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Jul. 7, 2014•0 likes•103,354 views

Jul. 7, 2014•0 likes•103,354 views

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A simple example of Earned Value Management (EVM) calculations to illustrate the EVM article on Planisware's online Project Portfolio Management glossary.

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- 1. Simple example of EVM in action © 2014 Planisware
- 2. The plan • Our team has been tasked with planting the trees on the plot of land behind our company’s new factory • The plan: – 30 batches of 20 trees (600 trees) – 5 batches per day (100 trees) – budgeted cost per tree 2.90$ (2.5$ per baby tree / 0.40$ for the slow release fertiliser) → total budget 1,740$ © 2014 Planisware 2
- 3. After the first day… • 70 trees were planted (the team hit a patch with stones that had to be removed before the trees could be planted) • Total cost was 350 $ (we had to rent a special machine to help remove the stones which cost 147$ for the day) • Simple EVM calculation: – Earned Value = 70 trees planted 2.90$ = 203$ – Budgeted Cost = 100 trees planned per day 2.90$ = 290$ – Actual Cost = 70 trees planted 2.90$ + 147$ for the machine = 350$ © 2014 Planisware 3
- 4. Visually… 0 50 100 150 200 250 300 350 400 Start 1st day Actual cost = 350$ Budgeted cost = 290$ Earned Value = 203$ © 2014 Planisware 4
- 5. Regarding cost… 0 50 100 150 200 250 300 350 400 Start 1st day EV AC BC © 2014 Planisware 5 We are here
- 6. Regarding cost… 0 50 100 150 200 250 300 350 400 Start 1st day EV AC BC © 2014 Planisware 6 We are here We should have been here
- 7. Regarding cost… 0 50 100 150 200 250 300 350 400 Start 1st day EV AC BC © 2014 Planisware 7 Cost variance = EV – AC = 203$ – 350$ = -147$ < 0
- 8. Regarding cost… 0 50 100 150 200 250 300 350 400 Start 1st day EV AC BC © 2014 Planisware 8 Cost variance = EV – AC We’re over budget, and have spent 203 350 = 58% more budget than anticipated (our cost performance index) = 203$ – 350$ = -147$ < 0
- 9. Regarding schedule… 0 50 100 150 200 250 300 350 400 Start 1st day EV AC BC © 2014 Planisware 9 We are here
- 10. Regarding schedule… 0 50 100 150 200 250 300 350 400 Start 1st day EV AC BC © 2014 Planisware 10 We are here Which is where we should have been then
- 11. Regarding schedule… 0 50 100 150 200 250 300 350 400 Start 1st day EV AC BC © 2014 Planisware 11 Schedule variance in hours
- 12. Regarding schedule… 0 50 100 150 200 250 300 350 400 Start 1st day EV AC BC © 2014 Planisware 12 Schedule variance in hours = 203$ – 290$ = = -87$ < 0 Schedule variance in dollars = EV – BC
- 13. Regarding schedule… 0 50 100 150 200 250 300 350 400 Start 1st day EV AC BC © 2014 Planisware 13 Schedule variance in hours We’re late and have only performed 203/290 = 70% of the work planned (our schedule performance index) = 203$ – 290$ = = -87$ < 0 Schedule variance in dollars = EV – BC
- 14. The consequences 0 500 1000 1500 2000 2500 3000 Start 1st 2nd 3rd 4th 5th 6th 7th 8th 9th © 2014 Planisware 14 Earned Value today Estimate at Completion EAC = 3,000$ Budget at Completion BAC = 1,740$ Extending the Actual Cost into the future gives us the end result if we do not modify the performance of the project
- 15. The consequences 0 500 1000 1500 2000 2500 3000 Start 1st 2nd 3rd 4th 5th 6th 7th 8th 9th © 2014 Planisware 15 Earned Value today Estimate at Completion EAC = 3,000$ Budget at Completion BAC = 1,740$ Cost Overrun
- 16. The consequences 0 500 1000 1500 2000 2500 3000 Start 1st 2nd 3rd 4th 5th 6th 7th 8th 9th © 2014 Planisware 16 Earned Value today Planned end date = 6 days Estimate at completion = 8.57 days Project Slip Estimate at Completion EAC = 3,000$ Budget at Completion BAC = 1,740$ Cost Overrun
- 17. The consequences → If we continue at this rate, we will need: 1,740$ 58% = 3,000 $ (cost estimate at completion) and 6 days 70% = 8.57 days (schedule estimate at completion) to finish the work. → If we want to finish on budget, we need to work at (planned remaining budget) (actual remaining budget) (1,740 – 290) (1740 – 350) = 104.3% of the originally planned performance → If we want to finish on time, we need to work at (actual remaining work) (planned remaining work) (600 – 70) (600 – 100) = 106% of the originally planned performance © 2014 Planisware 17
- 18. In technical terms… In real life, the elements we calculated have slightly different names: • The Actual Cost is usually referred to as the Actual Cost of Works Performed (ACWP) • The Planned Cost = Budgeted Cost for Work Scheduled (BCWS) • The Earned Value = Budgeted Cost for Work Performed (BCWP) © 2014 Planisware 18
- 19. Summary © 2014 Planisware 19 today time cost ACWP (Actual Cost of Work Performed) BCWS (Budgeted Cost of Work Scheduled) BCWP (Budgeted Cost of Work Performed) completion date Budget at Completion (BAC) Estimate at Completion (EAC) Schedule variance in $ SV = BCWS - BCWP Cost variance in $ CV = ACWP - BCWP Cost Overrun Project SlipSchedule variance in hours
- 20. To learn more about EVM and tools to help manage it, visit our glossary: www.planisware.com/glossary/earned- value-management © 2014 Planisware 20