Earned Value
JOEL VIRAY
jviray@lmrsolutions.com
TOPICS
What is Earned Value Management?
– Why do I need it?
– How do I do it?
• Earned Value Reporting
• Earned Value System
What is Earned Value?
A Manager’s Tool for Integrated Cost, Schedule
and Technical Performance Management
Technical
Schedule
Earned
Value
Cost
CSSR
CPR
Other Information
• Earned Value is an objective measurement of how much
work has been accomplished on a project and at what
cost
• Provide early alerts to performance slippage
• Earned Value indicates how much of the budget should
have been spent in view of the amount of work done so
far
Why use EVM?
• Accurate picture of project status
– cost, schedule, AND technical
• Early and accurate identification of trends
and problems
• Basis for corrective action
• Supports mutual goals of contractor and
customer
– bring project in on schedule and cost
How Does Earned Value Work?
• Successful EVM management requires
several key practices:
– Identify each project deliverable
– Develop a schedule for the completion of
each deliverable
– Assign a value to each deliverable
Terminology
•
•
•
•
ACWP = Actual Cost of Work Performed
BCWP = Budgeted Cost of Work Performed
BCWS = Budgeted Cost of Work Scheduled
SPI = Schedule Performance Index
– (EV/Planned Value) or (BCWP/BCWS)
• CPI = Cost Performance Index
– (EV/Actual Cost) or (BCWP/ACWP)
• EAC = Estimate at Completion
• BAC = Budget at Completion
WHY DO I NEED IT?
EVM - A Simple Example
•
•
Your project:
– total budget of $100,000
– 12 month effort
– produce 20 units
•
•
How are you doing? Is everything going to plan?
How far along are you? (64%, 50%, >40%)
Status:
– spent to date: $64,000
– time elapsed: 6 months
– units produced: 8
complete or 40%
Complete
– Is this where you expected to be or do you need to take
action?
Earned Value – the Math
EVM - A Simple Example
•
•
Your project:
– total budget of $100,000
– 12 month effort
– produce 20 units
Status:
– spent to date: $64,000
– time elapsed: 6 months
– units produced: 8
complete or 40%
Complete
The Basics
• BAC = Budget at Completion = $100,000
• BCWS = Plan =$50,000
• ACWP = Actuals = $64,000
• BCWP = Performance = $5,000/unit = $40,000
EVM - A Simple Example
Your project:
•
– total budget of $100,000
– 12 month effort
– produce 20 units
• Earned Value
– BAC = $100,000
– BCWS = $50,000
Status:
– spent to date: $64,000
– time elapsed: 6 months
– units produced: 8 complete
or 40% Complete
ACWP = $64,000
BCWP = $40,000
The Variance Measures
• CV= Cost Variance =BCWP-ACWP= -$24,000
• SV =Schedule variance = BCWP-BCWS= -$10,000
• CV% = CV/BAC = -20%
• SV % = SV/BAC = -10%
• CPI = BCWP/ACWP = 40,000/100,000 = 0.4
• SPI = BCWP/BCWS = 40,000/50,000 = 0.8
Earned Value Trend Graph
125K
EAC
$120K
Cost Variance
$20K
100K
BAC
$100K
Cost
75K
ACWP
$64K
50K
BCWS
$50K
Schedule Variance
$10K
25K
Earned Value (Work
Completed) $40K
10K
0
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TIME FRAME
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Sample Project: Second Story
Deck
•
•
•
•
Stands 10 feet off the ground
Measures 12 x 12 feet
Set of stairs will lead to the ground
Will be supported with 4 posts resting on
concrete footings
• Footings must extend below frost line (4
feet)
• Homeowner (and friends) will construct
with standard materials
Planned Values for Deck
Replacement Project
Measuring Performance
• End of Day 5
– Planned: 34 hours of work
– Expended: 36 hours
– Earned: 26 hours
Measuring Performance
Measuring Performance
• CPI (EV/Actual Cost)
26/36 = 0.72
– We are realizing 7.2 hours of result for every 10 hours of actual effort
expended
• SPI (EV/Planned Value)
26/34 = 0.76
– We are realizing 7.6 hours of result for every 10 hours of planned effort
Corrective Action
Stakeholder Priority
General Approach
Possible Approaches
Maintain project schedule
Sacrifice product
• Reduce scope of other
part of project (hand
railings)
• Stop digging and hope
building inspector doesn’t
notice
Sacrifice cost
• Work overtime
• Have a friend help (more
pizza and beer)
• Rent a back-hoe
Re-Baseline Plan
Why do we need Early
Warning?
Course corrections are easier
when you have time to make
adjustments
It’s too late when you’re this close
to the iceberg!
STATING THE OBVIOUS
• EVM will not solve your problems - only
you can do that!
• A good tool is POINTLESS if you don’t
TAKE ACTION based on the information
it gives you!!!
EPM Solution Architecture
Line of
Business Applications
WAW
DIFMS
SOS
Internal/External
SLDCADA
Databases
More…