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Earned value management with Examples | Control Cost | PMBOK | PMP
The document discusses Earned Value Management (EVM) as a method for measuring project performance by comparing planned vs. actual work and costs. It provides real-life examples detailing how to calculate metrics such as Cost Variance (CV), Cost Performance Index (CPI), Schedule Variance (SV), and Schedule Performance Index (SPI). The document concludes with the implications of project slip and cost overruns, emphasizing the need for adjustments to meet budget and schedule goals.
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Earned value management with Examples | Control Cost | PMBOK | PMP
- 1. Earned Value Management Earned Value Management topic from Control Cost – Cost Management BY – DilipChaturvedi, PMP Email Id : info@justpmp.com PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, IncConfidential and Copyrighted material of JustPMP
- 2. Agenda § What is Earned Value Management § Explained EVM with examples §Cost Variances (CV ) § Cost Performance Index(CPI) § Schedule Variances(SV) § Schedule Performance Index(SPI) § Cost Overrun and Project Slip § Summary PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, IncConfidential and Copyrighted material of JustPMP 2
- 3. What is Earned Value Management § Earned value management is the process of measuring the performance of work against what was planned to identify variances, opportunities to improve the project or just check the project health’s. § It is system of mathematical formulas that compares work performed against work planned, and measures the cost of the work the project has performed. §EVM is an important part of cost control, since it allows a project manager to predict future variances from the expenses to date within the project. PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, IncConfidential and Copyrighted material of JustPMP 3
- 4. Examples: Project Plan for Planting trees 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 $( 2.50 $ per baby tree / 0.40 $ for the slow release fertilizer ) - -> total budget 1,740 $ PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, IncConfidential and Copyrighted material of JustPMP 4
- 5. After the first day.. 1. 70 Trees were planted( the team hit a patch with stones that had to be removed before the trees could be planted. 2. 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 machine = $350 PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, IncConfidential and Copyrighted material of JustPMP 5
- 6. First Day 0 50 100 150 200 250 300 350 400 Start 1st Day Cost Duration Actual Cost(AC) Budgeted Cost(BC)Earned Value(EV) Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 Confidential and Copyrighted material of JustPMP PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 6
- 7. Regarding Actual Cost 0 50 100 150 200 250 300 350 400 Start 1st Day Cost Duration Actual Cost Budgeted CostEarned Value Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 We are here Confidential and Copyrighted material of JustPMP PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 7
- 8. Expected Cost on First Day 0 50 100 150 200 250 300 350 400 Start 1st Day Cost Duration Actual Cost Budgeted CostEarned Value Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 We are here We should have been here Confidential and Copyrighted material of JustPMP PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 8
- 9. Cost Variance(CV = EV-AC) on First Day 0 50 100 150 200 250 300 350 400 Start 1st Day Cost Duration Actual Cost Budgeted CostEarned Value Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 We are here We should have been here Cost variance(CV) = EV – AC = 203 – 350 = -147$ < 0 Confidential and Copyrighted material of JustPMP 9
- 10. Cost Performance Index(CPI = EV÷AC ) on First Day 0 50 100 150 200 250 300 350 400 Start 1st Day Cost Duration Actual Cost Budgeted CostEarned Value Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 We are here We should have been here Cost variance(CV) = EV – AC = 203 – 350 = -147$ < 0 CPI = EV ÷ AC = 203 ÷ 350 We are over budget and have spent 203 ÷ 350 = 58% more budget than anticipated (Cost Performance Index ) Confidential and Copyrighted material of JustPMP PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 10
- 11. Regarding Schedule on First Day 0 50 100 150 200 250 300 350 400 Start 1st Day Cost Duration Actual Cost(AC) Budgeted Cost(BC)Earned Value(EV) Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 We are here Confidential and Copyrighted material of JustPMP PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 11
- 12. Regarding Schedule in Duration on First Day 0 50 100 150 200 250 300 350 400 Start 1st Day Cost Duration Actual Cost(AC) Budgeted Cost(BC)Earned Value(EV) Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 We are here Schedule variances in hours Confidential and Copyrighted material of JustPMP Which is where we should have then been here PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 112
- 13. Schedule Variances( SV = EV - BC ) on First Day 0 50 100 150 200 250 300 350 400 Start 1st Day Cost Duration Actual Cost(AC)Budgeted Cost(BC) Earned Value(EV) Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 We are here Schedule variances in hours Schedule variance(SC) in dollars = EV – BC = 203 – 290 = -87$ < 0 Confidential and Copyrighted material of JustPMP Which is where we should have then been here PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 13
- 14. Schedule Performance Index (SPI = EV÷ BC ) on First Day 0 50 100 150 200 250 300 350 400 Start 1st Day Cost Duration Actual Cost(AC)Budgeted Cost(BC) Earned Value(EV) Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 We are here Schedule variances in hours Schedule variance(SC) in dollars = EV – BC = 203 – 290 = -87$ < 0 Confidential and Copyrighted material of JustPMP Which is where we should have then been here SPI = EV ÷ BC = 203 ÷ 290 We are late and have only performed 203 ÷ 290 = 70% of the work planned ( Our Schedule Performance Index ) PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 14
- 15. The Consequences.. Cost Overrun 0 500 1000 1500 2000 2500 3000 3500 Start 1st Day 2nd Day3rd Day 4th Day 5th Day 6th Day 7th Day 8th Day 9th Day Cost Duration Actual Cost(AC) Budgeted Cost(BC) Earned Value(EV) Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 Confidential and Copyrighted material of JustPMP Estimate at completion(EAC) = $ 3000 Budget at completion BAC = $ 1740 Cost Overrun Planned end date = 6 days Estimate at completion = 8.57 days PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 15
- 16. The Consequences.. Project Slip 0 500 1000 1500 2000 2500 3000 3500 Start 1st Day 2nd Day3rd Day 4th Day 5th Day 6th Day 7th Day 8th Day 9th Day Cost Duration Actual Cost(AC) Budgeted Cost(BC) Earned Value(EV) Actual cost(AC)- $350 Budgeted cost(BC)-$290 Earned value(EV)- $203 Project Slip Confidential and Copyrighted material of JustPMP Estimate at completion(EAC) = 3000 $ Budget at completion BAC = 1740 $ Cost Overrun Planned end date = 6 days Estimate at completion = 8.57 days PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 16
- 17. Summary of the Consequences 1. If we continue at this rate, we will need: 1740 ÷ 58 = $ 3,000(Cost Estimate at Completion) and 6 days ÷70% = 8.57 days (Schedule Estimate at Completion)to finish the work 2. If you want to finish on budget, we need to work at (Planned remaining budget) ÷ (actual remaining budget) ( 1740 – 290 ) ÷ ( 1740 – 350 ) = 104.3% of the originally performance 3. 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 Confidential and Copyrighted material of JustPMP PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 17
- 18. In technical terms… 1. In real life, the elements we calculated have slightly different names: 2. The Actual Cost is usually referred to as Actual Cost of Works Performed(ACWP) 3.The Planned Cost = Budgeted Cost for Work Schedules(BCWS) 4. The Earned Value = Budgeted Cost for Work Performed (BCWP) Confidential and Copyrighted material of JustPMP PMI, PMP, PMBOK and PMI-ACP are registered marks of Project Management Institute, Inc 18
- 19.