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Earned Value Project Management
Earned Value Project Management uses Earned Value Analysis (EVA), which is another important project controlling tool that helps to control cost and schedule in larger projects or sub-projects. The following example shows how it works.
Let us assume we are at the end of week 16 of a small project with 12 work packages, 7 of which are already completed, and another work package has been started.
Our project account shows the actual cost accrued, AC = 2.3 Mill. $, and the work package experts tell us the value of the work accomplished, earned value, EV = 1.4 Mill. $. The project planning documents show that by the end of week 16 we should have accomplished work corresponding to the planned value, PV = 1.8 Mill. $.
In earlier presentations of that matter we find
- Budgeted Cost of Work Scheduled BCWS = Planned Value PV
- Budgeted Cost of Work Performed BCWP = Earned Value EV
- Actual Cost of Work Performed ACWP = Actual Cost AC
We use the values PV, EV and AC to calculate Cost Performance Index (CPI) and Schedule Performance Index (SPI):
In our example, we obtain CPI = 0.609 and SPI = 0.778 indicating that we are over budget and behind schedule.
Earlier presentations refer to
- Cost Variance CV = BCWP – ACWP = EV - AC
- Schedule Variance SV = BCWP – BCWS = EV – PV
In our example, this would lead to a
- Cost Variance of CV = 1.4 Mill. $ - 2.3 Mill. $ = - 0.9 Mill. $
- Schedule Variance of SV = 1.4 Mill. $ - 1.8 Mill. $ = - 0.4 Mill. $
Remark
Using earned value analysis might not be sufficient if we need to solve problems of cost or schedule overrun. Under most conditions, we can combine it with other tools like
- Milestone Trend Analysis, and
- the "simple" tools: WBS, network diagram, Gantt chart (as we describe in more detail in our sub-section Project Controlling Tools).
In case you would like to use practical and useful packages of tools, templates and checklists, here you can get them. They save you a lot of time, are easy to use and easy to change:
All four PM Phases in one Set
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