project cost management, earned value management, performance measurement, schedule variance, cost variance, budget

1. Earned Value Management
Drexel University, Goodwin College CT431-120 Project Management
R. Gottardi, Instructor/Author May 31, 2009

2. 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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3. Project Tracking without Earned Value
Project Performance
BCWS Actual Cost
200
180
160
140
120
$000
100
80
60
40
20
0
1 2 3 4 5 6 7 8 9 10 11 12
BCWS 10 20 25 40 62 80 98 125 137 149 160 175
Actual Cost 30 48 52 55 60 65 70 72
Weeks
Conclusion: It looks like we are under budget. What’s missing?
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4. 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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5. 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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6. 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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7. Earned Value Vs. Planned Value
Project Performance
PV(BCWS) EV(BCWP)
200
180
160
140
120
$000
Schedule Variance
100
Behind Schedule
80
60
40
20
0
1 2 3 4 5 6 7 8 9 10 11 12
PV(BCWS) 10 20 25 40 62 80 98 125 137 149 160 175
EV(BCWP) 28 60 62 70 72 80 82 92
Weeks
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8. Earned Value vs. Actual Cost
Project Performance
Actual Cost EV(BCWP)
100
90
Cost Variance ($)
80 Under Budget
70
60
$000
50
40
30
20
10
0
1 2 3 4 5 6 7 8 9 10 11 12
Actual Cost 30 48 52 55 60 65 70 72
EV(BCWP) 28 60 62 70 72 80 82 92
Weeks
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9. Combine All Variables
Project Performance
PV(BCWS) AC(Actual Cost) EV(BCWP)
200
180
160
PV
140
120
$000
100
EV
80
60 AC
40
20
0
1 2 3 4 5 6 7 8 9 10 11 12
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
Weeks
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10. Variance Computations
• Cost Variance (CV)=EV-AC
• Schedule Variance (SV)=EV-PV
• Negative values are unfavorable
• Positive values are favorable
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11. Performance Indices
• Cost Performance Index (CPI)=EV/AC
• Schedule Performance Index
(SPI)=EV/PV
• <1= unfavorable
• >1=favorable
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12. Earned Value
• Integrates schedule & cost data
• Explains causes of variances
• Encourages objective measurement of
progress
• Measures performance
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13. Problem
• Given:
• EV = $5,000
• PV = $10,000
• AC = $15,000
• Solve:
• CV =
• SV =
• CPI =
• SPI =
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14. Problem
• Given:
• EV = $5,000 = Earned Value
• PV = $10,000
• AC = $15,000
• Solve:
• CV =
• SV =
• CPI =
• SPI
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15. Problem
• Given:
• EV = $5,000 = Earned Value = BCWP
• PV = $10,000
• AC = $15,000
• Solve:
• CV =
• SV =
• CPI =
• SPI =
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16. Problem
• Given:
• EV = $5,000 = Earned Value = BCWP
• PV = $10,000 = Planned Value
• AC = $15,000
• Solve:
• CV =
• SV =
• CPI =
• SPI =
16

17. Problem
• Given:
• EV = $5,000 = Earned Value = BCWP
• PV = $10,000 = Planned Value =BCWS
• AC = $15,000
• Solve:
• CV =
• SV =
• CPI =
• SPI =
17

18. Problem
• Given:
• EV = $5,000 = Earned Value = BCWP
• PV = $10,000 = Planned Value =BCWS
• AC = $15,000 = Actual Cost
• Solve:
• CV =
• SV =
• CPI =
• SPI =
18

19. 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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20. 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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21. 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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22. 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 =
22

23. 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 =
23

24. 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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25. 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 =
25

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 =
26

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 =
27

28. 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
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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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30. 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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31. 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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32. 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
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