03

Feb-03

0
Jan-03

The Whole
Story!

BCWS

56000

 SV: Schedule Variance (EV-PV)

Some
Derived
Metrics

A comparison of amount of work performed

during a given period of time to what was
scheduled to be performed.
A negative variance means the project is
behind schedule

CV: Cost Variance (EV-AC)

A comparison of the budgeted cost of work
performed with actual cost.
A negative variance means the project is over
budget.

 Schedule Variance = EV-PV

$49,000

Schedule
Variance &
Cost
Variance

- $55,000
SV = - $ 6,000

Cost Variance = EV-AC

$49,000
$ 56,000
CV = - $ 7,000

 SPI: Schedule Performance Index

SPI=EV/PV
If SPI<1, it means project is behind schedule.

Some More
Derived
Metrics

CPI: Cost Performance Index

CPI= EV/AC
If CPI<1, it means project is over budget.
CSI: Cost Schedule Index (CSI=CPI x SPI)
The further CSI is from 1.0, the less likely project
recovery becomes.

 SPI: EV/PV
49,000/55,000 = 0.891
CPI: EV/AC

Performanc
e Metrics

49,000/56000 = 0.875
CSI: SPI x CPI
.891 x .875 = 0.780
The CPI and SPI are statistically accurate
indicators of final cost results.

 Estimated Project Cost

Estimation
of Project
Cost &
Project
Duration

Project Cost = Budgeted Cost / CPI

Expected Project Duration

Project Duration = Budgeted Duration / SPI

120000
103865
102000
90882

100000
80000
60000

BCWP
ACWP

40000
20000

Dec-03

Nov-03

Oct-03

Sep-03

Aug-03

Jul-03

Jun-03

May-03

Apr-03

Mar-03

Feb-03

Jan-03

Making
Projections

BCWS

140000

Estimate to
Complete

120000

116,571

100000

102000

80000
60000
40000
20000
0

BCWS
BCWP
ACWP

 Schedule Status Reporting

Value of
Earned
Value

Cost Status Reporting

Forecasting

 Quantifying / measuring work progress can

be difficult.

Shortcomin
gs of
Earned
Value

Time required for data measurement, input

and manipulation can be considerable.

 EVA & EVMS will help reduce guesswork in:

measuring performance
forecasting

Summary

Need to get beyond misleading measures of

progress.
Reasons to use EVA and EVMS:
Good project management practice
OMB requirement

Incorporate into contracts

Questions /
Discussion