Earned value Management

1. 1
BASICS OF
EARNED VALUE
MANAGEMENT

2. 2
Why use Earned Value
Management Systems?
“The Bottom Line”
• EVM can focus program management attention on
critical issues and risks during the “project” life
cycle
• How are you doing, and how do you know how you
are doing?
– Early problem identification
• Completion Estimates
– How far along are you? (64%, 50%, >40%)
– What is your productivity/efficiency?
– Work remaining

3. 3
Five Basic Elements
BCWS Budgeted Cost of Work Scheduled
BCWP Budgeted Cost of Work Performed
ACWP Actual Cost of Work Performed

4. 4
5 Basic Performance Data
Questions & Answers
QUESTION ANSWER ACRONYM
How much work should Budgeted Cost for BCWS
be done? Work Scheduled
How much work is done? Budgeted Cost for BCWP
Work Performed
How much did the is done Actual Cost of ACWP
work cost? Work Performed

5. 5
What do we measure progress against?
and Why?
• Performance measurement baseline
– Budget that is spread over . . .
– Time, to accomplish the scope of
– Work, against which progress can be measured
• Earned Value is key concept
– how much progress did I make against my original
plan?
– expressed in dollars or hours
– Why? – early warning
$
time
baseline
earned value

6. 6
Why do we need
Early Warning?
Small course corrections are
easier when made early…
… If you wait until you reach
the Iceberg, its too late!!!

7. 7
Work Budgeted and Earned
• The value of the budgeted work is called:
Budgeted Cost of Work Scheduled
(BCWS)
• The value of work earned is called:
Budgeted Cost of Work Performed
(BCWP)
– BCWP is also called Earned Value (EV)

8. Budgeted Cost of Work Scheduled
(BCWS)
Total Budget = $5,000
to be spent over 5 months
I plan to lay 1 section
of track each month at an
estimated cost of $1,000.
BCWS each month = $1,000
Total BCWS = $5,000
Month 1
BCWS = $1,000
Month 4
BCWS = $1,000
Month 3
BCWS = $1,000
Month 5
BCWS = $1,000
Month 2
BCWS = $1,000
sum of all BCWS = performance baseline

9. 9
Budgeted Cost of Work Performed
(BCWP)
aka. Earned Value
We’re at the end of
February, Track 1 is
complete and track 2 is ½
done.
BCWS = $1,000
Track 1
Track 2
BCWS = $1,000
50% done
Value of work
performed = $1,500

10. 10
Schedule Variance
BC WS
BC WP
of the work I scheduled to have done,
how much did I budget for it to cost?
of the work I actually performed,
how much did I budget for it to cost?
SCHEDULE VARIANCE is the difference between work scheduled
and work performed (expressed in terms of budget dollars)
formula: SV $ = BCWP - BCWS
BUDGET
BASED
example: SV = BCWP - BCWS = $1,500 - $2,000
SV= -$500 (negative = behind schedule)

11. 11
Schedule Variance
$
BCWS
“the baseline”
BCWP
“earned value”
TIME
5,000
sv

12. 12
Actual Cost of Work Performed
(ACWP)
Track 1 Cost = $1,500!
Track 2 Cost = $750 cost to
date
Total Cost to Date = $2,250

13. 13
Cost Variance
BC WP
AC WP
of the work I actually performed,
how much did I budget for it to cost?
of the work I actually performed,
how much did it actually cost?
COST VARIANCE is the difference between budgeted cost
and actual cost
formula: CV $ = BCWP - ACWP
PERFORMANCE
BASED
example: CV = BCWP - ACWP = $1,500 - $2,250
CV= -$750 (negative = cost overrun)

14. 14
Cost Variance
$
TIME
BCWP
“earned value”
ACWP
“actual cost”
5,000
cv

15. 15
Variance Summary
• The difference between the BCWP and the
ACWP is called a cost variance
• The difference between the BCWP and
BCWS is called schedule variance and is
provided in terms of dollars

16. 16
Trend Analysis
Cost Performance Index (CPI) measure of cost efficiency
CPI = Value of Work Completed (BCWP)
Cost of Work Completed (ACWP)
Schedule Performance Index (SPI) measure of schedule efficiency
SPI = Value of Work Completed (BCWP)
Value of Work Planned (BCWS)
Closer to “1” the better
Less than 1 = overrun (CPI); behind schedule (SPI)
Greater than 1 = underrun (CPI); ahead of schedule (SPI)

17. 17
• DO I THINK THE CONTRACTOR WILL COME IN ON BUDGET?
COST PERFORMANCE INDEX:
CPI = cost efficiency for work performed to date
(The value of work accomplished for each dollar spent)
SCHEDULE PERFORMANCE INDEX:
SPI = schedule efficiency with which work has been accomplished
(The rate at which work is being accomplished)
Performance Efficiencies
WORK
= ACCOMPLISHED
ACTUALS
WORK
= ACCOMPLISHED
WORK
SCHEDULED
WORK
BCWP ACCOMPLISHED $1500
= BCWS = WORK = $2000 = .75
SCHEDULED
WORK
BCWP ACCOMPLISHED $1500
= ACWP = ACTUAL = $2250 = .67
COST

18. 18
EXERCISES
• Attendees – Go to your Exercise
Packet

19. 19
Solution
Cost Variance = -10
Schedule Variance = + 20
CPI = .97
SPI = 1.07
• How would you describe this project?
Over budget, ahead of schedule