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Understanding EVA V2

Earned value analysis (EVA) provides an objective method to measure project performance in terms of scope, time, and cost. EVA compares the planned value (amount of work planned to be completed), earned value (amount of work actually completed), and actual cost. Key metrics like schedule and cost variance and performance indexes indicate if a project is on budget and on schedule. For example, a project that is 50% complete but has spent more than planned and earned less value is behind schedule and over budget. EVA can also forecast the total estimated cost to complete the project if performance does not improve. Traffic light status reporting is subjective, while EVA provides quantitative metrics to objectively measure project health.

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35 views

Understanding EVA V2

Earned value analysis (EVA) provides an objective method to measure project performance in terms of scope, time, and cost. EVA compares the planned value (amount of work planned to be completed), earned value (amount of work actually completed), and actual cost. Key metrics like schedule and cost variance and performance indexes indicate if a project is on budget and on schedule. For example, a project that is 50% complete but has spent more than planned and earned less value is behind schedule and over budget. EVA can also forecast the total estimated cost to complete the project if performance does not improve. Traffic light status reporting is subjective, while EVA provides quantitative metrics to objectively measure project health.

Uploaded by

Fasi Haider
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Understanding

Earned Value Analysis


PMI.org
How is project health measured?

Project Manager evaluates project’s triple constraint of


scope, time and cost
Key Questions
• Is the project performing to budget?
• Is the project on schedule to deliver the agreed scope?

Typically Summarize Project Health using Green, Yellow,


Red Status

(Traffic Light Reporting)


Problems with the Traffic Light status approach

Subjective to interpretation and influence


• No objective measurement to guide Project Health
• A project can report green and suddenly turn red before a few days
before the launch
• A project can report red and be rationalized to green or yellow
without any objective data
• No prior indicators to problems
Apply Earned Value Analysis

Earned Value Analysis (EVA)


• Earned Value Analysis is an objective method to measure project
performance in terms of scope, time and cost
• Use EVA metrics are used to measure project health and
project performance
Earned Value Characteristics

Point in Time Evaluation


• How much work did you PLAN to complete? (Planned Value)
• How much work did you ACTUALLY complete? (Earned Value)
• How much did you spend to complete the work? (Actual Cost)
EVA Example

A $10,000 software project is scheduled for 4 weeks.


At the end of the third week, the project is 50% complete
and the actual costs to date is $9,000

Planned Value (PV) = $7,500


Earned Value (EV) = $5,000
Actual Cost (AC) = $9,000
What is the project health?

Schedule Variance = EV – PV = $5,000 – $7,500 = - $2,500


Schedule Performance Index (SPI) = EV/PV = $5,000 / $7,500 = .66
Cost Variance = EV – AC = $5,000 - $9,000 = - $4,000
Cost Performance Index (CPI) = EV/AC = $5,000 / $9,000 = .55

Objective metrics indicate the project is behind schedule and over budget.
On-target projects have an SPI and CPI of 1 or greater
Forecasting Costs

If the project continues at the current performance,


what is the true cost of the project?
Estimate At Complete
= Budget At Complete (BAC) / CPI
= $10,000 / .55 = $18,181
At the end of the project, the total project costs will be $18,181
Establish Ranges to Guide Traffic Light Status

[1.0 - .95]
Traffic Light status is useful in conveying
overall project with one color
Establish objective SPI and CPI ranges to
determine the true project color.
[.94 - .85]
Green [1.0 - .95]
Yellow [.94 - .85]
Red [.84, 0]
[.84, 0]
Earned Value Summary

• Earned Value is an objective method of determining project performance


instead of subjective approaches
• Apply Earned Value enforces the project discipline of tracking project actual
performance against baseline costs and dates
• Estimate at Complete calculation can forecast true project costs
based on project performance
PMI.org

TUESDAY, FEBRUARY 21, 2023 11

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