Earned Value Analysis

Earned Value Analysis Concept & Application

1. Earned Value Analysis Concept and Application Presented by Ahmed Rami Elsherif 27/12/2012

2. Concept Earned Value Analysis ( EVA). Is a Project Management control technique which integrates Scope, Schedule and Cost data for objectively measuring project performance and progress. Performance is measured by determining the budgeted cost of work performed (i.e., earned value) and comparing it to the actual cost of work performed (i.e., actual cost) and the planned cost of work performed (i.e. planned cost).

3. Definitions Concept Abbreviation Description Budget at Completion BAC Baseline c ost of 100% of the project. Actual Cost AC Total costs actually incurred so far. Earned Value EV Amount of budget earned so far based on physical work accomplished, without reference to actual costs. Planned Value PV The budget for the physical work scheduled to be completed by the end of the time period.

4. Metrics Concept Abbreviation Description Cost Variance CV Measure of cost overrun. CV = EV – AC Schedule Variance SV Measure schedule slippage. SV = EV – PV Cost Performance Index CPI Cost efficiency ratio. CPI = EV/AC Scheduled Performance Index SPI Schedule efficiency ratio. SPI = EV/PV Estimate at Completion EAC Expected total cost based on the current cost and schedule efficiency ratios. EAC = AC+((BAC-EV)/(CPI*SPI))

5. For example The project is to build a 4 wall room. The cost per wall is 100 SAR and it will take 1 day to construct 1 wall. At the end of the 3 day we have finished 2.5 walls and our actual cost is 280 SAR then our values are : Budget at Completion (BAC)        =              400 SAR Actual Cost (AC   )         =              280 SAR Earned Value (EV)            =              250 SAR Planned Value (PV)           =             300 SAR And based on the above data we can calculate the following:  

6. Calculated Metrics Cost Variance is   CV = EV – AC = 250 – 280 = -30 we are over budget by 30 SAR Scheduled Variance is SV = EV – PV = 250 – 300 = -50 we behind scheduled by 50 SAR Cost Performance Index is   CPI = EV / AC = 250 / 280 = .89 For each 1 SAR we spend we gain .89 halalas Schedule Performance Index is SPI = EV / PV = 250 / 300 = .83 We are behind schedule by 17 %. Estimate at Completion is EAC = AC+((BAC-EV)/(CPI*SPI)) = 483 If we continue with the same efficiency rates, we might end up with a total cost of 483 SAR.

7. Proposal Recent research studies have shown that the tools and techniques of Earned Value Analysis have positive impact on improving project controls on Scope, Cost and Schedule and are good predictors of project success. Popularity of EVA has grown significantly in recent years for which we would like to recommend using it for ATCO projects (i.e. construction, big projects in EWE, EWF). For that we have developed a simple module in the EIS where project managers will enter the EV parameters which the system will combine with data booked in accounts and calculates the EV metrics. Data from RAS ALKHER project is entered in the system for testing.

8. Login to EIS by assigned operational staff. Process the EV report of his particular division. Enter the EV values of the Month and any comments regarding the variances. Use the data and reports in the monthly project status reporting. Steps in EIS Project EV data entered by Operations on a monthly basis Projects status dashboard report Graphical Presentations

9. Proposed Plan Agree with you if this is a suitable solution. We can discuss this by taking RAS ALKHER project data which is already entered in the system as an example. If Yes share it with operations for feedback on possible enhancements or improvements. Identify users in each divisions and do training. Start using the new process.