CEM-371
Earned Value
Management
Lecture 7
Department of Construction Engineering and Managemnet
Military College of Engineering,
1
November 16, 2024 Risalpur - Pakistan
Feedback / Monitoring
Feedback is critical to the success
of any project.
Timely and targeted feedback can
enable project managers to
identify problems early and make
adjustments that can keep a
project on time and on budget.
Project Monitoring
Provides an “Early Warning” signal for
prompt corrective action.
Bad news does not age well.
Still time to recover
Timely request for additional funds
Earned Value Management
Earned Value Management (EVM) is a
project performance measurement
technique that integrates scope, time,
and cost data.
What’s more Important?
• Knowing where you
are on schedule?
• Knowing where you
are on budget?
• Knowing where you
are on work
accomplished?
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Earned Value needed because...
• Different measures of
progress for different types of
tasks
• Need for a uniform unit of
measure
• We need early warning to
take Management decisions
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So, Is This Stuff New ?
It’s been around since the sixties.
“Cost/Schedule Control Systems Criteria”
(C/SCSC)
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Earned Value Management
Earned Value Management (EVM)
has proven itself to be one of the
most effective PERFORMANCE
MEASUREMENT AND FEEDBACK
TOOLS for managing projects.
EVM has been called
‘‘management with the lights on’’
because it can help clearly and
objectively illuminate where a
project is and where it is going—as
compared to where it was
supposed to be and where it was
supposed to be going.
Earned Value Management Concept
Earned Value Analysis (EVA)
• EVA is a project performance
measurement technique that
integrates scope, time, and cost
data.
• You can determine how well the
project is meeting its goals
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Cost
How’s this project doing?
120000
100000
80000
Projected
60000
Actual
40000
20000
0
Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03
Time
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We Need To Take A Look Under
The Hood
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Organized
What could be the Steps for
EVM?
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How am I gonna eat this
elephant?
Obviously in small
bites.
EVA works best when work is
‘compartmentalized’.
Compartmentalization is best achieved with a
well-planned
November 16, 2024 Work Breakdown Structure. 14
Steps in EVM – Prepare WBS
First step in EVM is to develop a WBS
Project work needs to be broken down using a work
breakdown structure into executable tasks and
manageable elements often called control accounts
Steps in EVM – Integration of WBS & OBS
Then, All of the work needs to be assigned to the
workforce for execution using an organization breakdown
structure (OBS)
Control Account Matrix
Steps in EVM – Establishment of Work Plan
Work Plan is developed with time and Cost for activities
Steps in EVM – Establishment of PMB
EVM requires the establishment of a Performance
Measurement Baseline (PMB)
Project work needs to be logically scheduled and resourced in a
work plan; the work scope, schedule, and cost need to be
integrated and recorded in a time-phased budget known as a
Performance Measurement Baseline (PMB)
Steps in EVM – Establishment of PMB
EVM: Summarizing the Steps
The key practices of EVM include:
Establish a performance measurement baseline (PMB)
Decompose work scope to a manageable level
Assign unambiguous management responsibility
Develop a time-phased budget for each work task
Select EV measurement techniques for all tasks
Maintain integrity of PMB throughout the project
Measure and analyze performance against the baseline
Record resource usage during project execution
Objectively measure the physical work progress
Credit EV according to EV techniques
Analyze and forecast cost/schedule performance
Report performance problems and/or take action
Earned Value Management: Basic Elements
There are three basic elements of Earned Value Management
System (EVMS) / Earned Value Analysis (EVA)
Planned Value
Earned Value
Actual Cost
Earned Value Management: Basic Elements
Planned Value (PV) describes how far along project work is
supposed to be at any given point in the project schedule.
Also known as the Budgeted Cost of Work Scheduled (BCWS),
Planned Value is the “Planned cost of the total amount of work
scheduled to be performed by the specific point in time or by
some milestone date”.
It is a numeric reflection of the budgeted work that is
scheduled to be performed, and it is the established baseline
(also known as the performance measurement baseline, or
PMB) against which the actual progress of the project is
measured
Earned Value Management: Basic Elements
Planned Value (PV)
Earned Value Management: Basic Elements
Earned Value (EV) is a snapshot of physical work progress at a
given point in time.
Also known as the Budgeted Cost of Work Performed (BCWP),
it reflects the cost of the amount of work that has actually
been accomplished to date (or in a given time period),
expressed as the planned value for that work.
Hence Earned Value is “the planned (not actual) cost to
complete the work that has been done”
Earned Value Management: Basic Elements
Earned Value (EV)
Earned Value Management: Basic Elements
Actual Cost (AC), also known as the Actual Cost of Work
Performed (ACWP), is an indication of the level of resources
that have been expended to achieve the actual work
performed to date (or in a given time period).
Hence Actual Cost is “cost incurred to accomplish the work
that has been done to date”
Earned Value Management: Basic Elements
Actual Cost (AC)
Performance Analysis &
Forecasting
Some Derived Metrics (Variances)
SV: Schedule Variance (EV-PV)
A comparison of amount of work performed
during a given period of time to what was
scheduled to be performed. It determines whether
a project is ahead of or behind schedule
The Schedule Variance can be expressed as a
percentage by dividing the Schedule Variance
(SV) by the Planned Value (PV)
SV% = SV / PV
A negative variance means the project is behind
schedule.
SV = EV - PV = 32 - 48 = - 16 {unfavorable}
SV% = SV / PV =-16 / 48 = -33% {unfavorable}
The project is 33% behind schedule, meaning that
Some Derived Metrics (Variances)
CV: Cost Variance (EV-AC)
A comparison of the budgeted cost of work
performed with actual cost. It shows whether a
project is under or over budget.
Cost Variance can be expressed as a percentage
by dividing the Cost Variance (CV) by the Earned
Value (EV).
CV% = CV / EV
A negative variance means the project is over
budget.
CV = EV - AC = 32 - 40 = -8 {unfavorable}
CV% = CV / EV = -8 / 32 = -25% {unfavorable}
Some Derived Metrics (Indices)
SPI: Schedule Performance Index (how
efficiently the project team is using it’s time)
SPI=EV/PV
SPI< 1 means project is behind schedule
CPI: Cost Performance Index (Efficiency of
resources)
CPI= EV/AC
CPI< 1 means project is over budget
TCPI: To Compete Performance Index
TCPI = (BAC - EV) / (BAC - AC)
Helps the team determine the efficiency that
must be achieved on the remaining work for a
project to meet a specified endpoint.
CSI: Cost Schedule Index (CSI=CPI x SPI)The
further CSI is from 1.0, the less likely project
Some More Derived Metrics; Forecasts
EACt: Time Estimate at Completion
EACt = (BAC/SPI)/(BAC/DURATION)
= DURATION/SPI
Indicates the time which the project will take than
originally planned if work continues at the current
rate.
EAC: Estimate at Completion
EAC = BAC / CPI
It is the estimated final cost of the project if
current performance trends continue.
ETC: Estimate to Complete
ETC = (BAC - EV) / CPI
This shows what the remaining work will cost.
Class Activity
Lets suppose that for a specific project following are values of
3 elements of earned value management
Planned Value = Rs. 55, 000/-
Earned Value = Rs. 49,000/-
Actual Cost = Rs. 56,000/-
BAC = Rs. 230,000/-
Completion Time = 12 months
Find, SV, % SV, CV, % CV, SPI, CPI, CSI, VAC, EACt, EAC, ETC and
also elaborate what these values mean to project manager?
Variances
Schedule Variance = EV-PV
49,000
- 55,000
SV = - 6,000
%SV= SV/PV = -6000/ 55000
= - 11%
Cost Variance = EV-AC
49,000
56,000
CV = - 7,000
%CV= CV/EV = -7000/49000
= -14%
Performance Metrics
SPI: EV/PV
49,000/55,000 = 0.891
CPI: EV/AC
49,000/56000 = 0.875
CSI: SPI x CPI
.891 x .875 = 0.780
Forecasting Metrics
EACt: (BAC/SPI)/(BAC/months)
(230,000/ .891)/(230,000/12)= 13.47 months
EAC: BAC / CPI
230,000/0.875 = Rs. 262,857/-
ETC: (BAC - EV) / CPI
(230,000 – 49,000) / 0.891= Rs. 203, 143/-
Another Variance
VAC = BAC - EAC
230,000 – 262,857 = - 32,857
EVA: The Curve
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Consider a four-month long project having activities and schedule as per following
table. You are Project Manager of this project and want to monitor and control it with
the help of Earned Value Management techniques. Analyse the project at the end of
March (3rd month) and assume Earned Value (EV) = 800, Actual Cost (AC) = 900 to
answer following questions:
(1) Find out PV, BAC (budget at completion), SV, CV, SPI, and CPI.
(2) How can you find the chances of project success? Calculate the
relevant Index.
Activity Schedule ( in months)
Activity Activity Cost in
Rs Jan Feb
Mar Apr
A 200
B 400
C 300
D 100
THANK YOU!
