Innovation

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.

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