Earned Value

• Why would a PM use earned value

  it is a project control process based on a structural approach to planning, cost collection and performance. It establishes a baseline plan of performance by combining the planned work v actual work. By comparing the values you can assess the project efficiency and make informed decisions
• earned value example


  you have a budget of 10,000 for a project and after one month you have planned to have 50% of work completed so should have spent 5000, but you have spent 7000. By comparing the earned value by the actual cost you can see the project is on schedule but over budget. It is superior to separate the tracking of spend or work as it provides opportunity to look at cost performance and productivity through scheduled performance- EV = % of work completed x budget at completition
• interpreting earned value 


  normally plotted on a s curve which shows the funds the project is excepted to consume, then you can plot the actual cost of work performed and budget cost of work performed. this will show is you behind budget or on schedule
• Variances 


  Cost Variances- measures the differences between earned value and actual cost - if positive the project is under budget

  Schedule variances - measures the difference between earned value and planned value of the work completed - if positive your ahead of schedule
• Indexes


  Schedule performance index- divides the earned value by the planned value- if greater than 1 the project is ahead of schedule

  Cost performance index- divide earned value by actual cost- if above 1 your under budget
• Benefits


  supports forecasting- enables a prediction of when project work will be completed

  provides objective measurements which can easily be communicated to stakeholders - easy to update your project status

  allows you to see if you are behind budget - allows for reallocating of resources or way to optimize cost

  establishes a basis for estimating final costs

  easy way of tracking progress
• issues with earned value

  data accuracy- relies on there being no inconsistencies in tracking resources and cost usage

  determine the % of work complete is subjective

  not very useful for complex projects where there are frequent changes to scope or multiple work packages at once

  if there are significant changes to scope that affect budget or schedule then the original earned value baseline becomes less relevant