Earned Value Management What Could Have Happened:

Whilst this shows a simple and therefore intuitive example, it also powerfully demonstrates the value of collecting this informa-
Fundamentals of Applying EV to Projects
tion on a more complex project where the outcome may not seem as obvious.
1. Define Scope.
The Basic Earned Value Concept
2. Develop the WBS.
It was evident by looking at the data from week 2 that without some kind of management intervention the project was unlikely
Although the formulas associated with Earned Value are fairly simple, the concept has proven difficult to to complete on time and that this would have an adverse impact on the overall cost. It was also possible to predict what that 3. Schedule the work.
grasp for many people. Here is a simple example to make sure the concept is well understood. final cost might be. 4. Apply budget estimates to the programme.
The following graphic illustrates the progress and cost of building a wall. A plan is set and represented 5. Profile the budget.
Faced with this information so early, the pro-active project manager has at their disposal information to allow effective man-
by the Planned Value Budget (BCWS). Progress Earned Value (BCWP) is monitored and Actual Costs 6. Do the work.
agement decision making: perhaps the completion date was not paramount, but the contract terms could have been re-
(ACWP) are collected . You can see that trends have been plotted graphically on the right hand side. negotiated, or a better performing contractor found; or if cost was less important than schedule, additional resources may 7. Measure performance.
These charts compare our original plan with the progress made and costs incurred. have been applied to ensure the completion date; alternatively the wall quality may have been sacrificed to both cost and 8. Analyse results.
schedule.
Accidents will happen: 9. Forecast future outcomes.
Week 1: The first course of bricks is planned and that’s what we do. It costs what we planned. We earned what we 10. Take preventative or corrective action.
Only the Project Manager has the background to make the appropriate trade off but with Earned Value information, correctly
planned.
understood, the Project Manager can be in a position to reliably make those decisions very early whilst the impact may still
Budget (BCWS) Progress (BCWP) Cost (ACWP) be mitigated (in this case after only 2 weeks!)
Planned Value (PV) Earned (EV) Actual Costs (AC)

Benefits of Earned Value Earned Value Terms and Methodology

EVM is the best way to determine the real status of a project. As well as telling you how much you have
spent, it shows you how much you have achieved. Further, it tells you how much you still need to do and
Week 2: The second course of bricks is planned. But due to the football being on we somehow only manage to provides a good indication of final costs and expected completion dates.
complete half of what we planned. So it’s cost what we planned (we were still there), but we’ve earned less. And
we lost.
Budget (BCWS) Progress (BCWP) Cost (ACWP) • EVM builds on, and therefore enforces good Project Management practice and underpins good cor-
porate governance. Its introduction can drive the cultural and organizational change key to supporting
these objectives.
• EVM provides and objective measurement of what has been achieved on a project.
• EVM enables accurate forecasting.
• EVM provides project management information in a format that is easy for all stakeholders to under-
stand and act upon.
• EVM is an Early Warning System that allows the timely identification and analysis of progress and cost is-
Week 3: The third course is planned. And there being no football we work at our usual fine pace. At the end of the sues and corrective actions to be identified.
week we’re still half a course behind. So we haven’t slipped any more. But we still earned less than we planned. • EVM shows stakeholders whether they’re getting Value For Money.
Budget (BCWS) Progress (BCWP) Cost (ACWP) • EVM enables detailed project comparisons across programmes.
• EVM can be used on a wide range of project sizes and complexity.

The
The Project Project Management
Management ProcessProcess with Earned
with Earned ValueValue
Here is another way of looking at how Earned Value is part of the Project Management
Here is another way of looking at how Earned Value is part of the Project Management process.
Week 4: The fourth course is planned. The boss suggests I take both hands out of my pockets simultaneously. This process.
novelty speeds up my output and we catch up a little. But we’re still behind.
The above graphic is a simplified version of the classic representation of everything you need to know
about Earned Value. It is reproduced with the kind permission of the UK Association for Project Man-
Budget (BCWS) Progress (BCWP) Cost (ACWP)
agement Specific Interest Group on Earned Value. As you can see there are a few abbreviations to get
2. WBS to grips with.
1. Scope
9. Actual 50
Interpretation
Cost 40

Set Baseline
3. OBS 30

20

10

0
The above example shows a project in trouble. The Earned Value is below the plan and the actual costs
0 1 2 3 4 5
exceed the budgeted costs of that planned work. So there is every reason to believe that the project
is in trouble. But, before you start to react, make sure that you check the data. Is the Actual data ac-
Week 5: The last planned week. We’ve spent all the money. Not convinced that 4. RAM 10. Work curate? Do you now know the estimate to be flawed? What is an acceptable variance? Is the picture
two hands is a sustainable technique in the long term. So revert to one and my comfortable tempo. The miracle Performed you’re looking at appropriate for the assessment you’re trying to make? What intrinsic knowledge does
didn’t happen and we still haven’t finished. Don’t know what all the fuss is about. We’re nearly there. And next 6. Schedule I
the Project Manager have that might belie the data? Is it pitched at the right level? Often high-level
N15 N22 N29 N06 D13 D20 D27 D03
week is clear anyway. summaries can give a false sense of security, masking problems at lower levels of detai .
5. RBS 11. Earned
l
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TW
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TW
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1
Budget (BCWS) Progress (BCWP) Cost (ACWP)
50

2 Value 40

30
3
20
4 10

5 0
0 1 2 3 4 5

7. Resource Rates
?
12. Analysis
8. Budget 50
50

40

40 30

30 20

Week 6: Still not finished. Our nice customer found a whole week’s extra money to finish the job. We feel really bad 20

10
10

about letting him down again. Still haven’t found anything to do next week.
0
0 0 1 2 3 4 5
0 1 2 3 4 5

Budget (BCWS) Progress (BCWP) Cost (ACWP)enefits of Earned Value

Steps 1- 8 are Project

Steps Set
1- 8 are up. At
Project Setthis
up. point
At this you
point have a Performance
you have Measurement Baseline.
a Performance Measurement
Steps 9 – 12 are Controlling the Project
Baseline.
The amount of set up work must be appropriate to the size of project. EVA does NOT require massive soft-
ware upgradesStepsor 12 are Controlling
9 –investment. theimplementations
Simple Project have been shown to be possible with no special
software. Training is necessary to encourage the use of EVA output. Some companies have quoted a small
Week 7: Well we finally finished. And the customer found even more money. Again. Personally we’d sack the proj-
number of man days used to set up EVA systems, based on company written spreadsheets. Similarly time
ect manager. It was obvious from week 2 that something was up. He just stood there, took notes and watched the
accident happen. is spent producing weekly reports, but this is not additional time, but time that would be spent on whatev-
er the non EVA control tool is. Contacts
Budget (BCWS) Progress (BCWP) Cost (ACWP)

Wayne Abba (USA) [email protected]

Sven Antvik (Sweden) [email protected]
Lauren Bone (Austrailia) [email protected]
Ken Nishi (Japan) [email protected]
Steve Wake (United Kingdom) [email protected]