earned value

Earned value management

Earned value management (EVM) is a project management technique for measuring project performance and progress in an objective manner.

Earned Value

Actual Cost

Planned Value

Schedule Variance.

• Schedule Variance is a delta indicator:
• SV equals Earned Value minus the Planned Value.
• 

• SV > 0 --> good (ahead of schedule)
• SV < 0 --> bad (behind schedule)
• SV == 0 at project completion (all Planned Values will have been Earned)

Schedule Performance Index

• 
• Schedule Performance Index equals
• Earned Value divided by Planned Value
• The Schedule Performance Index is an indicator of project health.
• SPI > 1 --> good (ahead of schedule)

• Budgeted Cost of Work Scheduled
• (aka Planned Value == PV)

• Budgeted Cost of Work Performed
• (aka Earned Value == EV)

• Performance Measurement Baseline:
• Actually the planned value curve.

control accounts

RACI is an intersection of the project Work Breakdown Structure (WBS) and the organizational breakdown structure (OBS)

a RACI matrix

Control Account Managers (CAMs)

Control Account Manager (as in RACI)

Work Breakdown Structure

Organizational Breakdown Structure

• Actual Cost of Work Performed.
• The new name is AC (actual Cost)

Budget At Completion

The total planned value (PV or BCWS) at the end of the project. If a project has a Management Reserve (MR), it is typically not included in the Budget At Complete (BAC), and respectively, in the Performance Measurement Baseline.

Management Reserve

• 
• Cost Variance equals Earned Value minus Actual Cost

CV > 0 is good (under budget).

• 
• Cost Performance Index equals Earned Value minus Actual Cost

CPI greater than 1 is good (under budget):

< 1 means that the cost of completing the work is higher than planned (bad);

= 1 means that the cost of completing the work is right on plan (good);

> 1 means that the cost of completing the work is less than planned (good or  sometimes bad).



Having a CPI that is very high (in some cases, very high is only 1.2) may mean that the plan was too conservative, and thus a very high number may in fact not be good, as the CPI is being measured against a poor baseline. Management or the customer may be upset with the planners as an overly conservative baseline ties up available funds for other purposes, and the baseline is also used for manpower planning.

• Estimate At Completion (EAC) is the manager's projection of total cost of the project at completion.
• It is calculated by taking the Actual Costs and adding (Budget At Complete minus Earned Value) divided by the Cost Performance Index

• Estimate To Complete (ETC) is the estimate to complete the remaining work of the project.
• It is calculated by taking the Estimate At Complete and substracting the Actual Cost

To-complete performance index

The To-complete performance index (TCPI) provides a projection of the anticipated performance required to achieve either the BAC (Budget At Complete)or the EAC (Estimate At Complete). TCPI indicates the future required cost efficiency needed to achieve a target BAC  or EAC . Any significant difference between CPI, the cost performance to date, and the TCPI, the cost performance needed to meet the BAC or the EAC, should be accounted for by management in their forecast of the final cost.

• 
• describing the performance required to meet the original BAC budgeted total.

• 
• describing the performance required to meet a new, revised budget total EAC

Independent estimate at completion

The Independent estimate at completion (IEAC) is a metric to project total cost using the performance to date to project overall performance. This can be compared to the EAC, which is the manager's projection.

• The Independent estimate at completion (IEAC) is calculated by:
• 

• Earned Value Management (EVM) has no provision to measure project quality, so it is possible for EVM to indicate a project is under budget, ahead of schedule and scope fully executed, but still have unhappy clients and ultimately unsuccessful results.
• In other words, EVM is only one tool in the project manager's toolbox.

• Earned Value Management is used for project tracking (finances)
• It is complementary to critical path or critical chain schedule management.

Earned Value is the sum of the Planned Value from start to current