Earned Value Management

In fact, the biggest challenge project managers are facing are lack of correct information on time to make decisions. When they get information, they get lot of information which requires time and effort to analyse. A well implemented Earned Value Management (EVM) system not only solves this problem, but helps project managers to forecast.

Basic definitions of Earned Value Management

  • Planned Value (PV) – How much work are we supposed to complete till the review date?. Planned value is also known as Budgeted Cost Of Work Scheduled (BCWS)
  • Earned Value (EV) – How much work did we actually complete?. Earned value is also known as the Budgeted Cost Of Work Performed (BCWP)
  • Actual Cost (AC) – For the completed work, how much did we actually spend?. Actual Cost is also known as Actual Cost Of Work Performed (ACWP)

Once we have this much information, then we can calculate;

  • Schedule Variance (SV) = EV – PV
  • Schedule Performance Index (SPI) = EV/PV. If SPI=1, then the project is progressing as per schedule
  • Cost Variance (CV) = EV – AC
  • Cost Performance Index (CPI) = EV/AC. If CPI=1, then the work is getting completed as per budget
  • Budget At Completion (BAC) = AC + (BAC-EV) / CPI
  • To Complete Performance Index (TCPI) = (BAC-EV) / (BAC-AC). TCPI provides us with the ideal target CPI to be maintained for the remaining part of the work in order to complete the project within budget.

For a detailed explanation of Earned Value Management click here

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