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Earned Value Management

Presented by

Dipo Tepede, PMP, SSBB, MBA

This presentation is copyright © 2009 by POeT Solvers Limited. All rights reserved.

This presentation is protected by the Nigerian Copyright law and may not be reproduced,

distributed, transmitted, displayed, published or broadcast without the prior written permission

of POeT Solvers Limited. You may not alter or remove any trademark, copyright or other

notices. PMP®, CAPM®, PMI®, PMBOK® Guide are

registered marks of Project Management Institute, Inc.

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•  Be able to know the formulas for:

– Cost and Schedule Performance Index

– Estimate at Completion – To complete Performance Index

•  Be able to explain Estimate to Complete

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At the end of this training, our goal is for you to:

•  EVM – Earned Value Management

•  EVT – Earned Value Technique

•  AC – Actual Cost •  PV – Planned Value

•  EV – Earned Value

•  Cost Variance: CV = EV – AC

•  Schedule Variance: SV = EV – PV

•  Variance: Subtract/Index: Divide Powered by POeT Solvers Limited

Review

•  Cost Performance Index

•  Measure of cost efficiency on a project

•  Ratio of earned value to actual costs •  CPI = EV/AC

– CPI: Cost Performance Index

– EV: Earned Value

– AC: Actual Cost

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CPI Overview and Formula

•  Schedule Performance Index

•  Measure of schedule efficiency on a project

•  Ratio of earned value to planned value

•  SPI = EV/PV – SPI: Schedule Performance Index

– EV: Earned Value

– PV: Planned Value Powered by POeT Solvers Limited

SPI Overview and Formula

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Things to Know

•  Positive is good • Negative is bad

•  < 1 is bad •  =1 is good •  > 1 is good

CV and SV

CPI and SPI

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Earned Value Terms

Estimate to Complete

Estimate at Completion

• Estimate for the cost of all the remaining work in the project

• Forecasted estimate for the total cost of the project

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Bottom-up ETC Estimate work left and multiply by the hourly

rate

Accurate estimate to complete

Re-estimating everything

EAC = AC + Bottom-Up ETC

•  Takes time

•  Time spent in re-estimating is lost and cannot be regained

•  Re-estimation is costly

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Problems

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EAC Questions to Ask

• Project Progress so far?

• Will progress rate be same in future?

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Conclusions Drawn

Original estimate was right and the current project performance is wrong

Original estimate was wrong and the current project performance is correct

Might also have to consolidate both cost and schedule while calculating EAC

•  EAC = AC + BAC – EV

•  Abbreviations:

– EAC = Estimate at Collection – AC = Actual Costs

– BAC = Budget at Completion

– EV = Earned Value

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EAC at Budgeted Rate

•  EAC = BAC/CPI

•  Abbreviations:

– EAC = Estimate at Completion – BAC = Budget at Completion

– CPI = Cost Performance Indexe

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EAC at Present CPI Rate

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EAC With CPI & SPI Factored in

EAC = AC + ((BAC - EV)/(CPI*SPI))

•  EAC at budgeted rate

– EAC = AC + BAC – EV

•  EAC at present CPI rate – EAC = BAC/CPI

– EAC = AC + ((BAC - EV)/CPI)

•  EAC with CPI & SPI factored in

– EAC = AC + ((BAC - EV)/CPI*SPI)

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EAC Review

•  Situational questions

•  Identity EVM situations

•  Decide which formula to use •  All formulas must be on your cheat sheet

•  There is only one way to learn them:

– Practice, Practice, Practice, Practice, Practice, Practice, Practice, Practice, Practice, Practice, Practice, Practice,

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Know the Reasoning

560 km at 80km/h = 7hours

Leaving at 8am / Arrive at 3pm

At 1pm, you have driven 300km

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TCPI Example

•  Using your original arrival time:

•  You have 2 hours left

•  There are 250 km to go •  That means that you must drive 250km/2h

= 125km/h to reach your target

•  So your TCPI based on your original arrival estimate = 125

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TCPI based on original BAC

•  Using new arrival time:

•  4’o clock: you have 3 hours left

•  There are 250km to go •  You must drive 250km/3h = 83km/h to

reach the target

•  TCPI based on new arrival estimate = 83

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TCPI based on New EAC

•  Your Target is BAC:

•  TCPI = (BAC - EV) / (BAC - AC)

•  Your Target is EAC: •  TCPI = (BAC - EV) / (EAC - AC)

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TCPI Formulas

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Two More Formulas

Variance at Completion

Calculation of the Percent

Spent

• VAC = BAC - EAC

• % Spent = AC/BAC

•  Earned Value Techniques concern with:

– Earned value Mgt.

– Forecasting – To-Complete Performance Index

•  Terms and abbreviations that you need to know are: – AC – Actual Cost

– PV – Planned Value

– EV – Earned Value Powered by POeT Solvers Limited

Review

•  CV & CPI – Cost Variance and Cost Performance Index

•  SV & SPI – Schedule Variance and Schedule Performance Index

•  EAC – Estimate at Completion

•  ETC – Estimate to Complete

•  BAC – Budget at Completion •  TCPI – To Complete Performance Index

•  VAC – Variance at Completion Powered by POeT Solvers Limited

Review

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Review

Positive Variances Negative

Variances

Good

Index = 1

Index > 1

Bad

Index < 1