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SC AC BAC EAC BCWP ACWP BCWS ETC STWP ATWP VARIANCES Cost (spending) variance (CV) Schedule variance (SV) Time variance (TV) INDICES CPI SPI TPI CSI Example Boeing Earned Value Management System (EVMS) Variance = Schedule Variance = Cost Variance = Example Budgeted cost of the work we scheduled to be performed to date (BCWS Budgeted cost of work performed (BCWP Actual cost incurred in performing that work (ACWP Cost Variance (CV) = 300,000 - 350,0 Schedule Variance (SV) = 300,000 - 475,0 Cost Performance Index (CPI) = BCWP/ACWP = 300/3 Schedule Performance Index (SPI) = BCWP/BC Scheduled Time Work Performed (STWP) can be estimated as follo Therefore, Scheduled Cost (at some time t) Actual Cost (at some time t) Budget at completion = The total $ budgeted for the project Estimated cost at completion = What we expect to spend Budgeted cost of work performed = earned value Actual cost incurred in performing that work Budgeted cost of the work we scheduled to be performed to date = PV Estimated cost to complete = (BAC ? EV)/CPI Time scheduled for the work that has been performed Actual time used to perform that work Cost Variance = difference between budgeted cost of work performed (BCWP) and actual cost of that work (ACWP) = BCWP - ACWP Cost Variance = difference between Scheduled Cost (SC) and Actual Cost (AC) = SC – AC (negative value - cost overrun) Schedule Variance = difference between earned value (BCWP) and cost of work we scheduled to perform to date (BCWS) = BCWP – BCWS (negative value - behind schedule) Time Variance = difference between time scheduled for work performed (STWP) and actual time to perform it (ATWP)= STWP - ATWP (negative value - delay) Cost performance index = BCWP/ACWP (labor productivity) Schedule performance index = BCWP/BCWS Time performance index = STWP/ATWP (how long did it take you to take the exam divided how long I allotted) Cost schedule index = CPI/SPI ( you want to be greater than 1) Assume that operations on a Work Package cost $1,500 to complete. They were originally scheduled to finish today. At this point, we actually spent $1,350. And we estimate that we have completed two thirds (2/3) of the work. What are the cost and schedule variances? Budget at completion = The total $ budgeted for the project = 1500 Cost of work we scheduled to perform to date (BCWS) = 1500 BCWP (2/3 completed) = 1000 Actual cost incurred in performing that work (ACWP) = 1350 Cost (spending) variance (CV) = BCWP - ACWP = -350 Schedule variance (SV) = BCWP - BCWS = -500 Cost performance index = BCWP/ACWP = 74% Schedule performance index = BCWP/BCWS = 67% Spending higher than budget, and given what we have spent, we are not as far along as we should be (have not completed as much work as we should have) Value Management System (EVMS) Planned Budget - Actual Costs Earned Value - Planned budget Earned Value - Actual Costs Also track CPI/SPI based on Budgeted Cost for Work Performed, Actual Cost for Work Performed A project to develop a country park has an actual cost in month 17 of $350,000, a planned cost of $475,000, and a value completed of $300,000. Find the cost and schedule variances and the three indexes. Budgeted cost of the work we scheduled to be performed to date (BCWS) = 475,000 Budgeted cost of work performed (BCWP) = 300,000 Actual cost incurred in performing that work (ACWP) = 350,000 Cost Variance (CV) = 300,000 - 350,000 -50,000 Schedule Variance (SV) = 300,000 - 475,000 -175,000 Cost Performance Index (CPI) = BCWP/ACWP = 300/350 86% Schedule Performance Index (SPI) = BCWP/BCWS 63% Scheduled Time Work Performed (STWP) can be estimated as follows: Slope of Planned costs =BCWS/17 = 475,000/17 27941.18 Time t = Schedule Variance/Slope of Planned costs = -6.26 Time Difference= STWP = 17- 6.26 10.74 Actual time used to perform that work (ATWP) 17 Time Performance Index (TPI) = STWP/ATWP = 10.74/17 63% (negative value - cost overrun) (negative value - behind schedule) per month months www.oakinc.com/resources/articles.asp Link is dead. Planned Cost Planned Scheduled Finish Activity (Effort-Hours) Duration (Days) (Day) 1 Draw plans and materials list 6 1 Day 1 2 Destroy old deck 12 1 Day 2 3 Truck off trash 4 0.5 Day 3 4 Purchase materials 4 0.5 Day 3 5 Dig four footing holes 8 2 Day 5 6 Pour concrete footings 4 1 Day 6 7 Construct main deck 12 3 Day 9 8 Construct railings and stairs 8 2 Day 11 9 Clean-up 6 1 Day 12 Total 64 12 Notes: "Costs" are in hours, not $$. Daily and Cumulative Effort vs. Project Schedule Planned Cost 70 Day (Effort-Hours) Cumulative 60 1 6 6 2 12 18 50 3 8 26 40 4 26 5 8 34 30 6 4 38 20 7 38 12 8 38 10 6 6 9 12 50 0 10 50 1 2 11 8 58 12 6 64 Actual Cost Status Earned Value (Effort-Hours) (Done/Started) (Effort- Hours) ulative Effort vs. Project Schedule 64 58 50 50 38 38 38 34 26 26 12 18 12 8 8 8 6 4 0 0 0 0 2 3 4 5 6 7 8 9 10 11 12 Planned Cost (Effort-Hours) Cumulative As of Day 5, we had planned to expend 34 hours (cumulative planned cost) for the first 5 activities. However, based on actual results, we have expended 36 hours and completed the first four activities. Activity 5, “Dig footings”, has started, but is not yet finished and it is running over plan. Since digging is not done, we can’t take any credit for Earned Value on the activity. Planned Cost Planned Scheduled Finish Activity (Effort-Hours) Duration (Days) (Day) 1 Draw plans and materials list 6 1 Day 1 2 Destroy old deck 12 1 Day 2 3 Truck off trash 4 0.5 Day 3 4 Purchase materials 4 0.5 Day 3 5 Dig four footing holes 8 2 Day 5 Total-To-Date 34 6 Pour concrete footings 4 1 Day 6 7 Construct main deck 12 3 Day 9 8 Construct railings and stairs 8 2 Day 11 9 Clean-up 6 1 Day 12 Only when an activity is marked “Done” do we “earn” the planned value for completed work (Column G). At the end of Day 5, we planned to accomplish 34 hours of work. We’ve expended 36 hours, yet we’ve only earned 26 ost) for the first 5 activities. pleted the first four activities. Actual Cost Status Earned Value (Effort-Hours) (Done/Started) (Effort- Hours) 6 Done 6 12 Done 12 4 Done 4 4 Done 4 10 Started 0 36 26 e for completed work (Column G). expended 36 hours, yet we’ve only earned 26 hours. Planned Cost Actual Cost Earned Value Cumulative Day (Effort-Hours) (Effort-Hours) (Effort- Hours) Planned Value 1 6 6 6 6 2 12 12 12 18 3 8 4 4 26 4 4 4 26 5 8 10 0 34 6 4 38 7 38 8 38 9 12 50 10 50 11 8 58 12 6 64 70 60 50 Cumulative Planned 40 Value Cumulative Actual Cost 30 20 Cumulative Earned Value 10 0 1 2 3 4 5 6 7 8 9 10 11 12 Through Day 3 of the project, actual costs were according to plan. But on Day 4, the red jumps above the blue, showing that we’ve gone over plan. The gap between Actual Cost, Planned Value, and Earned Value clearly indicates project problems. Earned Value ratios: the Cost Performance Index (CPI) and the Schedule Performance Index (SPI). The CPI is the ratio of Earned Value divided by Actual Cost, and the SPI is the ratio of Earned Value divided by Planned V Both ratios are calculated using “To Date” cumulative values. CPI = 26/36 = #DIV/0! hours of result for every 10 hours of actual effort expended on our proje SPI = 26/34 = #DIV/0! hours of result for every 10 hours of planned effort on our project. (CPI and SPI are conservative forecasting tools – each assumes that past performance is an indicator of future results.) Cumulative Cumulative Actual Cost Earned Value 6 6 18 18 22 22 26 26 36 26 ulative Earned Value learly indicates project problems. hedule Performance Index (SPI). he SPI is the ratio of Earned Value divided by Planned Value. every 10 hours of actual effort expended on our project. every 10 hours of planned effort on our project. at past performance is an indicator of future results.) To forecast the "Estimated Cost at Completion" (EAC), divide the original cost by the CPI. CPI = 26/36 = 0.722222222 Cumulative Cumulative Cumulative Cumulative Day Planned Value Actual Cost Earned Value Projected EAC 1 6 6 6 2 18 18 18 3 26 22 22 4 26 26 26 5 34 36 26 36 6 38 52.62 7 38 52.62 8 38 52.62 9 50 69.23 10 50 69.23 11 58 80.31 12 64 88.62 SPI = 26/34 = 0.764705882 The Forecasted Duration is the original duration divided by the SPI. Planned Forecasted Activity Duration (Days) Duration (Days) 1 Draw plans and materials list 1 2 Destroy old deck 1 3 Truck off trash 0.5 4 Purchase materials 0.5 5 Dig four footing holes 2 2.62 6 Pour concrete footings 1 1.31 7 Construct main deck 3 3.92 8 Construct railings and stairs 2 2.62 9 Clean-up 1 1.31 Total 12 15.69 So after five days of work on the project, it looks like we’ve added more than three days to the schedule and 22 hours o Is the project really that far off track? Activity 5 is seriously over budget and not yet complete. The hole-digging activity seems to have run into trouble – after ten hours of work (two more than planned), the work is Activity 5 has also lowered the SPI because the project cannot take credit for its completion. First, we need to figure out what happened. Then we can take corrective action. 100 90 80 70 60 Planned Value 50 Actual Cost 40 Earned Value 30 Projected EAC 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 ore than three days to the schedule and 22 hours of work to the budget. ours of work (two more than planned), the work is not done. redit for its completion. Our key stakeholders discovered that the original estimates for digging were based on favorable soil conditions. For three of the four holes, this was a valid assumption. However, the diggers uncovered a large boulder (more than 500 lbs) on the 4th hole. Aside from the 4th hole, the other project tasks completed as planned and raised no concerns about the estimates for work not ye If we informally apply a “% complete” evaluation to our project, we earn 75% (3 out of 4 holes) of the hole digging activity. Planned Cost Actual Cost Earned Value Day (Effort-Hours) (Effort-Hours) (Effort- Hours) 1 6 6 6 2 12 12 12 3 8 4 4 4 4 4 CPI = 32/36 = 5 8 10 6 SPI = 32/34 = 34 36 32 If we recompute the EAC and schedule, our EAC forecast improves from 88 to 72 hours. Cumulative Cumulative Cumulative Cumulative Day Planned Value Actual Cost Earned Value Projected EAC 1 6 6 6 2 18 18 18 3 26 22 22 4 26 26 26 5 34 36 26 36 6 38 42.75 E25=B25/$H$12 7 38 42.75 8 38 42.75 9 50 56.25 10 50 56.25 11 58 65.25 12 64 72.00 Activity Forecasted Duration (Days) Planned Duration (Days) 1 Draw plans and materials list 1 2 Destroy old deck 1 3 Truck off trash 0.5 4 Purchase materials 0.5 5 Dig four footing holes 2 2.125 E38=D38/$H$13 6 Pour concrete footings 1 1.0625 7 Construct main deck 3 3.1875 8 Construct railings and stairs 2 2.125 9 Clean-up 1 1.0625 Total 12 12.75 We also shorten our schedule estimate from 15.7 days to 12.7 days. This information will help us decide on what corrective action to take. on favorable soil conditions. o concerns about the estimates for work not yet started. t of 4 holes) of the hole digging activity. CPI = 32/36 = 0.888889 SPI = 32/34 = 0.941176 E25=B25/$H$12 E38=D38/$H$13 The right corrective action depends heavily on the kinds of problems encountered and how the project stakeholders w For example, a key stakeholder (a spouse in this case) may insist that product cannot be compromised (“It won’t look r or may focus on schedule because of an upcoming social event. Possible Corrective Action for the Deck Project Stakeholder Priority General Approach Maintain project schedule Sacrifice product Sacrifice cost Maintain product features and performance Sacrifice schedule Sacrifice cost Maintain project cost Sacrifice product Sacrifice schedule After some discussion, the stakeholders decided that the key constraint is the product’s features and performance. They chose to remove the bolder and place the footing where originally planned, satisfying all building codes. However, since this choice adds work to the project, the plan must be adjusted. ds heavily on the kinds of problems encountered and how the project stakeholders weigh the various solutions. spouse in this case) may insist that product cannot be compromised (“It won’t look right”), e of an upcoming social event. Possible Specific Approaches Reduce the scope of some other part of the project. For example, use simpler hand railings Stop digging and hope the building inspector doesn’t notice the depth of the hole with the rock Work overtime to finish the task before the start of Day 6 Have a friend help (more pizza and beer) Rent a back-hoe Get permission from the stakeholders Run late, then beg forgiveness from the stakeholders Work overtime to finish the task before the start of Day 6 Have a friend help (more pizza and beer) Rent a back-hoe Reduce the scope of some other part of the project. For example, use simpler hand rails Stop digging and hope the building inspector doesn’t notice the depth of the hole with the big rock Since we have already gone over budget, changing schedule will have little impact on project cost olders decided that the key constraint is the product’s features and performance. and place the footing where originally planned, satisfying all building codes. work to the project, the plan must be adjusted. he various solutions. Removing the rock involved manually excavating around it, dragging it out of the hole, and restoring the earth displaced by the rock. In total, an additional eight hours of effort and one day of schedule need to be added. The table below shows the updated plan reflecting the added task “Remove boulder.” No other project activities have been changed. Also, the activity “Dig footings” was marked “Done” and the value of that work counted as “Earned”. Planned Cost Planned Activity (Effort-Hours) Duration (Days) 1 Draw plans and materials list 6 1 2 Destroy old deck 12 1 3 Truck off trash 4 0.5 4 Purchase materials 4 0.5 5 Dig four footing holes 8 2 6 Remove boulder 8 1 7 (6) Pour concrete footings 4 1 8 (7) Construct main deck 12 3 9 (8) Construct railings and stairs 8 2 10 (9) Clean-up 6 1 Total 72 13 The total project effort has been increased to 72 hours (from 64) and the duration has increased from 12 to 13 days. Cumulative Cumulative Cumulative Re-Baselined Actual Cost Day Planned Value Planned Value (Effort-Hours) 1 6 6 6 2 18 18 18 3 26 26 26 4 26 26 26 5 34 34 36 6 38 42 7 38 46 8 38 46 9 50 46 10 50 58 11 58 58 12 64 66 13 72 Earned Value ratios: the Cost Performance Index (CPI) and the Schedule Performance Index (SPI). The CPI is the ratio of Earned Value divided by Actual Cost, and the SPI is the ratio of Earned Value divided by Planned V At the end of Day 5, we have a new CPI = 34/36 = 0.944444444 ; and the new SPI = 34/34 = To = original cost/CPI. forecast at "Estimated (EAC), Completion"Cost cost by the origina To To forecast at "Estimated (EAC), Completion" (EA The "Estimated Cost at Completion" (EAC)forecast the "Estimated CosttheCompletion"Costthedivide the originalat divide the CPI. The new EAC = 72/0.94 = 77 hours. The Forecasted Duration is the original duration divided by the SPI, or 13/1.0 = 13. The project is still forecasted to exceed the new budget (because CPI is less than 1.0), due to two hours of rock removal on Day 5 (two hours against the eight hours added during the re-baseline). We expect that after Day 6, CPI productivity will climb back to 1.0. Re-baselining is only legitimate when it is performed in response to a stakeholder- approved scope change. counted as “Earned”. Scheduled Finish Actual Cost Status Earned Value (Day) (Effort-Hours) (Done/Started) (Effort- Hours) Day 1 6 Done 6 Day 2 12 Done 12 Day 3 4 Done 4 Day 3 4 Done 4 Day 5 10 Done 8 Day 6 Started Day 7 (6) Day 10 (9) Day 12 (11) Day 13 (12) 36 34 ion has increased from 12 to 13 days. Cumulative Earned Value (Effort- Hours) 6 80 18 70 26 60 26 50 34 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 Planned Value Re-Baselined Planned Value Performance Index (SPI). s the ratio of Earned Value divided by Planned Value. ; and the new SPI = 34/34 = 1 To forecast at "Estimated (EAC), Completion"CosttheCompletion"Costtheforecast the Cost cost by the CPI. To forecast at "Estimated (EAC), "Estimated (EAC), Completion""Estimated Cost origin To forecast cost byTo forecast at "Estimated (EAC), Completion" (EA the original cost by the original To forecast the "Estimated CosttheCompletion"Costthedivide the originalat divide the CPI. 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