Earned Value Management How to apply Earned Value Management to measure the Performance of your Project alphaPM Inc. www.alphaPM.com

AlphaPM Project Dashboard Tool This Dashboard is a very simple Excel Spreadsheet with five sections Let’s start with the section in the middle. This section is where you report your monthly Earned Value metrics – that is earned Value, Planned Value and Actual Cost. The next two lines show the Schedule And Cost Performance Indices, which are simply calculated by Excel. You may add a Comments line, to highlight any major events that affected the project. From this data in the middle, the two Performance Index Charts can be derived using the Earned Value Management formulas. If the Indices are 1.0, then the project is exactly on track, - If the Indices are above 1.0 then the project is ahead of schedule and/or budget - If the Indices are below1.0 then the project is behind schedule and/or budget. So the Charts give us an excellent view of how are project is doing, and whether it is getting worse or improving its performance. Finally, as you can see at the bottom of the Dashboard, you can report on your Key Project Milestones and Key Project Issues and Risks. This Dashboard will give you, your Client, Executive and Team a good meaningful view of how your project is really doing and alert all stakeholders to the timely need for any corrective actions.

How To Earned Value Management Overview Earned Value Management (EVM) is a management methodology for integrating scope, schedule and resources, and for objectively measuring project performance and progress. Performance is measured by determining the budgeted cost of work performed (i.e. earned value) and comparing it to the actual cost of work performed (i.e. actual cost). Progress is measured by comparing the earned value to the planned value. Source: A Guide to the Project Management Body of Knowledge (PMBOK Guide) Third Edition 2004 Example: Project Budget: $400K Project Schedule: 4 months (= Baseline Duration) At the 3 month checkpoint: Spent: $200K Work completed: $100K Earned Value Management helps you to report how the project is doing in terms of cost and schedule?

Earned Value Management Terms and Formulas Example: Project Budget: $400K Project Schedule: 4 months At the 3 month checkpoint: Spent: $200K Work completed: $100K Earned Value Management Terms and Formulas Terms and Formulas Alternative Definition Earned Value (EV) Budgeted Cost of Work Performed (BCWP) i.e. the budgeted cost to date x % complete Actual Cost (AC) Actual Cost of Work Performed (ACWP) i.e. actual cost of work performed to date Planned Value (PV) Budgeted Cost of Work Scheduled (BCWS) i.e. the estimated value of work to be performed Cost Variance (CV) = EV - AC Budgeted Cost of Work Performed (BCWP) - Actual Cost of Work Performed (ACWP) Schedule Variance (SV) = EV - PV Budgeted Cost of Work Performed (BCWP) - Budgeted Cost of Work Scheduled (BCWS) Cost Performance Index (CPI) = EV/AC Budgeted Cost of Work Performed (BCWP)/ Actual Cost of Work Performed (ACWP) Schedule Performance Index (SPI) = EV/PV Budgeted Cost of Work Performed (BCWP)/ Budgeted Cost of Work Scheduled (BCWS) Example $100K $200K $300K $100K – $200K = ($100K) $100K - $300K = ($200K) $100K/$200K = 0.5 i.e. 50% $100K/$300K = 0.33 i.e 33% Revised Total Duration Baseline Duration/Schedule Performance Index 4/0.33 = 12 months

Earned Value Management Chart for project example Project Budget: $400K Project Schedule: 4 months At the 3 month checkpoint: Spent: $200K Work completed: $100K Earned Value Management Chart for project example Budget 3 Month Checkpoint PV CV = EV – AC = (100K) SV = EV – PV = (200K) CPI = EV/AC = (50%) SPI = EV/PV = (33%) Actual Cost Earned Value Revised Total Duration = Baseline Duration/SPI = 4/0.33 = 12 months

Budget (Planned Value) Actual Effort (As of Day 10) How To Exercise Activities Owner Planned Effort (Days) Budget (Planned Value) $ Actual Effort (As of Day 10) Actual Cost (As of Day 10) Status Prepare Plan John 2 $2,000 4 $4,000 Completed Design Solution Susan 3 $3,000 Code Programs Jim 10 $10,000 5 $5,000 30% of all work completed Test Programs Debbie Not started Deploy into Production Brad Total 20 $20,000 Report the Performance for the Project at the 10 day point. (Assume a labour rate of $1,000/day) Step 1: Determine the value of the three variables needed to measure the project performance at the 10 day point (all activities are sequential) Planned Value: PV = Earned Value: EV = Actual Cost AC = Planned Value: PV = $10,000 {2,000 + 4,000+ 4,000 since Jim should have completed 4 days of coding at the 10 day point} Earned Value: EV = $9,000 {2,000 + 4,000 + 3,000 since Jim is only 30% complete} Actual Cost: AC = $12,000 (4,000 + 3,000 + 5,000 since that is the actual amount that all have spent} Click here when you have your answer

How To Exercise (continued) Activities Owner Planned Effort (Days) Budget (Planned Value) $ Actual Effort (As of Day 10) Actual Cost (As of Day 10) Status Prepare Plan John 2 $2,000 4 $4,000 Completed Design Solution Susan 3 $3,000 Code Programs Jim 10 $10,000 5 $5,000 30% of all work completed Test Programs Debbie Not started Deploy into Production Brad Total 20 $20,000 Report the Performance for the Project at the 10 day point. (Assume a labour rate of $1,000/day) We now know that Planned Value (PV) = $10,000 Earned Value (EV) = $ 9,000 Actual Cost (AC) = $12,000 Step 2: Calculate the Earned Value Performance Indices Cost Performance Index (CPI): CPI = EV/AC Schedule Performance Index (SPI): SPI = EV/PV Cost Performance Index (CPI): CPI = EV/AC = $9.000/$12,000 = 0.75 or 75% Schedule Performance Index (SPI): SPI = EV/PV = $9,000/10,000 = 0.90 or 90% Click here when you have your answer

AlphaPM Project Dashboard Tool This Dashboard is a very simple Excel Spreadsheet with five sections Let’s start with the section in the middle. This section is where you report your monthly Earned Value metrics – that is earned Value, Planned Value and Actual Cost. The next two lines show the Schedule And Cost Performance Indices, which are simply calculated by Excel. You may add a Comments line, to highlight any major events that affected the project. From this data in the middle, the two Performance Index Charts can be derived using the Earned Value Management formulas. If the Indices are 1.0, then the project is exactly on track, - If the Indices are above 1.0 then the project is ahead of schedule and/or budget - If the Indices are below1.0 then the project is behind schedule and/or budget. So the Charts give us an excellent view of how are project is doing, and whether it is getting worse or improving its performance. Finally, as you can see at the bottom of the Dashboard, you can report on your Key Project Milestones and Key Project Issues and Risks. This Dashboard will give you, your Client, Executive and Team a good meaningful view of how your project is really doing and alert all stakeholders to the timely need for any corrective actions.

An Easy Way to Remember the Formulas Three Variables: EV PV AC S C Four Formulas

An Easy Way to Remember the Formulas Three Variables: EV PV AC SV CV SPI CPI = EV - P A / Four Formulas

An Easy Way to Remember the Formulas Three Variables: EV PV AC SV CV SPI CPI = EV - PV AC / Four Formulas

Earned Value Management How to apply Earned Value Management to measure the Performance of your Project alphaPM Inc. www.alphaPM.com