Earned value analysis

From CEOpedia | Management online

Earned Value Analysis (EVA) is a project management technique used to compare the planned work versus the work completed in order to determine if the project is on schedule, ahead of schedule, or behind schedule. EVA provides an objective method of measuring progress on a project by combining scope, cost and schedule information. EVA considers the cumulative budgeted cost of the work that has been completed and compares this to the actual cost incurred and the planned value of the work completed. This gives an indication of the project’s performance and helps project managers to identify and address any potential issues. It is a valuable tool for assessing project performance and forecasting the future cost and completion date of the project.

Example of earned value analysis

  • An example of Earned Value Analysis is when a project manager is managing a construction project. The project manager will track the planned cost for each of the various phases of the project and compare that to the actual cost as the project progresses. This allows the project manager to determine if the project is on track, ahead of schedule, or behind schedule. The project manager can also determine if any changes need to be made in order to ensure the project is completed on time and within the budget.
  • Another example of Earned Value Analysis is when a company is developing a new software application. The project manager will track the planned budget for the project and compare it to the actual cost as the project progresses. This allows the project manager to identify any potential issues early on, such as scope creep or unexpected costs. The project manager can also evaluate if changes need to be made in order to ensure the project is completed on time and within the budget.
  • A third example of Earned Value Analysis is when a company is launching a new product. The project manager will track the planned budget for the product launch and compare it to the actual cost as the project progresses. This allows the project manager to evaluate the progress of the project and identify any potential issues early on, such as scope creep or unexpected costs. The project manager can then take the necessary steps to ensure the project is completed on time and within the budget.

Best practices of earned value analysis

  1. Establish a Baseline: Before beginning EVA, create a baseline of the project parameters, such as the project schedule, cost, and performance targets. This baseline should be tracked throughout the project and regularly updated to ensure any changes to the project are accurately reflected in the EVA.
  2. Track Progress: EVA should be used to track progress and compare actual performance to the baseline. Progress should be reported regularly to provide stakeholders with an accurate picture of the project’s progress.
  3. Analyze Progress: Analyzing progress using EVA can help identify potential issues and areas for improvement. EVA can be used to assess the impact of any changes to the project and to identify the best course of action for addressing any issues.
  4. Forecast Future Performance: EVA can be used to forecast the future cost and completion date of the project. This can help project managers to plan and manage resources effectively.
  5. Communicate with Stakeholders: EVA should be used to communicate progress to stakeholders. EVA reports can be used to provide stakeholders with an objective view of the project’s progress.

When to use earned value analysis

Earned Value Analysis (EVA) is a project management technique used to compare the planned work versus the work completed in order to determine if the project is on schedule, ahead of schedule, or behind schedule. EVA provides an objective method of measuring progress on a project by combining scope, cost and schedule information. It is an invaluable tool for monitoring project performance and can be used in the following scenarios:

  • EVA can be used to determine if the project is on track to meet its stated goals and objectives. It can be used to compare the actual work completed to the planned work, as well as to compare the actual cost incurred to the budgeted cost of the work completed.
  • EVA can be used to identify and address any potential problems that may arise during the project, such as if the project is behind schedule or over budget.
  • EVA can be used to forecast the future cost and completion date of the project.
  • EVA can be used to assess the performance of team members and help to identify areas of improvement.
  • EVA can be used to determine the value of work completed and help to prioritize tasks.

Types of earned value analysis

Earned Value Analysis (EVA) is an important project management technique used to measure progress and predict the future cost and completion date of a project. There are several types of EVA that can be used, including:

  • Cost Performance Index (CPI): This is a ratio of the budgeted costs of the work that has been completed, to the actual costs incurred to complete the work.
  • Schedule Performance Index (SPI): This is a ratio of the planned value of the work that has been completed, to the actual value of the work completed. It is used to measure the project’s progress against the planned schedule.
  • Estimate at Completion (EAC): This is an estimate of the total cost of the project, based on the current performance.
  • Estimate to Complete (ETC): This is an estimate of the additional costs that will be incurred to complete the project.
  • Variance at Completion (VAC): This is the difference between the planned value of the project and the estimated cost of the project.
  • Cost Variance (CV): This is the difference between the budgeted cost of the work completed, and the actual cost of the work completed.
  • Schedule Variance (SV): This is the difference between the planned value of the work completed, and the actual value of the work completed.

Steps of earned value analysis

Earned Value Analysis (EVA) is a project management technique used to compare the planned work versus the work completed in order to determine if the project is on schedule, ahead of schedule, or behind schedule. The following is a list of steps involved in performing an earned value analysis:

  • First, the project manager must define the scope of the project, including the objectives and deliverables that need to be achieved.
  • Next, the project manager must create a project budget and estimate the cost to complete the project.
  • After that, the project manager must develop a schedule of activities and estimate the amount of effort and duration for each activity.
  • The project manager then needs to track and record the actual costs incurred and the amount of work completed during the project.
  • The planned value (PV) and earned value (EV) of the project should then be calculated. The PV is the sum of the budgeted costs for the work that is planned to be completed. The EV is the sum of the budgeted costs for the work that has been actually completed.
  • Finally, the project manager can compare the PV and EV to determine the project’s performance. The variance between the two values can be used to identify any potential issues and take corrective action if needed.

Advantages of earned value analysis

Earned Value Analysis (EVA) is a powerful project management technique used to compare the planned work versus the work completed in order to determine if the project is on schedule, ahead of schedule, or behind schedule. EVA provides an objective method of measuring progress on a project by combining scope, cost and schedule information. The main advantages of EVA are:

  • EVA allows project managers to quickly and accurately measure project performance. It provides an objective way to track progress and compare budgeted costs with actual costs. This allows project managers to identify any potential issues and take corrective action.
  • EVA helps to forecast the future cost and completion date of the project. It can be used to create an accurate budget and timeline for the project, allowing project managers to plan and manage resources more effectively.
  • EVA provides visibility into the project’s progress and helps to identify areas of risk. This allows project managers to make informed decisions about the project and its deliverables.
  • EVA can help to identify areas of potential cost savings by comparing planned and actual costs. This can help project managers to reduce costs and improve the efficiency of the project.

Limitations of earned value analysis

Earned Value Analysis (EVA) is a valuable tool for assessing project performance and forecasting the future cost and completion date of the project. However, it does have some limitations which should be taken into consideration. These include:

  • Complexity: EVA can be complicated to set up and requires significant resources to maintain and monitor. It also requires a certain level of expertise to interpret the results.
  • Inaccurate Estimates: EVA relies on accurate estimates of budget and work completed to be effective, but these can often be difficult to accurately calculate.
  • Lack of Flexibility: EVA can be inflexible, as it requires data to be updated regularly, and changes to the project can disrupt the results.
  • Time Consuming: EVA can be time consuming to implement, as it requires significant data collection and analysis.

Other approaches related to earned value analysis

Earned Value Analysis (EVA) is a project management technique used to compare the planned work versus the work completed in order to determine if the project is on schedule, ahead of schedule, or behind schedule. Other approaches related to earned value analysis include:

  • Variance Analysis: This approach measures the difference in cost and schedule performance between the planned and actual results of the project.
  • Schedule Performance Index (SPI): This approach measures how well the project is performing in terms of meeting the schedule.
  • Cost Performance Index (CPI): This approach measures how well the project is performing in terms of meeting the cost objectives.
  • Estimate at Completion (EAC): This approach estimates the cost of a project, given the expected cost and performance of the project.

Overall, earned value analysis, variance analysis, SPI, CPI and EAC all provide valuable insights into the performance of a project and can help project managers to identify and address any potential issues.


Earned value analysis — recommended articles
Performance models — Software cost estimation — Earned value calculation — Final project report — Mechanisms of control — Life cycle project management — Work breakdown structure (WBS) — Analysis of project — Project monitoring and control

References

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