Earned Value Management A management technique to Assess

Graphical View AC PV EV Cost CV = EV - AC SV = EV

Example Actual Effort spent so far in Pers-days note Date : 4/5/2004 Estimated Completion

Two important Variance Metrics • Schedule Variance (SV): the difference between the estimated efforts

Graphical Representation Beating schedule on 4/5/2004 ACWP BCWP Effort ∆ = Cost Variance =

Two important Index Metrics • Schedule Performance Index (SPI): SPI = BCWP / BCWS

Potential Areas of Research 1. Improve the definition of BCWP 2. Improve or change

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Earned Value Management • A management technique to: – Assess project status – make the appropriate adjustments as needed • Based on 3 key project elements: 1. Planned Value (PV) or BCWS ( budgeted cost of work scheduled) 2. Earned Value (EV) or BCWP (budgeted cost of work performed) 3. Actual Cost or ACWP (actual cost of work performed)

Graphical View AC PV EV Cost CV = EV - AC SV = EV – PV Note: both cost variance and schedule variance are measured by the same unit ---- cost this puts a “burden” on the manager to interpret schedule Time

Example Actual Effort spent so far in Pers-days note Date : 4/5/2004 Estimated Completion date Actual Completion date 2/5/04 Work Tasks Estimated Effort in Pers-days 1 10 10 2 15 25 3/15/04 3 1 30 9 4/25/04 4 25 20 5/5/04 5 15 6 5/25/04 6 20 5 6/10/04 3/25/04 4/1/04 Each estimated effort is the BCW (e. g. for work task 3 it is 30 person days). BAC = 10+15+30+25+15+20 = 115 person-days BCWS (on 4/5/04 – tasks 1 and 2 were scheduled to be completed) = 10+15 = 25 person days BCWP (on 4/5/04 –tasks 1, 2, and 4 are completed) = 10 +15+25 = 50 person-days ACWP (on 4/5/04 – actual cost of tasks completed) = 10 + 25 + 20 = 55 person-days

Two important Variance Metrics • Schedule Variance (SV): the difference between the estimated efforts of the tasks that have been completed by the specified time and the estimated efforts of the tasks that were scheduled to be completed by the specified time or – BCWP - BCWS – in our example on 4/5/2004 : SV = 50 – 25 = +25 person days – ( we are 25 person-days ahead in schedule _ • Cost Variance (CV): the difference between the estimated efforts of the tasks that have been completed by the specified time and the actual efforts expended for the tasks that have been completed at the specified time or – BCWP - ACWP – in our example on 4/5/04 : CV = 50 – 55 = -5 person days – ( we have a 5 person-days of over-run in cost)

Graphical Representation Beating schedule on 4/5/2004 ACWP BCWP Effort ∆ = Cost Variance = BCWP-ACWP BAC = (∑ BCW’s) ∆ = Schedule Variance = BCWP - BCWS 4/5/2004 Time

Two important Index Metrics • Schedule Performance Index (SPI): SPI = BCWP / BCWS • If SPI is 1 then I am on schedule target • If SPI > 1 then ahead; SPI < 1 then behind • In our example on 4/5/02: SPI = 50/25 = 2 • Cost Performance Index (CPI) : CPI = BCWP / ACWP • If CPI is 1 then I am on cost target • If CPI < 1 then cost over-run ; CPI > 1 then cost under-run • In our example on 4/5/02: CPI = 50/55 =. 90 Would CPI index be more intuitive if it were flipped ? (e. g. CPI = ACWP/BCWP)

Potential Areas of Research 1. Improve the definition of BCWP 2. Improve or change the definition of “Schedule Variance” 3. Improve on the “forecasting” formula which is given as Estimate at Completion (EAC): EAC = ACWP + [(BAC-BCWP)/CPI] EAC = ACWP + [(BAC-BCWP)/(CPI x SPI)] EAC = ACWP + [(BAC-BCWP)/ (a. CPI x b. SPI)] where a and b are some constants