Project Management

Using Earned Value to Predict Your Project’s Success

This Post examines how the data points of Planned Value (PV), Earned Value (EV), and Actual Cost (AC) can be used to analyze the current status of a project and forecast its likely future. EVM looks at project performance for the current period and at cumulative performance to date. EVM is described and illustrated here in terms of cumulative data, using the Project data.

This post introduces a fourth data point, Budget at Completion (BAC), which is the final data point on the performance measurement baseline (PMB). Budget at Completion represents the total Planned Value for the project. For Project EZ, the BAC is 150.

This is a goof rule of thumb:

• If your SV >0 and your SPI > 1.0, you are ahead of schedule and under budget. If your SV = 0 and your SPI > 1.0, you are on budget and ahead of schedule. If your SV < 0 and your SPI 0 and your SPI > 1.0, you are ahead of schedule and under budget. If your SV = 0 and your SPI > 1.0, you are on budget and ahead of schedule. If your SV < 0 and your SPI < 1.0 you are behind in budget and schedule.
• Indices: Schedule Performance Index (SPI); Cost Performance Index (CPI); and To-Complete Performance Index (TCPI)
• Forecasts: Time Estimate at Completion (EACt); Estimate at Completion (EAC); and Estimate to Complete (ETC)

These variances, indices, and forecasts can be used to answer the key project management questions. It lets us show the relationship between those project management questions and the EVM performance measures.

Schedule Variance (Are we ahead or behind schedule?)
The Schedule Variance (SV) determines whether a project is ahead of or behind schedule. It is calculated by subtracting the Planned Value (PV) from the Earned Value (EV). A positive value indicates a favorable condition and a negative value indicates an unfavorable condition.

The Schedule Variance can be expressed as a percentage by dividing the Schedule Variance (SV) by the Planned Value (PV). In other words, the project is 33 percent behind schedule, meaning that 33 percent of the planned work has not been accomplished.

Schedule Performance Index (How efficiently are we using time?)
The Schedule Performance Index (SPI) indicates how efficiently the project team is using its time. SPI is calculated by dividing the Earned Value (EV) by the Planned Value (PV). The Schedule Performance Index indicates that—on average—for each 8-hour day worked on the project, only 5 hours and 20 minutes worth of the planned work is being performed; that is, work is being accomplished at 67 percent efficiency. This is a very useful statistic to use in resource allocation.

Time Estimate at Completion (When are we likely to finish work?)

Using the Schedule Performance Index (SPI) and the average Planned Value (PV) per unit of time, the project team can generate a rough estimate of when the project will be completed, if current trends continue, compared to when it was originally supposed to be completed.

The originally estimated completion time for the project was 12 months, so the project manager now knows that if work continues at the current rate the project will take six months longer than originally planned. It is important to note that this method generates a fairly rough estimate and must always be compared with the status reflected by a time-based schedule method such as critical path method. It is possible that an earned value analysis could show no schedule variance and yet the project is still behind schedule; for example, when tasks that are planned to be completed in the future are performed ahead of tasks on the critical path.

One trick I always use is to have the engineers update their time on the project daily. This is quite normal. But I also have them update the remaining time that task will take. If the original estimate was 40 hours, and the engineer spent 20 hours on it, that does not mean he is 50% done. Software is very hard to predict and new things are learned as one gets deeper in the project. So if the culture allows the engineers to update their remaining work every day, I can run Project scenarios to see if the critical path has changed. I can also have a discussion with the engineer to see if we can work smarter to pull in the estimate. Most of the time, we don’t spend enough time estimating a project and just jump in and write code. This mode usually bites you in the end.

Next I will show an example I found using the techniques I’ve written about in this post.

earned-value1

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December 27, 2008 - Posted by | earned value | , , , , ,

8 Comments »

  1. Thanks for this useful resource! Your explanations are clear. I confirm that EVM is a powerful project management tool!

    Comment by pmtoolbox | December 27, 2008 | Reply

  2. Thanks for the kind words!

    Comment by Donna Ritter | January 1, 2009 | Reply

  3. Donna,
    To comment or not to comment? Edit and/or Post as you wish.
    I hope you don’t mind if I propose a slightly different position on EV.
    I am not so enthusiastic about it.
    It’s good and useful up to a point, but has limitations, some of which you have mentioned. It should not be credited with super powers or voodoo magic that it doesn’t have.
    EV is not predictive. It is all about the history.
    BCWP and BCWS come straight out of a Baseline, and that Baseline becomes progressively out of date and obsolete as the project proceeds. Whatever prediction EV can be used for is limited to simple extrapolations, usually long range extrapolations based on limited short term historical data. It ignores the existence of a project plan which can (maybe) be changed to prevent the train wreck. Experience has shown that early EV numbers, the SPI and CPI, are very sticky and hard to shake off, so to this extent EV can be said to be good at predicting itself.

    As you mention, Tasks done early are not rewarded with good EV scores. Also, EV rewards doing the wrong Tasks, such as being successful on non-critical Tasks but letting the critical Tasks slide.
    When the individual EV numbers for a number of individual Tasks are amalgamated into a couple of numbers which are supposed to represent the overall performance on the whole project, it’s, well, meaningless.

    EV provides no guidance as to the causes of the EV scores, and no guidance as to the possible options available to the PM to stay on course or get back on course.

    On a slightly different topic, I would suggest that controlling the schedule is essentially all about the Start Date, Finish Date, Actual Duration and Remaining Duration. So I ask my engineers for the Actual Start, Actual Duration, and an estimate of Remaining Duration. Only then, how much Remaining Work. You can’t update the plan just by knowing that there is 10 Hours of Remaining Work. You need to know also that there is, say, 5 Days Remaining Duration, which might have been revised from, say, 2 Days.

    Comment by Trevor Rabey | January 23, 2009 | Reply

  4. The most common circumstance is that say PV=1000, and because whatever reasons, we can not start. So EV=0, SPI=0, how can we forcast the duration? Thanks!

    Comment by Zhennan Fan | March 11, 2009 | Reply

  5. I hope you can reply to this post: I have a cost resource assigned to a task in MS Project. The cost accrual is prorated. It is not a budget resource. I assigned this resource to a fixed duration task. The task is not effort driven. This is the only resource assigned to this task. The task duration will match the duration of the entire project. Basically, I want to be able to input our finance departments actual costs into the project plan so that I can do EVA on our costs and match it to the schedule. I have baselined the project.

    The problem is that Planned Value, (BCWS) will not populate based on this Cost resource. What am I doing wrong, if anything? I am running MS Project Pro 2007. That field is supposed to populate once the baseline is saved, but it won’t work.

    I’ve been working on this for hours and cannot make it work. Can you help?

    Thanks,
    Chris

    Comment by Chris | February 5, 2010 | Reply

    • Microsoft Project has a lot of quirks. Can you export the data from Project into a spreadsheet and figure out the PV the way you want? Have you tried the Microsoft Tech notes? That’s is where I’d start – but I’d lean on exporting the data and crunching it myself.

      Donna

      Comment by Donna Ritter | February 11, 2010 | Reply

  6. I did eventually find the answer. MS Project does not put cost resources through EVA. It must be a work resource. I am able to get some semblance of what I need using the Fixed Cost field, but nothing different from what I’d get just putting the budget in Excel and graphing actual vs. budget.

    Thanks for getting back to me. Apparently a lot of people have had this question and I’m not the only one.

    Thanks again,
    Chris

    Comment by Chris Sneed | February 13, 2010 | Reply

    • Great! Thanks for the solution.

      Donna

      Comment by Donna Ritter | February 19, 2010 | Reply


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