1. PM- Tools & Techniques – EVM 1
Earned Value Management & Analysis
PROJECT MANAGEMENT
Dr. Najam Abbas Naqvi
Department of Space Science
Institute Of Space Technology, Islamabad, Pakistan
Planned Value , Earned Value , Actual Value /Cost (PV,EV,AC)
Variance Analysis (CV, SV, VAC)
Forecasting (EAC, ETC)
To-Complete Performance Index (TCPI)
2. PM- Tools & Techniques – EVM
EARNED VALUE ANALYSIS / MANAGEMENT
2
Earned value analysis is a technique that integrates scope, schedule, and
cost information into single measures to assess the status of project
performance.
• This integration of the approved scope, schedule, and cost for the
project is called a Performance Measurement Baseline (PMB)
EVA / EVM compares the performance measurement baseline to the
actual schedule and cost performance
3. PM- Tools & Techniques – EVM
EARNED VALUE ANALYSIS: PV , EV & AC
3
EVM develops and monitors three key dimensions for each work package and control
account
• Planned Value, PV is the authorized budget assigned to scheduled work. It is the authorized
budget planned for the work to be accomplished for an activity or WBS component, not
including management reserve.The total planned value for the project is also known as Budget At
Completion (BAC)
• Earned Value , EV is a measure of work performed expressed in terms of the budget authorized
for that work. It is the budget associated with the authorized work that has been completed. The
EV is often used to calculate the percent complete of a project.
• Actual Cost, AC is the realized cost incurred for the work performed on an activity during a
specific time period. It is the total cost incurred in accomplishing the work that the EV measured.
AC will have no upper limit; whatever is spent to achieve the EV will be measured.
4. PM- Tools & Techniques – EVM
VARIANCE ANALYSIS : CV & SV
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Variance analysis measures the amount of variance between a planned outcome (often a baseline)
and actual performance. Variance Analysis measures the variance in schedule dates, expenditures,
resource utilization, quality metrics, technical performance. The most common earned value
variance measurements are:
Cost Variance , CV is the amount of budget deficit or surplus at a given point in time. It is a
measure of cost performance on a project
CV = EV – AC
Schedule Variance , SV is the amount by which the project is ahead or behind the planned delivery
date, at a given point in time.
SV = EV – PV
5. PM- Tools & Techniques – EVM
PERFORMANCE INDEX : CPI & SPI
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Cost Performance Index , CPI is a measure of the cost efficiency of budgeted
resources, expressed as a ratio of earned value to actual cost.
CPI = EV/AC
Schedule Performance Index , SPI is a measure of schedule efficiency expressed as the
ratio of earned value to planned value. It measures how efficiently the project team is
accomplishing the work.
SPI = EV/PV
6. PM- Tools & Techniques – EVM
FORECASTING : EAC & ETC
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• As the project progresses, the project team may develop a forecast for the estimate at
completion (EAC) that may differ from the budget at completion (BAC) based on the
project performance.
• Estimate At Completion, EAC is typically based on the actual costs incurred for work
completed, plus an estimate to complete (ETC) the remaining work.
• EAC forecast for ETC work performed at the budgeted rate: EAC = AC + (BAC – EV)
• EAC forecast for ETC work performed at the present CPI: EAC = BAC / CP
• EAC forecast for ETC work considering both SPI and CPI factors:
EAC = AC + [(BAC – EV) / (CPI × SPI)]
7. PM- Tools & Techniques – EVM
EVM
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Figure uses S-curves to display EV data for a project that is performing over budget and behind the schedule
8. PM- Tools & Techniques – EVM
TO-COMPLETE PERFORMANCE INDEX : TCPI
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• The To-Complete Performance Index (TCPI)
is a measure of the cost performance that is
required to be achieved with the remaining
resources in order to meet a specified
management goal, expressed as the ratio of
the cost to finish the outstanding work to
the remaining budget.
• The equation for the TCPI based on the
BAC:
TCPI = (BAC – EV) / (BAC – AC)
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11. PM- Tools & Techniques – EVM
EVM - EXAMPLE
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Suppose you have a budgeted cost of a project at $900,000. The project is to be completed
in 9 months. After a month, you have completed 10 percent of the project at a total expense
of $100,000. The planned completion should have been 15 percent.
• BAC: $900,000
• Actual Completion: 10 %
• Actual Cost (AC) : $100,000
• Planned Value(PV) = Planned Completion (%) * BAC = 15% * $900,000 = $135,000
• Earned Value (EV) = Actual Completion (%) * BAC = 10% * $900,000 = $ 90,000
• Cost Variance (CV) = EV – AC = $90,000 - $100,000 = -$10,000 (OverBudget)
• Cost Performance Index (CPI) = EV / AC = $90,000 / $100,000 = 0.90 (OverBudget)
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12. PM- Tools & Techniques – EVM
EVM - EXAMPLE
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• Schedule Variance (SV) = EV – PV = $90,000 - $135,000 = -$45,000 (Since the number is
negative, the project is considered behind schedule)
• Schedule Performance Index (SPI) = EV/PV = $90,000 / $135,000 = $0.666 (Behind
Schedule)
• EAC = BAC / CPI = $900,000 / 0.9 = $1,000,000
• ETC = EAC – AC = $1,000,000 - $100,000 = $900,000
• VAC = BAC – EAC = $900,000 - $1,000,000 = - $100,000
• TCPI based on BAC = (BAC – EV) / (BAC – AC) = ($900,000 - $90,000) / ($1,000,000 -
$100,000) = $810,000 / $900,000 = 0.9
The project will be $100,000 over-budget at completion
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14. 14
Thank You
OHT Will have a similar example of EVM with explanation of each
result/number. It will also include to make the S curve / graph too.
You may consult Internet for more explanation , examples and
graphs and interpretation.
OHT will be 20% of Total and only one Question of 20 Marks with
multiple parts .
All the Best !
