Applied eight earned value management (EVM) techniques to: (a) performing poorly, (b) on target, (c) performing better than expected. Provided calculations, a short explanation regarding the result, and explained future actions that you might take given where you stand

Earned value management is a project management technique used by the project managers to measure the performance and the progress of a project. The technique focus on the three fundamentals metrics  that include project cost, project scope and project time management(schedule).

 

By using EVM technique the following areas of the project are improved.;

1. project planning-EVM helps in identification of the work to be accomplished thus significantly improves the understanding of the scope of the work to be done among the stakeholders. At this stage, the technique element used is  called the Planned Value (PV).

2. continuous valuation of planned work-EVM technique emphasizes a continuous review of planned work verses actual value of work completed.

3. Earned value principle- pre-defined the metrics to quantify the accomplishment of work or sometimes called Budgeted cost of work performed.

4.Actual cost- this is also called Actual cost of work performed.

5. Variance analysis- This analyses project cumulative cost verses time, this can present various scenario that include;

a) work ahead of schedule with low cost

b) work ahead of schedule with high cost 

c) work on schedule with low cost 

d) work on schedule with high cost.

Step-by-step explanation

step 1. planned value formula

it is given by multiplying the percentage of work completed by the project budget  

PV=% work completed X Budget Actual cost.

for example a project that is scheduled to take four months and each has a planned budget of planned value of $2000

PV after 2 months = % complete planned X BAC;

                                 = 50% X ($ 2000 X 4 months)= $ 4000

Step 2. Actual cost formula

it include  all project expenses by the scheduled date.

for example assume $1500 is spent for the first month with only 20% of work done then;

actual cost = $ 1500 but the differences is in the % completed and the % planned, which is 20% and 25% respectively.

step 3: Earned value formula

EV=% complete (actual) X BAC

For example in step 2 above, EV = 20% x $8000= $ 1600

step 4: schedule variance (SV)

This measures the differences between actual work done and the expected work to date  or by a specific date.

SV=EV-PV

for example in step 2: PV =25% X BAC ($8000)= $2000

While EV = 20% X BAC ($8000)= $1600

therefore,

SV= $1600-$2000= -$ 400

interpretation

• positive value the project is ahead of schedule
• negative value the project is behind schedule
• zero value the project is on schedule

 this is an example of a  poorly performed project as per schedule variances .

action to be taken;

the project manager need to re-organize resource distribution, scope creep issues and reschedule activities that are lagging behind.

step 5: Cost variance 

This is a measure of the differences between the budgeted amount for the work that should have been completed to-date and the actual amount spent for the work 

CV= EV-AC

Where, EV= % Actual complete (20%)  X BAC($ 8000)=$1600

and AC= $ 1500

therefore,

CV= $1600-$1500=$ 100

interpretations

positive project is under budget

negative project is over budget

zero project is on budget

this examples shows that the project is under budget.

 Step 6: schedule performance index

it is a ratio of earned value to planned value .

SPI= EV/PV 

using the example in step 2:  EV=$1600  and planned value after one month is $ 2000

therefore,

SPI= 1600/2000= 0.8

interpretations

greater than 1  you have done more work than planned

Less than 1 you have completed less work than planned

equal to 1  the project is on schedule 

In this example 0.8 is less than 1 thus, the project is behind schedule

action to be taken

the project manager need to examine and if possible increase human resource to fast-track project activities .

step 7: Cost performance index 

measures the value of completed work against the actual cost.

CPI= EV/AC

using example in step 2 ,EV = $1600, AC= $1500

Therefore, CPI= 1600/1500=1.07

Interpretations

Greater than 1 project is under budget

less than 1 project is over budget

equal to 1 project is on budget

from this example, 1.07 is greater than 1 hence the project is under budget.

action to be taken;

the project manager may re-allocate the excess resources to future activities .