1. 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)

2. 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

3. 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 = = 115 person-days
BCWS (on 4/5/04 – tasks 1 and 2 were scheduled to be completed) = = 25 person days
BCWP (on 4/5/04 –tasks 1, 2, and 4 are completed) = = 50 person-days
ACWP (on 4/5/04 – actual cost of tasks completed) = = 55 person-days

4. 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)

5. 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

6. 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)

7. 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