CS Project

Earned Value Management

Earned value management is a project management technique for measuring project performance and progress in an objective manner.

It does not help to simply enter actual costs in the relevant fields, since this would only amount to cost accounting. What is required is a procedure by which current performance (expenditure) can be compared to an original plan (budget) and to take the necessary action. The Earned Value Analysis is a structured approach to costing which will enable the Project Manager to identify cost over-runs before they become too serious and to take the necessary action.

• A project plan that identifies work to be accomplished
• A valuation of planned work, called planned value (PV) or budgeted cost of work scheduled (BCWS)
• Pre-defined "earning rules" (also called metrics) to quantify the accomplishment of work, called earned value (EV) or budgeted cost of work performed (BCWP)

• Actual Cost (ACWP) - this is the actual cost incurred (spent) on work to date.
• Actual Units - these are the actual resource units incurred on work to date.
• Baseline Cost - this is the total cost of the work as originally planned.
• Baseline Cost to Date (BCWS) - this is the cost that is budgeted (according to the baseline plan) up to the current date.
• Baseline Units - these are the resource units that are budgeted (according to the baseline plan) until completion of the work.
• Baseline Units to Date - these are the resource units budgeted to have been used up to the current date.
• Cost Performance Index (CPI) - this is the ratio of BCWP to ACWP. A value greater than 1.00 indicates costs running under budget and a value less than 1.00 indicates a cost over-run.
• Cost Variance - this is the difference between BCWP and ACWP. A positive value indicates costs running under budget and a negative value indicates a cost over-run.
• Cost Variance (%) 
• Earned Value (BCWP) - this is the amount of money according to the original (baseline) plan required to complete the work performed to date.
• Earned Value (Units) - this is the number of resource units according to the original (baseline) plan required to complete the work performed to date.
• Estimate at Completion (EAC) - this is an estimate of the cost at completion based on the originally planned performance. The EAC is given by the sum of the remaining cost and ACWP.
• Forecast to Complete (FTC) - this is another estimate of the cost at completion based on the performance to date. The FTC is given by the ratio of ACWP and the percent complete value. If the percent complete is zero then FTC is set to equal to EAC.
• Remaining Cost - this is the remaining scheduled cost.
• Remaining Units - these are the remaining scheduled resource units.
• Schedule Performance Index (SPI) - this is the ratio of BCWP to BCWS. A value greater than 1.00 indicates that work is running ahead of schedule and a value less than 1.00 indicates that work is behind schedule.
• Schedule Variance - this is the difference between BCWP and BCWS. A positive value indicates that work is running ahead of schedule and a negative value indicates that work is behind schedule.
• Schedule Variance (%) 
• Scheduled Cost - this is the total cost at completion as calculated according to the current schedule.
• Scheduled Units - this is the total consumption of resource units as calculated according to the current schedule.

In the example below, it can be seen that ‘Clear Site’ was completed on time, but was over budget by £2,500. ‘Excavation’ was completed on time and on budget. ‘Concrete’ did not start on time, so is delayed and has no cost to date, but is also now forecast to be over budget by £500. The Estimated Actual Final Project Cost [EAC] has risen by £3,000.

The analysis is based on the calculation and monitoring of a number of cost fields.

• Baseline at Completion (BAC) - this is often referred to as the budget at completion and is the originally planned (baseline) cost of the work when completed. 
• Scheduled Cost - this is the cost of the work when completed according to the current schedule. 
• Actual Cost or Actual Cost of Work Performed (ACWP) - this is the actual amount of money spent on the work completed to date. 
• Baseline Cost to Date or Budgeted Cost of Work Scheduled (BCWS) - this is the amount of money that would have been spent to date if the original plan had been adhered to. If the current date is later than the baseline finish date, this value is equivalent to BAC. 
• Earned Value or Budgeted Cost of Work Performed (BCWP) - this is the original (budgeted or baseline) cost of the work that has been performed to date. This number gives an indication of the value of the work performed to date according to the costs as planned in the original budget. 
• Cost Variance - this is the difference between BCWP and ACWP and shows how the actual expenditure compares to the budget. A positive value indicates that the BCWP is greater than the ACWP, and therefore the cost is running under budget. A negative value indicates a cost over-run. 
• Schedule Variance - this is the difference between BCWP and BCWS and gives an indication of how the current schedule compares to the baseline schedule (in terms of time progress). A positive value (i.e. BCWP greater than the BCWS) indicates that the schedule is ahead of schedule. A negative value indicates that the work is behind schedule. 
• Cost Performance Index (CPI) - this is another measure of how the actual cost compares to the budget. 
• Schedule Performance Index (SPI) - this is another measure of how the current schedule compares to the original plan (in terms of time progress).
• Estimated Actual at Completion (EAC) - this gives an indication of what the cost at completion will be. It assumes that the estimated rate of expenditure will remain as originally scheduled. 
• Forecast to Completion (FTC) - this gives an indication of what the cost of work at completion will be. It assumes that the rate of expenditure continues as up till now.