Earned Value Analysis by John Cornman

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Earned Value AnalysisbyJohn Cornman
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Introduction

• Earned Value Analysis is an industry standard
  way to measure a projects progress, forecast its
  completion date and final cost, and provide
  schedule and budget variances along the way.
• Based on just 3 data points, it can provide
  consistent, numerical indicators with which you
  can evaluate and compare projects.

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The 3 fundamental metrics

• Budgeted Cost of Work Performed.
• Budgeted Cost of Work Scheduled.
• Actual Cost of Work Performed.

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Budgeted Cost of Work Performed

• This is the Earned Value.
• Abbreviated as BCWP.
• For completed work, it is the cost originally
  budgeted to accomplish that work.
• How much work was actually done?

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Budgeted Cost of Work Scheduled

• Abbreviated BCWS.
• It is the total budgeted cost up to the analysis
  date.
• Approximated by the total budget multiplied by
  the fraction of total project duration at the
  analysis date.
• How much work should have been done?

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Actual Cost of Work Performed

• Abbreviated ACWP.
• What it actually cost to accomplish all the work
  completed as of the analysis date.
• What did the work that was actually done
  actually cost?

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Derived Metrics

• Schedule Variance (SV)
• Schedule Performance Index (SPI)
• Cost Variance (CV)
• Cost Performance Index (CPI)

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A Few More Acronyms

• BAC - Budget At Completion
• Total Original Budgeted Cost
• Same as BCWS at completion
• EAC - Estimate At Completion
• Cumulative Actuals Estimate-To-Complete
• VAC - Variance At Completion
• Forecast of final cost variance

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Doing The Math

• SV BCWP - BCWS
• Negative means Behind Schedule
• SPI BCWP / BCWS
• Less than 1.00 means Behind Schedule
• CV BCWP - ACWP
• Negative means Over Budget
• CPI BCWP / ACWP
• Less than 1.00 means Over Budget
• EAC BAC / CPI

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An Example Lemonade

• Make 1,000 cups over 50 days
• Steady rate of 20 cups per day
• Budgeted cost per cup is 0.50
• Total project budget is 500

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Lemonade Progress

• At end of day 10
• 150 cups have been made
• Total actual cost is 90 (ACWP)

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Lemonade Status

• BCWS 100
• 10 days x 20 cups per day x .50/cup budget
• BCWP 75 (Earned Value)
• 150 cups x .50/cup budget
• SV BCWP - BCWS -25
• SPI BCWP / BCWS 0.75
• CV BCWP - ACWP 75 - 90 -15
• CPI BCWP / ACWP 0.833

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Lemonade Forecast

• EAC BAC / CPI 500 / 0.833 600
• VAC BAC - EAC 500 - 600 100
  (unfavorable)
• Schedule at Completion 50 / SPI 50 / 0.75
  66.67 days

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MS Project 98 Support
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Five Simple Criteria forEarned Value Applications

• 1. Define (scope) the project. . .with a WBS
• 2. Plan and schedule the project scope
• 3. Budget cost account plans to functions
• 4. Establish and maintain a performance baseline
• 5. Monitor performance and forecast final results
• Fleming Hoppleman. 1996. Earned Value
  Management. PMI

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Earned Value Management http//www.acq.osd.mil/pm
/