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project cost management, earned value management, performance measurement, schedule variance, cost variance, budget
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Earned Value ManagementDrexel University, Goodwin College CT431-120 Project ManagementR. Gottardi, Instructor/Author May 31, 2009
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Some Definitions
• Planned Value, PV (BCWS): the portion of the approved total cost estimate during a given period
• Actual Cost, AC: the total of the direct & indirect costs incurred in accomplishing work on a task or project during a given period
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Project Tracking without Earned ValueProject Performance
0
20
40
60
80
100
120
140
160
180
200
Weeks
$000
BCWS Actual Cost
BCWS 10 20 25 40 62 80 98 125 137 149 160 175
Actual Cost 30 48 52 55 60 65 70 72
1 2 3 4 5 6 7 8 9 10 11 12
Conclusion: It looks like we are under budget. What’s missing?
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What’s Missing
• Any measure of how much work has been accomplished
• Earned Value: an estimate of the value of the physical work actually completed
• Can be – currency, e.g., $– Quantities, e.g., tons, yds3, SF, etc.– Any agreed upon value for the tasks
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How Can We Measure Progress?
• % complete of the tasks’ durations• Rate of performance (RP): % complete actual/%
compete planned• Physical quantities (works for some tasks but not others)
– Tons of earth moved– Cubic yards of cement poured– Floors completed– Sq ft completed
• Let’s use RP because it is common to many tasks & gives us a schedule related measure
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Establish Earning Rules
Rule Credit at Start Credit at End
0/100 0% 100%
50/50 50% 50%
25/75 25% 75%
20/80 20% 80%
Credit means the budgeted cost of work performed is included in the earned value calculation to the extent of the % indicated.
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Earned Value Vs. Planned ValueProject Performance
0
20
40
60
80
100
120
140
160
180
200
Weeks
$000
PV(BCWS) EV(BCWP)
PV(BCWS) 10 20 25 40 62 80 98 125 137 149 160 175
EV(BCWP) 28 60 62 70 72 80 82 92
1 2 3 4 5 6 7 8 9 10 11 12
Schedule VarianceBehind Schedule
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Earned Value vs. Actual CostProject Performance
0
10
20
30
40
50
60
70
80
90
100
Weeks
$000
Actual Cost EV(BCWP)
Actual Cost 30 48 52 55 60 65 70 72
EV(BCWP) 28 60 62 70 72 80 82 92
1 2 3 4 5 6 7 8 9 10 11 12
Cost Variance ($)Under Budget
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Combine All VariablesProject Performance
0
20
40
60
80
100
120
140
160
180
200
Weeks
$000
PV(BCWS) AC(Actual Cost) EV(BCWP)
PV(BCWS) 10 20 25 40 62 80 98 125 137 149 160 175
AC(Actual Cost) 30 48 52 55 60 65 70 72
EV(BCWP) 28 60 62 70 72 80 82 92
1 2 3 4 5 6 7 8 9 10 11 12
PV
AC
EV
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Variance Computations
• Cost Variance (CV)=EV-AC
• Schedule Variance (SV)=EV-PV
• Negative values are unfavorable
• Positive values are favorable
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Performance Indices
• Cost Performance Index (CPI)=EV/AC
• Schedule Performance Index (SPI)=EV/PV
• <1= unfavorable
• >1=favorable
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Earned Value
• Integrates schedule & cost data
• Explains causes of variances
• Encourages objective measurement of progress
• Measures performance
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Problem
• Given:• EV = $5,000• PV = $10,000• AC = $15,000
• Solve:• CV =• SV =• CPI =• SPI =
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Problem
• Given:• EV = $5,000 = Earned Value• PV = $10,000 • AC = $15,000
• Solve:• CV =• SV =• CPI =• SPI
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000• AC = $15,000
• Solve:• CV = • SV = • CPI =• SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value• AC = $15,000
• Solve:• CV =• SV =• CPI =• SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BCWS• AC = $15,000
• Solve:• CV = • SV =• CPI =• SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BCWS• AC = $15,000 = Actual Cost
• Solve:• CV =• SV =• CPI =• SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC• SV = • CPI =• SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 • SV = • CPI = • SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 = -10,000• SV = • CPI = • SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 = -10,000• SV = EV-PV• CPI =• SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 = -10,000• SV = EV-PV = 5,000-10,000• CPI = • SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 = -10,000• SV = EV-PV = 5,000-10,000 = -5,000• CPI = • SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 = -10,000• SV = EV-PV = 5,000-10,000 = -5,000• CPI = EV/AC• SPI =
26
Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 = -10,000• SV = EV-PV = 5,000-10,000 = -5,000• CPI = EV/AC = 5,000/15,000• SPI =
27
Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 = -10,000• SV = EV-PV = 5,000-10,000 = -5,000• CPI = EV/AC = 5,000/15,000 = .33• SPI =
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 = -10,000• SV = EV-PV = 5,000-10,000 = -5,000• CPI = EV/AC = 5,000/15,000 = .33• SPI = EV/PV
29
Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BSWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 = -10,000• SV = EV-PV = 5,000-10,000 = -5,000• CPI = EV/AC = 5,000/15,000 = .33• SPI = EV/PV = 5,000/10,000
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Problem
• Given:• EV = $5,000 = Earned Value = BCWP• PV = $10,000 = Planned Value =BCWS• AC = $15,000 = Actual Cost
• Solve:• CV = EV-AC = 5,000-15,000 = -10,000• SV = EV-PV = 5,000-10,000 = -5,000• CPI = EV/AC = 5,000/15,000 = .33• SPI = EV/PV = 5,000/10,000 = .5
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Other Terms & Computations
• BAC: Budget at Completion: The original total budget for a project
• EAC: Estimate at Completion = BAC/CPI (CPI = Cost Performance Index)
• ETC: Estimate to Complete: EAC-AC
• Variance at Completion: BAC-EAC
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Earned Value
• Title: Earned Value Management• Filename: Earned Value Management Lecture 2009eMY31• Author: Ron Gottardi• Author Affiliation: Drexel University, Goodwin College of
Professional Studies• Course: CT431-120 Project management• Date: May 31, 2009• Copyright 2009 Ron Gottardi
