Earned Value Project Management

Budgeted cost vs. actual cost and schedule vs. reported status tell us very little about project status, but Earned Value Analysis can be used to determine project status exactly. The focus of Earned Value (EV) analysis is the accurate measurement of physical performance against a detailed plan. EV requires a master project schedule and a Work Breakdown Structure (WBS) with measurable work packages (deliverables) to which budget value, usually money, is assigned. EV Analysis integrates scope, cost, and schedule measures based on the WBS, the cost baseline, and project schedule to assess real project performance. Earned Value Analysis originated with the DoD using the terms Budgeted Cost of Work Scheduled (BCWS), Budgeted Cost of Work Performed (BCWP), and Actual Cost of Work Performed (ACWP). In 1996, DoD adopted the terms Earned value (EV), Planned value (PV), and Actual cost (AC) and these are the terms used in the Project Management Institute PMBOK Guide. EV Analysis is an accurate measure of true cost performance: what we got for what we spent and true schedule performance: what we planned to do versus what was actually done at any point in time. It employs three dimensions of project data: Planned value (PV) budgeted cost scheduled for the work during the selected time period. AKA BCWS Earned value (EV) value of work completed during the selected time period. AKA BCWP Actual cost (AC) actual costs for work performed during the selected time period. AKA ACWP Two critical Variances and Indices may be determined from these three values: EV, PV, and AC: Schedule variance SV = EV PV If negative, behind schedule Cost variance CV = EV AC If negative, over budget Cost Performance Index CPI = EV/AC If < 1, we get less than $1 for every dollar spent. Schedule Performance Index SPI = EV/PV If < 1, we are performing at less efficiency than planned. SPI indicates what percent of the plan has been achieved. The Performance Indices are efficiency indicators for a project and can be used to statistically forecast final cost and completion date. The EV measurement method for each deliverable should be agreed to during Planning and agreed to before the work begins. Keep the EV measurement method as simple as possible. The first EV analysis should be performed at the 15 20% period of the project life cycle as the team has moved from Forming, Storming, and Norming to Performing. Typical Measurement Methods for deliverables: 0/100, 50/50, % Complete, Milestone, Apportioned effort, Level of effort References Earned Value Project Management, Fleming and Koppelman, PMI, 2000 Don R. James, PMP Principal Consultant

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