Earned Value Technique

Earned Value Management is nice technique to gauge the performance of a project



Here is one for Earned Value Technique used to calculate performance of project at any given point of time.



Key Definitions:

• 
  
  Planned Value (PV) or Budgeted Cost Of Work Scheduled (BCWS):
  
  • Authorized budget assigned to the scheduled work to be accomplished for a schedule activity or WBS component.
    
• 
  
  Earned Value (EV) or Budgeted Cost Of Work Performed (BCWP):
  
  • Approved budget assigned to that work for a schedule activity or WBS component.
    
• 
  
  Actual Cost (AC) or Actual Cost Of Work Performed (ACWP)
  
  • Total cost incurred or recorded in accomplishing work performed during a given time period for a schedule activity or WBS component.
    

Sample Data:

Task Name	Duration	Planned Cost	Cost Expended	% Completed	Earned Value
A	23	150	250	100	150
B	4	40	50	80	32
C	32	75	100	70	52.5
D	12	100
E	14	150

• At the end of 59th day, performance review is required.
  
• 
  
  Only three tasks - A, B, C were planned till 59th day.
  
  • So PV = 150+40+75 = 265
    
• 
  
  Actual cost by 59th day is
  
  • AC = 250+50+100 = 400
    
• 
  
  Earned Value will be based on % completed * planned cost.
  
  • 
    
    EV = 100%*150 + 80%*40 + 70%*75 = 234.5
    
    
    
    
• Schedule Variance (SV) = EV - PV = 234.5 - 265 = -30.5
  
• 
  
  Cost Variance (CV) = EV - AC = 234.5 - 400 = -165.5
  
  • Negative SV means project behind schedule.
    
  • Negative CV means cost has been expended more that what was assigned.
    
• CPI (Cost Performance Index) = EV/AC = 234.5/400 = 0.5863
  
• 
  
  SPI (Schedule Performance Index) = EV/PV = 234.5/265 = 0.8849
  
  • SPI less than 1 means behind schedule.
    
  • SPI more than 1 means ahead of schedule.
    
  • SPI = 1 means on schedule.
    
  • CPI less than 1 means cost overrun.
    
  • CPI more than 1 means cost under run.
    
  • CPI = 1 means on budget.
    
  
  
  
• 
  
  To Complete Performance Index (TCPI) = (BAC - EV)/(BAC - AC)
  
  • BAC = Budget At Completion. = 150+40+75+100+150 = 515
    
  • TCPI is efficiency that must be achieved to complete remaining work with remaining budget.
    
  • TCPI = (515 - 234.5)/(515 - 400)=2.4391
    
  • So, 243% of original planned performance required to meet objectives.
    
  
  
  
• Estimate at Completion (EAC) = expected total costs of scheduled activity, WBS component or project.
  
• 
  
  Estimate to Complete (ETC) = expected cost needed to complete all the remaining work for a schedule activity, WBS or the project.
  
  • EAC = AC + ETC
    
  • ETC = (BAC - EV) for atypical variance.
    
  • EAC = AC + BAC - EV
    
  • ETC = (BAC - EV)/CPI for typical variance.
    
  • EAC = BAC/CPI for typical variance.
    
  • 
    
    VAC (Variance At Completion) = EAC - BAC
    
    
    
    
  • If this project has atypical variance, then
    
  • ETC = 515 - 234.5 = 280.5
    
  • EAC = 400 + 280.5 = 680.5
    
  • 
    
    VAC = 680.5 - 515 = 165.5
    
    
    
    
  • If this project has typical variance, then
    
  • ETC = (515 - 234.5)/0.5863 = 478.424
    
  • EAC = 515/0.5863 = 878.3899
    
  • VAC = 878.3899 - 515 = 363.3899