7.4 Earned Value Analysis
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Earned value analysis is a project management technique that compares the planned value of work scheduled to the actual cost of work performed and work earned. It measures project performance and progress in three dimensions: planned value, earned value, and actual cost. Planned value defines the work that should have been completed, earned value is the budget associated with work actually completed, and actual cost is the total cost incurred so far. Variance analysis using metrics like the cost performance index, schedule performance index, cost variance, and schedule variance allows evaluation of how a project's performance compares to its plan.
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7.4 Earned Value Analysis
- 3. What is it? Earned value provides a current view on scope, schedule, and cost performance. It compares the performance measurement baseline (what was planned) to the actual schedule and cost performance. Earned Value Analysis
- 4. Earned Value Management develops and monitors three key dimensions for your project and work packages: 1. Planned Value 2. Earned Value 3. Actual Cost You will also need your project budget, “Budget at Completion” or BAC. Earned Value Analysis
- 5. Earned Value Analysis Planned Value (PV) It is the authorized budget allocated by phase over the life of the project, but at a given point in time. Planned value defines the physical work that should have been accomplished. Project budget of $10,000, where 30% completed, against 40% planned and $5,000 spent so far. PV = 40% of $10,000 = $4,000
- 6. Earned Value Analysis Earned Value (EV) Is the budget associated with the authorized work that has been completed. The EV is often used to calculate the percent complete of a project. Project budget of $10,000, where 30% completed, against 40% planned and $5,000 spent so far. EV = 30% of $10,000 = $3,000
- 7. Earned Value Analysis Actual Cost (AC) Is simply the total cost incurred in accomplishing the work so far. Project budget of $10,000, where 30% completed, against 40% planned and $5,000 spent so far. AC = $5,000
- 8. We can then use Variance Analysis to see how our project is tracking, for example: • Cost Performance Index • Schedule Performance Index • Cost Variance • Schedule Variance Earned Value Analysis