UNIT-4

EARNED VALUE ANALYSIS

Earned Value Analysis (EVA) is one of the key tools and

techniques used in Project Management, to have an
understanding of how the project is progressing. EVA implies
gauging the progress based on earnings or money. Both,
schedule and cost are calculated on the basis of EVA. Learn
more with our PMP Certification!

Features of EVA

 Earned Value Analysis is an objective method to measure

project performance in terms of scope, time and cost.
 EVA metrics are used to measure project health and
project performance.
 Earned Value Analysis is a quantitative technique for
assessing progress as the software project team moves
through the work tasks, allocated to the Project Schedule.
 EVA provides a common value scale for every project
task.
 Total hours to complete the project are estimated and
every task is given an Earned Value, based on its estimated
(%) of the total.
 Earned Value is a measure of ‘Progress’ to assess
‘Percentage of Completeness’

Need for EVA

 EVA provides different measures of progress for different

types of tasks. It is the single way for measuring
everything in a project.
 Provides an ‘Early Warning’ signal for prompt corrective
action. The types of signals can be the following:
a) Bad news does not age well – Holding on to the bad news
does not help. The project manager needs to take an immediate
action.

b) Still time to recover – In case, the project is not going as

per schedule and may get delayed, the situation is needed to be
taken care of by finding out the reasons that are causing delay
and taking the required corrective action.

c) Timely request for additional funds – While there is time

to recover, the need for additional resources or funds can be
escalated with an early warning.

 It allows ‘rolling up’ the progress of many tasks into an

overall project status.
 It provides with a uniform unit of measure (dollars or
work-hours) for the progress.

Key Elements of EVA

 Planned Value (PV) – The approved cost baseline for the

work package. It was earlier known as Budgeted Cost of
Work Scheduled (BCWS).
 Earned Value (EV) – The budgeted value of the
completed work packages. It used to be known as
Budgeted Cost of Work Performance at a specified point
(BCWP).
 Actual Cost (AC) – The actual cost incurred during the
execution of work packages up to a specified point in time.
It was previously called Actual Cost of Work Performed
(ACWP).
Planned Value
Planned Value primarily answers the question, "Where were
we?" It describes the extent of the activities of the project
presented on its determined point and cost estimation. It
describes the baseline of the project and how it all started. The
cumulative PV or Planned Value is the sum of the approved
budget that has to be performed throughout the project.

Actual Value
The actual value (AV) is the real cost that has occurred in the
execution of the project. The actual value can either be more or
less than the Planned Value. The cumulative Actual Value is
the sum of the actual cost and the planned Value.
Earned Value of Completed Work
The earned value of the completed work denotes the sum of
the planned Value and the actual value. Planned Value is the
speculative value of the work. Earned Value is thereby
measured to monitor the level of work and project the plan.
The Earned Value can be calculated by multiplying the
percentage completed by the total budget incurred.

Requirements for Earned Value Analysis

To have a proper Earned Value Analysis calculator, the
calculation needs to be accurate. A solid project plan needs to
be created. The Earned Value Analysis could only be achieved
by Work Breakdown Structure or WBS. This is a deliverable-
oriented hierarchical decomposition of work structure. It helps
them to accomplish an objective work structure that can
provide the required variables. Earned Value Analysis table is
a scientific method of project management. One of the
necessary parameters that are required for Earned Value
Analysis report are:

 A release plan with a proper number of sprints.

 An estimated backlog of a product.
 The actual cost of work that has been performed.
 The estimated development velocity.

Purpose of Earned Value

The sole purpose of Earned Value Analysis in the project
management technique is to estimate the progress of the
project based on the budget and its schedules. If the purpose of
the Earned Value Analysis is to be matched, then the project
would be completed during the given time period by
calculating EVM.
Earned Value Analysis provides concise information about any
normal project. It tracks the project in a precise method which
ensures project tracking in a detailed method. It holds greater
visibility to make a proper Earned Value Management analysis
and finish the project in the given time. It also helps you to
assess your costs in project management and reach greater
heights. Earned Value Analysis helps you to make informed
decisions about your project. It helps you to create a complete
baseline to monitor the projects properly without hassle.
Earned Value Analysis is an effective management method
that will allow supervisors to look at the status of their
projects. Earned Value Analysis helps the supervisor to go
through documented data and show an effective project
budget.

There are a plethora of purposes for Earned Value Analysis in

software project management. To know more about clear
concepts of Project Management, check out Project
Management training program. You will have proper
knowledge of Project Management as well as Earned Value
Analysis example problem. This will help you increase your
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What are the Earned Value Methods Data Source?

Earn Value methods of data source refer to the method of
answering the three primal questions:

1. Where were we? (Planned value)

2. Where are we now? (Actual value)
3. Where will we be going? (Earned value of the completed
work)
It is a new method of Earned Value Analysis that helps in
optimizing the data in a very quantified way. They help to
improve the workflow and have a staunch method to achieve
optimal productivity.

Calculating Earned Value

Earned Value Management measures progress against a
baseline. It involves calculating three key values for each
activity in the WBS:

1. The Planned Value (PV), (formerly known as

the budgeted cost of work scheduled or BCWS)—that
portion of the approved cost estimate planned to be spent
on the given activity during a given period.

2. The Actual Cost (AC), (formerly known as the actual

cost of work performed or ACWP)—the total of the costs
incurred in accomplishing work on the activity in a given
period. This Actual Cost must correspond to whatever was
budgeted for the Planned Value and the Earned Value (e.g.
all labor, material, equipment, and indirect costs).

3. The Earned Value (EV), (formerly known as the budget

cost of work performed or BCWP)—the value of the work
actually completed.

These three values are combined to determine at that point in

time whether or not work is being accomplished as planned. The
most commonly used measures are the cost variance:
Cost Variance (CV) = EV - AC
and the schedule variance:
Schedule Variance (SV) = EV - PV
These two values can be converted to efficiency indicators to
reflect the cost and schedule performance of the project. The
most commonly used cost-efficiency indicator is the cost
performance index (CPI). It is calculated thus:
CPI = EV / AC
The sum of all individual EV budgets divided by the sum of all
individual AC's is known as the cumulative CPI, and is
generally used to forecast the cost to complete a project.
The schedule performance index (SPI), calculated thus:
SPI = EV / PV
is often used with the CPI to forecast overall project completion
estimates.
A negative schedule variance (SV) calculated at a given point in
time means the project is behind schedule, while a negative cost
variance (CV) means the project is over budget.

What is project tracking?

Project tracking is a method for following and monitoring the
progress, or lack thereof, of the tasks and activities involved
with a given project. Project tracking allows key personnel to
know precisely where a project is in its life cycle and whether
it’s on course for an on-time, on-budget delivery that will
provide a valuable ROI.
Project tracking also helps project managers and stakeholders
stay informed of what tasks and milestones have been
accomplished, what resources have been used, and what
adjustments or accommodations need to be made to account for
unforeseen roadblocks that crop up along the way.

Why is project tracking important?

Project tracking is essential for project managers, team
members, and stakeholders to stay in touch with a project’s
goals, deadlines, and current status. When managing large,
complex projects with multiple phases and milestones, project
tracking helps ensure that deliverables are submitted
on time and tasks accomplished according to schedule.
Project tracking also ensures that PMs are aware sooner rather
than later if a project is veering off course, and clarifies why
time tracking software is needed to manage any freelancers or
contract staff. Additionally, a project tracker can help managers
in pricing projects and identifying potential roadblocks before
they become significant problems, potentially saving time,
money, and resources spent on corrective actions.

What are project tracking best practices?

There are a few things you can do to ensure you and your team
get the most out of your project tracking system. Here’s a look
at some project tracking best practices:
 Plan
You can’t know whether a project is progressing according
to plan if there’s no plan to begin with. Without a
clear project plan that includes objectives, task lists, team
member assignments, target dates, milestones, deadlines,
and KPIs, you simply won’t be able to track the project with
any kind of accuracy.
 Be realistic
Staying on-target with deliverables starts with setting
realistic deadlines. Being overly ambitious with delivery
schedules and budgets can cause unnecessary stress and lead
to project failure. What’s more, project tracking becomes
much more difficult when deadlines and milestones are
constantly being pushed back.
 Identify risks
Identifying your project’s risks from the outset will go a
long way in helping you track the project and keep it on
pace. Project risks fall into one of three categories: known,
unknown, and unknowable. Defining each type of risk
 during the project planning phase can help you prepare for
and mitigate any possible impacts on the project’s
outcomes.
 Be consistent
Project tracking only works when you track the project
regularly. Make a schedule to monitor project work —
otherwise, you risk overlooking tasks and blowing
deadlines.
 Be accurate
Although it may be tempting to do if the project is
progressing slowly, don’t mark tasks as complete until they
are fully finished. This not only misrepresents progress to
team members and stakeholders but can also lead to tasks
being left incomplete at the end of the project.

What are the challenges of using project tracking?

 Scope creep. Scope creep occurs when a project's scope grows
beyond its original definition or goals. ...
 Poor communication. ...
 Unclear goals. ...
 Poor budgeting. ...
 Skill gaps. ...
 Insufficient risk analysis. ...
 Lack of accountability. ...
 Stakeholder disengagement.

Prioritizing Monitoring:
 The process of prioritizing projects is an activity for
defining what projects within a portfolio to perform in
what sequence.
 It is an attempt to make the project portfolio more
effective through identifying the most effective way of
implementing the projects.
  Project Prioritization Process is a structured and
consistent activity that aims to analyze the current
operational environment to identify any projects running in
parallel within the same portfolio, develop a scoring model
including ranking criteria, and apply that model to
prioritizing the projects in order to determine the execution
order that ensures the highest efficiency of the overall
portfolio.
 The process serves as a framework for managing the

effectiveness of parallel projects.

Steps involved for prioritizing monitoring:

 Collection – you must collect and gather all the data about
your projects.
 Ranking – you must develop and use a ranking model that
includes criteria for prioritizing.
 Verification – you must approve the ranked projects.

Project Management Configuration

Management and Change Control:

The process of controlling and documenting change for the

development system is called Configuration Management.
Configuration Management is part of the overall change
management approach. It allows large teams to work together
in s stable environment while still providing the flexibility
required for creative work.
Here, we will discuss Configuration Management and Change
Control and will cover objectives for both of them. Also, will
focus on the process of change control, and later in this section,
will discuss how we can revise the plan and what guidelines
need to follow to make changes in the plan. Let’s discuss one
by one.
Objectives of Configuration Management :
Configuration management has three major purposes as
follows.

 To identify the configuration of the product at various points

in time.
 Systematically control changes to the configuration.
 Maintain the integrity and tractability of the configuration
throughout the product life cycle.
When developing and maintaining a project, changes are
inevitable. When the project starts, there are multiple changes
to parameters of one or more project. The objective of the
change control is to identify, evaluate, priority and control
changes to the project. The change is made to the project if
there is any request by a project member or a stakeholder.

Different roles for Change Control :

The role of different persons and processes for change control
will be as follows.

Role Tasks

Documents the change requested, along with

Interested priority of the change, approaches to handle the
Party change, work around if the change is not
implemented.

Project Acknowledge the change applies to this project.

 Role Tasks

Manager

Change
Enter the change request into tracking system
Control
log.
Board

Project
Review the change request and determine
Team
whether or not it is worth evaluating for action.
Member

At the end, change has to be informed to requestor.

Process of change control :
It is as shown in the following diagram as follows.

Revise the Plan :

 If there are significant changes in the project deliverables,
schedule, budget or approach, the project plan s to identify.
This is also done at the end of each major life cycle phase. The
purpose is to revise the project plan is to accommodate
significant changes, so that the documented plan reflects the
plan in use by the project Team. This is the task of the senior
manager to reviews the change to project plan and approve
those changes.

The following guidelines should be followed while making

changes as follows.
 No one is allowed to change anything in the project without
knowing others.
 Every change must ensure quality.
 There should be a formal change control system on the basis
of which the project s changed.
 The project should be flexible so that changes can be made
easily.
 Records will be properly maintained after change and also
revised plan should also be ready.
A project that will need to manage changes to the project scope
or the product description and design should have a
configuration management plan at the outlet.

Contract management:
 Contract management is when someone takes on the
responsibility of managing contracts for employees or vendors
or other parties.
 Contract managers need legal knowledge to accurately lead the
contract management process.
 Not all companies have set contract managers, but major
defense firms or companies that frequently work with the
government tend to use contract managers.
Managing contracts is an overlooked form of management.
Managers interact frequently with employees, and some of those
discussions and situations naturally relate to compensation.
Some of these conversations will deal with contract
management. Other times, businesses need to manage contract
agreements with other businesses. It’s not talked about much,
but contract management is an important business topic. If
you’re unsure of how the contract management process works,
it’s important to understand the basics.

What is contract management, and why is it important?

Contract management is the process of managing contract

creation, execution, and analysis to maximize operational and
financial performance at an organization, all while reducing
financial risk. Organizations encounter an ever-increasing
amount of pressure to reduce costs and improve company
performance. Contract management proves to be a very time-
consuming element of business, which facilitates the need for an
effective and automated contract management system.

The fundamentals of contract management

When two companies wish to do business with each other, a

contract specifies the activities entered into by both
organizations and the terms through which they will each fulfill
their parts of the agreement. Contracts affect business
profitability in a very large way due to the emphasis on revenue
and expenses.

When a contract is phrased poorly, one organization might lose

countless thousands of dollars over a simple technicality they
lacked the resources to identify. Effective contract management
can ultimately create a powerful business relationship and pave
the road to greater profitability over the long term, but only
when managed correctly. It’s a good idea to include a legal
department or a lawyer in contract management discussions.
The precise wording of contracts is crucial to contract
management.
Contract management also applies to managing different
contracts with freelancers or employees. These occasionally
require management and alterations that help both parties.

Generally, contract management involves a few key stages.

There’s the early stages or pre-award phase. This is all the work
that takes place prior to a contract being given to someone,
whether it be a business or an employee. The middle stage is
when the process is awarded. This includes all the paperwork to
make the agreement final. Third, there’s the post-award stage.
This is where a lot of contract management and maintenance
comes in.

What are the stages of the contract management process?

While there are many components of contract management, we

can summarize the process by breaking it into five clear stages:
creation, collaboration, signing, tracking and renewal.

We can further identify individual steps within the stages. In all,

we can break the process down into nine steps, each of which
contributes to one of the five overarching stages. This makes it
easier to manage the end-of-quarter crunch that tends to happen
when it’s time for a new round of contracts. Here are the steps
of each stage: