Earned Value Analysis (EVA)

The Earned Value Analysis (EVA) is a project management method that allows the use of the KPIs CPI/SPI. It shows whether the project is on schedule in terms of costs and schedule.

Definition

Earned Value Analysis: Why?

E arned value analysis (or earned value management) is a widely used method for measuring the performance of projects. These three areas are considered in this method:

  • scope
  • costs
  • time

The following core questions can be answered with the EVA:

  • Is our plan on schedule, are we late?
  • When will the project be completed based on the current status?
  • Are we over or under budget (over/underspent)
  • What is the estimated cost upon completion of the project?
  • How efficiently do we use our resources?

In order to set up the EVA, the following requirements are necessary:

  • Precise baselining of the planned values (time, costs and scope) from a WBS , plan milestones and assign costs
  • Precise actual cost information: real-time actual data, clear differentiation between booking types (outsourcing costs, man-days, software licenses…)
  • Precise progress measurement: degree of completion calculated based on clear work/scope artifacts (e.g. user stories in agile teams)
  • Realistic estimates of completion collected by the project team

key values

  • Budget at Completion – BAC: Total cost of the project
  • Planned Value – PV (aka : Budgeted Cost of Planned Works – BCWS): The amount of work in € that needs to be performed according to the schedule:
    PV = BAC * Planned degree of completion in %
  • Planned Value – EV (also called : Budgeted Cost of Work Done – BCWP): The amount expressed in € for the work actually done:
    EV = BAC * completed degree in %
  • Actual costs – AC (also: Actual Cost of Work Performed (ACWP): The sum of all costs actually posted (in €)

The baselines

The quality of the baseline for the earned value analysis is a key success factor. The following procedure might be helpful:

  • Define the initial scope of work based on the project brief
  • Document all achievements in the WBS to achieve 100% visibility at a high level
  • Deviation from all required work packages that serve the services
  • Assign activities to work packages, define milestones and set the schedule
    • The short-term work packages should contain more detail than the long-term packages.
    • If a roadmap plan is in place, the WBS should be linked to it
  • Estimate the costs for the entire project duration
    • Estimate detailed short-term activities
    • Appreciate long-term work packages
  • Create a budget baseline
    • A BAC is defined for the entire project
    • A BAC per fiscal year is defined if this view is required for the EVA
    • A PV curve is available

The KPIs

The following key figures are mainly used in the context of EVA:
  • CV (cost variance) = EV-AC
  • SV (schedule deviation) = EV – PV
  • CPI (Cost Performance Index) = EV / AC
    • CPI> 1: Budget on track / underspent
    • CPI 1: Overbudget / overspent<
  • SPI (Schedule Performance Index) = EV/PV
    • SPI 1: Schedule on track>
    • SPI< 1: Appointment delay
  • EAC (estimate upon completion) = BAC / CP

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