1. EARNED VALUE MANAGEMENT SYSTEM A Project Performance ToolBy
Roy T. Uemura, PMP, P.E., MBA
Project Management Consultant
Project Professionals, LLC

2. How Is Your Project Doing?
Ahead of schedule?
Within your approved Budget?

3. How Is Your Project Doing?
What is your cost estimate at completion?
Will you be ahead or behind the scheduled completion date?

4. Agenda Explanation of Earned Value Management (EVM)
The traditional “Two Dimensional System” of Evaluation
EVM “Three Dimensional System” of Evaluation
Critical Variables in EVM
EVM Formulas
Applying EVM on projects
Example

5. Earned Value Management
Method for integrating scope, schedule, and resources, for measuring project performance.
Compares what was planned with what was actually spent with what was actually “earned”

6. Earned Value Management
Developed in the 1960’s
Popular method for reporting and controlling project in the Department of Defense
A common language to report progress and cost against a project
Helps answer the questions:
Are we on schedule?
How much did the work we do cost?
Are there variances?
Based on these trends, how much will it cost by the end of the project?

7. Early Warning System “… based on the Project Performance Plan
and Project’s Actual Performance against
the Plan,
the project will likely take this much time to finish, and
spend this much money.”

8. Traditional System (Two Dimensional)
Cost: compares what was planned to be expended versus what was actually expended
Time: Compares the date you are on a project versus when the project is to be completed
Production: Compares how much work was planned to be completed versus how much was actually completed.

9. Earned Value (Three Dimensional)
1. Actual work that was “earned”
versus
2. Work that was accomplished
3. Work that was scheduled to be accomplished

10. Critical Variables to EV Performance Indices
Quality of the project baseline plan
Actual performance against baseline plan
Management’s determination to control (change) the final results

11. Project Baseline Basis of performance measurement
Represents technical, cost and schedule objectives of the project
Cashflows
Outside Material
Outside Services

12. Scope of Work The scope of work of entire project must be defined
The Work Breakdown Structure (WBS) identifies and groups major deliverables
Integrate scope with budget and schedule.

13. Performance Measurement Methods
Fixed formula by task:
0/100 %, 25/75%, 50/50 %
Weighted Milestones Percent complete based on specific work
(milestone) accomplished.
Percent Complete
Increment completed / total activity or task
Equivalent Completed Units

14. Cost Account Plan

15. Project Description
Installed approximately 14.5 miles of transmission line of which about 4,000 feet was installed underground.
Installed 93 steel poles: 52 poles were direct buried and 41 were mounted on pier foundations.
The project was to install about 14.5 miles of line to connect our Waialua and our Kuilima Substations. This involved installing about 4,000 ft. of underground lines which was located within the Haleiwa Special Design District.
Just to give you some numbers, we installed 93 steel poles of which 41 of these poles were installed on pier foundations.
Steel pole heights ranged from ft AGL
Foundations: about 5 ft diam. x 15 ft deep. (Largest hole: 7 ft. diam. x 23 ft. deep)

16. Kuilima
The new Waialua-Kuilima line will provide a new source of power to Kuilima where the power could go East or West from Kuilima Substation in the event of a fault on the existing 46 kV system
Waialua

17. Visual Progress Report
Foundation: Dug Concrete Poured
Pole Erection:
Lines Strung:
Trench:
Conduit Installed:
Cable Installed:
Trench Covered:

18. Kuilima
The new Waialua-Kuilima line will provide a new source of power to Kuilima where the power could go East or West from Kuilima Substation in the event of a fault on the existing 46 kV system
Waialua

19. Controlling Change
Essential: Change Management Control System in the Project Plan prevents incorrect, inappropriate, or unauthorized changes to the project.
Inform appropriate stakeholders of authorized changes to the Baseline (scope/quality, schedule, cost)

20. EVM Input Data Required
PLANNING PHASE
Planned Value (PV)
Budget At Completion (BAC)
% Complete - Planned
EXECUTING & CONTROLLING PHASES
Actual Cost (AC)
% Complete - Actual

21. Calculations from Input Data
Earned Value - EV
Cost Variance - CV
Schedule Variance - SV

22. Calculations for Analysis
Cost Performance Index - CPI
Schedule Performance Index - SPI
Budget at Completion - BAC
Estimate to Completion - ETC
Estimate at Completion - EAC
To Complete Performance Index - TCPI

23. Primary Data Elements PV (Planned Value)
The value of the amount of work that was
planned to be accomplished on a task (or a
project) as of a certain date in the baseline
plan.
BAC (Budget at Completion)
Total cost of a task (or project) according to
the baseline plan.

24. Primary Data Elements (cont’d)
AC (Actual Cost)
The actual amount of money spent
on a task (or project) as of a certain date.

25. Performance Analysis EV = % Actual Complete x BAC EV (Earned Value).
The value of the amount of work actually
completed on a task (or project) as of a
certain date, according to the baseline
plan.
EV = % Actual Complete x BAC

26. Performance Analysis (cont’d)
CV (Cost Variance)
The difference between the value of work
that was actually completed (EV) on a task
(or project) and the cost that was actually
spend (AC) on the task (or project) as of a
certain date.
CV = EV - AC
(+$ = spending less than planned)

27. Performance Analysis (cont’d)
SV (Schedule Variance)
The difference between the value of work
that was actually completed (EV) on a task
(or project) and the work that should have
been done (PV) as of a certain date.
SV = EV - PV
(+$ = Ahead of Schedule)

28. Performance Analysis (cont’d)
CPI (Cost Performance Index)
The ratio of the value of work actually
completed (EV) on a task (or project) and
amount actually spent (AC) on a task (or
project) as of a certain date.
CPI = EV/AC
(>1 = Spending less than planned)
CPI: For every project dollar spent, $x.xx in physical work was accomplished,
CPI is a powerful tool to predict the final costs needed to finish a job.

29. Performance Analysis (cont’d)
SPI (Schedule Performance Index)
The ratio between the value of work that was
actually completed (EV) on a task (or project)
and the work that should have been done
(PV) as of a certain date.
SPI = EV/PV
(>1 = Ahead of Schedule)
SPI: For every dollar of physical work planned to accomplished, $x.xx was completed.
SPI can be a valuable tool to forecast completion date for the project.

30. Performance Analysis (cont’d)
ETC (Estimate To Completion)
The forecasted cost of the remaining task
(or project) is calculated by CPI or
CPI x SPI
ETC = Remaining Work / CPI
= (BAC - EV/ CPI or
ETC = Remaining Work/ (CPI x SPI)
= (BAC - EV/(CPI x SPI)

31. Performance Analysis (cont’d)
EAC (Estimate at Completion)
The value expressed in either dollars or hours
to represent the projected final cost of work
when completed. The EAC equals the actual
costs (AC) incurred plus the estimated costs
to complete the remaining work (ETC).
EAC = AC + ETC

32. Performance Analysis (cont’d) Ranges of Estimate at Completion
High-End Projection (Cumulative CPI x SPI)
EAC = AC + (BAC - EV) / (CPI x SPI)
In-Between Projection (80% CPI x 20% SPI)
EAC = AC + (BAC - EV) / (0.8 CPI x 0.2 SPI)
Low-End Projection (Cumulative CPI)
EAC = AC + (BAC - EV) / CPI

33. To Complete Performance Index
TCPI: Project performance which must be
achieved on all remaining work in order to
meet the financial goal by management
TCPI = Work Remaining / Funds Remaining
= (Total Budget - Earned value)
(BAC - Actual Costs)
= (BAC - EV)
(BAC - AC)

34. PMP Exam EAC = BAC Estimate At Completion (EAC) CPI
Estimate to Complete (ETC)
ETC = EAC - AC
Rita Mulcahy, PMP Exam Prep 5th Edition (2005)

35. Example Time: 4th month of 10 month schedule
Budget at Completion: BAC = $10,000
Planned Value: PV = $4,000
Actual Cost: AC = $3,800
Actual % Complete: 36%
Earned Value:
EV = 0.36 x $10,000 = $3,600

36. Earned Value Analysis Status Date BAC 1 2 3 4 5 6 7 8 9 10 Time
$10,000
$5,000
PV = $4,000
AC = $3,800
EV = $3,600 1 2 3 4 5 6 7 8 9 10
Time

37. Performance Analysis Traditional Analysis
Cost Variance:= Planned Expenditure - Actual Cost
CV = PV - AC
CV = $4,000 - $3,800 = $200 (under spent by $200)
Earned Value Analysis
CV = EV - AC
CV = $3,600 - $3,800 = -$200 (spending more than planned for work performed)
SV = EV - PV
SV = $3,600 - $4,000 = -$400 (less work was done than planned)

38. Performance Analysis Cost Performance Index (CPI) CPI = EV / AC
CPI = $3,600/$3,800 = (<1, for every $1 spent, only $0.95 in physical work was done)
Schedule Performance Index (SPI)
SPI = EV / PV
SPI = $3,600 / $4,000 = 0.9 (<1, for every $1 of physical work planned, only $0.9 was done)

39. Performance Analysis ETC = (BAC - EV) / CPI
Estimate To Complete (ETC)
ETC = (BAC - EV) / CPI
ETC = (BAC - EV) / (CPI x SPI)

40. Performance Analysis EAC = AC + [(BAC - EV)/(CPI x SPI)]
Estimate At Completion (EAC)
EAC = AC + [(BAC - EV)/(CPI x SPI)]
= 3,800 + [(10,000 – 3,600) / (0.95 x 0.90)]
= $11,285 (high end)
EAC = AC + [(BAC - EV) / CPI]
= 3,800 + (10,000 – 3,600) / 0.95
= $10,537 (low end)

41. Performance Analysis To Complete Performance Index (TCPI)
TCPI = (BAC - EV) / (BAC - AC)
TCPI = ($10,000 - $3,600) / ($10,000 - $3,800)
TCPI = $6,400 / $6,200
TCPI = 1.03

42. Analyzing Data for Trends
$10 $5 $0
($5)
Schedule Variance
($10)
($15)
Cost Variance
($20

43. Earned Value Analysis Time EAC $9.5 M CPI EAC ($7.5 M) SPI
Baseline Budget
CPI & SPI = 1
1.0
Time

44. Performance Report

45. Float and Management Reserves
The project manager should control contingency reserve and schedule float
The work at hand expands to fill the time available
Expenditures will rise to meet the budget.
The remaining “management reserves” should be added to EAC until such time when the reserve is no longer needed.

46. Earned Value Management System Performance Management
Accurate Baseline Estimate
Measure Performance against the Plan
Analyze variances to Plan
Assess impacts to Overall Plan
Identify corrective actions
Implement the corrective actions

47. Questions?