Introduction to Earned Value Management
What is Earned Value Management (EVM)? |
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EVM is a project performance measurement technique that integrates project scope, time and cost data
to produce metrics on which project management decisions can be made to improve performance, if required. |
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How does EVM add value? |
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EVM is performed throughout the project management lifecycle and enables the performance
of any and all tasks and sub-tasks to be monitored at any time so as to enable corrective actions to
be taken in a timely manner, so as to reduce project scope, schedule, cost and/or quality related
risks from occurring. |
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Costs Fundamental to Earned
Value Management |
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- Planned Value (PV)
The approved total cost estimate planned to
be spent on an activity during a given period -
formerly called Budgeted
Cost of Work Scheduled (BCWS).
- Actual Cost (AC)
The total direct and indirect costs incurred
in performing work on an activity during a given
period - formerly called Actual Cost of
Work Performed (ACWP).
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How is Earned Value (EV) calculated? |
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Earned value is calculated
for each sub task, task and the entire project by
multiplying the planned value (PV) by the actual %
complete (rate of performance). IE:
EV = PV x actual % complete
Therefore, earned value is an estimate of the value of the work
actually completed,
on a
specific date, based on the planned value. |
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What Project Performance Measurements are derived from EV? |
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- Cost Variance (CV)
CV = EV - AC
Therefore, a
negative CV means performing the
work cost more
than planned and vice versa.
- Schedule Variance (SV)
SV = EV - PV
Therefore, a
negative SV means that it
took longer
to perform the
work
than planned and vice versa.
- Cost Performance Index (CPI)
CPI = EV / AC
Therefore, a CPI
less than 1 means that it the activity or project is
over budget and vice versa.
- Schedule Performance Index (SPI)
SPI = EV / PV
Therefore, a SPI
less than 1 means that it the activity or project is
behind schedule and vice versa.
- To Complete Performance Index (TCPI)
TCPI = (BAC - EV)/(BAC - AC)
If the value of TCPI is larger than the cumulative CPI, work
must be performed more
efficiently than it has to date. Due to project inertia, large improvements are unlikely. If
the TCPI is much larger than CPI, completing the work within the budget is unlikely.
- Estimate at Completion (EAC)
- Low estimate:
EAC = AC + (BAC - EV)
- Medium estimate:
EAC = BAC / CPI
EAC = AC + (BAC - EV) / CPI
- High estimate:
EAC = AC + (BAC - EV) / (CPI * SPI)
- Estimated Time to Complete (ETC)
ETC = Original Time Estimate /
SPI
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Glossary |
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EV: |
Earned Value - formerly called Budgeted Cost
of Work Performed (BCWP) |
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PV: |
Planned Value - formerly called Budgeted
Cost of Work Scheduled (BCWS) |
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AC: |
Actual Cost - formerly called Actual Cost of
Work Performed (ACWP) |
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CV: |
Cost Variance |
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SV: |
Schedule Variance |
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CPI: |
Cost Performance Index |
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SPI: |
Schedule Performance Index |
Contact us for more
information regarding the Earned Value Management Implementation service.
Other related RobustPM services:
Earned Value Management System (EVMS) Implementation Service.