Earned value management (EVM) assesses a project's schedule and cost performance. It is based on the concept that work completed delivers value equal to the budget spent. Reasons EVM is not used include projects being too complex, lack of requirements, and inaccurate plans. EVM requires a baseline budget and integrated work breakdown structure, schedule, and budget. Formulas like schedule variance, cost variance, schedule performance index, and cost performance index are used to analyze performance. A scenario demonstrated calculating EVM metrics for a fence building project. The document discussed interpreting EVM data and considering factors like physical measurement and percentage complete for determining earned value.

1. Jason Douglas
Earned Value Basics and Application
Jason Douglas– PM, Senior PM and Portfolio Lead

2. The Road Ahead
• Earn Value Defined
• Reasons why Earned Value is not used
• What causes Earned Value not to be Accurate
• Earned Value Pre-requisites
• Simple Scenario
• Formula Basics
• Question 1
• Question 1 Answers
• Other Earned Factors to Consider
• Summary and Next Steps

3. Earned ValueDefined
Earned value management (EVM) is used to assess and grade a PM and
their project based on the schedule and cost performance of a project.
A PM needs to demonstrate control and one key areas is EVM:
• Ahead of / on / behind schedule
• Under / on / over budget
• Earned value management (EVM) is based on the concept that
• i) work completed will deliver value and
• ii) the value delivered equals the budget put into the work.

4. Reasons Why Earned Value is NOT used
• Too hard and expensive too
• Not enough budget or time
• Programme Management has not allocated enough time for
development or standardisation
• Plans are not mature enough
• Internal or External charge out rates will be exposed to customer or
other resources

5. • No documented requirements
• Incomplete requirements
• Just because requirements are
baselined does no make them
complete
• SMART* approach needs to be
used
• WBS* not used or not accepted;
(Plan the Plan)
• WBS incomplete;
• Plan not integrated (WBS-Schedule-
Budget)
• Schedule and/or budget incorrect
• Change management not used or
ineffective;
• Cost collection system inadequate;
• Incorrect progress recorded
• When is a task 0,20,80,100% complete
• management influence and/or
control.
• Contingencies added in to the project

6. Earned Value Pre-Requisites
• The project must have an agreed
‘Baseline Budget’
• Implications Include
• Project Outlook (budget from
Account) aligned to
• Cost Model
• Schedule (Effort, Duration and
Deliverables).
• AS IS model to be agreed/baselined
• If there is no contingency then
project slippages or additional
meetings need Change Requests
(CR) for money and time.
• Decision is needed on CR triggers
• Raw Financial Reports need to be
timely and align with reported
progress
• Requirements, deliverables,
governance approach and processes
need to be agreed up front.
• Good will

7. Simple Scenario
• Build a Fence with 10 Panels, each panel takes a day.
• It is day 4, 4 panels should have been built
• Each panel has a value of £100

8. Formulas Basics
Planned Value (PV) At end of day 4, 4 panels
should be complete
4 panels x £100 =£400
The budgeted value of the
work completed so far at a
specific date
Earned Value (EV) By end of day 4 only 3
panels have been built
hence the EV is £300
The actual value of the
work completed so far at a
specific date
Actual Cost (AC) By end of day 4 actual cost
is £400
The total expenditure for
the work so far at a
specific date
Budget At Completion
(BAC)
10 Panels at £100 each =
£1000
The total budget for the
project

9. Formula Basics Continued
Schedule Variance (SV) At end of day 4,
SV= £300-£400
-£100
Minus is behind schedule
Plus is in front
Is the projects work ahead
or behind schedule
SV=EV-PV
Schedule Performance
Index (SPI)
By end of day 4
SPI= £300/£400
0.75
Minus now becomes below
one
Plus becomes higher than
one
Represents schedule
variance as a ratio
SPI=EV/PV

10. Formula Basics Continued
Cost Variance (CV) At end of day 4,
CV= £300-£400
-£100
Minus is behind budget
Plus is in front
Is the projects costs ahead
or behind budget
CV=EV-AC
Cost Performance Index
(CPI)
By end of day 4
CPI= £300/£400
0.75
Minus is achieved less than
is planned
Plus achieved more than is
planned
Represents schedule
variance as a ratio
CPI=EV/AC

11. SPI and CPI Interpretation
• CPI above 1 – for every £ spent, obtaining more value that is expected
• SPI - how close the actual work is to the schedule – above 1 ahead of
schedule
• Interesting when combining 2 ratios together
CPI 0.75 / SPI 0.90 Spending too much money and behind time. Investigate
CPI 0.90 / SPI 1.5 Spending too much money getting ahead of schedule
CPI 1.5 / SPI 0.90 Adding lots of value but slower than planned
CPI 1.5 / SPI 1.5 Adding lots of value / faster than planned. CR required
and replan.

12. Question 1
• Bid Budget of £15,000 which includes uplifts. £10,000 is the Labour Cost. The Project Lasts 5
weeks and the money should be spent evenly
• By end of week 2 The following deliverables are completed, Project Start Up, Set up in corporate
system for reporting, request for labour and requests for getting labour reports done. The project
has been created a project sharepoint, Cost Model, CR Templates, DAIR Log Created, Projects
Meetings Set Up, Requirements are Baselined, Capacity Sheet Submitted, Bid Charter Baselined,
Pricing sheet submitted, Network Diagram created. The Cost registered in labour systems is
£4500. However 3 weeks work is Completed.
• What is the BAC, EV, PV, AC
• What is SV, SPI
• What is the CV, CPI
• Interpret the data what does it mean
PTO to see answers

13. Answers
• What is the BAC, EV, PV, AC
• BAC = £10,000
• EV = £6,000 (3 Weeks effort)
• PV = £4,000 (2 weeks effort)
• AC =£4,500 what has been spent
• What is SV, SPI
• SV = EV-PV £6,000 - £4,000 SV = £2000
• SPI = EV/PV £6,000/£4000 SPI = 1.5
• What is the CV, CPI
• CV = EV-AC £6,000-£4,500 = £1,500
• CPI = EV/AC =1.33
• Interpret the data what does it mean
• Ahead of schedule and ahead of budget at end of week 2.

14. EV Considerations
• Physical Measurement — directly transform the physical measurement of the amount of
work completed into EV
• example: building 10 Panels each has a value of £100 expected to be completed in 10 days in
proportion, earned value of 3 panel built is £300
• Percentage Complete — directly transform the percentage of the amount of work
completed into EV
• example: building 10 panel each has a value of £100 expected to be completed in 10 days in
proportion, earned value of 30% complete is £300
• Weighted Milestone — a EV is assigned to the 100% completion of each milestone of the
work packages with prior agreement with stakeholders
• Fixed Formula — a specific percentage of the overall PV is assigned to the start of a work
package and the remaining assigned upon completion; these must be agreed upon in the
project management plan
• 0/100 rule: 0% EV at the activity begins; 100% EV upon completion
• 20/80 rule: 20% EV at the activity begins; 80% EV upon completion.
• 50/50 rule: 50% EV at the activity begins; 50% EV upon completion

15. Summary and Next Steps
• Basic 101 of what is earned value
• Why we use it
• Covered of simple example and had a practise question
• Next Lesson on Earned value
• Applying Earned Value to projects and programmes
• More complex formula such as budget at completion

16. Thank you
Any questions to Jason Douglas
Jasondouglas1105@outlook.com
Mobile 07496002461
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