Earned Value Measurement

The benefits of Earned Value include:

• Provides the ability to the project manager to track the project cost very well

• Allows the project manager to look at other more productive aspects of the project

• Does not allow any space for estimation of project progress numbers

The performance measurement baseline is a combination of scope, schedule and cost baselines. Earned value measures project performance against scope, schedule and cost baselines (performance measurement baseline). Earned value measurement is better because it integrates cost, time and the work done (or scope) and can be used to forecast future performance and project completion dates and costs.

Few important terms of Earned Value:

1. PV - Planned Value - The estimated value of work planned to be done as of today

2. EV - Earned Value - The estimated value of work actually accomplished as of today

3. AC - Actual Cost (total cost) - The actual cost incurred for the work accomplished as of today

4. BAC - Budget at Completion (the budget) - The total BUDGET of the TOTAL project

5. EAC - Estimate at Completion - A current forecast of total project cost

6. ETC - Estimate to Complete - An estimate of additional cost required to finish the project (a forecast)

7. VAC - Variance at Completion - A forecast of over or under budget at the end of the project

Formulas and Interpretations:

• Cost Variance (CV); EV AC

NEGATIVE is over budget; POSITIVE is under budget

• Schedule Variance (SV); EV-PV

NEGATIVE is behind schedule; POSITIVE is ahead of schedule

NOTE: There are many ways to calculate EAC, depending on the assumptions made. Notice how the purpose of the formulas really is to focus create forecasts based on past performance on the project

• AC + Bottom-up ETC

This formula calculates actual cost plus a new estimate to complete the remaining work.

• BAC / CPI

This formula is used if no variances from BAC has occurred.

• AC + (BAC-EV)

This formula calculates actual to date plus remaining budget.

• AC + (BAC-EV) / (CPI-X SPI)

This formula calculates actual to date plus the remaining budget modified by performance.

• To Complete Performance Index (TCPI); (BAC-EV) / (BAC-AC)

This formula divides the work remaining to be done by money remaining to do it. It gives us a rate at which we must continue to work on the project to remain in budget.

• Estimate to Complete

EAC-AC or Reestimate; Reestimating the remaining work from the bottom top.

• Variance at Completion (VAC); BAC EAC

The over or under budget performance of the project at the end of the project. CPI can be calculated for costs incurred during a specific period of time (week, month, quarter, etc) rather than over all the time to date.