EVM

2024
Story?

• Some of the most well known

organisations practicing EVM are:
• NASA
• Project Management Institute (PMI)
• Society of Cost Estimating and Analysis
• Defence Acquisition University
• Federal Acquisition Institute
• Acquisition Management (UK)
Def
• What is Earned Value Management?
• Earned value management (EVM) is a
project management methodology that
integrates
• schedule,
• costs,
• Scop to measure project
performance.
• Based on planned and actual values,
EVM predicts the future and enables
project managers to adjust accordingly.
EVM
• Earned Value Management (EVM) is a
project performance management
methodology that integrates cost,
schedule, technical scope, and risk to
assess progress against a baseline, use
that information to identify problems,
and forecast cost (and, to a certain
extent, schedule) at completion.
• Earned Value Management relies on
maintaining a time-phased budget
baseline (in hours, dollars, or other
measurable units). This time-phased
budget is known as Planned Value (PV).
 For any project, specific time duration and specific
budget are allocated while making the project plan.

In ideal conditions, execution of the project will be

completed at exactly the same time and at the same
budget.

Budget and
Time Never happens in reality

Scope
May be before or after

Volume of work done

 • Earned Value Analysis (EVA) is a method that
allows the project manager to measure the
amount of work actually performed on a project
beyond the basic review of cost and schedule
reports.
• EVA provides a method that permits the project
What is Earned to be measured by progress achieved. The project
manager is then able, using the progress
Value Analysis? measured, to forecast a project’s total cost and
date of completion, based on trend analysis or
application of the project’s “burn rate”.
• This method relies on a key measure known as
the project’s earned value.
 • When the project execution starts, we will be recording
actual project progress in terms of budget and time
consumed by project tasks. Based on the budget
consumed by a task, task progress is measured and we
also record how much task progress should have been
done after consuming that much of budget.

Using Earned
• So we have three values here:
• Planned value (PV)=the budgeted amount through
the current reporting period.
Value to • Planned Value (PV) = % of project completed
(planned) * Project Budget
Monitor Project • EV=total project budget multiplied by the % of
project completion.

Performance • Earned Value = % of completed work * BAC (Budget

at Completion)
• Actual value (AV) =actual costs to date
• Estimated at Completion (EAC) calculation: EAC = (Total
Project Budget)/CPI
• EAC is a forecast of how much the total project will
cost.
 • Oftentimes the term “earned value” is defined as
the “budgeted cost of worked performed” or
BCWP. This budgeted cost of work performed
measure enables the project manager to compute
performance indices or burn rates for cost and
schedule performance, which provides
More information on how well the project is doing or
performing relative to its original plans. These
indices, when applied to future work, allow for
to project manager to forecast how the project
will do in the future, assuming the burn rates
will not fluctuate, which oftentimes is a large
assumption.
EVM Foundational Concepts

• Earned Value Management Systems

allow the project manager to answer
the following three questions, as
they relate to the project:
1.Where have we been?
2.Where are we now?
3.Where are we going?
More

• In Earned Value Management, unlike in

traditional management, there are three
data sources:
• – the budget (or planned) value of work
scheduled
• – the actual value of work completed
• – the “earned value” of the physical
work completed
 • Ahead of schedule vs. behind schedule
• Over budget vs. under budget
• Both project performance factors have
a direct impact on the total project
cost. What will be the total cost of my
project if I'm ahead of schedule but my
costs are higher than expected?
Two faces • If I'm behind schedule but my costs are
lower?
• EVM provides great information to help
with these questions
Planned Value

• Planned Value describes how far

along project work is supposed
to be at any given point in the
project schedule and cost
estimate. Cost and Schedule
baseline refers to the physical
work scheduled and the
approved budget to accomplish
the scheduled work. Together,
they result in an important value:
Planned Value (PV).
 • Define Scope: What you are tasked
to do (Scope Statement)
1.Assign Scope: Breakdown scope
into manageable parts (WBS)
2.Schedule Scope: Time-phased,
Explanation, (Project Schedule)
PV 3.Budget Scope: develop cost
(budget) for all approved scope
4.Baseline: Snap-shot in time, frozen.
What performance measurement is
there.
 Actual Cost (AC), also called actual expenditures, is
the cost incurred for executing work on a project.
This figure tells you what you have spent.

Actual Costs This period could represent days, weeks, months,

etc.

AC is also called Actual Cost of Work Performed

(ACWP).
 To report the accomplishments of the project,
you must apply Earned Value (EV) to the figures
and calculations in the project. EV is the
quantification of the “worth” of the work done
to date. In other words, EV tells you, in physical
terms, what the project has accomplished.
Earned Value
Planned Value (PV) is determined by the cost
and schedule baseline. Actual Cost (AC) is
determined by the actual cost incurred on the
project. Earned Value (EV) tells you, in physical
terms, what the project accomplished.
Without EVM
With EVM
 • There is no linear progression of the project in reality. It is
because a project has many tasks and each of these tasks
has its own volume of work to be performed at different
rates over a period of time.
• For instance, a software design task may be completed
over a period of, say, 20 days. If the work is performed
Linear linearly, then each day, the percentage of work to be
completed is 5% so that in 20 days, 100% of the work will
Progress? be completed.
• In reality, however, on some days the planned work may
be 3%, 5%, or 6% or could be just any other value.
• Reasons? Dependency, availability of resources etc
 PMI’s PMBOK® Guide defines a variance as “a quantifiable deviation, departure, or
divergence away from a known baseline or expected value” (PMI, 2004, p. 379).

Variance As the project planning components become known, the scope and quality, schedule,
and cost estimate. The project manager will review with the project’s sponsor or client to

Analysis seek approval.

When approval is granted the project has established a planning baseline or time-phased
cost plan. Also, the project manager will be provided with financial information from
accounting that will expressed the actual cost incurred on the project s work is
performed, then the project manager will seek information from the team that will state
the budgeted cost of work performed on the project, or earned value.

After those three values are established, a variance analysis can be performed. There are
two basic expressions of variance, schedule variance and cost variance.
 Schedule Variance status does indicate the dollar value difference between
work that is ahead or behind the plan and reflects a given measurement
method

Schedule Variance status does not address impact of work sequence, address
importance of work, assessment, indicate amount of time it will slip, identify
source (labor & material) of difference, indicate the time ahead/behind (or
Schedule regain) schedule, nor indicate the cost needed to regain schedule.

variance The formula utilized to express schedule variance is project earned value
minus the project planned value as of the date of examination. (SV = EV – PV)

If the variance is equal to 0, the project is on schedule. If a negative variance

is determined, the project is behind schedule and if the variance is positive
the project is ahead of schedule.
 The cost variance is defined as the “difference
between earned value and actual costs. (CV =
EV – AC)” (PMI, 2004, p. 357) Sometimes this
formula is expressed as the difference
between budgeted cost of work performed
and actual cost work performed.
Cost Variance
If the variance is equal to 0, the project is on
budget. If a negative variance is determined,
the project is over budget and if the variance
is positive the project is under budget.
 • While basic EV Analysis can help a project manager
identify problem areas on a project, advanced EV
Analysis can be used as a powerful forecasting tool.
One of the most common ways that Advanced EV
Analysis is used is to perform trend analysis.
Advanced Looking at CV and SV trends over time, for example,
can provide valuable insight into the rate at which a
EV Analysis project is improving or slipping, and whether
corrective actions taken are effective.
• Perhaps one of the most powerful applications of
advanced EV Analysis is to forecast cost and
schedule at completion. This can be done by
factoring EV performance when updating an
Estimate to Complete (ETC). The ETC, when added
to Actual Cost (AC) yields an Estimate at Complete
(EAC).
Standards
• There are several published standards relating
to Earned Value Management Systems. While all
these standards are generally compatible, there
are differences in terminology (generally due to
different industries served), and the level of
prescriptiveness for each standard varies.
• EIA-748
• PMI – ANSI 19-006-2019
• AACE – Recommended Practices
• ISO – 21508:2018
 • As per definitions of EVM,
Schedule variance (SV) = EV - PV
Cost variance (CV) = EV - AC
• Apart from variances in cost and schedule,
there are two more indicators available in EVM.

Formula • They are the cost performance indicator (CPI)

and the schedule performance indicator (SPI).
• They are calculated as follows:
CPI = EV/AC
SPI = EV/PV
Schedule Performance Index

• The SPI is defined by PMI’s PMBOK® Guide as “a measure of

schedule efficiency on a project. It is the ratio of earned value
(EV) to planned value (PV). The SPI is equal to earned value
divided by planned value, SPI = EV/PV.
• An SPI equal to or greater than one indicates a favorable
condition and a value of lass than one indicates an unfavorable
condition.” (PMI, 2004, p. 374
• For example, should your calculation show a SPI of 1.1, that
translate to your project recognizing $1.10 for every $1.00 spent
to date on your project. Assuming your SPI efficiency remains
through out the reminder of work; your project will finish ahead
of schedule.
 The CPI is defined by PMI’s PMBOK® Guide as a “measure of
cost efficiency on a project. It is the ratio of earned value (EV)
to actual costs (AC). The CPI is equal to the earned value
Cost divided by the actual costs, CPI = EV/ AC.” (PMI, 2004, p. 356

Performance
Index A CPI equal to or greater than one indicates a favorable
condition and a value of less than one indicates an
unfavorable condition.

For example, should your calculation show a CPI of $0.90,

which translates to your project recognizing $0.90 for every
$1.00 spent to date on your project. Assuming your CPI
efficiency remains the same throughout the reminder of
work; your project will be over budget.
 Efficiencies being realized

Potential Work less complex than anticipated

Causes of
Favorable Cost Fewer revisions and rework
Performance
Favorable Market Fluctuations in the Cost
of Labor or Material
Overhead Rate Decreases
Potential Causes of Unfavorable
Cost Performance

• Work more complex than anticipated

• Design review comments extensive
• Rework
• Unclear Requirements
• Scope Creep
• Unfavorable Market Fluctuations in the Cost Labor or
Material
• Overhead Rate Increases
Estimates to Complete
• Now it is time to learn how to analyze the future or what is expected to
happen on a project given the progress measurements reported to date.
Anticipating future progress requires determining when the project will be
completed and how much it will cost to complete it.
• To complete our analysis, we will look at the Estimate at Completion
(EAC) and the Budget at Completion (BAC).
• The Estimate at Completion (EAC) is the actual cost to date plus an
objective estimate of costs for remaining authorized work. The objective
in preparing an EAC is to provide an accurate projection of cost at the
completion of the project.
• The Budget at Completion (BAC) is the sum of all budgets allocated to a
project scope.
 Item Questions
Planned Value (PV) How much work should be done?

Earned Value (EV) How much work was done?

Actual Cost (AC) How much did the work cost?
Budget at Completion (BAC) What is the total job budgeted to
cost?
Estimate at Completion (EAC) What do we expect the total job
to cost?
 The EAC is the best estimate of the total cost at the
completion of the project. The EAC is a periodic
evaluation of the project status, usually on a monthly
basis or when a significant change happens to the
project. EACs are developed with varying degrees of
detail and supporting documents. A comprehensive EAC
is usually prepared annually or if there are any major
changes in the project.

EAC There are multiple ways to develop an EAC. The

technique selected is based upon the dollar value of the
project, the risk, accounting system available and the
accuracy of the estimates.
 Estimated At Completion (EAC)

Estimated at completion is the current

expectation of what the total costs will be for
the project when it is done.
How Estimated at Completion (EAC) = Budget at
completion (BAC) / Cost performance index
(CPI)
With this calculation, you divide the total
project budget by the CPI value you figured
out above.
 Here are five basic ground rules for effective Earned Value
Management:

Organize the project team and the scope of work, using a work
breakdown structure. Each task should have a single WBS number and
organizational code.
Schedule the tasks in a logical manner so that lower level schedule
elements support subsequent elements and the top level milestones.

Summary Allocate the total budget resources to time-phased control accounts.

Establish objective means for measuring work accomplishment.

Budget should be earned in the same way that it was planned.

Control the project by analyzing cost and performance variances,

assessing final costs, developing corrective actions, and controlling
changes to the integrated baseline.
 Good luck in your personal EVM endeavors and
remember, it all begins with a sound project plan and
you too, can do earned value management!

How to cite this article:

Paper
Reichel, C. W. (2006). Earned value management
systems (EVMS): "you too can do earned value
management" Paper presented at PMI® Global
Congress 2006—North America, Seattle, WA.
Newtown Square, PA: Project Management Institute.
 • EVM is a technique that you can use to manage and
control your project, but EVM won’t solve
everything. It doesn’t always work on your project
and it’s not a magic bullet that can pierce all project
EVM Is problems. In fact, it has some pitfalls.
Great, With • You can’t rely solely on earned value management.
Remember, it’s merely calculating a single objective
a Few data point. The earned value of your project can
change and can change fast. Naturally, cost and
Caveats progress are seldom reflected in the actual project as
they are when you’re executing the project. So,
EVM acts as a safeguard and provides useful data.
It’s best to make these calculations monthly or more
frequently if your project is shorter in duration.
 Calculation: SPI = EV/PV

SPI measures progress achieved against

progress planned.

SPI
An SPI value <1.0 indicates less work was
completed than was planned.

SPI >1.0 indicates more work was

completed than was planned.
CPI

• Calculation: CPI = EV/AC

• CPI measures the value of work completed
against the actual cost.
• A CPI value <1.0 indicates costs were higher than
budgeted.
• CPI >1.0 indicates costs were less than budgeted.
 • Primary Data Points
• Budget At Completion (BAC)
• Total cost of the project
• Budgeted Cost for Work Scheduled (BCWS) / Planned Value
(PV)
• The amount expressed in Pounds (or hours) of work to be
EVM performed as per the schedule plan
• PV = BAC * % of planned work.
Measures • Budgeted Cost for Work Performed (BCWP) / Earned Value
(EV)
• The amount expressed in Pounds (or hours) on the actual
worked performed
• EV = BAC * % of Actual work
• Actual Cost of Work Performed (ACWP) / Actual Cost (AC)
• The sum of all costs (in Pounds) actually accrued for a task to
date
 • For example, say we should have
completed £800 pounds of work by
today. We completed £600 worth of
Example work. The BCWP is £600. The BCWS is
£800. And if we actually paid £700 then
(ACWP) = £700.
Variances:

• Cost Variances (CV)

• How much under or over budget
• CV = EV-AC
• NEGATIVE is over budget, POSITIVE is under budget
• Schedule Variances (SV)
• How much ahead or behind schedule
• SV = EV-PV
• NEGATIVE is behind schedule, POSITIVE is ahead of schedule
• Variance At Completion (VAC)
• Variance of TOTAL cost of the work and expected cost
• VAC = BAC - EAC
Performance Indices:

• Cost Performance Index

• CPI = EV / AC
• Over (< 1) or under (> 1) budget
• Schedule Performance Index
• SPI = EV / PV
• Ahead (> 1) or behind (< 1) schedule
EVM Benefits

• EVM contributes to:

• Preventing scope creep
• Improving communication and visibility with stakeholders
• Reducing risk
• Profitability analysis
• Project forecasting
• Better accountability
• Performance tracking
 • Let’s take a look at an example.
Example to • Assume we’re halfway through a year-long
project that has a total budget of 100,000 PKR.
understand • The amount budgeted through this six-month
mark is 55,000 PKR.
this whole • The actual cost through this six-month mark is
story 45,000 PKR.
• So how is the project progressing?
Calculation
• Planned Value (PV) = Rs55,000
• Actual Cost (AC) = Rs45,000
• Earned Value (EV) = (Rs100,000 * 0.5) = Rs50,000
• Schedule Variance (SV) = EV–PV = Rs50,000-Rs55,000 = -Rs5,000 (bad because <0)
• Schedule Performance Indicator (SPI) = EV/PV = Rs50,000/Rs55,000 = 0.91 (bad because
<1)
• Cost Variance (CV) = EV–AC = Rs50,000-Rs45,000 = Rs5,000 (good because >0)
• Cost Performance Indicator (CPI) = EV/AC = Rs50,000/Rs45,000 = 1.11 (good because >1)
• Estimated at Completion (EAC) = (Total Project Budget)/CPI = Rs100,000/1.11 = Rs90,000
SV
• Because SV is negative and SPI is <1, the project is considered behind schedule.
• We’re 50% of the way through the project but have planned for 55% of the costs
to be used.
• There will have to be some catch-up in the second half of the project.
CV

Because CV is positive and CPI is >1, the project is considered to be under

budget.

We’re 50% of the way through the project, but our costs so far are only
45% of our budget.

If the project continues at this pace, then the total cost of the project
(EAC) will be only Rs90,000, as opposed to our original budget of
Rs100,000.
>1 or <1, and > or
<0
Which one is better
 • Cost Variances (CV)
• How much under or over budget
• CV = EV-AC
• NEGATIVE is over budget, POSITIVE is under budget
• Schedule Variances (SV)
• How much ahead or behind schedule

Variances • SV = EV-PV
• NEGATIVE is behind schedule, POSITIVE is ahead of
schedule
• Variance At Completion (VAC)
• Variance of TOTAL cost of the work and expected
cost
• VAC = BAC - EAC
 • Cost Performance Index
• CPI = EV / AC
• Over (< 1) or under (> 1) budget
Performance • Schedule Performance Index
Indices: • SPI = EV / PV
• Ahead (> 1) or behind (< 1) schedule
Variables
• Budget At Completion (BAC)=Total cost of the project
• Estimate At Completion (EAC)=The expected TOTAL cost required to finish
complete work= EAC = BAC/CPI
• Estimate to complete (ETC)=the expected cost required to finish all the
REMAINING work= ETC = (BAC-EV) / CPI
Problem
A project has a budget of £10M and schedule for 10 months. It is assumed that the
total budget will be spent equally each month until the 10th month is reached.
After 2 months the project manager finds that only 5% of the work is finished and a
total of £1M spent.
Find CV, AC, SV, CPI, SPI, ETC?, EAC.
Solution:
• PV = £2M
EV = £10M * 0.05 = £0.5M
AV = £1M
• CV = EV-AC = 0.5-1 = -0.5M
CV% = 100 * (CV/EV) = 100*(-0.5/0.5) = -100% overrun
• SV = EV-PV = 0.5-2 = -1.5 months
SV% = 100 * (SV/PV) = 100*(-1.5/2) = -75% behind
• CPI = EV/AC = 0.5/1 = 0.5
• SPI = EV/PV = 0.5/2 = 0.25
• EAC = BAC/CPI = 10/0.5 = £20M
• ETC = (BAC-EV) / CPI = (10-0.5)/0.5 = £19M
• Rem Time to compete = (10-0.5)/0.25 = 38 Months
 Allah Ap sab ko
Jaza Dey Ameen!