### Jan. 18 2012 WAR Presentation on EVM

```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
CV = EV - AC
SV = EV – PV
Note: both cost variance and
schedule variance are measured
by the same unit ---- cost
Cost
this puts a “burden” on the
manager to interpret schedule
Time
Example
note
Work
Estimated
Effort in
Pers-days
Actual
Effort spent
so far in
Pers-days
Date : 4/5/2004
Estimated
Completion
date
Actual
Completion
date
2/5/04
2/5/04
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
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)/ (aCPI x bSPI)]
where a and b are some constants
```