Earned Value Project Management
Last updated: 2022-03-19
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.
Earned Value Analysis Example: Gantt Chart
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. $.
Earned Value Analysis - Snapshot
In earlier presentations of that matter we find
- Planned Value PV = Budgeted Cost of Work Scheduled BCWS
- Earned Value EV = Budgeted Cost of Work Performed BCWP
- Actual Cost AC = Actual Cost of Work Performed ACWP
Performance Indices: CPI & SPI
We use the values PV, EV and AC to calculate Cost Performance Index (CPI) and Schedule Performance Index (SPI):
Earned Value Analysis: Formulas for CPI, SPI
In our example, we obtain CPI = 0.609 and SPI = 0.778 indicating that we are over budget and behind schedule, because CPI < 1 and SPI < 1.
- If CPI < 1, the project is over budget
- If CPI = 1, the project is on budget
- If CPI > 1, the project is under budget
- If SPI < 1, the project is behind schedule
- If SPI = 1, the project is on schedule
- If SPI > 1, the project is ahead of 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. $
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
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