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(BAC [(cumulative CPI xEV) SPI)] cumlative
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Variance at Completion (VAC)
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Table 7-6 EVM Formulas
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How do we know where we are in the project Can you show an example Earned value management is a good way to tell where you are on your project The important thing to remember if you are planning to use EVM is that you need to set it up early in the project life cycle You need to determine which progress-reporting rule (or rules) mentioned earlier in this chapter you plan to use Also, you need to be consistent in how you credit the work performed and how you report the progress This may take some education for both you and your project team See Figure 7-3 for an example of how the earned value key components would map out in a chart
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EAC BAC VAC
$ PV AC EV Slippage Now Point in time checkpoint Cost Variance
Schedule Variance
Time
Figure 7-3 Sample earned value chart
An important aspect of calculating earned value is that it is typically a point in time checkpoint, and to be effective it should be checked on a regular basis (early and often) Let s take the chart shown in Figure 7-3 and do the math
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Earned Value Example Using BEC Case Study
You are the PM on a new project to build the sidewalls (protective barrier) for an ice hockey game The assumptions used to calculate EV for this project are as follows:
You have four days to build four walls for the ice arena The duration estimate indicates it will take one day to build each side of the arena The estimated cost (planned value) is $1,000 per wall
A checkpoint at Day 3 shows you have only completed two-and-a-half sides of the ice arena The information in the questions, tables, and answers that follow will guide you through the process of determining earned value on this project Question 1: What are the earned value management key component values (For the answer, see Table 7-7)
EVM Component Formula or Results
Planned Value (PV) $3,000 PV = Day 1 PV + Day 2 PV + Day 3 PV or PV = $1000 + $1000 + $1000 Actual Cost (AC)
Comments
Checkpoint at Day 3 of a four-day project Planned value/cost at $1,000 per day is as follows: PV = 3 * $1,000 = $3,000
You would only know this from the $2,900 AC = dollars spent at this time For example: hours worked by the team times, the cost per hour, and of course Labor ($1,500) the actual cost of equipment and + Materials ($800) building materials spent + Equipment ($600) $2,500 EV = Day 1 EV + Day 2 EV + Day 3 EV (EV = $1000 + $1000 + $500) or EV = 25 * $1,000 = $2,500 Two and a half sides of the ice arena are completed by Day 3 Therefore, the value of the work performed (completed) is $2,500
Earned Value (EV)
Budget at Completion (BAC)
$4,000 Four sides at $1,000 per side, BAC = 4 * $1,000 = $4,000
The BAC is usually set at the beginning of the project and can only change through approved change control
Table 7-7
Key Components for Earned Value Management
7: Project Cost Management
Earned Value Variances
Formula and Results
Interpretation
Schedule Variance (SV) SV = EV PV Negative means you are behind schedule (the $2,500 $3,000 = $500 project is delayed) or the schedule was not estimated accurately Cost Variance (CV) CV = EV AC Negative means your have overspent the budget $2,500 $2,900 = $400 or underestimated the cost of the project
Table 7-8
Schedule and Cost Variance Calculations
Question 2: Is the project on schedule and on budget (See Table 7-8 for the answers) Answer: In this case, the project is behind schedule and the budget is overspent
Other key components of EVM are CPI and SPI; these indexes help you forecast the remaining cost to your project Using the information provided in the preceding earned value case study example, calculate the run rate (CPI and SPI) to see if you are getting your money s worth of performance for the money spent on setting up the walls at the ice arena Question: What are the CPI and SPI for the ice arena project, and are you receiving the work performance or cost performance you had planned for (See Table 7-9 for the answer) Answer: Based on the results in the table (and the interpretation), the answer is no on both counts, which means you will miss your target to complete as well as missing your budget
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