ASSIGNMENT
amoha1234
earned_value-1.pptEarned Value Analysis
Tracking Project Progress
What Is Earned Value?
- The dollar amount you planned to spend for the work actually completed
- Earned Value is the budgeted cost of the work that has actually been performed/completed
- Earned Value = Budgeted Cost of the Work Performed (BCWP)
What Is Earned Value Analysis (EVA)?
EVA enables the project progress to be tracked in terms of:
- The work that has actually been completed
--- Compared To ---
- The work that was scheduled to be completed
Why Is Earned Value Analysis Important?
- EVA enables the project team to know:
- If the project is ahead of, or behind schedule
- How far the project is ahead of, or behind schedule
- If the project is over or under budget
- How much the project is over or under budget
Why Is Earned Value Analysis Important?
- EVA enables the team to address the project’s triple constraints earlier rather than later
- Scope – re-prioritize/reduce requirements
--- and/or ---
- Schedule – adjust the timeline
--- and/or ---
- Cost – request additional funding
The Components of Earned Value Analysis
- WBS – Work Breakdown Structure
- Identifies products to be delivered by the project
- Products or sub-products should be broken down to what can be completed in 80 hours (“80-hour rule”), when applicable
- Provides the basis for
- Distinct products or sub-products – which help to provide
- Valid estimates – which enable
- Tracking earned value / project progress
The Components of Earned Value Analysis
- Earned Value (EV) ---- or BCWP
- The budgeted cost of the work actually performed
- How much work was actually completed
- Planned Value (PV) ---- or BCWS
- The budgeted cost of the work scheduled to be performed
- How much work should have been completed
- Actual Cost (AC) ------- or ACWP
- The actual cost of the work performed
- How much money has been actually spent
The Components of Earned Value Analysis
- Budget at Completion (BAC)
- Dollar amount originally budgeted to complete the project
- Estimate at Completion (EAC)
- Estimate of dollar amount needed to complete the project
- Variance at Completion (VAC)
- Estimate of the dollar amount projected above or below budget
- Schedule at Completion (SAC)
- Projection of the time needed to complete the project
The Components of Earned Value Analysis
- Schedule Variance (SV)
- The work completed vs. the work planned to be completed
- SV = (Earned Value – Planned Value)
- Tells us if the project is ahead of, or behind schedule
- Negative value means the project is behind schedule
The Components of Earned Value
- Schedule Performance Index (SPI)
- Utilized to forecast how long it will take to complete the project
- SPI = (Earned Value / Planned Value)
- Tells us if the project is ahead of, or behind schedule
- Less than 1.00 means the project is behind schedule
The Components of Earned Value
- Cost Variance (CV)
- What we planned to spend on the work completed vs. what was actually spent on the work completed
- CV = (Earned Value – Actual Cost)
- Tells us if the project is over or under budget
- Negative value means the project is over budget
The Components of Earned Value
- Cost Performance Index (CPI)
- Utilized to forecast how much it will cost to complete the project
- CPI = (Earned Value / Actual Cost)
- Tells us if the project is above or below budget
- Less than 1.00 means the project is over budget
The Components of Earned Value
- Estimate at Completion (EAC)
- EAC = (Budget at Completion / Cost Performance Index)
- Forecast of the total project cost
- Variance at Completion (VAC)
- VAC = (Budget at Completion – Estimate at Completion)
- Forecast of how much the project will be over or under budget
- Schedule at Completion (SAC)
- SAC = (Scheduled Project Length / Schedule Performance Index)
- Forecast of total project length (days, weeks, months, etc.)
A Sample Project Scenario
- Assumption: for the sake of simplicity, all screens will require the same time and effort, and all reports will require the same time and effort
- WBS = 20 screens and 10 reports
- Scheduled Project Length = 12 weeks
- Cost is estimated at $3,000 per screen = $60,000
- Cost is estimated at $2,000 per report = $20,000
- Cost estimate to complete the project = $80,000
A Sample Project Scenario
- At week 6 (half-way through the project) we know:
- Planned Work and Planned Expenses:
- 10 of the 20 screens were scheduled to have been completed
- 5 of the 10 reports were scheduled to have been completed
- $40,000 (50% of the money) was scheduled to have been spent
- Actual Work Completed and Actual Expenses:
- 4 of the 20 screens have been completed
- 2 of the 10 reports have been completed
- 20% of the work has been completed
- $25,000 has been spent (actual cost)
A Sample Project Scenario
- Half-way through the project we know:
- BAC = $80,000 (the budget to complete 20 screens and 10 reports)
- PV = $40,000 (we planned to complete 50% of the work)
- Planned to complete $40,000 worth of product
- Planned to complete 10 screens and 5 reports
- EV = $16,000 (we completed 20% of the work)
- Completed $16,000 worth of product
- Completed 4 screens and 2 reports
- AC = $25,000 (we spent approximately 30% of the budget)
- Actual cost to complete 4 screens and 2 reports was $25,000
A Sample Project Scenario
- Calculations
- Cost Variance
- CV = (EV – AC)
- CV = ($16,000 – $25,000) = -$9,000
- More money ($9,000) has been spent, than was planned
- The project is currently $9,000 over budget
- Cost Performance Index
- CPI = (EV / AC)
- CPI = $16,000 / $25,000 = .64
- 1/.64 = 1.56
- The project will cost over one-and-a-half times the original estimate
A Sample Project Scenario
- Calculations
- Schedule Variance
- SV = (EV – PV)
- SV = ($16,000 – $40,000) = -$24,000
- The project is behind schedule
- Schedule Performance Index
- SPI = (EV / PV)
- SPI = $16,000 / $40,000 = .4
- Only 40% of the project will be completed at the end of 12 weeks
- 1/.4 = 2.5
- The project is projected to take 2.5 times longer than planned
Forecasts
- Estimate at Completion
- EAC = (BAC / CPI)
- EAC = ($80,000 / .64) = $125,000 to complete the project
- Variance at Completion
- VAC = (BAC - EAC)
- VAC = ($80,000 – 125,000) = $45,000 over budget at completion
- Schedule at Completion
- SAC = (Scheduled Project Length / SPI)
- SAC = (12 weeks / .4) = 30 weeks to complete the project
Forecasts
Timeline (weeks)
Cost (thousands of dollars)
6
12
18
24
30
Actual Cost = $25,000
Planned Value = $40,000
Earned Value = $16,000
Budget at Completion
20
40
60
80
100
120
140
EAC = $125,000 SAC = 30 weeks
Cost Variance ($9,000)
Schedule Variance ($24,000)
Summary
- The project is currently $9,000 over budget
- At this rate, the project is forecast to be $45,000 over budget upon completion
- The project is behind schedule
- At this rate, only 40% of the work will be completed at the end of 12 weeks
- The project is forecasted to take 30 weeks, as opposed to the original 12 weeks to complete development
Summary
- Adjustments can be made to address these issues
- Requirements can be re-prioritized
- Utilize the 80/20 principle
- Some “requirements” may not be needed during this phase
- The business solution can be delivered on-time and within budget
- Additional resources utilized
- All requirements are satisfied
- The project is completed on-time
- However, the project goes over budget
Summary
- Earned Value Analysis enables you to determine:
- If your project is on, ahead of, or behind schedule
- If your project is under or over budget
- How much additional time will be needed to complete the project
- How much additional money will be needed to complete the project
- Earned Value Analysis enables you to:
- Report accurate project status
- Make the necessary adjustments earlier, rather than later, to address project issues
Timeline
(weeks)
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612182430
20
40
60
80
100
120
140
Actual Cost = $25,000
Planned Value = $40,000
Earned Value = $16,000
Budget
at
Completion
EAC = $125,000
SAC = 30 weeks
Cost Variance
($9,000)
Schedule Variance
($24,000)
