Earned Value Management EVM Calculation 1

What for? used to monitor: Time and budget in comparison to planning 2

For what? Requirements: -a clearly defined objective -cost and time limitations -a clearly perceived route to the goal -tasks of a creative nature -work taking place over an extended period -a high labour content -a formalized management structure 3

Basics -planned output at standard cost rate -actual output at standard cost rate -actual costs → process efficiency → cost efficiency 4

Preparation -define sub-processes and required resources -schedule sub-processes -identify process milestones 5

Concomitant Analysis -record actual costs -summarize costs according to steps in your WBS -compare planned cost and actual cost -compare scheduled progress and reality 6

Variables PTC = planned time cost RTC = real time cost MC = material cost (also includes unique investment) PP(t) = percental progress PC(t) = planned costs = PTC x t + MC AC(t) = actual costs = RTC x t + MC EV(t) = earned value = AC x PP(t) SV(t) = schedule variance = EV(t) – PC(t) SPI(t) = schedule performance index = EV(t)/PC(t) CV(t) = cost variance = EV(t) – AC(t) CPI(t) = cost performance index = EV(t)/AC(t) 7

Planned Cost PTC MC PC Sum up needed work hours Multiply with worker costs (wages, insurance and so on) Add material costs At t=100% the project should be finished and the costs equal PC 8

Actual Cost ATC MC AC Sum up actual worker costs until t Add material costs At any point t you can monitor the project costs so far 9

Earned Value PP EV Determine the actual progress so far Look up the project budget (payment- profit) The product of payment and PP is the actual progress in terms of money In other words: EV indicates the produced value so far Obviously, EV will always reach 100%. The question is when 10

Comparing Schedule PC EV SV SPI The planned costs contain a set time limit Is the progress higher than scheduled (SV=EV(t)-PC(t)>0), then we are ahead of schedule, and verse vice The schedule performance index indicates the same, but as a division EV(t)/PC(t)=SPI(t) is the SPI higher than 1, we are more than good in time 11

Comparing Costs AC EV CV CPI The actual costs imply our profit The calculations work parallel to the schedule EV(t)-AC(t)>0 means gain, lower than 0 additional costs The CPI works the same EV(t)/AC(t)=CPI(t) CPI>1 means gain CPI<1 means loss 12

Monitoring How often should one enquire the progress? As you see, there is some work to be done when enquiring. Especially the estimation of the progress is not so easy Depending on the progress, different sources commend different steps 13

Milestone Monitoring We already identified milestones in the progress These are good for monitoring, if they fulfil the other conditions For example if we have a S->S relation in our WBS but a time gap and the second process takes time over the end of the first one, the end of the first is an appropriate milestone 14

Calendary Monitoring Monitor due to dates. For example at the beginning of every month when the wages are paid, or every week, if you work with weekly payment 15

Monitor after xx% of the project Percental Monitoring Monitor after xx% of the project As long as you follow the project at least a little, you can estimate when approximately 20%, 50% or 75% are done. 16

Monitoring Times With all types of monitoring make sure to have a useful relation between number of monitorings and the gaps between them This relation should be based on the risk analysis of the project and your spare time for it. Neither you should waste time nor risk to miss an important development 17

Earned Value Management Cost Value Reconciliation

Preparation Cost estimation of the project Project time Dead costs like bureau and taxes Estimate spare time until next project Add some collateral This needs some experience

Emending the preparation Add collateral to your price Add dead costs to your EVM graphs Of course, in this way of monitoring the „bank events“ are much more significant

Aftermath Compare the planned development with the actual one Remember the spare time you want to be able to cope with Are your numbers still black? Then you did right. Simple as can be.

Using earned value: a project manager's guide Sources Using earned value: a project manager's guide By Alan Webb © 2003 ISBN 0 566 08533 X 22

Thank You For Your Attention If you have questions, please go ahead 23