Project 1

Module 1 Extra on EVA & Trend Analysis

PROJ6003 – PROJECT EXECUTION AND CONTROL

Ibrahim Abdallah [email protected]

Learning Facilitator

Master of Global Project Management

• EVA: SV (Schedule Variance) and SPI (Schedule

Performance Index=EV/PV) are used to assess the

magnitude of variation of the original schedule

baseline. Measures efficiency of the work performed

comparing the earned value to the planned value. If in

SPI, ratio is greater than 1, than the project is ahead of

schedule.

• VERY GOOD VIDEO that summarises EVA:

https://www.youtube.com/watch?v=U313VMm2r7Q

Control Schedule - Tools & Techniques

Earned Value Analysis – SV & SPI

Control Costs - Tools and Techniques

Planned value

Earned value

Actual cost

Schedule Variance =

EV-PV

Cost Variance = EV - AC

Schedule performance

index = EV/PV

Cost performance index =

EV/AC

• It is just a standard way to measure a project’s progress at any point in time

using money figure.

• Earned Value is necessary to provide a realistic estimate of performance

against a time-phased budget.

• Compares the Performance Measurement Baseline to the actual schedule and

cost performance.

• EVM integrates the scope, schedule and cost baselines to form the

Performance Measurement Baseline.

• EVM develops and monitors three key dimensions for each work package and

control account: • Earned value = budgeted cost of work performed = the % of work completed using the

original budget

• Planned value = budgeted cost of work scheduled

• Actual cost = actual cost of work performed

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EVA explained…

1. Earned Value Management (Technique)

EVM is an objective

technique to measure the

project performance.

The underpinning notion is that

any amount of completed

project work creates value

of the project.

Using EVM, the current project

performance is measured by

comparing the EV against the

baseline or Planned Value

(PV).

Larson and Gray (2011, p. 459)

• Planned Value (PV) is the value of what should have been completed (what has

been planned).

• Earned Value (EV) is the value of what work has been completed.

• Actual Cost (AC) is the actual cost or how much we have currently spent.

• Schedule Variance (SV) is the difference between Earned Value (what has been

completed) and Planned Value (What has been planned or should have been

completed).

• The formula is SV = EV - PV and if the result is negative, then the project is behind

schedule.

• Cost Variance (CV) is the difference between Earned Value (what has been

completed) and Actual Cost (how much we have currently spent).

• The formula is CV = EV-AC and if the value is negative then we are over budget, ie we

have spent more than we should have.

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In other words…

PMI, 2017, p. 267

Larson and Gray (2011, p. 462)

CV = EV – AC

CV = 200 – 340

CV = -140 Negative = Overbudget

SV = EV – PV

SV = 200 – 300

SV = -100 Negative = Behind Schedule

Earned Value Interpretation Practice

Larson and Gray (2011, p. 463)

EV < PV

SV = NEGATIVE

Behind schedule

EV < AC

CV = NEGATIVE

Over budget

EV > PV

SV = POSITIVE

Ahead schedule

EV > AC

CV = POSITIVE

Under budget

EV > PV

SV = POSTIVE

Ahead schedule

EV < AC

CV = NEGATIVE

Over budget

EV < PV

SV = NEGATIVE

Behind schedule

EV > AC

CV = POSITIVE

Under budget

Earned Value Example 2

Status Report

Planned values

Remember:

CV = EV – AC

SV = EV – PV

Using Indexes instead of absolute values to

determine the efficiency ratios:

Percentage Complete Index (PCIB) = EV/BAC

PCIB indicates the work accomplished in

percentage of total $ budgeted (BAC)

Cost Performance Indicator (CPI) = EV/AC

Measures cost efficiency of the work

accomplished. It is the most accepted index used.

It is very accurate, reliable and stable.

Schedule Performance Indicator (SPI) = EV/PV

Measures schedule efficiency to date.

Another Way of Monitoring Progress

Percentage Complete Index (PCIB) = EV/BAC

Graphical Interpretation of the values from the

previous example using End of Period 7.

Earned Value Practice Activity

Planned Budget:

Actual:

Planned Gantt-Chart:

AC EV PV

Solution: https://www.youtube.com/watch?v=z7b3SYQuqJM

As the project progresses, the project team may develop a forecast for the estimate

at completion (EAC) that may differ from the budget at completion (BAC) based on

the project performance.

• Forecasting involves making projections of conditions and events in the project’s

future based on current performance information and other knowledge available at

the time of the forecast.

• Forecasts, thus, are generated and updated as a result of the work performance

data (which means, you will need to perform a EVA prior to forecast the project).

• There’s a range of EAC calculations that can be used to represent

different risk scenarios…

2. Trend Analysis (Technique)

Forecasting - Estimate At Completion

1.0 EAC = AC + Bottom-up ETC

• This formula is used when original estimation is based on wrong

data/assumptions or circumstances have changed. It calculates actual costs

plus new estimate for the remaining work.

• ETC (Estimate to Complete) – expected costs to finish all the remaining work.

• Required to reestimate the remainder work from bottom up.

2. Trend Analysis (Technique) Cont’d

2.0 EAC forecast ETC work performed at the planned rate

EAC = AC + (BAC - EV)

• This method accepts the actual performance to date (favourable or not).

• The variance is caused by a one-time event and is not likely to happen again.

This formula is used if the future work (ETC) will be

accomplished at the planned rate.

• It considers that the BAC can still be used as a means to project future.

2. Trend Analysis (Technique) Cont’d

3.0 EAC forecast for ETC work performed at the present CPI

EAC = BAC / CPI

• This formula is used when original estimation is met without any deviation. It

means that your project is going well and what it has been predicted to date will

be expected in the future.

• CPI is expected to be the same for the remainder of the project.

• You are maintaining the CPI and SPI as 1 and you have to continue the project

in the same way. It is always good for a project manager if he or she is

maintaining the CPI and SPI as 1 or more than 1.

2. Trend Analysis (Technique) Cont’d

4.0 EAC forecast for ETC work considering both SPI and CPI factors

EAC = AC + [(BAC – EV) / (CPI x SPI)]

• This formula is used to calculate actual cost to date plus the remaining budget

changed based on the performance. Not everything is good, you have irregular

indexes, so you need to put into the EAC this index to see how much money

you will need to finish up the project.

• In other words, if both the CPI and SPI influence the remaining work.

2. Trend Analysis (Technique) Cont’d

3. To-Complete Performance Index (Technique)

A measure of the cost

performance that is required to

be achieved with the remaining

resources in order to meet a

specified management goal.

This ratio measures the amount

of value each remaining dollar in

the budget must earn to stay

within the budget.

TCPI = Work remaining / Funds Remaining

TCPI = (BAC-EV)/(BAC-AC)

TCPI = (EAC-EV)/(EAC-AC)

Any Questions or Concerns?

PROJ6003 – PROJECT EXECUTION AND CONTROL

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