Emerging Tech

Project Metrics: Tips for doing Earned Value Analysis

Determining whether a project is successful could depend on what the project sponsor thinks makes it successful or it could depend on what the project manager thinks makes it successful. Spending some time in the early stages of the project contemplating this question will help alleviate any potential confusion at the end and hopefully allow you project to overall be more successful.

Being able to determine the success of a project seems to get more complex the larger the initiative and broader the project scope. A large project may be partially successful because you were able to deliver the agreed upon scope of work but maybe you missed on the projects duration or its budget. Would you still consider this a success? The answer most likely is "It depends." It could depend on what the project sponsor thinks makes it successful or it could depend on what the project manager thinks makes it successful. Spending some time in the early stages of the project contemplating this question will help alleviate any potential confusion at the end and hopefully allow you project to overall be more successful.

A quick primer before you begin

In general terms, Earned Value Management (EVM) is the way that we can track and measure the performance of a project against the baseline that has been created for that same project.

A quick primer before you begin

You can start to decipher your EVM by knowing about your project the terms shown in Table A:

Table A

Acronym   Description
PV Planned Value The budgeted amount which has been assigned to the scheduled work which needed to completed for each activity and/or component. It is also know as the Budgeted Cost of Work Scheduled (BCWS)
AC Actual Cost The total costs of the work that was performed on the project. It is also known as the Actual Cost of Work Performed (ACWP)
BAC Budget at Completion The originally budgeted amount for the project. Also know as the baseline cost.

Now that you're familiar with the terms and basic formulas, Table B shows the more complex ones that will help you determine whether your project is on track.

Remember this when calculating these formulas: If you're calculating a variance, you are normally using 0 as your center point so any negative numbers are bad news while positive numbers are good news. When calculating against an index, being on target is how close your results are to 1. Lower than 1 is bad while higher than 1 is good.

Table B

Acronym Formula Overview
EV Earned Value EV =BAC * Percent of Project Completed This is the value that had been planned to be spent to all work which has already been completed to date.
CV Cost Variance CV = EV - AC You calculate your CV when you want to determine whether or not you are under/over budget.
SV Schedule Variance SV = EV - PV SV helps you determine if your project is ahead of schedule or behind.
CPI Cost Performance Index CPI = EV / AC This is used when you want to determine if you are spending your money well on the project. For every dollar you spend you should understand if it is helping you achieve your projects goal.
SPI Schedule Performance Index SPI = EV / PV Another view used to determine when you are ahead of or behind schedule versus your plan.
EAC Estimate at Completion EAC = BAC / CPI

EAC = AC + ETC

EAC = AC + (BAC - EV)

There are multiple ways to calculate your EAC based on your situation. In the end it is used to determine what they final cost may be at any point in time of your project
ETC Estimate to Complete ETC = EAC - AC Your ETC will help you understand how much more it will cost to finish the project based on your current status.
VAC Variance at Completion VAC = BAC - EAC The total variance (positive or negative) in dollars of your project budget versus the amount originally budgeted.

In the beginning deciphering the difference between each of these can seem like a burden to a new project manager but after going through it a few times it'll become quite simple. Keeping up with your project and its associated metrics will allow you to have a greater awareness of your project status.

Bill Stronge is a PMP certified Project Manager with a Global CPG organization currently focusing on eBusiness projects. During his 14+ years he has worked on enterprise wide applications in both a developer and architect role as well as a project manager leading teams of various sizes. He can be reached for questions at wstronge@hotmail.com.

18 comments
ron.e.wolf
ron.e.wolf

Interesting stuff. Not being a bean counter, but having run many medium-sized ($1M-$5M) size projects, its interesting to see that there are accepted ways to quantify this stuff. I've more done it in a soft way based on time schedules and budget comparisons. So who am I to question some basics that seem to be at work here. But I will anyway. In common use, the word 'value' applies not to expenditure but to return. A project may be 50% complete, but not able to return anything useful to the organization until its, say, 90% complete. But from this terminology, seems that the 50% completed project would have a positive value. Guess I don't see that. But I know that bean counters have ways of making costs seem like value/capital/earning, so I'll assume that's what's going on here. If someone understands this, then pls educate me/us. Also, I think its pretty sloppy nomenclature when 'V' stands for two completely different things Variance and Value. Come on, there are other letters that could have been chosen, that just begs for confusion.

casey
casey

There is no doubt EVA has its place to determine how accurate your planning process is. But the statement intimating a possibility that there may be more than one idea of success , is in my opinion, an indication of improper project initiation. More to the point, there is only one measure of success - the perception of the sponsor. To think otherwise is a sure recipe for disaster.

pranaysrivastav
pranaysrivastav

Hi, EV is usually calculated as sum total of all the planned work completed and not as a percentage of project completed. Emerging trend of EVM does have schedule variance and schedule performance index in terms of time. Pranay

ndsatya
ndsatya

Bill, Good effort. However the data is not totally accurate. 1. BAC is not your Baseline cost. Baseline cost includes the contingency reseve. BAC may or may not include. 2. EV - What will you do, if you do not know what percent of is complete. Actually it can be put EV = Amount of work actually done 3. There is one more formula for EAC, which is frequently used as well. EAC = AC + [(BAC-EV)/CPI] My suggestion would have a very simple example with EV, PV, AC,CPI, SPI, CV, SV, ETC, EAC and BAC. Nevertheless, cudos to you. Overally a good try and good sharing. Satya Dash

harish_honwad
harish_honwad

SV Schedule Variance SV = EV - PV SV helps you determine if your project is ahead of schedule or behind. Intutively, my science background winces at the units for schedule variance being expressed in cost units ? Why can't it be in time units ? - Can you picture PM reporting the SV for a project is X hrs /days/weeks ahead or behind the planned schedule ?

ndsatya
ndsatya

There are different techniques for project intiations. EVM is not there. You have Opportunity Cost, ROI, ROIC, BCR etc. while initiating a project, not EVM. Satya

osocram
osocram

I'm agree with Satya, but If you decide to use Earn Value Analisys (EVA) in your project, you need to use to, another tools like Critica Path Method (CPM) because is usual than the EVA show you that the project is Ok, but CPM show you that the proyect is overhead. (EVA no make an analisys over critical path -project time duration-). Another example, is the use of risk analisys over the variances in reserves in time and money.

ndsatya
ndsatya

You just have to convert back the SV or EV or PV to the unit you want. You can do it. Satya

osocram
osocram

this feature is a origin-defect of the Earn Value Analisis (EVA), this mean the cost of the variance time over your project plan base line. You can find the schedule variance with the Earn Schedule www.earnedschedule.com an extension for EVA and now approved for PMI.

casey
casey

Satya, my point is that any and all attempts to rationalize or measure project success (the author of this thread's opening assertion) other than reaching a definitive understanding with the project sponsor, are pointless. Whatever the sponsor agrees to metrics-wise - be it ROI, EVM, time saved, etc. - is where effort should be concentrated. Put another way, the only technique for measuring success (not progress) is the one the sponsor agrees to before the project begins. - CASEY

casey
casey

Satya, my point is that any and all attempts to rationalize or measure project success (the author of this thread's opening assertion) other than reaching a definitive understanding with the project sponsor, are pointless. Whatever the sponsor agrees to metrics-wise - be it ROI, EVM, time saved, etc. - is where effort should be concentrated. Put another way, the only technique for measuring success (not progress) is the one the sponsor agrees to before the project begins. - CASEY

ndsatya
ndsatya

Hi, I think we are in different zones. I am with EVM. It works. CPM is in planning stage. EVM is in Monitoring and Controlling stage. They can not be compared. Again Risk Analysis is different. Normally it is done in planning stage and can be revisited in controlling stage. Satya

ndsatya
ndsatya

Thanks for the detailed comment. And I believe we are in sync.

ndsatya
ndsatya

If the project is overrun or overbudget, you can find them via EVM. EVM will not tell you that the project is alright. I agree with you on the rolling wave planning part.

osocram
osocram

I?m sure, you agree with me, that you can use the EVM for predict the ending of you project (Using CPI and SPI), so if you project is ok in work (and don?t have problems with critical path), CPI and SPI show you 1.0 (or close). Using this index for predicts you finish result in the project, you will find that you finish the project in time and cost. But, if you made a Risk analysis, maybe you planned with some reserves (in time and/or money). In Risk Control, you need to make an reserves variance analysis. If you are at 50% (for example) in your project, and you spent all the reserves in time and/or money, because many risk was be a fact, and you have more risk in the future, you will be in problems of cost and/or time.

osocram
osocram

Let me try to explain in short words: For make a EVM, you need the budget, (cost base line) For make the budget, you need a chronogram of you project, (money over the time) For make a chronogram, you need to make CPM (sequenced activities, and find the critical path, -and I know, you can use other techniques to). It is possible in some times in your project (maybe more that we liked) than You delayed some activities that be in critical path, and advanced in other activities that not be in critical path. So, in EVM you can find that the project is Ok, because you made work, and finished partial/complete products, but if you make a new analysis with CPM, the critical path show you that the project is overrun in time. And yes, you use CPM in planning stage, but because you obtain the time, critical path and slack activities, you can use CPM for controlling the chronogram and take decisions. In the standard of PMI, there is a ?progressive planning?, so, you are ?planning? maybe, over all the time of your project.