Friday, June 10, 2005

Earned Value Management


Earned Value Management (EVM) is one of the key areas in Project cost management..

In the middle of the project , if we want to find the current cost varience of the project, following is the fomula...

EV- AC = CV - Cost Varience (if CV gets + Result you are on budget., negative result will send you home :) )

EV/AC = CPI - Cost Performance Index

if we need the schedule varience at this given time , we can use this formula as follows:

EV- PV = SV - Schedule Varience

EV/PV = SPI - Schedule performance Index

Today I had to do soemthing different to the above, I got a project which is quite beind the budget than estimated and I wanted to find the estimation at completion... Uhhh.... I know I have to reschedule this one .. no way out .. Fast tracking might help to some degree...

Any way I applied little theory I learnt :)

I did the calculation as EAC (Estimate at completion) = AC + ETC becase I didnt see the past performance of the project and the original assumptions are no longer valid for this project ... OOHHHH I saw STARS !!

------------

In the evening I was googling as usual and I found a very useful article about Earn Value Management in the Nasa Site. So I copied it here...

Earned Value Management (EVM) is a program management technique that integrates technical performance requirements, resource planning, with schedules, while taking risk into consideration. The major objectives of applying earned value to a contract are to encourage contractors to use effective internal technical, cost and schedule management control systems, and to permit the customer to rely on timely data produced by those systems for better management insight. This data is in turn used for determining product-oriented contract status, and projecting future performance based on trends to date. In addition, EVM allows better and more effective management decision making to minimize adverse impacts to the project.
Earned value provides an objective measurement of how much work has been accomplished on a project. Using the earned value process, the management team can readily compare how much work has actually been completed against the amount of work planned to be accomplished. All work is planned, budgeted, and scheduled in time-phased "planned value" increments constituting a Performance Measurement Baseline (PMB).
Let’s look at a simplified example:

.

The baseline plan shown in the above graph illustrates a task with a total budget amount of $240k, which is planned for accomplishment over 24-month time frame. The “time-now” line shows that $100k of the project resources was planned to be completed at this point in the project. Another way to look at this is that the project was planned to be 41.6% complete ($100k / $240k) at this point in time.
As work is performed, it is "earned" on the same basis as it was planned, in dollars or other quantifiable units such as labor hours. Comparing earned value with the planned value measures the dollar value of work accomplished versus the dollar value of work planned. Any difference is called a schedule variance.

Earned Value – Planned Costs = Schedule Variance (SV)

.

In our example the task was planned to have accomplished $100k worth of work in twelve months, but the real accomplishment was only $60k. The graph shows a “behind schedule” condition. The schedule variance in dollars would be a negative $40k, the difference between the earned value accomplished ($60k), and the value of the planned work ($100k) to date. According to our formula then:

$60k - $100k = ($40k)

The value earned for the work performed compared with the actual cost incurred for the work performed (taken directly from the contractor's accounting systems), provides an objective measure of cost efficiency. Any difference is called a cost variance.

Earned Value – Actual Costs = Cost Variance (CV)

A negative variance means more money was spent for the work accomplished than was planned. Conversely, a positive variance means less money was spent for the work accomplished than was planned to be spent.

.

From the performing organization’s own accounting system, we determine the actual costs for performing the $60K work was $110K.

When the actual costs are compared with the earned value of $60k, the difference is the cost variance. The earned value of $60k less the actual cost of $110k, is a negative cost variance of $50k. In this example, the task is in an overrun condition by $50k.

$60k - $110k = ($50k)

Analysis of these variances should reveal the factors causing the deviation from plan.

The Task Manager uses this information in conjunction with his knowledge of the task, to project an estimate to complete for this task. The Task Managers analyzes variances resulting from comparisons of these five basic data elements; planned work, work accomplished, actual costs, total budget at completion and the estimate at completion. The work breakdown structure provides a useful framework for summarizing this performance information for all levels of management.

Earned value improves on the "normally used" spend plan concept (budget versus actual incurred cost) by requiring the work in process to be quantified. The planned value, earned value, and actual cost data provides an objective, quantifiable measurement of performance, enabling trend analysis and evaluation of any cost estimate at completion within multiple levels of the project.

EVM is a valuable tool in the Project Manager’s “toolbox” for gaining valuable insight into project performance and is the tool that integrates technical, cost, schedule and risk management. In addition, EVM provides valuable quantifiable performance metrics for forecasting at-completion cost and schedule for their project.
-----------
quite usefull right ..??? I got to go back for rescheduling my project.. yyaackk!!!

17 comments:

bad credit home mortgage loan on 5:45 AM said...

This is a excellent blog. Keep it going. Here's a subject that may interest you; estimate home value STOP renting estimate home value

low interest rate mortgage on 8:22 PM said...

A real enlightening blog. Don't stop now. Here's the secrets a lot of people are searching for; California mortgage quote Learn about purchasing California mortgage quote

Orange County real estate on 7:40 PM said...

Your Blog. It's nice . You may be interested in living better without low interest rate mortgage Start Planning low interest rate mortgage

estimate home value on 3:31 AM said...

This is a excellent blog. Keep it going. You may be interested in living better without equity home loan mortgage Learn about purchasing equity home loan mortgage

refinance property on 5:14 PM said...

Blog is informative . Dont't stop. This may be of interest to you information about best refinance mortgage rate Learn about purchasing best refinance mortgage rate

low interest rate mortgage on 11:36 PM said...

Blog is informative . Dont't stop. Don't miss visiting this site about home mortgage guide STOP renting home mortgage guide

home mortgage guide on 4:15 PM said...

Your blog is great Here's a subject that may interest you; Southern California home loan Start Planning Southern California home loan

Qualify for a home loan on 1:11 PM said...

Your blog is creative Keep up the great work. Here's the secrets a lot of people are searching for; Orange County real estate STOP renting Orange County real estate

best refinance mortgage rate on 10:22 PM said...

Your Blog. It's nice . You may be interested in living better without mortgage refinance Start Planning mortgage refinance

low interest rate mortgage on 6:07 PM said...

A real enlightening blog. Don't stop now. Don't miss visiting this site about Qualify for a home loan New Information Qualify for a home loan

poor credit home loan on 5:29 PM said...

Your blog is great Here's the secrets a lot of people are searching for; best refinance mortgage rate Learn about purchasing best refinance mortgage rate

home loan rate on 11:03 PM said...

This is a excellent blog. Keep it going. You may be interested in living better without Orange County real estate New Information Orange County real estate

mortgage refinance on 1:26 AM said...

Your Blog. It's nice . If you have a mortgage issue, I'm sure you'd be interested in refinance property STOP renting refinance property

debt consolidation refinance on 6:33 PM said...

Your blog is creative Keep up the great work. Don't miss visiting this site about home mortgage guide Learn about purchasing home mortgage guide

investment property refinance on 3:34 PM said...

A real enlightening blog. Don't stop now. No better time than now to stop debt consolidation refinance How to buy debt consolidation refinance

poor credit home loan on 2:09 AM said...

Your blog is great You may be interested in living better without equity home loan mortgage STOP renting equity home loan mortgage

Orange County real estate on 6:21 PM said...

This is a excellent blog. Keep it going. No better time than now to stop debt consolidation refinance STOP renting debt consolidation refinance

 

PROJECTIZED. Copyright 2008 All Rights Reserved Revolution Two Church theme by Brian Gardner Converted into Blogger Template by Bloganol dot com