The document discusses Earned Value Management (EVM), which is a project management technique for measuring project performance and progress. It defines key EVM terms like Planned Value, Earned Value, Actual Cost, Budget at Completion, and formulas for calculating variables like Schedule Variance, Cost Variance, Schedule Performance Index, and Cost Performance Index. Examples are provided to illustrate how EVM can be used to track project status and estimate completion costs based on past performance. Effective use of EVM requires discipline in planning, tracking progress periodically, measuring variances, reporting on status, and developing action plans as needed.

1. Earned Value Management in Action
Vivek Prakash – Aug, 16, 2012
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2. Earned Value Management
Definitions
EVM Terms
Explanation
Planned Value (PV)
Estimated value of the work planned to be spent
as of today.
Earned Value (EV)
Value of the work that is completed as of today
(PV of completed work)
Actual Cost (AC)
Total cost actually incurred as of today
Budget at Completion (BAC)
Total planned value of the project
Estimate at Completion (EAC) Forecasted total project cost as of today
Estimate to Complete (ETC)
Estimated cost of the remaining work
Variance at Completion (VAC) The variance of total project cost project as of
today
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3. Earned Value Management
Formulas
EVM Terms
EVM Formula Explanation
Schedule Variance
SV = EV - PV
Measure of schedule performance.
–ve value indicate delay
Cost Variance
CV = EV - AC
Measure of cost performance. –ve
value indicate cost overrun
Schedule Performance
Index
SPI = EV/PV
Measure of progress achieved.
Value less than 1 indicate delay
Cost Performance
Index
CPI = EV/AC
Measure of value of the work
completed. Value less than 1
indicate cost overun
To Complete
Performance Index
TCPI =
(BAC-EV)
(BAC-AC)
Measure of cost performance to be
achieved on remaining work to
meet project objectives
Estimate to Complete
ETC = EAC - AC
Estimated cost of remaining work
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4. Earned Value Management
Formulas
EVM Terms EVM Formula
Explanation
Variance at
Completion
VAC = BAC - EAC
Variance of total projected cost from
budget
AC + Bottom up ETC
When original estimates are
fundamentally flawed
BAC
Cumulative CPI
Observing no variance, will continue
with same expenditure rate
AC + (BAC-EV)
Variance observed as of now will not be
observed in future. Will complete the
project in remaining budget
Estimate at
Completion
(EAC)
AC + [(BAC-EV)/
Current variance trends will continue.
(Cum.CPI x Cum.SPI)] Remaining budget is modified with cost
and schedule performance
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5. Earned Value Management
Cost
Cost baseline
Time
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6. Earned Value Management
Cost
Cost baseline
Actuals
Time
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7. Earned Value Management
Cost
Cost baseline
Actuals
Earned
Time
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8. Earned Value Management
AC
PV
Cost
Cost baseline
Actuals
Earned
EV
Time
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9. Earned Value Management
AC
PV
Cost
Cost baseline
Actuals
Schedule variance in $
Earned
EV
Time
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10. Earned Value Management
AC
PV
Cost
Cost baseline
Actuals
Cost variance
Earned
EV
Time
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11. Earned Value Management
A wall is to be constructed around a square plot. Each side takes 1 week with
estimated budget of $1,000. You have only one crew (with 1 supervisor and 3
workers), therefore construction is planned in sequence. After 1st week, a worker
fell ill. We are not at end of 2nd week and status of the project is as below
Side 1
Side 2
Side 3
Side 4
Task
Side 1
Side 2
Week 1
Week 2
Week 3
Week 4
AS------AF
AS--------PF
Side 3
Cost incurred
Complete $1000
Half done
PS-----------PF
Side 4
Status
$800
To start
PS-----------PF
To start
Status at the end of 2nd Week
AS – Actual Start, AF – Actual Finish, PS – Planned Start, PF – Planned Finish
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12. Earned Value Management
#
Terms
1.
PV
2.
AC
3.
EV
4.
BAC
5.
CV
5.
SV
6.
CPI
7.
SPI
8.
EAC
9.
ETC
10.
VAC
Values
Comments
© 2012 pmwares – All rights reserved

13. Earned Value Management
#
Terms
1.
2.
3.
4.
5.
5.
6.
PV = 1000+1000
AC = 1000+800
EV = 1000+500
BAC
CV (EV-AC) = 1500 – 1800
SV (EV-PV) = 1500 – 2000
CPI (EV/AC) = 1500/1800
2000
1800
1500
4000
-300
-500
0.833
7.
8.
SPI (EV/PV) = 1500/2000
EAC (BAC/CPI) = 4000/0.833
0.75 We are progressing @ 75%
4801 We currently estimate that the total project
will cost $4801
9.
ETC (EAC–AC) = 4801 – 1800
3001 We currently estimate that we have to spend
$3001 to finish the project
10.
VAC (BAC–EAC) = 4000 – 4801
-801 We currently estimate that we will spend
$801 more than budgeted.
Values Comments
We planned to do work worth $2000
We actually spent $1800
We actually completed $1500 worth of work
Originally budgeted to complete in $4000
We are over budget by $300
We are behind schedule
We are getting 83 cents out of every dollar
invested
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14. What it needs to implement EVM
Discipline
Planning
Stable baseline
Periodic tracking

Gathering data of actual progress from team
Actual Efforts & Remaining Efforts

Updating plan
Reporting

Measuring variance

Action Plan

Reporting to stakeholders
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