Earned Value Analysis - V (Quantifying the project schedule delays and cost variance)

Analytical parameters to the rescue:

When an CEO/Vice President/Delivery Head asks any project manager/project in-charge the following questions they are supposed to have answers for the following questions?

a. How much we are delayed?

b. How much we have earned till now in this project?

c. Whether our earnings till date are as per our budget or beyond our budgets?

d. Are we inline with our project schedule ?

e. How much effecient our resources are ?

f. How would you rate our project interms of Cost and Schedule?

In this blog we will discuss on the parameters which are necessary to answer these questions. I suggest to read my previous blog if you have not gone  across to know the fundamental parameters which are required to understand this blog.

1. CV - Cost Variance

Helps to determine whether your project has execeeded your project or its under budget. Its the variance between Earned Value(EV) and Planned Value (PV). (EV-PV)

2. SV - Schedule Variance

Helps to determine whether your project is as per the schedule or behind the schedule or ahead of schedule. Its determined with the help of the variance betwen the Earned Value and the Actual Cost. (EV-AC)

3. CPI - Cost Performance Index

Cost performance index (CPI) is a measure of cost efficiency. CPI is calculated as EV divided by AC. This would be indicating the cost for every single rupee spent.(EV/AC)

4. SPI - Schedule Performance Index

The rate at which the project scheduled deadlines are met as per the original plan. (EV/PV)

Please find the attached excel sheet which provides you an additional information on the CV,SV,CPI and SPI parameters.

Reference file for download:

Analytical Parameters for Rescue Spreadsheet

Earned Value Analysis-IV (Using Excel)

Deriving PV,EV and AC with an Excel Sheet

For executing Earned Value management or Analysis effectively you need to calculate 3 important data which is crucial. The following are discussed earlier also to make it much more comfortable when its reinforced here.

PV:Planned value is also called as Budgeted Cost of Work Scheduled(BCWS). Authorized budget for planned work. Based on this budget we estimate our quote and profitability in the initial stage of the project.


EV:Earned Value is also called as budgeted Cost of Work Performed. Authorized budget for work actually completed. This what we are supposed to have spent on  the project. 


AC:Actual Cost is also called as the Actual Cost of Work performed. The cost actually incurred in completing the work actually achieved. This will be based on the actual resources and efforts spent on the project. Precisely based on the % of work we have completed.

Example:
Lets assume there is an project which starts on 2nd Feb 2010. We have planned to use 2 resources and 88 Man hours to complete the project for going live. During the execution of the project we want to have an reality check on the project using Earned Value Analysis/Management Techniques. We want to do it as on 8th Feb 2010. So we need to check how much of task has been actually completed on 8th Feb 2010, by representing the work completed in %.

Task A is 100% completed.
Task B is 100% completed
Task C is 75% completed with an alternative resource due to non-availability of resource.
Task D is 50% completed due to an sudden resource change in Task C.

If you refere back to the excel sheet on workings you will be able to figure out the following facts on on PV, EV and AC.

Planned Value/BCWS : 6080
Earned Value/BCWP : 4448
Actual Cost/ACWP : 5744

So the project is over budgeted and beyond schedule. In my next blog we will discuss on the on the various parameters which can be determined using these three derived values (PV,EV and AC).

Please find the attached excel sheet which helps you understand more on calculating the same.

EVM (Earned Value Management Template Sample)

Other useful links:

An Approach with MS Project http://epmcentral.com/articles/evstep1.php
An Wonderful video explaining EVM in simple terms: http://www.youtube.com/watch?v=UggTFk2EiUg (Recommended)

Earned Value Analysis-III

Earned value analysis can be worked out effectively when you have compartmentalized the project or you have made the project with an clear work breakdown structure. Refer to my article on Work breakdown Structure for having an understanding of workbreakdown structure. 

Please note that workbreakdown structure has to have the following characteristics:

• Please note that any work breakdown structure component must have scope of work to be achieved, Total 
• cost (Direct and Indirect Cost) and time frame for completing the same. 
• Each and every WBS item must be assigned to an Individual or an group.
• It must be having an facility to update the % of work completed, whether its an milestone or not.

Now lets get into the actual subject about to be discussed. Too much of wbs..huh...Be patient while we are going to get across to three important terms:

a. BCWS - Budgeted Cost of Work Scheduled - (Budgeted cost of project as per project plan upto the schedule)

b. ACWP - Actual Cost of Work Performed -  (Actual expenditure made on the resources for the work actually performed)

c. BCWP - Budgeted Cost of Work Performed (Budgeted cost of project as per the work executed)

Example:

An project is schedule to start on 1st Jan and proposed to be completed by 31st March. It has 3 Milestones 1st on 15th Jan, 2nd on 15th Feb and 3rd on 15th March. Now assume that the entire project budgeted cost would be approximately 1,00,000.00. As per the budgeted schedule, we would spend Rs.25,000.00 at 1st Milestone, Rs.50,000.00 at 2nd Milestone and Rs.75000.00 at the 3rd Milestone.

Assume that we are in the second milestone and looking the current project status, the following could be the scenario:

a. BCWS - 50,000.00 (Scheduled)

b. ACWP - 35,000.00 (Actuals ) - Its surprisingly happened with the limited 2 qualified resources we have achived

c. BCWP - 45,000.00 (Budgeted as Per Schedule -  We should have actually spend 45,000.00 as per our budget)

We will explore further in my next post.

Image Courtesy: http://www.baz.com/kjordan/swse625/htm/tp-py.htm

Earned Value Analysis-II

Earned Value Analysis is actually in attempt to do the same activity of Plan vs Actuals but in a more scientific and prudent manner, so that decisions can be taken with lot of confidence and clarity.

The key factors which are handled with respect to Earned Value Analysis are the following:

• Cost
• Work Scheduled
• Work Accompolished.

Need for EVM:

• Helps in tracking the project status in simple terms
• Typically helps associating non-productive man hours.
• Helps to arrive in Budget Cost of Work Scheduled (BCWS) Vs Actual Cost Work Performed (ACWP)
• Ultimately the project has to be monitored in terms of Cost,Budgeted  and completed work.

EVA calculations are derived from measuring the characteristics of projects performance and status. So, whats required to learn and understand EVA ? Not really much some, if you are maintaining timesheets, proper track of projects progress with little formulae you can really achive it.

We will see the method of calculating the same in the next part.

Earned Value Analysis - I

Earned Value Analysis - I

In many projects when being managed the top management or project manager either the misses the budget on time and cost. Earned Value Analysis will help you to have control on the same. Any Project Manager would like to know the following facts:

1. Where we are as per Budget?

2. Where we are on Schedule?

3. Where do we stand on our accomplishments?

Earned Value Analysis will help you to understand the current status of the project on the terms of accuracy,consistency and criticalness of the project.

The key factors in arriving at an understanding on financial impact of the project.

• % of Budget Spent
• % of work done
• % of Time Elapsed

But looking at only these aspects will not provide complete picture or state of the project in its entirity, due to lack of its clarity and relationship to the entirity of the project.

Earned Value Analysis is industry standard or practice to Measure Project Progress, Forecast and final cost, provides you the variance in Budgeted and schedule. The key aspect is its provides you numerical indicators for evaluation and taking decisions.

In my next part we will see more about EVA in detail.