This is based on the concepts of project management

1. 1
EARNED VALUE ANALYSIS
(EVA)

2. 2
Today’s Situation
Need for accurate and consistent status of information
Numerous complex (and interrelated) projects
 Projects with many WBS activities
 Diverse technology platforms
70% of projects are:
•Over budget
•Behind schedule
52% of all projects finish at 189% of their initial budget
And some, after huge investments of time and money, are simply
never complete
Source:The Standish Group

3. 3
“Have we done what we said we’d do?”
% complete of
% of Budget spent
% of work done
% of time elapsed
When evaluating the current status of a
project the following questions arise:
•What is the current effort?
•What has been delivered so far?
•What should have been the corresponding
effort?
•When will the project end?
•What will be the overall effort?
•What is the actual cost spent on work?

4. Earned Value Analysis -EVA
Earned value
analysis (EVA),
allows project
managers to make
sure the cost of the
project aligns with
its progress
Understanding how
to calculate and use
EVA can help you
manage your
projects effectively
4
• Earned value analysis is a standard method of
measuring a project's progress at any point to
analyze changes in the project's plan and adjust
the budget accordingly.
• Project managers use EVA to predict the total
cost of a project at completion.
• This method considers all the work the team has
completed and the money they have spent at a
specific point in the project and compares it to
the baseline, or the original budget and schedule.
• Project managers can use this information to
determine patterns and make decisions about
how to proceed with the project.

5. 5
Earned Value Analysis
“Earned Value Analysis” is:
• an industry standard way to:
• measure a project’s progress,
• forecast its completion date and final cost, and
• provide schedule and budget variances along the way.
Compares the PLANNED amount of work with what has
actually been COMPLETED, to determine if COST ,
SCHEDULE, and WORK ACCOMPLISHED are progressing as
planned.

6. 6
EVA Contd..
 By integrating three measurements, EVA provides consistent,
numerical indicators to evaluate and compare projects.
Work is “Earned” or credited as it is completed.
Earned value = % of completion x project budget
For example, if you have a project budget of $4 million and your team has completed
20% of your project,
EV = 20% x $4 million
= $800,000
If your team has spent $800,000 or less on the project so far, you can confirm the project
aligns with the budget.

7. 7
Earned Value needed because...
Provides an “Early Warning” signal for prompt corrective action.
 Still time to recover
 Timely request for additional funds
 Circular A-11, Part 7 (Executive Office of the President, Office of Management and
Budget ): Agencies must use a performance based acquisition management system,
based on ANSI/EIA Standard 748, to measure achievement of the cost, schedule, and
performance goals.
Performance-based acquisition management means a documented, systematic process for
program management, which includes integration of program scope, schedule and cost
objectives, establishment of a baseline plan for accomplishment of program objectives,
and use of earned value techniques for performance measurement during execution of
the program.

8. ANSI/EIA standard(American National Standards Institute / Electronic
Industries Alliance)
Define authorized work
Identify Program Organization Structure
Company integration of EVMS subsystems with Work Breakdown Structure
(WBS)
Identify organization/function for overhead
Integrate WBS and Organization Breakdown Structure (OBS), create control
accounts
Sequential scheduling of work
Identify interim measures of progress, i.e. milestones, products, etc.
Establish time-phased budget
Identify significant cost elements within authorized budgets
Identify discrete work packages
All work package budgets & planning packages sum to control acct
Identify and control budgets
Establish overhead budgets by organization element
Identify management reserve and undistributed budget
Reconcile program target cost goal with sum of all internal budgets
(Contd…)
8

9. ANSI/EIA standard
Record direct costs from accounting system
Summarize direct costs into WBS without allocation
Record indirect costs
Identify unit costs, equivalent units costs or other costs
Accurate material cost accumulation by control accounts; EV measurement at
right time; full accountability of material
Control account monthly summary, identification of Cost Variance
(CV) and Schedule Variance (SV)
Explain significant variances
Identify and explain indirect cost variances
Summarize data elements and variances thru WBS/OBS for mgmt.
Implement management actions as result of EVM analysis
Incorporate authorized changes in timely manner
Reconcile budgets with prior budgets
Control retroactive changes
Prevent all but authorized budget changes
Document changes to Performance Measurement Baseline (PMB)
9

10. 10
Requirements of Earned Value
Proper WBS Design
Baseline Budget Control Accounts
Baseline Schedule
Work measurement by Control Account
 work-hours, dollars, units, etc.
Good Project Management Practices

11. 11
Steps for EVA
1. Define the work :
Work Breakdown Structure (WBS) with work packages
containing 3 measurable components:
Scope of work to be accomplished
Total (direct and indirect) cost
Timeframe for completion

12. 12
Control Account Plans
A CAP is essentially a Work Package with some added
features:
Assignment of responsibility
• Organization
• Individual
Division (if necessary) into lower-level Work Packages.
Metrics for measuring EV performance
• Milestones
• % complete
• Other
The sum of the CAPs constitutes the Performance
Measurement Baseline (PMB)

13. 13
Steps for EVA
2. Setting up a Baseline Plan :
Work is planned, budgeted, and scheduled in time-phased
"planned value" increments constituting a Performance
Measurement Baseline (PMB).
Performance Measurement Baseline

14. 14
Steps for EVA
3. Measure Performance:
Focuses on performance
Analyzing the data to determine real project status.
In determining the status of projects, three key components
are examined
• Cost and Schedule baseline
• Actual Charges (expenditures)
• Reported accomplishments or “Earned Value”

15. Measuring variables
Budgeted cost for work scheduled (BCWS), sometimes called the planned value.
Budgeted cost for work performed (BCWP) or earned value.
Actual cost of work performed (ACWP).
Budget at completion (BAC).
Estimate at completion (EAC) which is comprised of the cumulative of actual
cost of work performed plus the estimate to complete the remaining work.
Cost variance (CV) which is calculated as BCWP minus ACWP. A result greater
than 0 is favorable (an underrun), a result less than 0 is unfavorable (an
overrun).
Schedule variance (SV) which is calculated as BCWP minus BCWS. A result
greater than 0 is favorable (ahead of schedule), a result less than 0 is
unfavorable (behind schedule).
Variance at completion (VAC) which is calculated as BAC minus EAC. A result
greater than 0 is favorable, a result less than 0 is unfavorable.
15

16. 16
Metrics Defined
BCWS - Budgeted Cost of Work Scheduled/
Planned Cost
Planned cost of the total amount of work
scheduled to be performed by the milestone
date.
BCWS is the sum of the budget items for all
work packages, planning packages, and
overhead which was scheduled for the period,
rather than the cost of the work actually
performed.
BCWS = % Complete (Planned) x Project Budget
BCWP is also contrasted to Actual Cost of
Work Performed (ACWP) which measures the
actual amount spent rather than the budgeted
estimates
BCWP = % Complete (Actual) x Project Budget
ACWP - Actual Cost of Work Performed
Cost incurred to accomplish the work that has
been done to date.
Cost Variance = BCWP – ACWP.

17. EVM
Percent complete is simply the amount of work that has been
completed divided by the budget at completion.
% complete = BCWP / BAC
Percent spent is the amount of the budget that has been spent.
It is calculated by dividing the actual cost of work performed by
the budget at completion.
% spent = ACWP / BAC
Earned Value (EV) = Total project budget multiplied by the %
complete of the project (BCWP)
17

18. Assume we are working on a Client/Server project, and part of the scope is for
Software Design. The time frame is 5 months and the budget for this scope
is $15,000, resulting in a budget of $3,000 per month.
Client/Server Project - WBS 1.1.1 Software Design
Dollars
JAN FEB MAR APR MAY
PV 3000 3000 3000 3000 3000
18

19. 19
Some Derived Metrics
SV: Schedule Variance (BCWP-BCWS)
 A comparison of amount of work performed during a
given period of time to what was scheduled to be
performed.
 A negative variance means the project is behind
schedule
CV: Cost Variance (BCWP-ACWP)
 A comparison of the budgeted cost of work performed
with actual cost to measure cost efficiency.
 A negative variance means the project is over budget
i.e. more money is spent than was planned.

20. 20
Schedule Variance & Cost Variance
Schedule Variance = BCWP-BCWS
$49,000
- 55,000
SV = - $ 6,000
Cost Variance = BCWP-ACWP
$49,000
56,000
CV = - $7,000

21. 21
Schedule Variance Chart

22. 22
Cost Variance Chart

23. 23
SPI: Schedule Performance Index
SPI=BCWP/BCWS
SPI<1 means project is behind schedule
CPI: Cost Performance Index
CPI= BCWP/ACWP
CPI<1 means project is over budget
CSI: Cost Schedule Index (CSI=CPI x SPI)
The further CSI is from 1.0, the less likely project
recovery becomes.
Some More Derived Metrics

24. 24
Performance Metrics
SPI: BCWP/BCWS
49,000/55,000 = 0.891
CPI: BCWP/ACWP
49,000/56000 = 0.875
CSI: SPI x CPI
.891 x .875 = 0.780
The CPI and SPI are statistically
accurate indicators of final cost
results.

25. Project Scope Build 80 modules
Project Schedule Estimate 5 Days
Cost Estimate per module 1000 units of money
Project Cost Estimate 80000 units of money
25
Project Plan
The project team needs to build 80 modules in 5 days. It is estimated that each module will cost 1000 units of money.
The following figure provides initial plan for the project. It also provides equivalence between Project Scope, Schedule,
and Cost.
Let us assume that, the project was started
3 days ago and we are evaluating the
performance at the end of Day 3.
Day 1 Day 2 Day 3 Day 4 Day 5
Modules Planned
to be Built
10 13 17 20 20
Estimated Cost
for the Day
Estimated
Cumulative Cost
Module Actually
Built
8 12 15
Value of Modules
Actually Built
Cumulative Value
of Modules
Actually Built
Actual Cost for
the Day
8000 12000 16000
Actual
Cumulative Cost

26. Project Scope Build 80 modules
Project Schedule Estimate 5 Days
Cost Estimate per module 1000 units of money
Project Cost Estimate 80000 units of money
26
Project Plan
The project team needs to build 80 modules in 5 days. It is estimated that each module will cost 1000 units of money.
The following figure provides initial plan for the project. It also provides equivalence between Project Scope, Schedule,
and Cost. Let us assume that, the project was started 3 days ago and
we are evaluating the performance at the end of Day 3.
Day 1 Day 2 Day 3 Day 4 Day 5
Modules Planned
to be Built
10 13 17 20 20
Estimated Cost
for the Day
10000 13000 17000 20000 20000
Estimated
Cumulative Cost
10000 23000 40000 60000 80000
Module Actually
Built
8 12 15
Value of Modules
Actually Built
8000 12000 15000
Cumulative Value
of Modules
Actually Built
8000 20000 35000
Actual Cost for
the Day
8000 12000 16000
Actual
Cumulative Cost
8000 20000 36000

27. Solutions:
SV = 35000 – 40000 = -5000
CV = 35000 – 36000 = -1000
SPI = 35000 / 40000 = 0.875
CPI = 35000 / 36000 = 0.97
27

28. 28
Benefits of Earned Value
Schedule Status Reporting
Cost Status Reporting
Forecasting
Risk Identification
Risk Monitoring
Earned Value Analysis is a suggested technique of the following processes:
• Monitor and Control Project Work,
• Control Schedule,
• Control Costs, and
• Control Procurements.