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Earned value management

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Earned Value Management
Earned Value Management
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Earned value management

  1. 1. Earned Value Management FAISAL HUSAINI M.Arch. (Building Services) Jamia Millia Islamia, New Delhi
  2. 2. Earned value management (EVM) is a methodology that combines scope, schedule, and resource measurements to assess project performance and progress. It is a commonly used method of performance measurement for projects. It integrates the scope baseline with the cost baseline, along with the schedule baseline, to form the performance baseline, which helps the project management team assess and measure project performance and progress. Tools and Techniques: Earned Value Management Earned Value Terminology 1. Planned Value (PV): Planned value (PV) is the authorized budget assigned to scheduled work. The relationship analysis of EV, PV and AC: 2. Budget at Completion (BAC): Based on your original baselined plan, what you planned to spend to complete the entire project. Think of it as the Planned Value of the entire project. 3. Actual Cost (AC): Based on your current progress to date, what did you actually spend by this time. 4. Earned Value (EV): The value of the work actually performed to date. Based on your original baselined plan AND the activities you've actually completed to date, what you should have spent to complete those activities. PV and AC: 1. Earned Value = Planned Value on schedule 2. Earned Value = Actual Cost on budget 3. Earned Value < Planned Value behind schedule 4. Earned Value < Actual Cost over budget 5. Earned Value > Planned Value ahead of schedule 6. Earned Value > Actual Cost under budget
  3. 3. PROBLEM: to construct a wall of 1000 bricks • Planned cost: 50000 Rs • Planned Time: 10 Days • 800 bricks were Laid after 10 Days • Using 45000 Rs Budget at Completion (BAC): 50000 Rs Planned Value (PV): 50000 Rs Actual Cost (AC): 45000 Rs Earned Value (EV): 40000 Rs We can conclude EV < PV behind schedule EV < AC over budget Try a problem on: Earned Value Management EV < AC over budget
  4. 4. Variances from the approved baseline will be monitored: Once we've determined our PV, AC, and EV, we can now perform some calculations to tell us about the performance of our project in terms of schedule and cost. The first set of calculations are variances: Cost Variance: CV = EV - AC The Cost Variance (CV) is "the amount of budget deficit or surplus at a given point in time, expressed as the difference between the Earned Value and the Actual Cost." CV is the difference between the Actual Cost of work done and the Earned Value of work done. Schedule Variance: SV = EV - PV Tools and Techniques: Earned Value Management Cost and Schedule Variances Schedule Variance: SV = EV - PV The Schedule Variance (SV) is the difference between the Planned (baseline) Value of work done and the Earned Value of work done. Negative variances are bad. If the CV or SV are negative, this means that we are over budget or behind schedule, respectively. PROBLEM: to construct a wall of 1000 bricks • Planned cost: 50000 Rs • Planned Time: 10 Days • 800 bricks were Laid after 10 Days • Using 45000 Rs Budget at Completion (BAC): 50000 Rs Planned Value (PV): 50000 Rs Actual Cost (AC): 45000 Rs Earned Value (EV): 40000 Rs SOLUTION: • Cost Variance: CV = EV-AC CV = 40000-45000 = -5000 (Over Budget) • Schedule Variance: SV = EV – PV SV = 40000-50000 = -10000 (Behind Schedule)
  5. 5. Cost Performance Index: CPI = EV ÷ AC The Cost Performance Index (CPI) tells us how efficient we are at managing our budget. CPI =1.0 On Budget CPI >1.0 Under Budget CPI <1.0 Over Budget Schedule Performance Index: SPI = EV ÷ PV The Schedule Performance Index (SPI) tells us how efficient we are at managing our schedule. SPI =1.0 On Schedule SPI >1.0 Ahead of Schedule Tools and Techniques: Earned Value Management Cost and Schedule Performance Indices (CPI & SPI) SPI >1.0 Ahead of Schedule SPI <1.0 Behind Schedule PROBLEM: to construct a wall of 1000 bricks • Planned cost: 50000 Rs • Planned Time: 10 Days • 800 bricks were Laid after 10 Days • Using 45000 Rs Budget at Completion (BAC): 50000 Rs Planned Value (PV): 50000 Rs Actual Cost (AC): 45000 Rs Earned Value (EV): 40000 Rs SOLUTION: • Cost Performance Index (CPI): CPI = EV/AC CV = 40000/45000 = 0.9 (Over Budget) • Schedule Performance Index (SPI) : SPI = EV / PV SPI = 40000/50000 = 0.8 (Behind Schedule)
  6. 6. The final calculations we can make with Earned Value are for our Estimate to Complete (ETC) and Estimate at Completion (EAC). These calculations tell us how much money we will spend to complete (finish) our project assuming we continue our project at the same performance level we are currently operating. Estimate to Complete: ETC = (BAC - EV) ÷ CPI Estimate to Complete: (ETC) will tell us how much money is required to complete the remaining work on our project. Estimate at Completion: EAC = AC + ETC Estimate at Completion (EAC) will tell us the total amount of money we will spend to Tools and Techniques: Earned Value Management Estimate to Complete / Estimate at Completion Estimate at Completion (EAC) will tell us the total amount of money we will spend to complete the entire project based on our performance to date. PROBLEM: to construct a wall of 1000 bricks • Planned cost: 50000 Rs • Planned Time: 10 Days • 800 bricks were Laid after 10 Days • Using 45000 Rs Budget at Completion (BAC): 50000 Rs Planned Value (PV): 50000 Rs Actual Cost (AC): 45000 Rs Earned Value (EV): 40000 Rs SOLUTION: • Estimate to Complete (ETC): ETC = (BAC - EV) ÷ CPI ETC = (50000-40000)/0.9 = 11111 Rs • Estimate at Complete (EAC) : EAC = AC + ETC EAC = 45000+11111 = 56111 Rs
  7. 7. Tools and Techniques: Earned Value Management Earned Value over Time
  8. 8. The goal of Project control is "comparing actual performance with planned performance, analyzing variances, assessing trends to effect process improvements, evaluating possible alternatives, and recommending appropriate corrective action as needed.“ CORRECTIVE MEASURE FOR COST PERFORMANCE: Project Manager will consider: • Adjust resource levels or resources to ensure the proper skills are being utilized. • Evaluate scope of work to ensure no "out of scope" work has found its way into the project (i.e. Scope Creep). • Evaluate new risks and determine response strategies. Tools and Techniques: Earned Value Management • Evaluate new risks and determine response strategies. • Ensure issues are promptly reviewed and closed. • Using less expensive resources than planned in order to recover some budget decline. • Adjusting the time frame to complete the work. • use less expensive resources (note that this may impact the schedule performance). • Ensuring your plan is optimized for resources, and no new resources are regularly joining the team and dragging down productivity. • Implementing productivity improvement ideas offered by the project team.

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