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Earned Value Analysis by John Cornman For Details -- Lewis, Ch 10. Introduction. “Earned Value Analysis” is an industry standard way to measure a project’s progress, forecast its completion date and final cost, and provide schedule and budget variances along the way.

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Earned value analysis by john cornman for details lewis ch 10
Earned Value AnalysisbyJohn CornmanFor Details -- Lewis, Ch 10


Introduction
Introduction

  • “Earned Value Analysis” is an industry standard way to measure a project’s progress, forecast its completion date and final cost, and provide schedule and budget variances along the way.

  • Based on just 3 data points, it can provide consistent, numerical indicators with which you can evaluate and compare projects.


The 3 fundamental metrics
The 3 fundamental metrics

  • Budgeted Cost of Work Performed.

  • Budgeted Cost of Work Scheduled.

  • Actual Cost of Work Performed.


Budgeted cost of work performed
Budgeted Cost of Work Performed

  • This is the “Earned Value.”

  • Abbreviated as BCWP.

  • For completed work, it is the cost originally budgeted to accomplish that work.

  • “How much work was actually done?”


Budgeted cost of work scheduled
Budgeted Cost of Work Scheduled

  • Abbreviated BCWS.

  • It is the total budgeted cost up to the analysis date.

  • Approximated by the total budget multiplied by the fraction of total project duration at the analysis date.

  • “How much work should have been done?”


Actual cost of work performed
Actual Cost of Work Performed

  • Abbreviated ACWP.

  • What it actually cost to accomplish all the work completed as of the analysis date.

  • “What did the work that was actually done actually cost?”


Derived metrics
Derived Metrics

  • Schedule Variance (SV)

  • Schedule Performance Index (SPI)

  • Cost Variance (CV)

  • Cost Performance Index (CPI)


A few more acronyms
A Few More Acronyms

  • BAC - Budget At Completion

    • = Total Original Budgeted Cost

    • Same as BCWS at completion

  • EAC - Estimate At Completion

    • = Cumulative Actuals + Estimate-To-Complete

  • VAC - Variance At Completion

    • = Forecast of final cost variance


Doing the math
Doing The Math

  • SV = BCWP - BCWS

    • Negative means Behind Schedule

  • SPI = BCWP / BCWS

    • Less than 1.00 means Behind Schedule

  • CV = BCWP - ACWP

    • Negative means Over Budget

  • CPI = BCWP / ACWP

    • Less than 1.00 means Over Budget

  • EAC = BAC / CPI


  • An example lemonade
    An Example: Lemonade

    • Make 1,000 cups over 50 days

    • Steady rate of 20 cups per day

    • Budgeted cost per cup is $0.50

    • Total project budget is $500


    Lemonade progress
    Lemonade Progress

    • At end of day 10:

    • 150 cups have been made

    • Total actual cost is $90 (ACWP)


    Lemonade status
    Lemonade Status

    • BCWS = $100

      • 10 days x 20 cups per day x .50/cup budget

  • BCWP = $75 (Earned Value)

    • 150 cups x .50/cup budget

  • SV = BCWP - BCWS = -$25

  • SPI = BCWP / BCWS = 0.75

  • CV = BCWP - ACWP = $75 - $90 = -$15

  • CPI = BCWP / ACWP = 0.833


  • Lemonade forecast
    Lemonade Forecast

    • EAC = BAC / CPI = $500 / 0.833 = $600

    • VAC = BAC - EAC = $500 - $600 = $100 (unfavorable)

    • Schedule at Completion =50 / SPI = 50 / 0.75 = 66.67 days



    Five simple criteria for earned value applications
    Five Simple Criteria forEarned Value Applications

    1. Define (scope) the project. . .with a WBS

    2. Plan and schedule the project scope

    3. Budget cost account plans to functions

    4. Establish and maintain a performance baseline

    5. Monitor performance and forecast final results

    Fleming & Hoppleman. 1996. Earned Value Management. PMI


    Earned Value Management

    http://www.acq.osd.mil/pm/


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