About Earned Value

"Earned value" is a method for measuring project performance. It compares the amount of work that was planned with what was actually accomplished to determine if cost and schedule progress is as planned.

Earned value analysis is an industry standard used to measure a project's progress, forecast its completion date and final cost, and provide schedule and budget variances.

Schedule activities "earn value" as they are completed.

The earned value function calculates the following for every scheduled activity:

The results of these calculations are used by Unifier to calculate the:

  • Budget Cost of Work Scheduled (BCWS)
  • Budget Cost of Work Performed (BCWP)
  • Actual Cost of Work Scheduled (ABCWP)
  • Cost Variance (CV)
  • Schedule Variance (SV)
  • Cost Performance Index (CPI)
  • Schedule Performance Index (SPI)
  • Cost Schedule Index (CSI)
  • To Complete Performance Index (TCPI)

    Note: All calculations are done from the start date of an activity to the current date.

In Unifier, the earned value sheet always represents data by CBS code. Earned value calculations depend on the Company Cost Sheet and Cash Flow, and can optionally include activities on the Schedule Sheet. Users can also view a graphical representation of Earned Value, Budget at Completion (BAC) and Actual Cost.

Example Budget Cost of Work Scheduled (BCWS) Calculation

Assume a budget of $1000 is to be consumed by an activity scheduled to be performed in one week (5 days).

 

Mar 10

Mar 11

Mar 12

Mar 13

Mar 14

Total

BAC

$200

$200

$200

$200

$200

$1000

BCWS

$200

$200

$200

 

 

$600

Note: This is a simplified example. Normally, costs are incurred per CBS. BAC, % Complete, and ACWP will differ based on the CBS in consideration

Example Budget Cost of Work Performed (BCWP) or Earned Value

This is the value of the planned (not actual) work performed by the status date, measured in currency.

For example, based on the previous example, if 40% of the work is completed on day 3, then BCWP is $400.

 

Mar 10

Mar 11

Mar 12

Mar 13

Mar 14

Total

BAC

$200

$200

$200

$200

$200

$1000

BCWS

$200

$200

$200

 

 

$600

BCWP

$200

$200

$ 0

 

 

$400

Example Actual Cost of Work Performed (ACWP) or the Actual Cost

This is the total of direct and indirect costs incurred in performing work during a given period. Assume that the task's actual cost (ACWP) at the status date is $750.

 

Mar 10

Mar 11

Mar 12

Mar 13

Mar 14

Total

BAC

$200

$200

$200

$200

$200

$1000

BCWS

$200

$200

$200

 

 

$600

BCWP

$200

$200

$ 0

 

 

$400

ACWP

$250

$200

$300

 

 

$750

This earned value analysis identifies discrepancies between ACWP, BCWS, and BCWP— problems for which the user can then take immediate steps to remedy.

Earned Value and Derived Measures

From the examples above, Unifier will calculate the following values:

Cost Variance

Cost Variance (CV) is the difference between a task's estimated or budgeted cost and its actual cost. A negative variance indicates the project is over budget.

  • CV = BCWP - ACWP       Example: $400 - $750 = -$3

 

Scheduled Variance

Scheduled Variance (SV) is the difference between the current progress and the scheduled progress of a task, in terms of cost. It is a comparison of the amount of work performed during a given period of time to what was scheduled to be performed. A negative variance means the project is behind schedule.

  • SV = BCWP - BCWS        Example: $400 - $600 = -$200

 

Cost Performance Index

Cost Performance Index (CPI) is the ratio of budgeted costs of work performed to actual costs of work performed. A value of less than 1(less than 100%) indicates that the project is over budget; you are getting less work per dollar than planned.

  • CPI = BCWP/ACWP      Example: 400/750 = 0.53 or 53%

 

Scheduled Performance Index (SPI)

Schedule Performance Index (SPI) is the ratio of budgeted costs of work performed to budgeted costs of work scheduled. A value of less than 1 (less than 100%) indicates that the project is behind schedule.

  • SPI = BCWP/BCWS      Example: 400/600 = 0.67 or 67%

 

Cost Schedule Index

The Cost Schedule Index (CSI) reflects the relationship between CPI and SPI. CSI value should be close to 1.0. The farther the value from 1.0, then project recovery becomes more difficult to achieve.

  • CSI = CPI x SPI      Example: 0.53 x 0.67 = 0.3551

 

To Complete Performance Index (TCPI)

The To Complete Performance Index (TCPI) is the ratio of the work remaining to be done to funds remaining to be spent, as of the status date. A TCPI value greater than 1 indicates a need for increased performance; less than 1 indicates performance can decrease. This helps determine how much of an increase in performance is necessary on the remaining project tasks in order to remain within budget.

  • TCPI = (BAC - BCWP) / (BAC - ACWP)  Example: ($1000 - $400) / ($1000 - $750) = 2.4

 

Estimate At Completion

Estimate at Completion (EAC) is the expected total cost of a task or project, based on the performance as of status date.

  • EAC = ACWP + [(BAC - BCWP) / CPI]  Example: $750 + [($1000 - $400) / 0.53] = $1882

 

Variance At Completion

VAC is the difference between the Budget At Completion (BAC) and the Estimate At Completion (EAC).

  • VAC = BAC - EAC       Example: $1000 - $1882 = -$882

 


Last Published Monday, June 3, 2024