Monitoring project health using Earned Value Management (EVM) is being explained using a small example of a project scenario

1. 1
Monitoring Project Health
“You cannot manage what you cannot measure…and what gets measured gets done”
……Bill Hewlett, Hewlett Packard

2. 2
Case Study
Project Scenario:
===============
Project Name: Alpha
Duration: 4 months
Total Budget: Rs.1,00,000
Billing Type: Monthly billing of Rs.25,000 for 4 months
Project Deliverables: 20 components per month (verified and
accepted)
=========================================
Project status at end of 2nd month:
Number of components delivered: 36
Actual money spent: Rs.57,000
How do I
know if this
project is
delivering
value?

3. 3
What is Earned Value Management (EVM)?
It is a tool that combines scope, time & cost to assess project performance and
health in terms of:
 Whether the project is on, above or behind the schedule
 Whether the project is on, under or over the budget
EVM provides set of formulas that will help the project team in 2
aspects:
 Understand the current project performance (Fact Finding)
 Forecast the future outcome

4. 4
What is Earned Value Management?
Fact Finding:
1. Understand the project budget
2. What is the planned value as per the
schedule?
3. What is the earned value as per
project performance?
4. What is the actual spending so far?
5. Find out if we are above or behind the
schedule (SPI)
6. Find out if we are under or over the
budget (CPI)
Forecasting:
1. How much the project is going to cost
at completion?
2. How to keep project on track?

5. 5
What is Earned Value Management?
Project Name: Alpha
Duration: 4 months
Total Budget: Rs.1,00,000
Billing Type: Monthly billing of Rs.25,000 for 4
months
Project Deliverables: 20 components per month
(verified and accepted)
===============================
Project status at end of 2nd month:
Number of components delivered: 36
Actual money spent: Rs.57,000
Project Budget: Rs.1,00,000
Planned % complete: 50%

6. 6
What is Earned Value Management?
Planned Value (PV)
How much budget project was planning to
use until the end of 2nd month
PV = Project Budget * Planned % complete
PV = Rs.1,00,000 * .50 = Rs.50,000
Project Name: Alpha
Duration: 4 months
Total Budget: Rs.1,00,000
Billing Type: Monthly billing of Rs.25,000 for 4
months
Project Deliverables: 20 components per month
(verified and accepted)
===============================
Project status at end of 2nd month:
Number of components delivered: 36
Actual money spent: Rs.57,000

7. 7
What is Earned Value Management?
What is Earned Value?
Earned value tells how much work the
project have been able to accomplish with
the budget that was given. It tells how
much value the project has earned
What is required to calculate Earned Value?
1. Project budget
2. Actual % complete
Project Name: Alpha
Duration: 4 months
Total Budget: Rs.1,00,000
Billing Type: Monthly billing of Rs.25,000 for 4
months
Project Deliverables: 20 components per month
(verified and accepted)
===============================
Project status at end of 2nd month:
Number of components delivered: 36
Actual money spent: Rs.57,000

8. 8
What is Earned Value Management?
Project Name: Alpha
Duration: 4 months
Total Budget: Rs.1,00,000
Billing Type: Monthly billing of Rs.25,000 for 4
months
Project Deliverables: 20 components per month
(verified and accepted)
===============================
Project status at end of 2nd month:
Number of components delivered: 36
Actual money spent: Rs.57,000
Since 36 components are delivered, out
of 80
Actual % complete = 36 / 80 = 45%

9. 9
What is Earned Value Management?
Earned Value (EV)
It tells how much the project actually earned
until the end of 2nd month
EV = Project budget * Actual % complete
EV = Rs.1,00,000 * 45% = Rs. 45,000
Project Name: Alpha
Duration: 4 months
Total Budget: Rs.1,00,000
Billing Type: Monthly billing of Rs.25,000 for 4
months
Project Deliverables: 20 components per month
(verified and accepted)
===============================
Project status at end of 2nd month:
Number of components delivered: 36
Actual money spent: Rs.57,000

10. 10
What is Earned Value Management?
Project Name: Alpha
Duration: 4 months
Total Budget: Rs.1,00,000
Billing Type: Monthly billing of Rs.25,000 for 4
months
Project Deliverables: 20 components per month
(verified and accepted)
===============================
Project status at end of 2nd month:
Number of components delivered: 36
Actual money spent: Rs.57,000
Actual project cost: Rs.57,000

11. 11
What is Earned Value Management?
Schedule Performance Index (SPI):
It tells about schedule efficiency as the ratio
of earned value to planned value
SPI = Earned Value / Planned Value
SPI = __________ / ___________
SPI = ______
SPI 0.90 means, for every one rupee spent, the project is earning a value
of 90 paise!! Not a good news!!
Project Name: Alpha
Duration: 4 months
Total Budget: Rs.1,00,000
Billing Type: Monthly billing of Rs.25,000 for 4
months
Project Deliverables: 20 components per month
(verified and accepted)
===============================
Project status at end of 2nd month:
Number of components delivered: 36
Actual money spent: Rs.57,000
45,000 50,000
0.90

12. 12
What is Earned Value Management?
Cost Performance Index (CPI):
It is an indicator that tells whether you are
over or under budget
CPI = Earned Value / Actual Cost
CPI = ___________ / ___________
CPI = _______
CPI 0.79 means, for every one rupee spent, the project is earning a value
of 79 paise!! Not a good news!!
Project Name: Alpha
Duration: 4 months
Total Budget: Rs.1,00,000
Billing Type: Monthly billing of Rs.25,000 for 4
months
Project Deliverables: 20 components per month
(verified and accepted)
===============================
Project status at end of 2nd month:
Number of components delivered: 36
Actual money spent: Rs.57,000
45,000 57,000
0.79

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What is Earned Value Management?
Let’s see how forecasting can be done

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What is Earned Value Management?
Estimate At Completion
If we assume the CPI of the project is going
continue at 0.79, then we can predict the
project cost when it is complete
EAC = Project budget / CPI
EAC = Rs.1,00,000 / 0.79
EAC = Rs.1,26,582
Project will spend Rs.26,582 more than the budgeted value, if the same
trend continues…..ie continuing at a CPI of 0.79
Project Name: Alpha
Duration: 4 months
Total Budget: Rs.1,00,000
Billing Type: Monthly billing of Rs.25,000 for 4
months
Project Deliverables: 20 components per month
(verified and accepted)
===============================
Project status at end of 2nd month:
Number of components delivered: 36
Actual money spent: Rs.57,000

15. 15
What is Earned Value Management?
What steps the project team can take to get
things back on track?
Start Thinking….

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