HKSM

Earned value analysis (EVA) is a technique that compares planned work, accomplished work, and actual cost to assess project performance and forecast outcomes. It uses variances and indices to reveal cost and schedule efficiency so the team can take timely action.

Key Points

• EVA integrates scope, schedule, and cost to provide an objective view of performance.
• Core data elements are Planned Value (PV), Earned Value (EV), and Actual Cost (AC).
• Key results include Cost Variance (CV), Schedule Variance (SV), Cost Performance Index (CPI), and Schedule Performance Index (SPI).
• Forecasts such as Estimate at Completion (EAC), Estimate to Complete (ETC), Variance at Completion (VAC), and To-Complete Performance Index (TCPI) guide future expectations.
• Requires a stable, approved baseline and consistent progress measurement rules.
• Best suited to discrete, measurable work packages with clear acceptance criteria.

Purpose of Analysis

EVA answers whether the project is getting the planned value for the money and time spent, and what outcome is likely if current trends continue. It supports proactive control by highlighting variances early.

• Detect cost and schedule issues before they become critical.
• Understand performance trends, not just point-in-time results.
• Produce data-driven forecasts for stakeholders and decision makers.
• Inform corrective and preventive actions, replanning, or change requests.

Method Steps

• Establish the performance measurement baseline with budgeted cost by work package and time (BAC, PV curve).
• Define how progress will be measured (percent complete rules, earned value techniques).
• Collect actual costs (AC) and objectively determine earned value (EV) for the status date.
• Compute CV = EV − AC and SV = EV − PV; compute CPI = EV/AC and SPI = EV/PV.
• Analyze causes and impacts; assess trends using cumulative metrics and charts.
• Forecast EAC and ETC using suitable formulas; calculate VAC = BAC − EAC and TCPI.
• Recommend actions and update plans, baseline only through approved changes.

Inputs Needed

• Scope baseline and WBS with work packages and control accounts.
• Cost baseline with Budget at Completion (BAC) and time-phased PV.
• Schedule baseline and measurement dates or reporting periods.
• Defined percent-complete rules and EV earning methods (e.g., 0/100, 50/50, weighted milestones).
• Actual cost records, timesheets, accruals, and procurement spend.
• Approved changes, risk data, assumptions, and resource rates/calendars.

Outputs Produced

• Performance metrics: CV, SV, CPI, SPI, trends, and control charts.
• Forecasts: EAC, ETC, VAC, and TCPI for cost and schedule guidance.
• Variance analyses with identified drivers and recommended actions.
• Stakeholder reports and updates to risk responses and plans as needed.

Interpretation Tips

• CPI or SPI of 1.0 means on target; less than 1.0 means overrun or delay, greater than 1.0 means better than plan.
• Use cumulative CPI and SPI for trend reliability; single-period spikes can be misleading.
• Choose EAC formulas based on context, e.g., EAC = BAC/CPI if current cost performance is expected to persist.
• TCPI greater than 1.0 means the remaining work must be done more efficiently than to date to meet the target.
• Reconcile EV with physical progress and quality; high EV without meeting acceptance criteria is not real progress.
• Late in the project, SPI based on cost EV may be less informative for schedule than critical path metrics.

Example

Project BAC = 200,000. At month 3, PV = 120,000, EV = 100,000, AC = 150,000.

• CV = EV − AC = 100,000 − 150,000 = −50,000 (over budget).
• SV = EV − PV = 100,000 − 120,000 = −20,000 (behind schedule).
• CPI = EV/AC = 100,000/150,000 = 0.67; SPI = EV/PV = 100,000/120,000 = 0.83.
• EAC (trend persists) = BAC/CPI = 200,000/0.67 ≈ 298,500; VAC = 200,000 − 298,500 ≈ −98,500.
• TCPI to meet BAC = (BAC − EV)/(BAC − AC) = (200,000 − 100,000)/(200,000 − 150,000) = 100,000/50,000 = 2.0 (very challenging).

Conclusion: The project is over budget and behind schedule; without corrective action, the final cost will likely exceed the original budget.

Pitfalls

• Weak or inconsistent percent-complete rules that inflate EV.
• Using EVA without an approved, time-phased baseline.
• Not accounting for approved scope changes, leading to distorted metrics.
• Recording costs in the wrong period or excluding committed costs.
• Relying only on indices without root-cause analysis or critical path review.
• Applying EVA to purely level-of-effort activities as if they were discrete work.

PMP Example Question

A project reports EV = 400, AC = 500, and PV = 450 at the status date. What is the best interpretation and action?

1. The project is under budget and ahead of schedule; continue as planned.
2. The project is over budget and behind schedule; analyze drivers and plan corrective actions.
3. The project is over budget but ahead of schedule; slow down work to save cost.
4. The project is under budget but behind schedule; crash the schedule to recover time.

Correct Answer: B — The project is over budget and behind schedule; analyze drivers and plan corrective actions.

Explanation: CV = EV − AC = −100 (over budget) and SV = EV − PV = −50 (behind schedule). Address root causes and consider corrective actions and reforecasting.