Wednesday 1 April 2020

Earned Value Analysis (EVA) or Earned Value Management (EVM)


Earned Value Analysis (EVA) or Earned Value Management (EVM) is a systematic PM methodology that allows the project manager to measure the amount of work actually performed on a project with respect to planned cost and schedule. It has the ability to combine measurements of the project triangle: scope, time, and costs.


In NASA Library, the first version of Earned Value Management (EVM) was developed by its Defence Department (DoD) to track programs during the 1960 and since 2005, EVM has been a part of general federal project risk management. Now, it is used in the private sector such as consulting firms, IT, automotive, manufacturing, aerospace, and educational establishments worldwide.


It has no relationship to the investment value or benefit of the project for which it has been funded. However, earned value matrix can be used to measure the cost and schedule inputs to Devaux's Index of Project Performance (DIPP), which integrates schedule and cost performance with the planned investment value of the project across the project management triangle.

Earned value calculations require the following input data to measure the performance of the project:

TERM
ABBREVIATION
MATHEMATICAL INTERPRETATION
DEFINITION
PLANNED VALUE
PV
Also called as Budgeted Cost for Work Scheduled (BCWS)
Authorized Budget assigned to the scheduled work
EARNED VALUE
EV
Also called as Budgeted Cost for Work Performed (BCWP)
Measure of actual work performed expressed as budget authorized for that work
ACTUAL COST
AC
Also called as Actual Cost of Work Performed (ACWP)
Actual cost incurred for the work performed


With this Input, you can derive the following calculations:

Project Variances:

TERM
ABBREVIATION
MATHEMATICAL 
INTERPRETATION
DEFINITION
SCHEDULE VARIANCE
SV
= EV - PV
Amount by which project is ahead or behind plan
COST VARIANCE
CV
= EV - AC
Amount by which actual cost is ahead or behind planned cost
VARIANCE AT COMPLETION
VAC
= BAC - EAC
Estimated difference in cost at the completion of the project compared to Plan


Performance Indices:

SCHEDULE PERFORMANCE INDEX
SPI
= EV/PV
Measure of Schedule efficiency expressed as Earned Value to Planned Value
COST PERFORMANCE INDEX
CPI
= EV/AC
Measure of Cost efficiency expressed as Earned Value to Actual Cost

Note: CPI < 1 Project over budget , CPI > 1 project under budget, and CPI = 1 means project is on estimated budget.

SPI < 1 Project behind schedule, SPI > 1 Project ahead of schedule, and  SPI = 1 means project is on schedule.


Project Forecasting:

ESTIMATE AT COMPLETION
EAC
Option 1)  = AC + (BAC - EV)
Option 2)  = BAC/CPI
Option 3)  = AC + [(BAC- EV)/(CPI * SPI)]
Expected Total Cost of project = sum of Actual Cost till date and Estimate To Complete remaining work
Option 1; Remaining Work will be done at the planned/budgeted rate
Option 2; Remaining Work will be done at the present CPI
Option 3; Remaining Work will be done considering present SPI and CPI
ESTIMATE TO COMPLETE
ETC
= EAC - AC
Expected Cost to finish the remaining project work
TO-COMPLETE PERFORMANCE INDEX
TCPI
Option 1) = (BAC- EV)/(BAC- AC)
Option 2) = (BAC- EV)/(EAC- AC)
Measure of the cost performance required with the remaining resources to meet goal.
Work Remaining/Funds Remaining
Option 1; Efficiency that must be maintained to complete on Planned Budget
Option 2; Efficiency that must be maintained to complete on current EAC
ESTIMATED COMPLETION DATE
ECD
= Project Start Date + (Planned Duration/SPI)
Expected Completion Date of the project

Note: TCPI define as how to effectively should use resources to complete the project on budget.  TCPI < 1 is good for project.


EVM/EVA contributes to; Improve communication and visibility with stakeholders, Reduce risk, Profitability analysis, Project forecasting, Better accountability and Performance tracking.


You can comment us about this article and EVM template that help you to understand Earned Value Analysis (EVA) or Earned Value Management (EVM) and compute the performance of the project. Moreover, help us to write more about engineering technologies and methodologies.



 link


Monday 30 March 2020