Earned Value Analysis Concept and Application

Presented byAhmed Rami Elsherif

27/12/2012

Concept

Earned Value Analysis (EVA). Is a Project Management control technique which integrates Scope, Schedule and Cost data 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) and the planned cost of work performed (i.e. planned cost).

Definitions

ConceptAbbreviation

Description

Budget at Completion BAC Baseline cost of 100% of the project.

Actual Cost AC Total costs actually incurred so far.

Earned Value EVAmount of budget earned so far based on physical work accomplished, without reference to actual costs.

Planned Value PVThe budget for the physical work scheduled to be completed by the end of the time period.

Metrics

ConceptAbbreviation

Description

Cost Variance CVMeasure of cost overrun.CV = EV – AC

Schedule Variance SVMeasure schedule slippage. SV = EV – PV

Cost Performance Index CPICost efficiency ratio.CPI = EV/AC

Scheduled Performance Index

SPISchedule efficiency ratio.SPI = EV/PV

Estimate at Completion EACExpected total cost based on the current cost and schedule efficiency ratios.EAC = AC+((BAC-EV)/(CPI*SPI))

For example

The project is to build a 4 wall room. The cost per wall is 100 SAR and it will take 1 day to construct 1 wall. At the end of the 3 day we have finished 2.5 walls and our actual cost is 280 SAR then our values are :

Budget at Completion (BAC) = 400 SAR

Actual Cost (AC ) = 280 SAR

Earned Value (EV) = 250 SAR

Planned Value (PV) = 300 SAR

And based on the above data we can calculate the following:

Calculated Metrics

Cost Variance is CV = EV – AC = 250 – 280 = -30

we are over budget by 30 SAR

Scheduled Variance is SV = EV – PV = 250 – 300 = -50

we behind scheduled by 50 SAR

Cost Performance Index is CPI = EV / AC = 250 / 280 = .89

For each 1 SAR we spend we gain .89 halalas

Schedule Performance Index is SPI = EV / PV = 250 / 300 = .83

We are behind schedule by 17 %.

Estimate at Completion is EAC = AC+((BAC-EV)/(CPI*SPI)) = 483

If we continue with the same efficiency rates, we might end up with a total cost of 483 SAR.

Proposal

Recent research studies have shown that the tools and techniques of Earned Value Analysis have positive impact on improving project controls on Scope, Cost and Schedule and are good predictors of project success.

Popularity of EVA has grown significantly in recent years for which we would like to recommend using it for ATCO projects (i.e. construction, big projects in EWE, EWF).

For that we have developed a simple module in the EIS where project managers will enter the EV parameters which the system will combine with data booked in accounts and calculates the EV metrics.

Data from RAS ALKHER project is entered in the system for testing.

1. Login to EIS by assigned operational staff.

2. Process the EV report of his particular division.

3. Enter the EV values of the Month and any comments regarding the variances.

4. Use the data and reports in the monthly project status reporting.

Steps in EIS

Project EV data entered by Operations on a

monthly basis

Projects status dashboard report

Graphical Presentations

Proposed Plan

1. Agree with you if this is a suitable solution. We can discuss this by taking RAS ALKHER project data which is already entered in the system as an example.

2. If Yes share it with operations for feedback on possible enhancements or improvements.

3. Identify users in each divisions and do training.

4. Start using the new process.