1. Earned Value Analysis Tracking Project Progress

2. Introduction | Components | Project Scenario | Values | Calculations | Forecasts | Summary l What Is Earned Value? The dollar amount you planned to spend for the work actually completed Earned Value is the budgeted cost of the work that has actually been performed/completed Earned Value = Budgeted Cost of the Work Performed (BCWP)

3. Introduction | Components | Project Scenario | Values | Calculations | Forecasts | Summary l What Is Earned Value Analysis (EVA)? EVA enables the project progress to be tracked in terms of: The work that has actually been completed --- Compared To --- The work that was scheduled to be completed

4. Introduction | Components | Project Scenario | Values | Calculations | Forecasts | Summary l Why Is Earned Value Analysis Important? EVA enables the project team to know: If the project is ahead of, or behind schedule How far the project is ahead of, or behind schedule If the project is over or under budget How much the project is over or under budget

5. l Why Is Earned Value Analysis Important? EVA enables the team to address the project ’ s triple constraints earlier rather than later Scope – re-prioritize/reduce requirements --- and/or --- Schedule – adjust the timeline --- and/or --- Cost – request additional funding

6. l The Components of Earned Value Analysis WBS – Work Breakdown Structure Identifies products to be delivered by the project  Products or sub-products should be broken down to what can be completed in 80 hours ( “ 80-hour rule ” ), when applicable Provides the basis for  Distinct products or sub-products – which help to provide  Valid estimates – which enable  Tracking earned value / project progress

7. l The Components of Earned Value Analysis Earned Value (EV) ---- or BCWP The budgeted cost of the work actually performed How much work was actually completed Planned Value (PV) ---- or BCWS The budgeted cost of the work scheduled to be performed How much work should have been completed Actual Cost (AC) ------- or ACWP The actual cost of the work performed How much money has been actually spent

8. l The Components of Earned Value Analysis Budget at Completion (BAC) Dollar amount originally budgeted to complete the project Estimate at Completion (EAC) Estimate of dollar amount needed to complete the project Variance at Completion (VAC) Estimate of the dollar amount projected above or below budget Schedule at Completion (SAC) Projection of the time needed to complete the project

9. l The Components of Earned Value Analysis Schedule Variance (SV) The work completed vs. the work planned to be completed SV = (Earned Value – Planned Value) Tells us if the project is ahead of, or behind schedule Negative value means the project is behind schedule

10. l The Components of Earned Value Analysis Schedule Performance Index (SPI) Utilized to forecast how long it will take to complete the project SPI = (Earned Value / Planned Value) Tells us if the project is ahead of, or behind schedule Less than 1.00 means the project is behind schedule

11. l The Components of Earned Value Analysis Cost Variance (CV) What we planned to spend on the work completed vs. what was actually spent on the work completed CV = (Earned Value – Actual Cost) Tells us if the project is over or under budget Negative value means the project is over budget

12. l The Components of Earned Value Analysis Cost Performance Index (CPI) Utilized to forecast how much it will cost to complete the project CPI = (Earned Value / Actual Cost) Tells us if the project is above or below budget Less than 1.00 means the project is over budget

13. l The Components of Earned Value Analysis Estimate at Completion (EAC) EAC = (Budget at Completion / Cost Performance Index) Forecast of the total project cost Variance at Completion (VAC) VAC = (Budget at Completion – Estimate at Completion) Forecast of how much the project will be over or under budget Schedule at Completion (SAC) SAC = (Scheduled Project Length / Schedule Performance Index) Forecast of total project length (days, weeks, months, etc.)

14. l A Sample Project Scenario Assumption: for the sake of simplicity, all screens will require the same time and effort, and all reports will require the same time and effort WBS = 20 screens and 10 reports Scheduled Project Length = 12 weeks Cost is estimated at $3,000 per screen = $60,000 Cost is estimated at $2,000 per report = $20,000 Cost estimate to complete the project = $80,000

15. l A Sample Project Scenario At week 6 (half-way through the project) we know: Planned Work and Planned Expenses:  10 of the 20 screens were scheduled to have been completed  5 of the 10 reports were scheduled to have been completed  $40,000 (50% of the money) was scheduled to have been spent Actual Work Completed and Actual Expenses:  4 of the 20 screens have been completed  2 of the 10 reports have been completed  20% of the work has been completed  $25,000 has been spent (actual cost)

16. l Half-way through the project we know: BAC = $80,000 (the budget to complete 20 screens and 10 reports) PV = $40,000 (we planned to complete 50% of the work) Planned to complete $40,000 worth of product Planned to complete 10 screens and 5 reports EV = $16,000 (we completed 20% of the work) Completed $16,000 worth of product Completed 4 screens and 2 reports AC = $25,000 (we spent approximately 30% of the budget) Actual cost to complete 4 screens and 2 reports was $25,000

17. l Calculations Cost Variance CV = (EV – AC) CV = ($16,000 – $25,000) = -$9,000 More money ($9,000) has been spent, than was planned The project is currently $9,000 over budget Cost Performance Index CPI = (EV / AC) CPI = $16,000 / $25,000 =.64 1/.64 = 1.56 The project will cost over one-and-a-half times the original estimate

18. l Calculations Schedule Variance SV = (EV – PV) SV = ($16,000 – $40,000) = -$24,000 The project is behind schedule Schedule Performance Index SPI = (EV / PV) SPI = $16,000 / $40,000 =.4 Only 40% of the project will be completed at the end of 12 weeks 1/.4 = 2.5 The project is projected to take 2.5 times longer than planned

19. l Forecasts Estimate at Completion EAC = (BAC / CPI) EAC = ($80,000 /.64) = $125,000 to complete the project Variance at Completion VAC = (BAC - EAC) VAC = ($80,000 – 125,000) = $45,000 over budget at completion Schedule at Completion SAC = (Scheduled Project Length / SPI) SAC = (12 weeks /.4) = 30 weeks to complete the project

20. Forecasts

21. l Summary The project is currently $9,000 over budget At this rate, the project is forecast to be $45,000 over budget upon completion The project is behind schedule At this rate, only 40% of the work will be completed at the end of 12 weeks The project is forecasted to take 30 weeks, as opposed to the original 12 weeks to complete development

22. l Summary Adjustments can be made to address these issues Requirements can be re-prioritized  Utilize the 80/20 principle  Some “ requirements ” may not be needed during this phase  The business solution can be delivered on-time and within budget Additional resources utilized  All requirements are satisfied  The project is completed on-time  However, the project goes over budget

23. l Summary Earned Value Analysis enables you to determine: If your project is on, ahead of, or behind schedule If your project is under or over budget How much additional time will be needed to complete the project How much additional money will be needed to complete the project Earned Value Analysis enables you to: Report accurate project status Make the necessary adjustments earlier, rather than later, to address project issues