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Geneva School of Business Administration
Earned Value Management
Fundamental Principles
Earned
Olivier Lazar, Msc., MBA, PMP

Value
Measureme
nt
Earned Value Measurement (EVM)
Definition

Technique...integrates project
Scope, Cost and Schedule measures
to help the project management team
assess project performance.
PMBOK Guide, 2008
EVM History

EVM emerged as a financial analysis specialty in United

States Government programs in the 1960s on DoDs
programs (Polaris missiles)
EVM was not limited to the DoD for long. It was quickly
adopted by the National Aeronautics and Space
Administration
also received greater attention by publicly traded
companies in response to the Sarbanes-Oxley Act of
2002
EVM Objectives and Benefits

Going beyond 2 dimensional project assessment

(Cost vs Allocated Budget) by integrating
Technical Achievement monitoring
Exactly measure What did we get for the money
we spent?
Anticipate rather than React
Provide Vision over the project from Now to
Completion
Easy to use, to report and to analyze
Earned Value Principles

EVM Measures:
1. Planned effort (Planned Value PV) Baseline
Person-days estimated at current date
Cumulative cash flow of project
2. Actual effort (Actual Cost AC)
Person-days expended at current date
If measuring cost, use committed cost
3. Scope achievement (Earned Value EV)
Percent of work (scope/deliverables) accomplished

EVM Analyzes:
Current status vs baseline (variance)
Estimate to complete (Effort & Duration)
(Baseline estimate x index actual effort)
Corrective actions (if needed)
Earned Value Illustrated (S-Curve)
Cost

Estimate to Complete
(ETC = BAC EV)
Estimate At Completion
Budget At Completion (BAC) (EAC = AC + ETC)

Performance Measurement Baseline

Actual Cost (AC) Performance Indexes:

- SPI (Schedule): EV / PV
Planned Value (PV) - CPI (Cost): EV / AC
Cost Variance = EV - AC
Actual Time
Variance
Schedule Variance = EV - PV

Earned Value (EV) = BAC x Physical %

Data Date Time

Earned Value Calculations

1. Planned Value (PV) = [(BAC/Project Duration) x Elapsed time units]

2. Actual Cost (AC)
3. Earned Value (EV) = BAC x Physical % Complete
4. Cost Variance (CV) = EV - AC
5. Schedule Variance (SV) = EV - PV
6. Cost Performance Index (CPI) = EV / AC
7. Schedule Performance Index (SPI) = EV / PV
8. Estimate at Completion (EAC) = AC+ETC
9. Estimate to Compete (ETC) = BAC EV
10. To Complete Performance Index (TCPI) = (BAC-EV)/(EAC-AC)
Acronyms, see PMBOK Guide
What does these PI tell us?

Of course, about the current status But Its too late

anyway!
Highlight the trends
Predict deviations
Evaluate resources
About the Quality of the Project Plan
Is the initial estimate accurate?
Deviation can highlight a problem with the accuracy of the initial
plan
About how realistic is an objective
The TCPI will tell you when used with CPI

Microsoft Excel
Worksheet
Interpretation and Analysis
PV: Budgeted Cost
AC: Actual Cost CV SV PROJECT STATUS
EV: Earned Value
Over-achieving, but overspent for
the achievement
1 (-) (+)
Cost

1 Money being wasted, e.g.

unnecessary overtime?
Time
Over-achieving and
underspending
2 (+) (+)
Cost

2 No action needed (unless

spending customers money is
an issue!)
Time
Under-achieving on the project,
but overachieving for the spend
3 (+) (-)
Cost

3 Team performing well but

under-resourced
Time
Under-achieving, and overspending
for the achievement
4 (-) (-)
Cost

4 Team under-resourced and

under-performing
Time
Difficulties and Limitations

Consolidation issues:

If a consolidated indicator is green, get a look at the details. Some

difficulties can be masked by over well-performing activities of
workpackages.

So called Support Activities (1FTE, 100% rate, long term)

AC = PV, SPI and CPI correlated

Datas time consistency (costs and % at same Data Date)

Lack of Planning (Failing to Plan is Planning to Fail Ika, 2006)

Difficult to obtain a stable and consistent Baseline

Cultural Issues

Earned Value Management is NOT addressing Quality

Progress Measurement

Progress measurement : difficulties to define a precise

and accurate way of estimate the work performed

Existing ways of measurement:

Physical % Complete (ex. 42.5% of task)
Defined Steps (25/25/30/20)
0/100
Custom % Complete (n/y, ex. 20/80)
Level of Effort (EV=PV) eg. Management tasks
References
ISO/WD 21500, International Organization for Standardization, to be
published. Project Management Guide to Project Management.
ISO 10600, International Organization for Standardization, 1997. Quality
Management Guidelines to Quality in Project Management.
American National Standard Institute, 1998. ANSI/EIA 748 EVMS Standard.
AACE, Association for Advancement of Cost Engineering, 1956 2002.
Project Management Using Earned Value, Gary C. Humphreys
Humphreys & Associates, 2002.
PMI , Project Management Institute, 2005. Practice Standard for Earned
Value Management.
PMI, Project Management Institute, 1996-2008. A Guide to the Project
Management Body of Knowledge.
Sarbanes-Oxley Act, 2002.
Office of the Secretary of Defense & National Aeronautics And Space
Administration, 1962. DOD & NASA Guide PERT COST.
Thats all Folks!
Olivier Lazar
olivier.lazar@valense.com
+41 78 936 00 62