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Project Management Earned Value


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Published in: Economy & Finance, Business

Project Management Earned Value

  1. 1. PROJECT MANAGEMENT Via EARNED VALUE “ A Concept to Measure the Project Performance”
  2. 2. EARNED VALUE: INTRODUCTION 06/04/09 &quot;A method for measuring project performance. It compares the amount of work that was planned with what was actually accomplished to determine if cost and schedule performance is as planned.&quot; - Englert and Associates <ul><li>Money is used as a common parameter of calculating EV </li></ul><ul><li>Money is common to all the projects hence all the projects and their sub-projects can be compared </li></ul><ul><li>Inference can be drawn on Variance from budgeted cost and scheduled activities. </li></ul><ul><li>Results can be obtained very fast, even weekly </li></ul><ul><li>This Concept is useful for taking fast corrective actions </li></ul>
  3. 3. GLOSSARY <ul><li>Budget Cost of Work Scheduled (BCWS): Budget associated with the planned and scheduled activities. </li></ul><ul><li>Actual Cost of Work Performed (ACWP): The actual cost charged to those activities that have been completed </li></ul><ul><li>Budgeted Cost of Work Performed (BCWP): The planed cost of the activities that have been completed, also traditional “EV”. </li></ul>06/04/09 Example: Suppose if an activity was supposed to be completed after a week with an estimated cost of 1 lacs, but actually only 75% of the activity was completed after a week and the money incurred was 90 thousand, then BCWS is 1 lacs, ACWP is 90 thousand and BCWP is 75 thousand
  4. 4. CALCULATION OF EV <ul><li>Steps: </li></ul><ul><li>Establish the work breakdown structure (WBS) that divides the project into its component activities </li></ul><ul><li>Estimate and allocate a cost to each activity </li></ul><ul><li>Schedule the activities over time </li></ul><ul><li>With the time calculate the percentage of the activity completed and its corresponding budgeted cost </li></ul>06/04/09
  5. 5. Measurement of Project Performance From EV Concept <ul><li>Schedule variance (SV): Tells about the activities going on according to the schedule or not. </li></ul><ul><li>SV=EV-BCWS. </li></ul><ul><ul><ul><li>Positive SV means that project is progressing ahead of what was planned. </li></ul></ul></ul><ul><ul><ul><li>Negative SV means that Project is lagging behind the scheduled activities. </li></ul></ul></ul><ul><li>Cost Variance (CV): Provides information about the cost incurred compared to total budget allotted. </li></ul><ul><li>CV=EV-ACWP. </li></ul><ul><ul><ul><li>Positive CV means that Project is well under the budget. </li></ul></ul></ul><ul><ul><ul><li>Negative value of CV means that Project has crossed the budget. </li></ul></ul></ul><ul><li>… .Continued </li></ul>06/04/09
  6. 6. 06/04/09 IILUSTRATION Establish WBS WBS is a hierarchical breakdown of all the work required to achieve the scope of the portion of the objective Schedule variance (SV): Tells about the activities going on according to the schedule or not. SV=EV-BCWS. Cost Variance (CV): Provides information about the cost incurred compared to total budget allotted. CV=EV-ACWP. Actual Cost Activity Progressed Activity 1 Activity 3 Activity 2 Planned Actual Budgeted Cost Planned Schedule Cost Variance Schedule Variance EV
  7. 7. <ul><li>Schedule Performance Index (SPI): Another form of expressing the schedule variance, in a ratio format </li></ul><ul><li>SPI = EV/BCWS </li></ul><ul><ul><ul><ul><li>If SPI>1 then we are ahead of scheduled activities </li></ul></ul></ul></ul><ul><ul><ul><ul><li>If SPI<1 then we are lagging behind from scheduled activities </li></ul></ul></ul></ul><ul><li>Cost performance Index (CPI): Another from of expressing the cost variance, in a ratio format </li></ul><ul><li>CPI = EV/ACWP </li></ul><ul><ul><ul><ul><li>If CPI>1 Project is well under budget </li></ul></ul></ul></ul><ul><ul><ul><ul><li>If CPI<1 Project has crossed the budget already </li></ul></ul></ul></ul><ul><li>Estimate at Completion (EaC): This figure tells us were the project is heading as compared to total budget cost (BaC) </li></ul>06/04/09 or
  8. 8. UNDERSTANDING OF EV <ul><li>Graph of Actual cost incurred Vs Planned Value </li></ul><ul><li>No involvement of EV </li></ul><ul><li>It might appear that first Actual cost crossed the budget and then it came under the budget </li></ul><ul><li>No conclusions can be made as no information is provided regarding schedule of the activities </li></ul>06/04/09 … ..Continued
  9. 9. UNDERSTANDING OF EV <ul><li>Figure 3 depicts graphical representation of CV. When CV is positive, project is well under budget and vice versa. </li></ul><ul><li>These two graphs collectively provide information about the schedule of the activities and the cost incurred. </li></ul>06/04/09 <ul><li>Figure 2 depicts graphical </li></ul><ul><li>representation of SV. When </li></ul><ul><li>SV is positive project is ahead </li></ul><ul><li>in activities and vice versa. </li></ul>
  10. 10. 06/04/09 All cost Data is in INR Example Calculating EV and SV from Daily Progress Report Data of Piling activity PLANNED EXECUTED SV Piles/day Cum. Piles Cum. Cost Piles/day Cum. Piles Cum.Cost 1-June 4 4 260769.2 7 7 420000 159230.7 2-June 4 8 521538.4 6 13 780000 258461.5 3-June 0 0 521538.4 0 13 900000 258461.5 4-June 5 13 782307.6 2 15 1140000 117692.3 5-June 4 17 1043076.9 4 19 1320000 96923 6-June 4 21 1303846.1 3 22 1440000 16153.8 7-June 5 26 1564615.3 2 24 1560000 -124615.38 8-June 4 30 1825384.6 2 26 1680000 -265384.6
  11. 11. <ul><li>Graph 1 Shows BCWS, BCWP and SV </li></ul><ul><li>Target piling is 113 from June and 100 from July, in total 213 piles till 31 st July </li></ul><ul><li>BCWP represent a lag in progress of activity after 7 th June-2007 </li></ul><ul><li>Schedule Variance became negative due to considerable delay in activity </li></ul><ul><li>Red dotted line represent the expected BCWP or EV if work is progressed according to last week </li></ul><ul><li>Expected time of finish would be 10 th June as compared to 31 st July </li></ul><ul><li>Schedule variance slowly reaches to zero from initial negative value </li></ul>Chart 1 Chart 2
  12. 12. CONCLUSION <ul><li>Money turns out be a useful parameter for monitoring the project performance in terms of SV and CV </li></ul><ul><li>Results from EV concepts can be obtained very fast </li></ul><ul><li>EV is useful for taking corrective actions on time </li></ul><ul><li>We can also predict the future completion of the activities with EV </li></ul><ul><li>Not only time but also future expected cost of the activities can be very well predicted </li></ul><ul><li>Step-wise monitoring can also give an experience to plan accordingly for next projects/activities </li></ul>06/04/09
  13. 13. THANK YOU