Earned Value Analysis

Earned Value Analysis

Earned Value Analysis compares the Current Project status with the Baseline Plan

Earned Value for a task =

(budgeted cost of task)x(% completion of task)Task Progress Conventions

Estimated by a knowledgeable unbiased assessor X% complete when task started and other (1-X)%

when task finished. Usually 50-50 or 0-100

Earned Value for the entire project is the summation of earned values for all tasks

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PV, EV, and AC

PV: Planned Value, baseline cost of scheduled work. Also known as Budgeted Cost of Work Scheduled (BCWS)

AC: Actual cost of work performed. Also shown by (ACWP)

EV: Earned Value, budgeted cost of work performed. Also shown by (BCWP)


Control System Example 1

Week 2: Task expenses = 460 worker-hours

370

380

390

400

410

420

430

440

450

460

470

1 2 3 4

Week

Cos

t (i

n w

ork

er-h

ours

)

WeekPlanned Cost

(BCWS) Actual Cost

Cumulative Actual Cost

(ACWP)

1 400 420 4202 400 460 880

Is the task “out of control”?

Actual

Planned



Week 3: Task expenses = 500 worker-hrs

WeekPlanned cost

(worker-hours)Actual cost

(worker-hours)Cumulative cost (worker-hours)

1 400 420 4202 400 460 8803 400 500 1380

Again, is the task “out of control”?

0

100

200

300

400

500

600

1 2 3 4

Week

Wor

ker-

hour

s

Actual

Planned


Controlling Projects

Key decisions in controlling performance in project management: What is the optimal review frequency? What are appropriate acceptance levels at each review stage?

“Both over-managed and under-managed development processes result in lengthy design lead time and high development costs.”

R.H. Ahmadi, R. Wang. 1999. Managing Development Risk in Product Design Processes. Operations Research 47, 235-246


6

Types of System Variation

Common cause variation: “in-control” or normal variation

Special cause variation: variation caused by forces that are outside the system

Treating common cause variation as if it were special cause variation is called “tampering”

Tampering always degrades the performance of a system – W.E. Deming


7

Performance Metrics for Example 1

PV: Planned Value, baseline cost of scheduled work. AC: Actual cost of work performed. EV: Earned Value, budgeted cost of work performed. PWC: percentage of work completed.

Week PV AC PWC EV1 400 420 23% 3682 800 880 50% 8003 1,200 1,380 85% 13604 1,600 1,500 100% 1600


Schedule Variance

Schedule variance: difference between value of work completed and value of scheduled work SV = EV – PV


Week PV AC PWC EV SV1 400 420 23% 368 -322 800 880 50% 800 03 1,200 1,380 85% 1360 1604 1,600 1,500 100% 1600 0

Cost Variance

Cost variance: difference between value of work completed and actual expenditures CV = EV – AC


Week PV AC PWC EV SV CV1 400 420 23% 368 -32 -522 800 880 50% 800 0 -803 1,200 1,380 85% 1360 160 -204 1,600 1,500 100% 1600 0 100

Total Variance

Total variance: Cost Variance–Schedule Variance

=(EV-AC)-(EV-PV) TV = PV – AC


Week PV AC PWC EV SV CV TV1 400 420 23% 368 -32 -52 -202 800 880 50% 800 0 -80 -803 1,200 1,380 85% 1360 160 -20 -1804 1,600 1,500 100% 1600 0 100 100

Earned Value Chart

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TimeNow

Dol

lars

Schedulevariance

Costvariance

PV(baseline)

AC

EV

Actual cost

Value completed (Earned Value)

7-11

Earned Value Chart 2


Time

Dol

lars

PVAC

EV

7-12



Time

Dol

lars

PV

AC

EV

7-13



Time

Dol

lars

PV

AC

EV

7-14



Time

Dol

lars

PV

AC

EV

7-15



Time

Dol

lars

PV

AC

EV

7-16


Progress report at the end of week #5:

Cumulative Percent of Work Completed:

Worker-Hours Charged to Project:



We ekPlan 1 2 3 4 5 6 7 8 9 10 TotalTask A 6 6 6 8 10 36Task B 12 12 12 36Task C 10 10 12 12 12 56Scheduled work-hrs 6 6 6 20 22 22 10 12 12 12PV work-hrs 6 12 18 38 60 82 92 104 116 128



We ekPlan 1 2 3 4 5 6 7 8 9 10 TotalTask A 6 6 6 8 10 36Task B 12 12 12 36Task C 10 10 12 12 12 56Scheduled work-hrs 6 6 6 20 22 22 10 12 12 12PV work-hrs 6 12 18 38 60 82 92 104 116 128Actual 1 2 3 4 5 6 7 8 9 10Task A 5 6 8 10 10Task B 15 10Task CActual work-hrs 5 6 8 25 20AC 5 11 19 44 64




We ekPlan 1 2 3 4 5 6 7 8 9 10 TotalTask A 6 6 6 8 10 36Task B 12 12 12 36Task C 10 10 12 12 12 56Scheduled work-hrs 6 6 6 20 22 22 10 12 12 12PV work-hrs 6 12 18 38 60 82 92 104 116 128Actual 1 2 3 4 5 6 7 8 9 10Task A 5 6 8 10 10Task B 15 10Task CActual work-hrs 5 6 8 25 20AC 5 11 19 44 64% work completed 1 2 3 4 5 6 7 8 9 10Task A 0.15 0.3 0.4 0.6 0.8Task B 0.25 0.65Task C% work completed 1 2 3 4 5 6 7 8 9 10Task A 5.4 10.8 14.4 21.6 28.8Task B 9 23.4Task CEV 5.4 10.8 14.4 30.6 52.2

SV -0.60 -1.20 -3.60 -7.40 -7.80CV 0.40 -0.20 -4.60 -13.40 -11.80

Schedule and Cost Indices

SPI: Schedule Performance Index SPI = EV / PV CPI: Cost Performance Index CPI = EV / AC


We ekPlan 1 2 3 4 5 6 7 8 9 10PV work-hrs 6 12 18 38 60 82 92 104 116 128AC 5 11 19 44 64EV 5.4 10.8 14.4 30.6 52.2

SV -0.60 -1.20 -3.60 -7.40 -7.80CV 0.40 -0.20 -4.60 -13.40 -11.80SPI 0.900 0.900 0.800 0.805 0.870CPI 1.080 0.982 0.758 0.695 0.816

Budget and Estimate at Completion


BAC: Budget At Completion EAC: Estimate At Completion ETC: Estimated to Completion

Updating Forecasts: Future is the same as actual

Assumes that the progress in future is the same as actual


9.92649.156

9.156816.0

128

ACEACETC

EAC

CPI

BACEAC

Updating Forecasts: Future is the same as schedule (Example 2)

Assumes that the progress in future is the same as schedule


8.65648.139

8.1398.11128

ACEACETC

EAC

CVBACEAC

TIME To Completion: (Example 2)


Weeks5.655.11CompletionToTime

CompletionToTime

5.1187.0

10

nowp

p

pp

-TET

ET

SPI

TET

Assumes that the progress in future is the same as actual

Tp: Project duration

ETp: Estimated project duration

Tnow: Elapsed time

Updating Forecasts: Optimistic Viewpoint (Example 2)


Weeks75.5575.10CompletionToTime

-CompletionToTime

75.10)75.0(10

7500.87

55

-Variance Time

nowp

p

pp

nownow

TET

ET

tVTET

.tV

SPI

TTtV

Assumes that the progress in future is the same as schedule

Example 3

Budgeted cost for finished task = $850K. Actual cost to date = $550K; Task is 70% complete, but was scheduled to be 80% complete by now. The project was scheduled for 12 months. It is now end of month 10.

AC = 550, PV = 0.8×850 = 680, EV = 0.7×850 = 595

Cost variance = EV – AC = +45

Schedule variance = EV – PV = -85

CPI = EV / AC = 1.082

SPI = EV / PV = 0.875


Example 3

BAC= 850. AC = 550; % Complete = 70%, Scheduled % Complete = 80%. Scheduled Duration = 12 months, now = end of month 10. PV = 0.8×850 = 680, EV = 0.7×850 = 595

CV = EV – AC = +45, SV = EV – PV = -85

CPI = EV / AC = 1.082, SPI = EV / PV = 0.875

Estimated Remaining Cost = 850/1.082 -550= 236

Estimated Remaining Time = Tp/0.875 –Tnow= 12/0.875-10 = 13.71-10 = 3.71 months

Estimated Remaining Cost = 850-CV -AC= 850-(45) – 550 = 255

tV = Tnow - Tnow /0.875 =- 1.43

Estimated Remaining Time = Tp –tV – Tnow = = 12- (-1.43) – 10 = 3.43 months


Critical Ratio

The critical ratio is the product of a schedule ratio and a cost ratio. Indicates when a task or process is becoming unacceptable, typically when the ratio drops below 1.


cost actual

progress actualfor cost budgeted

progress scheduled

progress actual


If both progress and budget are on the same curve, then it is

ACPV

EV

AC

EV

PV

EV

2

Monitoring the Critical Ratio

Although Task 1 is behind schedule, the cost is correspondingly below budget so everything is fine if lateness is no problem for this activity.

Task 2 is on budget but progress is lacking so too much money was spent than should have been spent; when the project is completed, it will probably go over budget.

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Critical Ratios With Control Limits


Cost Control Chart


Earned Value Analysis

Documents

Transcript of Earned Value Analysis