“Have we done what we have to do?”
Have you ever been asked about your project performance? Is it good or not? Has the execution done according to our plan? Have we spent a lot of money or we spend the planned money? Are we on schedule or behind the schedule?
In the beginning you should focus about the most Important 2 factors in your project as planning engineer are (Time and Cost)
How you can monitor your project status and performance with these two factors and make good reports about your performance according to your status and actual data of your project and also forecast:
– Will the project meet the project completion date?
– What will be the cost at completion of your project?
Earned value management is a technique which helps you to answer all the previous questions and provide schedule and budget variances along the way.
What is EVM?
Earned Value Management (EVM) is a project management technique that objectively tracks physical accomplishment of work.
It is simply answer the three following questions:
1- Knowing where you are on schedule?
2- Knowing where you are on budget?
3- Knowing where you are on work accomplished?
EVM consists of the following three basic elements:
Planned Value (PV)
Actual Cost (AC)
Earned Value (EV)
By integrating three measurements, it provides consistent, numerical indicators with which you can evaluate and compare projects.
It compares the PLANNED amount of work with what has actually been COMPLETED, to determine if COST, SCHEDULE, and WORK ACCOMPLISHED are progressing as planned.
Planned Value (PV)
Planned value (PV) is also referred to as Budgeted Cost of Work Scheduled (BCWS). PV or BCWS is the total cost of the work scheduled/planned as of a reporting date.
PV – Planned Value or Budgeted Cost of Work Scheduled
Actual Cost (AC)
Actual cost (AC) is also referred to as Actual Cost of Work Performed (ACWP). AC or ACWP is the total cost taken to complete the work as of a reporting date.
Earned value (EV) is also referred to as Budgeted Cost of Work Performed (BCWP). EV or BCWP is the total cost of the work completed/performed as of a reporting date.
The Whole Story
All these three elements can be derived from Work Breakdown Structure by associating the costs to each of the tasks. For a big project, it will be a tedious task to calculate these elements manually. Scheduling software tools like Microsoft Project is used to calculate these three elements.
1. Reporting Schedule
SV: Schedule Variance SV = EV-PV
A comparison of amount of work performed during a given period of time to what was scheduled to be performed.
SV : (+Ve) means the project is ahead of schedule
SV : (-Ve) means the project is behind schedule
If SPI=0 means project is on schedule
SPI: Schedule Performance Index SPI=EV/PV
If SPI>1 means project is ahead of schedule
If SPI<1 means project is behind schedule
If SPI<1 means project is on schedule
2. Reporting Cost
CV: Cost Variance CV = EV-AC
A comparison of the budgeted cost of work performed with actual cost.
CV : (+Ve) means the project is under budget
CV : (-Ve) means the project is over budget
CPI: Cost Performance Index CPI=EV/AC
If CPI<1 means project is over budget
If CPI>1 means project is under budget
If CPI<1 means project is on budget
You can check the following graph to see the effect of all the previous parameter to check the project status (Project is over budget and behind schedule)
We hope you enjoy our journey today
Hope to receive your feedback and recommendations