Post on 08-Aug-2018
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Earned Value Techniques
forProject Cost Control
Dr. Robert Monson
University of St. Thomas
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Earned Value Concepts
Earned Value (EV) is a cost managementtechnique where the value of completed
work is compared to actual costs and the
scheduled costsEarned Value is expressed in terms of $s,
so that completed work can be compared to
actual costs and spend plans
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Earned Value Calculations
EV is calculated by multiplying an estimateof the task percent completeby the totalestimated cost for that task
Example5 week long task costing $10,000Task reported as 37% complete
Value of work completed =>.37*10,000 = $3,700
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Why use Earned Value?
Consider a project where you are running at$90,000 or 90% of spend plan. In traditional
reporting you would consider yourself
under budgetIf the earned value of that work is $80,000,
and the spend plan says $90,000, you would
realize you are over budget as well asbehind schedule
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Example
Task 1
Budget of $10,000
Estimated to be 40% complete
We have spent $5,000 based on accounting
We thought we would spend $3,000 by this date
What is the status of this task?
Overrun (Because EV is $4,000 vs. $5,000)
Ahead of Schedule (Because EV is $4,000 vs. $3,000)
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Metrics for Cost Control
Cost Variance
CV = BCWP ACWP = EV ACWP
Difference between work completed and actual costs
This is where you are on the tasks vs. $s chart
Schedule Variance
SV = BCWP BCWS = EV BCWS
Difference between work completed and work
scheduled
This is your monetary burn rate
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Metrics for Cost Control
Cost Variance IndexCV% = CV/BCWP
Ratio of work completed to $s spent
Schedule Variance IndexSV% = SV/BCWS
Ratio of work completed to work planned
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How do we normally evaluate projects?
Tasks
Time
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Evaluating Status
Tasks
Time
37% Complete
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Budget Status
$
Time
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Project Evaluation
We cant really define whether we are onSpecification
Our Gannt chart doesnt really tell us whether we
are on ScheduleWe need to know the Budget curve to define if we
are spending at the correct rate
Therefore:We typically are considering the wrong variables!
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Project Evaluation
We have to discover what we are really
interested in
Whether the work is getting done close to
estimateWhether the work is progressing as planned
Do we think we can finish on Spec, Schedule
and Budget
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Task Evaluations
Tasks
$
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Task Evaluations
Tasks
$
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Task Evaluations
Tasks
$
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Budget Evaluations
Time
$
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Consider some examples
We must look at both pieces of information
in conjunction to get the whole picture
We need to know if we are:
Getting the work done for the right priceGetting the work done on schedule
From this information we define status
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Tasks
$
Time
$
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Tasks
$
Time
$
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Tasks
$
Time
$
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Project Evaluation
Consider the Earned Value of Tasks
To define if the work is truly getting completed
Consider the Cost Variance
Are we getting the work done for the moneyestimated?
Consider the Schedule Variance
Are we spending at the appropriate rate to stayon schedule?