The Earned Value Technique is a method to measure project performance against the Project baseline. Result from an Earned Value analysis indicate potential deviation of the Project from cost and schedule baselines.
Earned Value Technique Acronym Term Explanation PV Planned Value Estimated Value of the Work Planned to be done EV Earned Value Estimated Value of the Work Actually accomplished AC Actual Value Actual Cost incurred in work accomplished BAC Budget At Completion The Budgeted amount for the total Work EAC Estimate At Completion The current estimate for the Total Project Cost ETC Estimate to Complete From this point, how much more the Project Would cost to complete VAC Variance at Completion How much over or under budget we expect to be at the end of the Project.
Earned Value Formulas Acronym Formula Explanation Cost Variance (CV) EV-AC Negative is over budget, positive is under budget. Schedule Variance (SV) EV-PV Negative is behind schedule, Positive is ahead of schedule. Cost Performance Index (CPI) EV/AC We are getting $_____ worth of work out of every $1 spent. Schedule Performance Index (SPI) EV/PV We are progressing at ________ percent of the rate originally planned. Estimate At Completion (EAC) BAC/CPI How much more do we expect the Project to cost Estimate to complete (ETC) EAC-AC How much more the Project would cost. Variance at Completion BAC-EAC How much over or under budget we expect to be at the end of the Project.
Lets take the example of a Project to build a compound wall. It’s a four side wall and each side is to take one day to build and its budgeted for $500 per side. The walls are planned to be completed one after the other. Today is end of day 3, calculate the CPI and SPI of this project.
Earned Value Problem Example Activity Day 1 Day 2 Day 3 Day 4 Status at the End of Day 3 Side 1 S---------F Complete, spent $500 Side 2 S-------PF ---F Complete, spent $700 Side 3 PS—S—PF 50% done, spent $300 Side 4 PS------PF Not yet Started
Earned Value Problem Solution Term Calculation Value Interpretation of the Answer PV 500+500+500 $1500 By third day, we should have done $1500 worth of Work. EV Complete, Complete, half done 500+500+250=$1250 $1250 We have actually accomplished only work worth $1250 AC 500 plus 700 plus 300=$1500 $1500 We have actually spent $1500 CV $1250 minus $1500 -$250 We are over budget by $250 SV $1250 minus $1500 -$250 We are behind Schedule CPI $1250 divided by $1500 .83 We are getting 83 cent out of every dollor spent SPI $1250 divided by $ 1500 .83 We are progressing at 83% of the rate originally planned.