EARNED VALUE
MANAGEMENT
(EVM)
Introduction
EVM is a project management technique
which measures the progress of a project by
combining technical performance, schedule
performance, and cost performance.
Work Accomplished
Schedule
Budget
Introduction
EVM compares PLANNED work to
COMPLETED work to determine if work
accomplished, cost, and schedule are
progressing as planned.
The amount of work actually completed
and resources actually consumed at a
certain point in a project
TO
The amount of work planned (budgeted) to
be completed and resources planned to be
consumed at that same point in the project
Key Definitions
Budgeted Cost of Work Scheduled (BCWS) The
cost of the work scheduled or planned to be completed
in a certain time period per the plan. This is also called
the PLANNED VALUE.
Budgeted Cost of Work Performed (BCWP) The
budgeted cost of the work done up to a defined point in
the project. This is called the EARNED VALUE.
Actual Cost of Work Performed (ACWP) The actual
cost of work up to a defined point in the project.
Variance Formulas
Schedule Variance:
SV = BCWP - BCWS
Schedule Performance Index:
SPI = BCWP / BCWS
Cost Variance:
CV = BCWP - ACWP
Cost Performance Index:
CPI = BCWP / ACWP
Results
SV, CV = 0 Project On Budget and Schedule
SV, CV < 0 Over Budget and Behind Schedule
SV, CV > 0 Under Budget and Ahead of
Schedule
CPI, SPI = 1 Project On Budget and Schedule
CPI, SPI < 1 Over Budget and Behind Schedule
CPI, SPI > 1 Under Budget and Ahead of
Schedule
Example
Project description:
We are supposed to build 10 units of
equipment
We are supposed to complete the project
within 6 weeks
We estimated that 600 man-hours to
complete all the units
It costs us $10/hour to build the equipment
Example
Project status:
Week 3
4 units of equipment completed
400 man-hours spent
How are we doing?
Are we ahead or behind schedule?
Are we under or over budget?
Example
Accomplished Work: 4/10 = %40 complete
BCWP = (600 man-hours*$10/hour)*(4/10 units)
= $2400
Schedule: 3/6 = %50 over
BCWS = (600 man-hours*$10/hour)*(3/6 weeks)
= $3000
Budget: 400/600 = %67 spent
ACWP = 400 man-hours*$10/hour = $4000
Example
SV = BCWP – BCWS = $2400 - $3000 = -$600
SV is negative; we are behind schedule
CV = BCWP – ACWP = $2400 - $4000
= -$1600
CV is negative; we are over budget
SPI = BCWP / BCWS = $2400 / $3000 = 0.8
SPI is less than 1; we are behind schedule
CPI = BCWP / ACWP = $2400 / $4000 = 0.6
CPI is less than 1; we are over budget
PROJECT PERFORMANCE PREDICTIONS
Earned Value analysis results are used to predict the
future performance of the project
NOTE: There are various names in the literature.
Budget At Completion (BAC) = The total budget (PV or
BCWS) at the end of the project. If a project has
Management Reserve (MR), it is typically added to the
BAC.
Amount expended to date (AC)
Estimated cost To Complete (ETC)
ETC = (BAC – EV) / CPI
Estimated cost At Completion (EAC)
EAC = ETC + AC