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

2. 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.

3. 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?

4. 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

5. 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

6. 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 since Jim should have completed 4 days of coding at the 10 day point} Earned Value: EV = $9,000 {2, , ,000 since Jim is only 30% complete} Actual Cost: AC = $12,000 (4, , ,000 since that is the actual amount that all have spent}
Click here when you have your answer

7. 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, Earned Value (EV) = $ 9, 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

8. 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.

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

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

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

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