PMEducation

Earned Value Management is a Cost-based method of assessing and reporting project progress. This financial data, however, should not be used in isolation. Earned Value calculations are recommended to supplement other information. In general, this information only has value when it is tracked over time. Single statistics can be misleading!

​

• Earned Value: EV, also known as Budgeted Cost of Work Performed (BCWP).

       The budget cost for the work (plus overheads) that was actually completed in a

       given time period. It is a measure of the work accomplished. Think of it as

       "what you got." Activities may be classed as discrete or level of effort. If

        discrete, no credit is given for completing an activity until it is fully done. (see

        note below: Earned Value Measurement" 

       

• Planned Value: PV, also known as Budgeted Cost of Work Scheduled (BCWS). The budgeted cost of the work (plus overheads) that was scheduled to be accomplished in a given time period. Think of it as "your Cost Plan for what was supposed to get done".

​

• Actual Cost: AC, also known as Actual Cost of Work Performed (ACWP). The actual cost of the work (plus overheads) that was actually completed in a given time period. Think of it as "what you aid." Since payment lags behind invoices and work done, you will need to freeze a moment in time to catch AC, EV, and PV.

​

​With these 3 metrics we can calculate useful performance measurables.

​

     1.  Cost Variance (CV): CV =  EV-AC. A negative CV means the project has

          spent more than it should for the work produced. Positive CV means you

          have saved money.

​

     2.  Schedule Variance (SV): SV = EV-PV. A negative SV means the project is

          behind schedule. Positive SV means you are ahead of schedule.

​

     3.  Cost Performance Index (CPI): CPI = (EV/AC). CPI represents the cost

          efficiency of work performed. A CPI greater than 1.0 means the project is

          costing less than planned, so far. A CPI less than 1.0 means the project is

          costing more than planned, so far.

​

     4.  Schedule Performance Index (SPI):  SPI = (EV/PV). CPI represents the time

          efficiency of the work performed. An SPI greater than 1.0 means more work

          is getting completed than planned, so far. An SPI less than 1.0 means less

          work is getting completed than planned, so far.

​

     5.  Critical Ratio (CR): CR = CPI x SPI.  CR looks at both Cost and Schedule. 

          CR can be expected to range between 0.9 and 1.2 for a healthy project.

​

Recall: The total budget for the project is called Budget at Completion (BAC)

​

     6.  Percentage of Work Complete: Based on Cost, the percentage of work

          complete can be calculated by: PC = (EV / BAC) x 100

​

     7.  Percentage of Money Spent: This is a simple calculation:

          PS = (AC  / BAC) x 100

​

 When we recall that Total Expected Cost (TEC) is how much we expect the project to have cost, at completion, we can use the above metrics for forecasting it. TEC is sometimes called Estimate at Completion (EAC) and means the same thing.

​

     8a.  If CPI is expected to continue the same for the remainder of the project,

            then EAC = (BAC/CPI)

​

     8b.  If future work will be accomplished according to the cost plan,

            then EAC = AC + (BAC-EV)

​

     8c.  If the future work will not likely be accomplished according to the cost plan,

            then EAC = AC + (bottom up re-estimate of remaining work)

​

     8d.  If both the CPI and the SPI influence the remaining work,

            then EAC = AC + {(BAC-EV) / (CPI x SPI)}

​

     9.  You can also forecast the TIME To Complete your project (TTC) as:

           TTC= Planned total duration / SPI 

​

            This assumes the current SPI will continue to the end of your project.

 

Finally, we can consider the To Complete Performance Index (TCPI). This is the cost performance that must be achieved for one of 2 goals.

​

     10a.  To complete the project on the cost plan,

             then TCIP = (BAC-EV) / (BAC-AC) 

               Think of it as the remaining work divided by the remaining budget.

​

•              (BAC-EV)=(PV for the remaining work).

•              (BAC-AC)=(the remaining money left in the budget)

​​

             In this case, a TCIP greater than 1.0

             means it will be harder to complete the project staying within the Budget.

​

     10b.  To complete the project spending no more than the current EAC,

             then TCIP = (BAC-EV) / (EAC-AC)

               Think of it as the remaining work divided by the remaining money to

                reach the current EAC. 

​

•               (EAC-AC)=(the remaining money left in the EAC)

​​

            In this case, a TCIP greater than 1.0 means it will be

            harder to complete the project staying within the current Estimate at     

            Completion (which is how much we expect the project to cost, at

            completion.

​

FINAL NOTES:

​

These metrics can be plotted against time, on a graph, as your project develops. The figure below illustrates this idea. In this way you can see changes and trends as time goes by, and so improve your monitoring which leads to more effective controlling.