Earned Value Management

EVM Calculation

What for?

used to monitor:Time and budget

in comparisonto planning

For what?

Requirements:-a clearly defined objective-cost and time limitations-a clearly perceived route to the goal-tasks of a creative nature-work taking place over an extended period-a high labour content-a formalized management structure

Basics

-planned output at standard cost rate-actual output at standard cost rate

-actual costs

→ process efficiency→ cost efficiency

Preparation

-define sub-processes and required resources-schedule sub-processes

-identify process milestones

Concomitant Analysis

-record actual costs-summarize costs according to steps in your WBS

-compare planned cost and actual cost-compare scheduled progress and reality

VariablesPTC = planned time costRTC = real time costMC = material cost (also includes unique investment) PP(t) = percental progressPC(t) = planned costs = PTC x t + MCAC(t) = actual costs = RTC x t + MCEV(t) = earned value = AC x PP(t)SV(t) = schedule variance = EV(t) – PC(t)SPI(t) = schedule performance index = EV(t)/PC(t)CV(t) = cost variance = EV(t) – AC(t)CPI(t) = cost performance index = EV(t)/AC(t)

Planned Cost

PTC

MC

PC

Sum up needed work hours

Multiply with worker costs (wages, insurance and so on)

Add material costs

At t=100% the project should be finished and the costs equal PC

Actual Cost

ATC

MC

AC

Sum up actual worker costs until t

Add material costs

At any point t you can monitor the project costs so far

Earned Value

PP

EV

Determine the actual progress so far

Look up the project budget (payment-profit)

The product of payment and PP is the actual progress in terms of money

In other words: EV indicates the produced value so far

Obviously, EV will always reach 100%. The question is when

Comparing Schedule

PC

EV

SV

SPI

The planned costs contain a set time limit

Is the progress higher than scheduled (SV=EV(t)-PC(t)>0), then we are ahead

of schedule, and verse vice

The schedule performance index indicates the same, but as a division

EV(t)/PC(t)=SPI(t) is the SPI higher than 1, we are more than good in time

Comparing Costs

AC

EV

CV

CPI

The actual costs imply our profit

The calculations work parallel to the schedule EV(t)-AC(t)>0 means gain,

lower than 0 additional costs

The CPI works the same

EV(t)/AC(t)=CPI(t)

CPI>1 means gain CPI<1 means loss

Monitoring

How often should one enquire the progress?

As you see, there is some work to be done when enquiring. Especially the estimation of the

progress is not so easy

Depending on the progress, different sources commend different steps

Milestone Monitoring

We already identified milestones in the progress

These are good for monitoring, if they fulfil the other conditions

For example if we have a S->S relation in our WBS but a time gap and the second process

takes time over the end of the first one, the end of the first is an appropriate milestone

Calendary Monitoring

Monitor due to dates.

For example at the beginning of every month when the wages are paid, or every week, if you

work with weekly payment

Percental Monitoring

Monitor after xx% of the project

As long as you follow the project at least a little, you can estimate when approximately 20%,

50% or 75% are done.

Monitoring Times

With all types of monitoring make sure to have a useful relation between number of monitorings

and the gaps between them

This relation should be based on the risk analysis of the project and your spare time for it. Neither

you should waste time nor risk to miss an important development

Cost Value Reconciliation

Earned Value Management

Preparation

Cost estimation of the project

Project time

Dead costs like bureau and taxes

Estimate spare time until next project

Add some collateral

This needs some experience

Emending the preparation

Add collateral to your price

Add dead costs to your EVM graphs

Of course, in this way of monitoring the „bank events“ are much more significant

Aftermath

Compare the planned development with the actual one

Remember the spare time you want to be able to cope with

Are your numbers still black? Then you did right. Simple as can be.

Sources

Using earned value: a project manager's guideBy Alan Webb © 2003ISBN 0 566 08533 X

Thank You For Your Attention

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