Earned Value Management A management technique to: Assess project status make the appropriate adjustments as needed Based on 3 key project elements: Planned Value (PV) or BCWS ( budgeted cost of work scheduled) Earned Value (EV) or BCWP (budgeted cost of work performed) Actual Cost or ACWP (actual cost of work performed)

Graphical View CV = EV - AC SV = EV – PV Note: both cost variance and schedule variance are measured by the same unit ---- cost this puts a “burden” on the manager to interpret schedule AC PV EV Cost Time

Example note 9 6 5 Date : 4/5/2004 Actual Effort spent so far in Pers-days Estimated Completion date Actual Completion date Estimated Effort in Pers-days Work Tasks 1 10 10 2/5/04 2/5/04 2 25 3/15/04 3/25/04 15 3 1 30 9 4/25/04 4 5/5/04 4/1/04 25 20 5 6 5/25/04 15 5 6/10/04 20 6 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 ∆ = Cost Variance = BCWP-ACWP BAC = (∑ BCW’s) Effort ∆ = 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 Improve the definition of BCWP Improve or change the definition of “Schedule Variance” 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