Earned value analysis (EVA) is a powerful tool for measuring project performance and progress. It compares the actual work done, the planned work, and the budget to determine if the project is on track, ahead, or behind schedule and cost. In this article, you will learn how to use EVA to assess your project progress and identify potential issues and risks.
Earned value analysis is a method of project management that integrates scope, time, and cost data to evaluate the current status and forecast the future outcomes of a project. It uses three key metrics: planned value (PV), actual cost (AC), and earned value (EV). PV is the budgeted amount of work that should have been completed by a certain date. AC is the actual amount of money spent on the work done so far. EV is the value of the work completed, based on the original budget. By comparing these metrics, you can calculate the variance and performance indicators of your project.
What is the project status? How is the project performing against its budget? Based on cost of work performed, are we likely to overspend at the project’s completion? Is the project behind schedule? Is the project team productive?
Variance and performance indicators are the core of earned value analysis. They show you how much your project deviates from the baseline plan and how efficiently you are using your resources. There are four main indicators: schedule variance (SV), cost variance (CV), schedule performance index (SPI), and cost performance index (CPI). SV is the difference between EV and PV. It tells you if you are ahead or behind schedule. CV is the difference between EV and AC. It tells you if you are over or under budget. SPI is the ratio of EV to PV. It tells you how fast you are progressing compared to the plan. CPI is the ratio of EV to AC. It tells you how much value you are getting for each dollar spent.
Variance calculation involves finding the mean of a dataset and then squaring the difference between each data point and the mean. By averaging these squared differences, the resulting variance provides a measure of the data's spread around the mean. Performance indicators encompass a broad range of metrics used to assess the performance of a system or entity. These indicators can include profitability ratios, productivity measures, customer satisfaction scores, and industry-specific key performance indicators (KPIs). By analyzing performance indicators, decision-makers gain valuable insights into the efficiency, effectiveness, and overall success, enabling them to make informed decisions and conduct comprehensive performance evaluations.
Variance and performance indicators can help you assess your project progress and identify potential issues and risks. Generally, a positive value for SV and CV indicates that you are ahead of schedule or under budget, while a negative value means you are behind schedule or over budget. A value equal to 1 for SPI and CPI tells you that you are on track with the plan. Additionally, SV and CV can be expressed as a percentage of PV or AC; for instance, if SV is -$10,000 and PV is $50,000, then SV% is -20%, which would mean you are 20% behind schedule. Additionally, SPI and CPI can be multiplied to get the overall performance index (TCPI). For example, if SPI is 0.8 and CPI is 0.9, then TCPI is 0.72, indicating that you are only getting 72% of the planned value for your actual cost.
Earned Value Analysis (EVA) is a widely used technique in project management that helps assess project progress by comparing the planned and actual performance of a project. It provides insights into how well a project is performing in terms of cost and schedule. EVA integrates project scope, schedule, and cost to give a comprehensive view of project performance. There are few basic key points to make your EVA plan. 1. Define Baselines: 2. Determine Planned Value 3. Actual Cost of Work Performed 4. Determine Earned Value 5. Calculate Performance(Cost & schedule) Indicators 6. Assessing (Cost & Schedule) Variance 7. Interpreting Results 8. Taking Corrective Actions 9. Regular Monitoring and Reporting
Earned value analysis can also help you forecast the future outcomes of your project, such as the estimated completion date and the final cost. To do this, you need to use some additional metrics: estimate at completion (EAC), estimate to complete (ETC), and variance at completion (VAC). EAC is the projected total cost of the project based on the current performance. ETC is the projected remaining cost of the project based on the current performance. VAC is the difference between EAC and the original budget (BAC). These metrics can be calculated using different formulas, depending on the assumptions and conditions of your project.
In my experience forecasting project outcomes using earned value analysis is a crucial aspect of effective project management. By leveraging metrics like estimate at completion, estimate to complete, and variance at completion, project managers can project the future trajectory of their projects. EAC provides an estimated total cost based on current performance, while ETC predicts the remaining cost. VAC highlights deviations from the initial budget. By utilizing these metrics and selecting the appropriate formulas, project managers can make informed decisions, adjust plans, and ensure projects stay on track within budget and timelines. EVA enables proactive management and increases the likelihood of project success.
Earned value analysis is a valuable tool for project management, but it requires planning and preparation. To use EVA effectively, you should define the scope and deliverables of your project and break them down into manageable work packages. Assign a budget and a schedule to each work package and establish a baseline plan for your project. Track and record the actual work done, the actual cost incurred, and the value earned for each work package on a regular basis. Calculate and analyze the variance and performance indicators for each work package and for the whole project using EVA formulas. Forecast the future outcomes of your project using EVA formulas and adjust your plan accordingly. Additionally, communicate the results of your EVA to stakeholders and team members to make informed decisions and actions. With EVA, you can identify potential issues, optimize resources, and improve project outcomes, ensuring that your project delivers the expected value on time and within budget.
In my experience, the challenge it is the possibility to get a mayor quantity of real information, no all times you can have this, for this reason this technique is a guide for know the performance of your project but in the real scenarios, appear cost or hidden scopes that affect the plan, I think that if you have a strict following you can act according with the continuous changes of environment and it is very important also that you have the engagement of the team for get the goals for all.