EVM is a standard method for monitoring and controlling a project. This analysis method uses a variety of project data and formulae to forecast or establish project performance and health. It is clear that success of a project depends on three factors:
These three constraints are vital and must be adhered to in a project management plan. Each of these three constraints is interrelated and can cause a project to fail. Project managers who are experienced will agree that a project delayed by more than expected will cost more. A project with scope management problems could also have scope creep or change management issues, which can impact both time and cost. EVM is a good way to evaluate project performance periodically since it considers all 3 factors when objectively calculating project health.
EVM implementation involves project metrics like
PV,Ai Present Value are units of currency. They are determined by the work to be completed and the budgeted cost of that work.
EV – Earned value is the measure of actual work done and the budgeted costs of this work performed
AC – Actual Cost is self explanatory. It is the actual expense incurred
Schedule Variance – The variance in the planned value of work and earned value of work is called SV.
CV – Cost Variance refers to the difference between actual and earned value.
Below are the formulae for EVM.
CV = AC – EEV
SV = PV – EV
CPI = AC/EV
SPI = PV / EV
EAC = AC +BAC – EV
EAC = BAC/CPI
EAC = AC + BAC – EV / (SPI – CPI)
CPI stands for Cost Performance Index. A score of 1 or more indicates that the project is performing at its best in terms of cost performance. SPI is Schedule performance Index. A score of 1 or more indicates that the project is on schedule and can be delivered on time. A score below 1 indicates that corrective actions are needed. This is true for both SPI as CPI.
Other terms that can be used in formulas or in EVM are:
EAC stands for Estimate At Completion. It is the final cost of a project at completion.
ETC stands for Estimate To Complete. It is the cost of the project’s remaining costs.
There are many formulae to calculate EAC. However, it is important that you know which formula to use in each scenario. For example, if a project is performing at budgeted rates then equation EAC = AC+BAC–EV.
It is important to note that EAC, ETC and BAC are useful in forecasting performance. Variance analysis resulting from CV, SV and CPI are used for performance reviews and analysis. EVM is a powerful way to professionally manage and control projects. Project managers and stakeholders can trust the forecasted delivery dates, cost estimate forecasts and project management results resulting from this analysis.
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