Earned Value Management topic from Control Cost – Cost Management What is Earned Value Management Explained EVM with examples Cost Variances (CV ) Cost Performance Index(CPI) Schedule Variances(SV) Schedule Performance Index(SPI) Cost Overrun and Project Slip PMP Training in USA,PMP Training in California,PMP Training in Qatar,PMP training in Saudi Arabia,PMP training in India,PMP training in Mumbai,PMP Training in Hyderbad, PMP Training in Chennai,PMP Training in Canada

1. Earned Value
Management
Earned Value Management topic from Control Cost – Cost Management
BY – Dilip Chaturvedi, PMP
Email Id : info@justpmp.com
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2. Agenda
§ What is Earned Value Management
§ Explained EVM with examples
§ Cost Variances (CV )
§ Cost Performance Index(CPI)
§ Schedule Variances(SV)
§ Schedule Performance Index(SPI)
§ Cost Overrun and Project Slip
§ Summary
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3. What is Earned Value Management
§ Earned value management is the process of measuring the performance of work against
what was planned to identify variances, opportunities to improve the project or just check
the project health’s.
§ It is system of mathematical formulas that compares work performed against work planned,
and measures the cost of the work the project has performed.
§ EVM is an important part of cost control, since it allows a project manager to predict future
variances from the expenses to date within the project.
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4. Examples: Project Plan for Planting
trees
Our team has been tasked with Planting the trees on the Plot of land behind our company’s new factory.
The Plan:
- 30 Batches of 20 trees ( 600 trees)
- 5 batches per day ( 100 trees )
- Budgeted cost per tree 2.90 $( 2.50 $ per baby tree / 0.40 $ for the slow release fertilizer )
- -> total budget 1,740 $
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5. After the first day..
1. 70 Trees were planted( the team hit a patch with stones that had to be removed before the trees could
be planted.
2. Total cost was $350 ( we had to rent a special machine to help remove the stones which cost $147 for
the day )
Simple EVM calculation
- Earned value = 70 trees planted * $2.90 = $203
- Budgeted cost = 100 trees planned per day * $2.90 = $290
- Actual cost = 70 trees planted * $2.90 + $147 for machine = $350
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6. First Day
0
50
100
150
200
250
300
350
400
Start 1st Day
Cost
Duration
Actual Cost(AC) Budgeted Cost(BC) Earned Value(EV)
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
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7. Regarding Actual Cost
0
50
100
150
200
250
300
350
400
Start 1st Day
Cost
Duration
Actual Cost Budgeted Cost Earned Value
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
We are here
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8. Expected Cost on First Day
0
50
100
150
200
250
300
350
400
Start 1st Day
Cost
Duration
Actual Cost Budgeted Cost Earned Value
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
We are here
We should have
been here
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9. Cost Variance(CV = EV-AC) on First Day
0
50
100
150
200
250
300
350
400
Start 1st Day
Cost
Duration
Actual Cost Budgeted Cost Earned Value
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
We are here
We should have
been here
Cost variance(CV) = EV – AC
= 203 – 350 = -147$ < 0
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9

10. Cost Performance Index(CPI = EV÷AC )
on First Day
0
50
100
150
200
250
300
350
400
Start 1st Day
Cost
Duration
Actual Cost Budgeted Cost Earned Value
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
We are here
We should have
been here
Cost variance(CV) = EV – AC
= 203 – 350 = -147$ < 0
CPI = EV ÷ AC = 203 ÷ 350
We are over budget and have
spent 203 ÷ 350 = 58% more
budget than anticipated (Cost
Performance Index )
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11. Regarding Schedule on First Day
0
50
100
150
200
250
300
350
400
Start 1st Day
Cost
Duration
Actual Cost(AC) Budgeted Cost(BC) Earned Value(EV)
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
We are here
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12. Regarding Schedule in Duration on
First Day
0
50
100
150
200
250
300
350
400
Start 1st Day
Cost
Duration
Actual Cost(AC) Budgeted Cost(BC) Earned Value(EV)
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
We are here
Schedule
variances
in hours
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Which is where we should
have then been here
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13. Schedule Variances( SV = EV - BC ) on
First Day
0
50
100
150
200
250
300
350
400
Start 1st Day
Cost
Duration
Actual Cost(AC) Budgeted Cost(BC) Earned Value(EV)
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
We are here
Schedule
variances
in hours
Schedule variance(SC) in dollars = EV – BC
= 203 – 290 = -87$ < 0
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Which is where we should
have then been here
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14. Schedule Performance Index
(SPI = EV÷ BC ) on First Day
0
50
100
150
200
250
300
350
400
Start 1st Day
Cost
Duration
Actual Cost(AC) Budgeted Cost(BC) Earned Value(EV)
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
We are here
Schedule
variances
in hours
Schedule variance(SC) in dollars = EV – BC
= 203 – 290 = -87$ < 0
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Which is where we should
have then been here
SPI = EV ÷ BC = 203 ÷ 290
We are late and have only
performed 203 ÷ 290 = 70% of
the work planned ( Our Schedule
Performance Index )
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15. The Consequences.. Cost Overrun
0
500
1000
1500
2000
2500
3000
3500
Start 1st Day 2nd Day 3rd Day 4th Day 5th Day 6th Day 7th Day 8th Day 9th Day
Cost
Duration
Actual Cost(AC) Budgeted Cost(BC) Earned Value(EV)
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
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Estimate at
completion(EAC) =
$ 3000
Budget at completion
BAC = $ 1740
Cost Overrun
Planned end date
= 6 days
Estimate at completion
= 8.57 days
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16. The Consequences.. Project Slip
0
500
1000
1500
2000
2500
3000
3500
Start 1st Day 2nd Day 3rd Day 4th Day 5th Day 6th Day 7th Day 8th Day 9th Day
Cost
Duration
Actual Cost(AC) Budgeted Cost(BC) Earned Value(EV)
Actual cost(AC)- $350
Budgeted cost(BC)-$290
Earned value(EV)- $203
Project Slip
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Estimate at
completion(EAC) =
3000 $
Budget at completion
BAC = 1740 $
Cost Overrun
Planned end date
= 6 days
Estimate at completion
= 8.57 days
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17. Summary of the Consequences
1. If we continue at this rate, we will need: 1740 ÷ 58 = $ 3,000(Cost Estimate at Completion)
and 6 days ÷ 70% = 8.57 days (Schedule Estimate at Completion)to finish the work
2. If you want to finish on budget, we need to work at (Planned remaining budget) ÷ (actual
remaining budget) ( 1740 – 290 ) ÷ ( 1740 – 350 ) = 104.3% of the originally performance
3. If we want to finish on time, we need to work at (actual remaining work) ÷ (planned
remaining work) (600 – 70) ÷ (600 - 100) = 106% of the originally planned performance
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18. In technical terms…
1. In real life, the elements we calculated have slightly different names:
2. The Actual Cost is usually referred to as Actual Cost of Works Performed(ACWP)
3. The Planned Cost = Budgeted Cost for Work Schedules(BCWS)
4. The Earned Value = Budgeted Cost for Work Performed (BCWP)
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