Earned Value Analysis for Beginners
Dear Folks,
You might have heard a lot about Earned value, earned value management, earned value analysis and so on. Lets get some insight on this topic. Lets go straight into the topics
3-Constraints or Triple Constraints
Lets starts from the basics of Earned Value Analysis,
If you look into any projects which can be under any industry, a project always contains 3-Major items, these are
- DURATION OF PROJECT -TIME
- Time required to complete a project Eg. 3year
- COST OF PROJECT- COST
- Money required to complete a project Eg. 1Million US Dollar
- SCOPE OF PROJECT- SCOPE
- Detailed activities that leads to successful completion of a project Eg. Footing excavation, Footing Shuttering, footing reinforcement, concreting etc. in a real project activities will range between from 100-30000+ activities depending upon the
So what I am trying to say is, inorder to track progress of a project from its start to end, you must measure these 3 constrains in parallel.
Example
Imagine that you are building a house for a client, you promised him to build house (activities that sum up to build this house that satisfy client requirement is called scope) within a cost of $120,000 (Cost of project) in 6 months (Time).
3-methods of measuring progress
Time Tracking
In my experience I have dealt with projects that uses time to measure the progress of project, means a project of 100 days will progress to 50% according to plan on its 50th day.
Good, but I have few questions
Did they completed activities which they are supposed to complete?
Are they spending right amount of money?
Answer is “No idea” L
Time & Cost Tracking
This method is more effective than the above, because they measure time and cost in parallel means
A 100 day project with a budget of $50000 should spend $25000 on its 50th day, if project goes according to the plan.
Great, But I have a question
Did they completed activities which they supposed to complete by 50th day?
Answer may be, yes we may complete
Time,Cost & Scope Tracking
As these are 3 major constraints, these are perfect way to measure progress of any project. According to this method we can accurately say by any period of time how much activities should be completed and money that should be spent. Obviously this is a great method and elders named this method Earned value method.
Use this method to analyse your project performance and call it as Earned value analysis, and also manage all projects to call it Earned value management. That how these technical terms evolved over time.
Earned value technique has a history starting from early 60s formulated by American defense department.
Earned value analysis
To analyze earned value in your project you should know technical terms that Iisted below
- Budgeted at Completion or BAC
- Planned Value Cost or PV
- Earned Value Cost or EV
- Actual Cost or AC
- Cost Variance or CV
- Schedule Variance or SV
- Cost Performance Index or CPI
- Schedule Performance Index or SPI
- Estimate at Completion or EAC
- Estimate to Completion or ETC
- Variance At Completion or VAC
- To Complete Performance Index or TCPI
Lets understand all these with an example of Ann the Project Manager.
Hope you now understood the example, now let see what really happened on site
Hope you now understood EV,PV,AC,SV &CV
let get into more details
Did you understand, the real meaning of EAC, ETC and VAC?
here it goes..
So, Thats a whole story of Earned value, we can perform earned value using softwares like Oracle Primavera p6 and Microsfot Project
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Tag:AC, Actual Cost, BAC, Budgeted at Completion, Cost Performance Index, Cost Variance, CPI, CV, EAC, Earned Value, Earned value analysis, Earned Value Cost, Earned value Management, Estimate at Completion, Estimate to Completion, ETC, EV, Planned Value Cost, PV, Schedule Performance Index, Schedule Variance, SPI, SV, TCPI, To Complete Performance Index, VAC, Variance At Completion
2 Comments
Good article – I like the graphics.
One thing I didn’t see (or just plain missed it) –
Actual costs and earned values have to be tracked based on the basis of the budget and resource loading in your schedules.
It’s a common mistake I’ve seen many times in my 37 years of experience.
Thank you for your comments sir.
What you said is right. appreciate is you could share your experience in form of articles which will help other.
we would love to publish such articles