Project Management
Monitoring and Control
using
Earned Value Management (EVM)
Minder Chen, Ph.D.
CSU Channel Islands
Minder.chen@csuci.edu
Free download  EVM for Dummies (link)
Project Planning
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Project Cost Management
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Project Cost Management
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Monitoring and Control
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Control
• Control is the process of comparing actual
performance against plan to identify deviations,
evaluate possible alternative courses of actions,
and take appropriate corrective action.
• The project control steps for measuring and
evaluating project performance are presented
below:
1. Setting a baseline plan.
2. Measuring progress and performance.
3. Comparing plan against actual.
4. Taking action.
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Project Monitoring and Control
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Planning the Project under Triple Constraints
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Planning Process
Costs/Budget
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Using Gantt Chart for Project Control
http://en.wikipedia.org/wiki/File:GanttChartAnatomy.svg
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Interaction of WBS and OBS Establishes the Control Accounts
http://www.humphreys-assoc.com/evms/basic-concepts-earned-value-management-evm-ta-a-74.html
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Performance Measurement Baseline
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Budget
http://pm-foundations.com/tag/project-budgeting/
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Budget Summary Matrix
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PM Information System Overview
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-phased
2
Resource
Schedule
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Time-phased
Budget
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Control Costs
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Control Costs
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Earned Value Management (EVM)
• Monitoring your project’s performance involves
determining whether you’re on, ahead of, or behind
schedule and on, under, or over budget. But just
comparing your actual expenditures with your
budget can’t tell you whether you’re on, under, or
over budget — which is where EVM comes in.
• The basic premise of earned value management
(EVM) is that the value of a piece of work is
equal to the amount of funds budgeted to
complete it.
http://www.dummies.com/how-to/content/earned-value-management-terms-and-formulas-for-pro.html
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Earned Value Management (EVM)
• Important questions for controlling projects: Did I get
my money’s worth? Did I spend my hours, days and
weeks wisely?
• Earned Value Management (EVM) has been used to
answer these basic questions. EVM uses a common
set of units ($$$) to compare the funds spent, the work
planned, the work done and the passage of time.
– Quantifying (in budget terms) the value of all project tasks
(work packages)
– Looking at the dates work or products are supposed to be
done
– Seeing when the work is actually done
– Recording how much was spent completing the work.
http://www.pmi.org/Why-Earned-Value-Management-Works.aspx
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Earned Value
• The earned value system starts with the time-phased costs that
provide the project budget baseline, which is called the
planned budgeted value of the work scheduled (PV). Given this
time-phased baseline, comparisons are made with actual and
planned schedule and costs using earned value.
• At the work package level, collect the actual costs for the work
performed. These costs will be called the actual cost of the
work completed (AC).
• ** Collect percent complete and multiply this times the
original budget amount for the value of the work actually
completed. These values will be called earned value (EV).
• The unique EVM element is the value of completed work. In
EVM, work is worth what is budgeted to complete it, not what
was spent to complete the work. It is not necessary to know
how much was spent to determine the EV.
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PV, EV, AC
• Planned value (PV): The approved budget for the
work scheduled to be completed by a specified date;
also referred to as the budgeted cost of work
scheduled (BCWS). The total PV of a task is equal to
the task’s budget at completion (BAC) — the total
amount budgeted for the task.
• Earned value (EV): The approved budget for the work
actually completed by the specified date; also referred
to as the budgeted cost of work performed (BCWP).
• Actual cost (AC): The costs actually incurred for the
work completed by the specified date; also referred to
as the actual cost of work performed(ACWP).
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Percent Complete Rule
• This rule is the heart of any earned value system. The best
method for assigning costs to the baseline under this rule
is to establish frequent checkpoints over the duration of
the work package and assign completion percentages
in dollar terms.
• For example, units completed could be used to assign
baseline costs and later to measure progress. Units might
be lines of code, hours, drawings completed, cubic yards of
concrete in place, workdays, prototypes complete, etc. This
approach to percent complete adds “objectivity” to the
subjective observation approaches often used.
• When measuring percent complete in the monitoring phase
of the project, it is common to limit the amount earned to
80 or 90 percent until the work package is 100 percent
complete.
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How to Determine a Task’s Earned Value
• Percent-complete method: EV is the product of the fraction
representing the amount of an activity that has been completed and the
total budget for the activity. This method is potentially the most accurate if
you correctly determine the fraction of the activity you have completed.
However, because that estimate depends on your subjective judgment,
this approach is also most vulnerable to errors or purposeful
manipulation.
• Milestone method: EV is zero until you complete the activity, and it’s
100 percent of the total activity budget after you complete it. The
milestone method is the most conservative and the least accurate. You
expect to spend some money while you’re working on the task. However,
this method doesn’t allow you to declare EV greater than $0 until you’ve
completed the entire activity. Therefore, you’ll always appear over budget
while you perform the activity.
• 50/50 method: EV is zero before you start the activity, 50 percent of the
total activity budget after you start it, and 100 percent of the activity
budget after you finish the activity. The 50/50 method is a closer
approximation to reality than the milestone method because you can
declare an EV greater than $0 while you perform the task. However, this
approximation can inadvertently mask overspending.
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Example
http://www.dummies.com/how-to/content/how-to-determine-a-tasks-earned-value.html
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Summarize EVM Data via WBS or OBS
The variance calculations are typically done at the
control account level which provides the ability to
summarize the data up through the WBS and/or the
OBS.
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Varainces
• Schedule variance (SV): The difference between the
amounts budgeted for the work you actually did and for the
work you planned to do. The SV shows whether and by how
much your work is ahead of or behind your approved
schedule.
SV = EV - PV
• Cost variance (CV): The difference between the amount
budgeted and the amount actually spent for the work
performed. The CV shows whether and by how much you’re
under or over your approved budget.
CV = EV – AC
A positive variance indicates a desirable condition, while a
negative variance suggests problems or changes that have
taken place.
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Cost/Schedule Graph
Estimated
cost At
Completion
Budgeted cost
At Completion
CV = EV - AC
SV = EV - PV
Using the
money to
represent how
much has
been
completed.
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CV and SV: Cost Variance & Schedule Variance
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Earned Value Review
• Assessing the current status of a project using the schedule
variance (SV) and cost variance (CV) are computed each
reporting period.
• A positive variance indicates a desirable condition, while a
negative variance suggests problems or changes that have
taken place.
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Earned Value Management
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Performance Index
Planned value (PV)
Earned value (EV)
Actual cost (AC)
•CV = EV – AC
•SV = EV - PV
•Cost performance index (CPI) = EV/AC
•Scheduling performance index (SPI) = EV/PV
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Performance Measure
To describe your project’s schedule and cost performance with
EVM, you use the following indicators:
• Schedule performance index (SPI): The ratio of the approved budget for
the work performed to the approved budget for the work planned. The SPI
reflects the relative amount the project is ahead of or behind schedule,
sometimes referred to as the project’s schedule efficiency. You can use the
SPI to date to project the schedule performance for the remainder of the
task.
• Cost performance index (CPI): The ratio of the approved budget for work
performed to what you actually spent for the work. The CPI reflects the
relative value of work done compared to the amount paid for it, sometimes
referred to as the project’s cost efficiency. You can use the CPI to date to
project the cost performance for the remainder of the task.
With this information can we answer the key questions,
“Did we spend our money well?”, and
“Did we use the time we had efficiently.”
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Case Study
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Case Study
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Gantt Chart Showing Status—Through Period 7
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Case Study
• Cost performance index (CPI) = EV/AC
= 160/230 = .696 or .70
• Scheduling performance index (SPI) = EV/PV
=160/200 = .80
• Percent complete index
(PCIB) in terms of budget amounts
= EV/BAC = 160/320 = .50 (50%)
• Percent complete index
(PCIC) in terms of actual dollars spent
= AC/EAC = 230/459 = .50 (50%)
EAC: actual expected dollars for the
completed project
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Estimated Total Cost at Completion (using CPI)
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Estimate cost To Complete (ETC)
• EAC forecast for ETC work performed at the budgeted rate.
This EAC method accepts the actual project performance to date (whether
favorable or unfavorable) as represented by the actual costs, and predicts
that all future ETC work will be accomplished at the budgeted rate.
Equation: EAC = AC + (BAC – EV)
• EAC forecast for ETC work performed at the present CPI.
The ETC work is assumed to be performed at the same cumulative cost
performance index (CPI) as that incurred by the project to date.
Equation: EAC = BAC / CPI
• EAC forecast for ETC work considering both SPI and CPI
factors. In this forecast, the ETC work will be performed at an efficiency
rate that considers both the cost and schedule performance indices. This
method is most useful when the project schedule is a factor impacting the
ETC effort. Variations of this method weight the CPI and SPI at different
values (e.g., 80/20, 50/50, or some other ratio) according to the project
manager’s judgment.
Equation: EAC = AC + [(BAC – EV) / (CPI × SPI)]
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Estimate based on Combined Cost and Schedule Performance
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Cost and Schedule Variance Trends
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Risk Management
http://www.mybusinessprocess.net/wp-content/uploads/2012/01/Risk-Management-Process-3.jpg
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