1. EARNED VALUE MANAGEMENT (EVM) TUTORIALS
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2. OBJECTIVES OF EVM TUTORIALS
An attempt has been made through these tutorials to make the understanding of various concepts of Earned Value Management easy by using examples and diagrams.
Various aspects of EVM described in these tutorials are as follows :
Topic 1: EVM-Understanding Basics of Earned Value Management (EVM) & its
advantages.
Topic 2: Performance Measurement using EVM at Business, Program, Project
and Resource Level : Understanding various KPIs : CV, SV, CPI, SPI & Forecasting
(ETC, EAV, VAC).
Topic 3: Forecasting and Creating Transparency by using EVM:
Profit Margins
Cash Flow
Work In Progress
Re forecasting & Transparency for Shareholders
Recovery Plan
Topic 4 : Implementation of EVM

3. EARNED VALUE MANAGEMENT (EVM) TUTORIALS
TOPIC 1: EVM- UNDERSTANDING BASICS OF EARNED VALUE MANAGEMENT (EVM)
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4. WHAT IS EVM?
EVM is a project control process based on a structured approach to planning, cost collection and performance measurement. It facilitates the integration of project scope, time and cost objectives and the establishment of a baseline plan for performance measurement. - Association of Project Management, 2006

5. Now another approach is required to estimate the cost at completion.
UNDERSTANDING EVM
EXAMPLE 1: Client wants to construct a house in 3 years period with an estimated cost of AED 3 million. After six months of work it is found that AED 400k has been spent. What does this information indicate in terms of Project’s Performance : Will the Project accomplish with in the stipulated budget ?
1st APPROACH
Actual spent in 6 months = AED 400K
Remaining period to complete the project = 30 months. 3
+0.6M
Assuming linear cost distribution over a period of 36 months
AED- MILLIONS
2.4
Estimate to complete (ETC) the remaining work= (30/6)* 400K = AED 2 million
0.5
Estimate at completion = AED 2m + 400K= AED 2.4 m
0.4
Estimated Variance at completion = AED 3m – AED 2.4m= +AED 600K 6 36
MONTHS
i. Cost wise Project is performing good.
ii. Estimated cost at completion is AED 600 K less than the budgeted cost.
THINK: Is available information sufficient to measure project’s
performance ?
Q1 What if the project is not on schedule ? 3
AED- MILLIONS
2.4
Answer:
A1. Assuming, updated Project schedule forecasts a slippage in overall
Project duration by 4 months.
0.5
0.4
NOTE:
Now another approach is required to estimate the cost at completion. 6 36 40
MONTHS

6. UNDERSTANDING EVM
2nd APPROACH
Forecast remaining duration of project = 36 months
Estimated Cost To Complete the remaining project = (36/6)* 400 = AED 2.4 million 3
+200k
2.8
AED- MILLIONS
2.4
Estimate at completion = 2.4 m+ 400k = AED 2.8 million
Estimated Variance at Completion = AED 3 million- AED 2.8 million = +AED 200 k
0.5
0.4
i. Cost wise Project is performing Good. 6 36 40
MONTHS
ii. Cost at Completion if AED 200K less than the budgeted cost.
THINK: Has actual work done been considered in performance measurement ?
Q.2a. How much Physical Work been accomplished to date ?
Answer:
A.2a. 10% (Physical % Completion)
Q.2b How much % of duration elapsed to date ?
A.2b. 6months/36 months= % (Schedule % Completion)
Approaches 1 and 2 were based on Schedule % Completion, ignoring the physical work remaining.
So another approach is required taking into account the Physical % Completion.

7. UNDERSTANDING EVM
AMOUNT
3rd APPROACH
Budget At Completion (BAC)= AED 3 million
EAC
BAC
ETC
Earned Value = 10% of BAC = AED 300,000
Actual Cost = AED 400,000 AC PV CV
Planned Value (PV)= AED 500,000 (Considering linear spread) EV SV
Cost Variance (CV) = EV-AC = AED – 100,000
Schedule Variance(SV) = EV-PV = AED -200,000 t1 T T2
TIME
CPI= EV/AC= 0.75
SPI = EV/PV = 0.60
FORECAST SLIPPAGE
This indicates that for every AED 1 spend only 0.75 fills is earned. Hence Cost wise performance of the project is not good, there is a cost
Over run of AED 100,000. Similarly there is a schedule slippage of AED 200,000.
If this trend continues then the forecast could be calculated as follows:
ETC = (BAC-EV)/CPI = AED 3,600,000
EAC = ETC + AC = AED 4,000,000
VAC = BAC – EAC = AED- 1,000,000
Note how the perception of project’s performance changed from good to poor as we moved from
1st Approach to 3rd Approach. If 1st or 2nd approaches are followed to assess the performance and
estimate the forecast figures, then project’s stakeholders will be taken by surprise, when the good
performing project will end up into a loss making project. However by following 3rd Approach
(Earned Value Management) Early Warnings of poor performance are generated, which provides an
opportunityto mitigate the cause of cost over runs and schedule slippages and to minimize the
Potential losses.
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8. BASICS OF EARNED VALUE MANAGEMENT(EVM)
AC= Actual Spent
PV=Planned Value
EV= Earned Value
CV=Cost Variance
SV=Schedule Variance
VAC= Variance At completion
ETC= Estimate To Completion
EAC= Estimate At Completion
CPI= Cost Performance Index
SPI= Schedule Performance Index
AMOUNT
BUDGETED PROFIT
Contract Fee
FORECAST PROFIT
EAC
BAC
VAC
ETC AC PV CV EV SV t1 T T2
TIME
FORECAST SLIPPAGE
Budgeted Profit= Contract Fee- BAC
Forecast Profit= Contract Fee - EAC
EAC= AC+ ETC
ETC= (BAC- EV)/CPI
CPI= EV/AC
INTRODUCTION

9. ADVANTAGES OF EVM BENEFITS OF EVM
Early warnings in terms of –ve cost variance and schedule slippages are generated using EVM. Performance can be monitored at various levels (project, business, discipline, resource etc), as such source & cause for variances could be identified. This provides an opportunity to proactively mitigate the problems.
Resource utilization could be optimized using EVM.
Reforecasting the ETC results in generating more realistic revenue and profit margins.
EVM creates transparency thereby reducing the element of surprise for the stakeholders.
EVM could be used as an effective tool for maximizing the profitability of the project.
If applied at organizational level EVM provides a consistent Project Management methodology which saves efforts from re inventing the wheel every time.
EVM leads to continuous improvement as organization gets more and more accurate in terms of budgeting from the available historical date and in terms of performance by benchmarking the projects and from the lessons learnt from previous projects.
TO KNOW MORE ABOUT EVM IN RELATION TO YOUR INDUSTRY PLEASE CONTACT US AT
BENEFITS OF EVM

10. EARNED VALUE MANAGEMENT (EVM) TUTORIALS
TOPIC 2: Performance Measurement using EVM at Business, Program, Project and Resource Level : Understanding various KPIs : CV, SV, CPI, SPI & Forecasting (ETC, EAV, VAC).
COMING SOON
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