EVM (Earned Value Management)

A. Definition
B. Earned Value Management (EVM) Measure
C. Earned Value Management (EVM) Definitions

A. Definition

Earned Value (EV) is one of the project management techniques for measuring project performance in terms of the estimated deliverable, budget, and schedule of the project. An EV is a periodic, consistent, and objective measurement of work performed that is compared to the total estimated of plan (schedule progress or cost) to actual work performance (schedule progress or cost performance), and obtains an estimate for the resources that will be used at completion.

Earned Value Management (EVM) is a performance management process based on a structured approach to planning, data gathering and performance measurement that links resource planning to cost and schedule requirements. All project works or activities are budgeted and scheduled in time increments incorporating the baselines. An EVM is a single integrated system of combining measurements of the project scope of work, schedule and cost, and also able to provide accurate forecasts of project performance.

Earned Value Management System (EVMS) is a program of the performance management system that integrates the work scope, schedule, and cost parameters. EVMS provides the objective performance measurement data that measures progresses objectively with earned value metrics; accumulates direct costs; allows for analysis of deviations from plans; facilitates forecasting the achievement of milestones and contract events; provides supporting data for forecasting of estimated costs; and encourages discipline in incorporating changes to the baseline in a timely manner.

B. Earned Value Management (EVM) Measure

PV = BAC * % of Planned Work
EV = BAC * % of Actual Work

Where,
PV (Planed Value): planned complete work at the time of analysis,
EV (Earned Value): values accomplished at the time of analysis,
BAC (Budget at Completion): total Project Cost

CPI (Cost Performance Index): = EV / AC (if CPI > 1 means the Project is under budget)
SPI (Schedule Performance Index): = EV/ PV (if SPI < 1 means the Project is behind schedule)

Where,
AC (Actual Cost) – actually spent cost at the time of analysis

EAC = BAC / CPI = AC + ETC = AC + ((BAC – EV) / CPI) (expected similar trend of remaining works) or

EAC = AC + (BAC – EV) (expected different trend of remaining works, original plan)

ETC = EAC – AC = (BAC / CPI) – (EV / CPI) = (BAC – EV) / CPI

Where,
EAC (Estimate at Completion),
ETC (Estimate to Completion),

BCWS / PV: the amount of work to be performed as per the schedule,
BCWP / EV: the amount on the actual work performed),
ACWP / AC: the sum of all cost actually accrued for a work,

Where,
BCWS (Budgeted Cost for Work Scheduled)
BCWP (Budgeted Cost for Work Performed)
ACWP (Actual Cost of Work Performed)

CV (Cost Variance) = EV – AC (positive means under budget)

SV (Schedule Variance) = EV – PV (positive means ahead of schedule)

VAC (Variance at Completion) = BAC - EAC

C. Earned Value Management (EVM) Definitions

Accounting Period is the time duration which will be collected for transfer into the taxation and Earned Value Management System (EVMS) for reporting purposes.

Actual Cost (AC) is the costs actually incurred and recorded.

Actual Cost of Work Performed (ACWP) is a direct cost actually incurred and indirect costs applied in and recorded in the Earned Value Management System (EVMS) for accomplishing the work performed within a given accounting period. An ACWP reflects the applied costs that may be expressed as a value for a specific period or cumulative to date.

Actual Progress (AP) is the actual earned value that is the achieved performance or gained value with actual consumed resources. The Actual Progress is calculated based on an agreed upon the progress measurementation method or procedure.

Budget at Completion (BAC) is a sum of all budgets established for the contract through a given Work Breakdown Structure (WBS).

Budgeted Cost for Work Performed (BCWP) is a sum of the budgets for completed works (completed work packages and completed portions of open work packages) and the accomplished indirect costs applied in and recorded in the Earned Value Management System (EVMS) within a given accounting period.

Budgeted Cost for Work Scheduled (BCWS) is a sum of the budgets for all scheduled to be completed works (planned work packages) and to be accomplished indirect costs applied in and recorded in the Earned Value Management System (EVMS) within a given accounting period.

Cost Variation (CV)

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