Demystifying
Earned Value Analysis
Kansas City MPUG Chapter
June 18, 2002
Presented by Tim Pyron
Author: Que’s Special Edition Using Microsoft Project 2002
Que’s Special Edition Using Microsoft Project 2000
SAMS Teach Yourself Microsoft Project 2000 in 24 Hours
Editor:
Woody's Project Watch
Phone: (210)822-0839
(www.woodyswatch.com)
Email: tpyron@txdirect.net
Overview
•
Understanding Earned Value Analysis
•
Understanding the EV metrics
•
Project’s Earned Value calculations
•
Graphing Earned Value metrics in Excel
•
Conclusion
2
What is Earned Value Analysis
•
EVA is the tool used by those who
practice Earned Value Management
•
EVA provides early warning signals of
trouble
•
EVA provides a basis for revising the
plan (and maybe the goals) in order to
get back on track
•
EVA provides a basis for estimating
final costs and the project finish date.
3
What’s wrong with using Variances?
•
Each variance shows a different aspect of
progress in its own units; and comparing
dollars and time makes it difficult to assess
your net position
•
EVA measures everything in dollars
•
Variances don’t show if productivity is at the
levels you planned
•
EVA measures productivity up through the
status date
4
Figure 1 (Simple Cost Variance)
5
History of Earned Value Analysis
•
Started with defense contracts
•
Originally used to justify staged
payments for projects in progress
•
Now widespread in private sector also
•
Is becoming a world-wide standard
6
Example: Using variances
Baseline duration is 1 Year (Jan – Dec)
Baseline cost is $1,000,000
Baseline work is scheduled to be 50% complete as of June 30
Baseline cost through June 30 is $500,000
Actuals on June 30:
60% of work is completed
Actual Cost is $550,000
Cost is $1,050,000
*Cost = Remaining Cost + Actual Cost
What is the Cost Variance?
$ 50,000
Does that mean the project will go over budget?
That there’s not enough in the budget to finish the project?
??
7
Example: Using EVA
Baseline duration is 1 Year (Jan – Dec)
Baseline cost is $1,000,000
Baseline work is scheduled to be 50% complete as of June 30
Baseline cost through June 30 is $500,000
Actuals on June 30:
60% of work is completed
Actual Cost is $550,000
Cost is $1,050,000
*Cost = Remaining Cost + Actual Cost
What is the planned value of this project?
$1,000,000
How much of that value has been earned by June 30? $600,000
How much was planned to be earned?
$500,000
What did it actually cost ?
$550,000
8
Planned Value (PV)
•
PV is that part of the project/task’s value
we plan to be completed up through the
status date.
•
PMBOK formerly called PV the
Budgeted Cost of Work Scheduled or
BCWS.
•
Total Baseline Cost called BAC
(Budgeted at Completion)
9
Earned Value (EV)
•
EV is the planned value of the
completed portion of the project/task
•
EV = % Work Complete * Baseline Cost
Note that % Work Complete uses currently scheduled
work – not baseline work. Example:
Baseline Work = 10h
Actual Work
= 5h
Scheduled Work = 15h
% Work Complete = 33%
BAC
= $1,000 Earned Value
= $333
•
PMBOK formerly called EV the
Budgeted Cost of Work Performed or
BCWP
10
Actual Costs (AC)
•
AC is the actual cost of work that was
completed as of the status date
•
PMBOK formerly called this the
Actual Cost of Work Performed or
ACWP.
11
Prerequisites for using EVA
•
Work and cost must be distributed over time
(Microsoft Project’s timephased data)
•
The must capture the baseline
•
You must define a Status Date for assessing
performance (Project, Project Information)
•
You must track actual start and finish dates,
work, and costs; and you must reschedule
work not completed on time and work that is
completed ahead of schedule.
12
The Sample Task
Task 1
•
Duration = 4 days
•
Abe is assigned 100% to the task
•
Abe's standard rate is $1/hr.
•
Figure 1 illustrates the task and Abe's
assignment before any actual work is
recorded.
13
Figure 2 (Before actuals)
14
Figure 3 (Task is 50% Complete)
15
Planned Value and Earned Value
•
Are equal if everything goes as planned
•
Both use Baseline Cost for different amounts
of work (planned vs actual)
•
Any difference is due to the amount of work
completed by the status date
•
Differences can arise when (for example):
•
•
•
Estimated work changes after the baseline was
captured
Overtime is used but not scheduled (or vice versa)
Resources are diverted to higher priority tasks or
projects.
16
SV: Earned Value Schedule Variance
•
Equals Earned Value minus Planned Value
•
SV = Earned Value – Planned Value
SV =
BCWP
–
BCWS
Task1: $16
–
$24
= - $8
•
Positive SV means more work completed than
planned. If continued, project may finish early
Might be possible to transfer some resources to
other tasks or projects
•
Negative SV means work is not being
completed on time. Project might finish late
PM should determine the cause to avoid missing
the finish goal.
17
Figure 4 (SV, SV%, SPI)
18
SV%: Schedule Variance Percent
•
Expresses SV as a % of Planned Value
•
SV% = SV / PV
= (BCWP – BCWS) / BCWS
Task1: ( $16
–
$24 )/
$24
=
– 33%
That means 33% of planned work was not finished
•
SV% is useful when comparing SV between projects
of vastly different sizes
19
SPI: Schedule Performance Index
•
Most important version of SV
•
Is ratio of Earned Value to Planned Value
SPI = EV / PV = BCWP / BCWS
Task1:
•
$16 / $24 = 0.67
SPI < 1.0 is unfavorable
SPI = 0.67 means we earned only $0.67 of every $1
we planned to earn this period
•
SPI > 1.0 is favorable
SPI = 1.25 would mean we earned $1.25 for every
$1 we planned to earn during this period.
20
SPI: Revise Estimated Duration
•
Use SPI to revise estimated total duration,
thus the new estimated finish date
•
Assumes current SPI will continue to end of
project
•
Revised Remaining Duration (Rem.Dur.)
= Remaining Duration / SPI
Task 1: =
2d
/ 0.67 = 3d
•
Finish Date = Status Date + Rem. Duration
Task 1:
=
Day 3
+
3d = Day 6
21
Earned Value and Actual Costs
•
Are equal if everything goes as planned
•
Both use Actual Work, but it’s valued at
different costs (planned vs actual) – any
difference is due to the cost of the work
•
Differences can arise when (for example):
•
•
•
•
Unplanned overtime was used
Resource cost rates changed
Higher cost resources were substituted
Earned Value minus Actual Costs is the
Earned Value Cost Variance: CV = EV – AC
22
Figure 5 (substitute more costly resource)
23
Figure 6 (CV, CV%, CPI)
24
CV: Earned Value Cost Variance
•
CV = Earned Value – Actual Costs
•
CV =
Task 1:
•
Positive CV is favorable: the value of the work
was greater than the cost of producing it.
•
Negative CV is unfavorable: the value of the
work is less than the cost of producing it.
BCWP
$16
–
–
ACWP
$20
= – $4
25
CV%: Cost Variance Percent
•
Expresses CV as a % of Earned Value
•
CV%
•
CV% is useful when comparing CV between
projects of vastly different sizes
= CV / EV
= (BCWP – ACWP) / BCWP
Task 1: = ( $16 – $20 ) / $16 = - 25%
That means 25% of planned work was not
finished
26
CPI: Cost Performance Index
•
Most important version of CV
•
Is ratio of Earned Value to Actual Cost
CPI = EV / AC = BCWP / ACWP
Task1: $16 / $ 20 = 0.80
•
CPI < 1.0 is unfavorable
If CPI = 0.80 means for every dollar of actual cost
we produce work worth only $0.80
•
CPI > 1.0 is favorable
IF CPI = 1.25 it would mean that for every $1 we
actually spent we produced work worth $1.25
•
Use CPI to calculate if project will go over budget and
27
by how much
Estimate to Complete (ETC)
•
What will it cost to finish the remaining
budgeted work (unearned value) assuming
the current CPI will continue to the end of the
project?
•
Divide remaining budgeted work by CPI
•
Remaining budgeted work = BAC - EV
*BAC is Budgeted At Completion (Baseline Cost)
•
ETC = (BAC – EV ) / CPI
Task 1: ( $32 – $16 ) / 0.80 = $20
28
Estimate at Completion (EAC)
•
A revised total cost at completion
•
EAC
= AC + ETC
Task 1:
$20 + $20
= $40
•
Project 2002 now calculates EAC this
way
•
The new Earned Value Cost Indicators
table shows EAC, BAC, and VAC
(Vac = Variance at Completion)
29
Figure 7: (BAC, EAC, VAC, TCPI)
30
TCPI: To Complete Performance Index
Is there enough left in the budget to complete the project?
•
(BAC – BCWP) (Budgeted cost of unfinished work)
--------------------- = -----------------------------------------------(BAC – ACWP)
(Unspent Budget)
*where BAC = Baseline Cost
•
Task1: = ($32 - $16) / ($32 - $20)
=
16
/
12
= 1.33
•
If TCPI > 1: Not enough in the budget to complete the planned
work. Must increase productivity or reduce scope or quality.
•
If TCPI < 1: Running under budget. Could increase scope or
quality, or can increase contract profit
31
Summary of EV Metrics
Three core metrics
Planned Value
PV (BCWS)
Earned Value
EV (BCWP)
Actual Costs
AC (ACWP)
Variances
Schedule Variance
SV = EV-PV; SV% = SV/PV
Cost Variance
CV = EV-AC; CV% = CV/EV
Indicators (performance indexes)
Schedule Performance Index
SPI = EV/PV
Cost Performance Index
CPI = EV/AC
To Complete Performance Index
TCPI = (BAC-EV)/(BAC-AC)
32
MS Project’s EV Calculation
For Assignments:
EV = % Work Complete * BAC
For Tasks:
1. Calculate Actual Duration ( = % Complete *
Duration)
2. Sum timephased Baseline Cost for periods
spanned by Actual Duration
Note: Assignments are not rolled-up to the task.
So, Sum of Assignment EV’s <> Task EV
33
Work around: How to con Project into
using % Work Complete
1. Work with a backup copy of the project file
2. Choose Tools, Options, Calculation tab:
Disable Updating task status updates resource status
3. Add % Complete and % Work Complete
columns to the Earned Value table
4. Copy % Work Complete column
into % Complete
column
* Assignments still don’t roll up to tasks, but …
34
Generating EV Graphs
•
Graphing EV metrics reveals trends
over time
•
Use Analysis Toolbar:
Analyze Timescaled Data in Excel
•
Adjust data and graph formats
37
Figure 9 Plain EV Graph
38
Figure 10 BCWS extended to Finish Date
39
Figure 11 PV, EV, AC, SV, and CV
40