CEM-371

Earned Value
Management
Lecture 7

Department of Construction Engineering and Managemnet

Military College of Engineering,
1
November 16, 2024 Risalpur - Pakistan
 Feedback / Monitoring
Feedback is critical to the success
of any project.
Timely and targeted feedback can
enable project managers to
identify problems early and make
adjustments that can keep a
project on time and on budget.
 Project Monitoring
Provides an “Early Warning” signal for
prompt corrective action.

 Bad news does not age well.

 Still time to recover

 Timely request for additional funds

 Earned Value Management

Earned Value Management (EVM) is a

project performance measurement
technique that integrates scope, time,
and cost data.
 What’s more Important?

• Knowing where you

are on schedule?

• Knowing where you

are on budget?

• Knowing where you

are on work
accomplished?
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 Earned Value needed because...

• Different measures of
progress for different types of
tasks
• Need for a uniform unit of
measure
• We need early warning to
take Management decisions

November 16, 2024 6

 So, Is This Stuff New ?

It’s been around since the sixties.

“Cost/Schedule Control Systems Criteria”

(C/SCSC)

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 Earned Value Management
Earned Value Management (EVM)
has proven itself to be one of the
most effective PERFORMANCE
MEASUREMENT AND FEEDBACK
TOOLS for managing projects.

EVM has been called

‘‘management with the lights on’’
because it can help clearly and
objectively illuminate where a
project is and where it is going—as
compared to where it was
supposed to be and where it was
supposed to be going.
Earned Value Management Concept
 Earned Value Analysis (EVA)
• EVA is a project performance
measurement technique that
integrates scope, time, and cost
data.

• You can determine how well the

project is meeting its goals

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Cost
How’s this project doing?
120000

100000

80000

Projected
60000
Actual

40000

20000

0
Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03
Time

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 We Need To Take A Look Under
The Hood

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 Organized
What could be the Steps for
EVM?

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 How am I gonna eat this
elephant?

Obviously in small
bites.
EVA works best when work is
‘compartmentalized’.
Compartmentalization is best achieved with a
well-planned
November 16, 2024 Work Breakdown Structure. 14
 Steps in EVM – Prepare WBS
First step in EVM is to develop a WBS
Project work needs to be broken down using a work
breakdown structure into executable tasks and
manageable elements often called control accounts
 Steps in EVM – Integration of WBS & OBS
Then, All of the work needs to be assigned to the
workforce for execution using an organization breakdown
structure (OBS)

Control Account Matrix

 Steps in EVM – Establishment of Work Plan
Work Plan is developed with time and Cost for activities
 Steps in EVM – Establishment of PMB
EVM requires the establishment of a Performance
Measurement Baseline (PMB)
Project work needs to be logically scheduled and resourced in a
work plan; the work scope, schedule, and cost need to be
integrated and recorded in a time-phased budget known as a
Performance Measurement Baseline (PMB)
Steps in EVM – Establishment of PMB
 EVM: Summarizing the Steps
The key practices of EVM include:
 Establish a performance measurement baseline (PMB)
 Decompose work scope to a manageable level
 Assign unambiguous management responsibility
 Develop a time-phased budget for each work task
 Select EV measurement techniques for all tasks
 Maintain integrity of PMB throughout the project
 Measure and analyze performance against the baseline
 Record resource usage during project execution
 Objectively measure the physical work progress
 Credit EV according to EV techniques
 Analyze and forecast cost/schedule performance
 Report performance problems and/or take action
 Earned Value Management: Basic Elements

There are three basic elements of Earned Value Management

System (EVMS) / Earned Value Analysis (EVA)

 Planned Value
 Earned Value
 Actual Cost
 Earned Value Management: Basic Elements

Planned Value (PV) describes how far along project work is

supposed to be at any given point in the project schedule.

Also known as the Budgeted Cost of Work Scheduled (BCWS),

Planned Value is the “Planned cost of the total amount of work
scheduled to be performed by the specific point in time or by
some milestone date”.

It is a numeric reflection of the budgeted work that is

scheduled to be performed, and it is the established baseline
(also known as the performance measurement baseline, or
PMB) against which the actual progress of the project is
measured
Earned Value Management: Basic Elements
Planned Value (PV)
 Earned Value Management: Basic Elements

Earned Value (EV) is a snapshot of physical work progress at a

given point in time.

Also known as the Budgeted Cost of Work Performed (BCWP),

it reflects the cost of the amount of work that has actually
been accomplished to date (or in a given time period),
expressed as the planned value for that work.

Hence Earned Value is “the planned (not actual) cost to

complete the work that has been done”
Earned Value Management: Basic Elements
Earned Value (EV)
 Earned Value Management: Basic Elements

Actual Cost (AC), also known as the Actual Cost of Work

Performed (ACWP), is an indication of the level of resources
that have been expended to achieve the actual work
performed to date (or in a given time period).

Hence Actual Cost is “cost incurred to accomplish the work

that has been done to date”
Earned Value Management: Basic Elements
Actual Cost (AC)
Performance Analysis &
Forecasting
 Some Derived Metrics (Variances)
SV: Schedule Variance (EV-PV)
 A comparison of amount of work performed
during a given period of time to what was
scheduled to be performed. It determines whether
a project is ahead of or behind schedule

 The Schedule Variance can be expressed as a

percentage by dividing the Schedule Variance
(SV) by the Planned Value (PV)
 SV% = SV / PV

 A negative variance means the project is behind

schedule.

 SV = EV - PV = 32 - 48 = - 16 {unfavorable}
 SV% = SV / PV =-16 / 48 = -33% {unfavorable}
The project is 33% behind schedule, meaning that
 Some Derived Metrics (Variances)

CV: Cost Variance (EV-AC)

 A comparison of the budgeted cost of work
performed with actual cost. It shows whether a
project is under or over budget.

 Cost Variance can be expressed as a percentage

by dividing the Cost Variance (CV) by the Earned
Value (EV).
 CV% = CV / EV

 A negative variance means the project is over

budget.

 CV = EV - AC = 32 - 40 = -8 {unfavorable}
 CV% = CV / EV = -8 / 32 = -25% {unfavorable}
 Some Derived Metrics (Indices)
SPI: Schedule Performance Index (how
efficiently the project team is using it’s time)
 SPI=EV/PV
 SPI< 1 means project is behind schedule

CPI: Cost Performance Index (Efficiency of

resources)
 CPI= EV/AC
 CPI< 1 means project is over budget

TCPI: To Compete Performance Index

 TCPI = (BAC - EV) / (BAC - AC)
 Helps the team determine the efficiency that
must be achieved on the remaining work for a
project to meet a specified endpoint.
CSI: Cost Schedule Index (CSI=CPI x SPI)The
further CSI is from 1.0, the less likely project
 Some More Derived Metrics; Forecasts
EACt: Time Estimate at Completion
 EACt = (BAC/SPI)/(BAC/DURATION)
= DURATION/SPI
 Indicates the time which the project will take than
originally planned if work continues at the current
rate.

EAC: Estimate at Completion

 EAC = BAC / CPI
 It is the estimated final cost of the project if
current performance trends continue.
ETC: Estimate to Complete
 ETC = (BAC - EV) / CPI
 This shows what the remaining work will cost.
 Class Activity
Lets suppose that for a specific project following are values of
3 elements of earned value management

 Planned Value = Rs. 55, 000/-

 Earned Value = Rs. 49,000/-
 Actual Cost = Rs. 56,000/-
 BAC = Rs. 230,000/-
 Completion Time = 12 months

Find, SV, % SV, CV, % CV, SPI, CPI, CSI, VAC, EACt, EAC, ETC and
also elaborate what these values mean to project manager?
 Variances
Schedule Variance = EV-PV
49,000
- 55,000
SV = - 6,000

%SV= SV/PV = -6000/ 55000

= - 11%

Cost Variance = EV-AC

49,000
56,000
CV = - 7,000

%CV= CV/EV = -7000/49000

= -14%
 Performance Metrics

SPI: EV/PV
49,000/55,000 = 0.891

CPI: EV/AC
49,000/56000 = 0.875

CSI: SPI x CPI

.891 x .875 = 0.780
 Forecasting Metrics

EACt: (BAC/SPI)/(BAC/months)
(230,000/ .891)/(230,000/12)= 13.47 months

EAC: BAC / CPI

230,000/0.875 = Rs. 262,857/-

ETC: (BAC - EV) / CPI

(230,000 – 49,000) / 0.891= Rs. 203, 143/-
 Another Variance

VAC = BAC - EAC

230,000 – 262,857 = - 32,857

 EVA: The Curve

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Consider a four-month long project having activities and schedule as per following
table. You are Project Manager of this project and want to monitor and control it with
the help of Earned Value Management techniques. Analyse the project at the end of
March (3rd month) and assume Earned Value (EV) = 800, Actual Cost (AC) = 900 to
answer following questions:

(1) Find out PV, BAC (budget at completion), SV, CV, SPI, and CPI.
(2) How can you find the chances of project success? Calculate the
relevant Index.
Activity Schedule ( in months)
Activity Activity Cost in
Rs Jan Feb
Mar Apr
A 200

B 400

C 300

D 100
THANK YOU!