Earned Value

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Earned Value
JOEL VIRAY jviray_at_lmrsolutions.com
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TOPICS

• What is Earned Value Management?
• Why do I need it?
• How do I do it?
• Earned Value Reporting
• Earned Value System

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What is Earned Value?
A Managers Tool for Integrated Cost, Schedule
and Technical Performance Management
Technical
Schedule
Earned Value
Cost
CSSR
CPR
Other Information

• Earned Value is an objective measurement of how
  much work has been accomplished on a project and
  at what cost
• Provide early alerts to performance slippage
• Earned Value indicates how much of the budget
  should have been spent in view of the amount of
  work done so far

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Why use EVM?

• Accurate picture of project status
• cost, schedule, AND technical
• Early and accurate identification of trends and
  problems
• Basis for corrective action
• Supports mutual goals of contractor and customer
• bring project in on schedule and cost

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How Does Earned Value Work?

• Successful EVM management requires several key
  practices
• Identify each project deliverable
• Develop a schedule for the completion of each
  deliverable
• Assign a value to each deliverable

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Terminology

• ACWP Actual Cost of Work Performed
• BCWP Budgeted Cost of Work Performed
• BCWS Budgeted Cost of Work Scheduled
• SPI Schedule Performance Index
• (EV/Planned Value) or (BCWP/BCWS)
• CPI Cost Performance Index
• (EV/Actual Cost) or (BCWP/ACWP)
• EAC Estimate at Completion
• BAC Budget at Completion

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WHY DO I NEED IT?
EVM - A Simple Example

• Your project
• total budget of 100,000
• 12 month effort
• produce 20 units
• How are you doing? Is everything going to plan?
• How far along are you? (64, 50, gt40)
• Is this where you expected to be or do you need
  to take action?

• Status
• spent to date 64,000
• time elapsed 6 months
• units produced 8 complete or 40 Complete

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Earned Value the Math
EVM - A Simple Example

• Your project
• total budget of 100,000
• 12 month effort
• produce 20 units
• The Basics
• BAC Budget at Completion 100,000
• BCWS Plan 50,000
• ACWP Actuals 64,000
• BCWP Performance 5,000/unit 40,000

• Status
• spent to date 64,000
• time elapsed 6 months
• units produced 8 complete or 40 Complete

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EVM - A Simple Example

• Your project
• total budget of 100,000
• 12 month effort
• produce 20 units
• Earned Value
• BAC 100,000 ACWP 64,000
• BCWS 50,000 BCWP 40,000
• The Variance Measures
• CV Cost Variance BCWP-ACWP -24,000
• SV Schedule variance BCWP-BCWS -10,000
• CV CV/BAC -20
• SV SV/BAC -10
• CPI BCWP/ACWP 40,000/100,000 0.4
• SPI BCWP/BCWS 40,000/50,000 0.8

• Status
• spent to date 64,000
• time elapsed 6 months
• units produced 8 complete or 40 Complete

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Earned Value Trend Graph
125K
Cost Variance 20K
100K
75K
ACWP 64K
BCWS 50K
Cost
50K
25K
Earned Value (Work Completed) 40K
10K
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TIME NOW
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TIME FRAME
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Sample Project Second Story Deck

• Stands 10 feet off the ground
• Measures 12 x 12 feet
• Set of stairs will lead to the ground
• Will be supported with 4 posts resting on
  concrete footings
• Footings must extend below frost line (4 feet)
• Homeowner (and friends) will construct with
  standard materials

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Planned Values for Deck Replacement Project
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Measuring Performance

• End of Day 5
• Planned 34 hours of work
• Expended 36 hours
• Earned 26 hours

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Measuring Performance
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Measuring Performance

• CPI (EV/Actual Cost)
• 26/36 0.72
• We are realizing 7.2 hours of result for every 10
  hours of actual effort expended
• SPI (EV/Planned Value)
• 26/34 0.76
• We are realizing 7.6 hours of result for every 10
  hours of planned effort

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Corrective Action
Stakeholder Priority General Approach Possible Approaches
Maintain project schedule Sacrifice product Reduce scope of other part of project (hand railings) Stop digging and hope building inspector doesnt notice
Sacrifice cost Work overtime Have a friend help (more pizza and beer) Rent a back-hoe
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Re-Baseline Plan
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Why do we need Early Warning?
Course corrections are easier when you have time
to make adjustments Its too late when youre
this close to the iceberg!
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STATING THE OBVIOUS

• EVM will not solve your problems - only you can
  do that!
• A good tool is POINTLESS if you dont TAKE ACTION
  based on the information it gives you!!!

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EPM Solution Architecture
Line of Business Applications WAW DIFMS SOSSLDCA
DA More
Internal/External Databases