Earned value management (EVM) or Earned Value Project Management (EVPM) is used to measure project performance and progress.
Calculating EVM might be intimidating at first if you don't like math, but it is a great way to keep track of your project. Most project tools will help you to calculate this as part of the tool. This is good information to know if you are planning to take your Project Management Professional (PMP) Examination.
Planned Value (PV): This variable is the approved budget for the work scheduled to be completed by a certain point. PV is also called the Budgeted Cost of Work Scheduled (BCWS). The PV of each task is equal to to the task's budget at completion (BAC).
As per the PMBOK Guide, “Planned Value (PV) is the authorized budget assigned to work to be accomplished for an activity or WBS component.”
PV = (Planned%Complete) X (BAC)
An example is that you are a project manager of a one year project. The project has a total budgeted cost of 120,000 USD. Half way through the year (six months) you have 50% of the work completed.
The BAC is 120,000 USD
Planned percent completed is 50%
Time is 6 months or half way through
=50% of 120,000
=(50/100) X 120,000
= 60,000
No you know that your project has a PV of 60,000 USD!
The Earned Value (EV) is the approved budget for the work actually completed to date. This is also referred to as budgeted cost of work performed (BCWP).
Earned Value = % of completed work X BAC
Using the same example above.
=50% of BAC
=50 of 120,000
=.5 X 120,000
=60,000
Therefore your project has an EV of 60,000 USD.
The Actual Cost (AC) is the cost actually incurred for the work completed to date. This is also referred to as the actual cost of work performed (ACWP). In the example above, the actual cost is 60,000 USD.
Now you can calculate your Schedule Variance (SV) and your Schedule Performance Index (SPI). This will let you know as the project manager if you are on schedule.
Schedule Variance (SV) is the difference between the amounts budgeted for the work you actually did and for the work you planned to do. SV can be viewed simply as if your project is ahead of or behind schedule.
SV = EV-PV
If the SV is positive, your project is ahead of schedule; if it is negative you are behind schedule.
A SV of 0 means you are on schedule. When you conclude your project, the SV should be 0.
Schedule Performance Index (SPI) is the ratio of approved budget to work performed.
SPI = BCWP/BCWS
You can also calculate your Cost Variance (CV) and your Cost Performance Index (CPI). This will allow you to know if you are on target for your budget.
Cost Variance (CV) is the difference between the amount budgeted and the amount spent for work performed. CV can be viewed simply as if your project is under or over budget.
CV = EV-AC
If the CV is positive, your project under budget; if it is negative you are over budget.
A CV of 0 means you are on budget. When you conclude your project, the CV should be 0.
Cost Performance Index (CPI) is the ratio of approved budget to budget spent.
CPI = BCWP/ACWP
There are a lot of calculations to learn for project management, but once you learn them, it will get easier and it is much more interesting we you are applying them to your actual projects!
THANKS
ReplyDelete