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Project Management (a quick tutorial) - - Earned Value

Earned Value

Earned Value is a common method of tracking project costs and determining if you are over or under budget.  Earned Value compares the planned completed work with the actual completed work.  The goal is the early identification of schedule and / or cost variances so they can be remedied.

Earned Value indicates potential project performance problems.  An earned value analysis helps to identify were items are late and / or over budget, as the impact of one can disguise the other.

W  Wiki: Earned Value Management

Earned Value Management promises to improve the definition of project scope, prevent scope creep, communicate objective progress to stakeholders, and keep the project team focused on achieving progress.

Wikipedia

The Earned Value calculations are an output of most project management software programs.  It requires:

  1. scheduling all primary tasks
  2. identifying costs against each major task (labor and material costs)
  3. setting a schedule baseline at the project start
  4. updating the schedule as the project progresses: updating timelines and updating project actual costs: updating task cost and task duration 

Earned Value Parameters

The key earned value parameters are identified below:

Key Earned Value Parameters

Code

Description

Calculation

BCWS or PV

Budgeted Cost of Work Scheduled

Planned percent complete times the planned cost

(the Planned Value)

BCWP or EV

Budgeted Cost of Work Performed

Actual percent complete times the planned cost to date.
(the Earned Value)

ACWP

Actual Cost of Work Performed

Actual cost to date

SV

Earned Value Schedule Variance

BCWP minus BCWS

CV

Earned Value Cost Variance

BCWP minus ACWP

BAC

Budgeted at Completion

Planned Cost

FAC or EAC

Forecast at Completion
(Estimate at Completion)

Scheduled Cost

Variance

Variance

BAC minus FAC

Earned Value: … Positive is good; negative is bad. When you see positive numbers in the variance columns of the Earned Value table (that is, the SV, CV, and VAC columns), you are ahead of schedule or under budget, so far. When you see negative numbers in these columns, the task is behind schedule or over budget. When you see $0.00 in SV, CV, or VAC, the associated task is exactly on target with the schedule or budget.

Microsoft Office Project 2003 Inside Out by Teresa S. Stover

I  Word to the Wise –

Earned Value provides an early warning of performance problems.  As an example - tasks can appear below budget because they are late; hiding one problem with another.  

W  Wiki: Earned Value Management

Wikipedia has a great discussion on earned value management.  The calculations can be extensive; however they are automated in many of the scheduling programs.

How to read the Earned Value Chart:

  1. determine the Earned Value, Planned Value and Actual Value curves
  2. determine the schedule variance in cost and time by comparing the Earned Value to the Planned Value for schedule performance
  3. determine the Cost Variance by comparing the Earned Value to the Actual Value for cost performance

The diagram above shows a positive variance (good), however the achievement is diluted by the tasks behind schedule. 

In actuality - the delays may overshadow the cost savings, adding additional costs and thereby diminishing (even eliminating) the savings achieved to date.

W  Wiki: Earned Value Management

Earned Value Management promises to improve the definition of project scope,
prevent scope creep, communicate objective progress to stakeholders, and
keep the project team focused on achieving progress.

Wikipedia

 


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Construction Management Southeast Kansas

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