Earned Value Analysis

Revision as of 15:47, 10 September 2016

Abstract

In order to measure performance in terms of cost, time and work progress, the Earned Value Analysis (EVA) is introduced as a suitable method, offering quantitative analysis techniques as well as objective performance indicators. Besides giving an overview of the method itself and the steps, which must be followed in order to carry out an EVA, the requirements on both structural and methodological level are presented and the key benefits are outlined. In addition to its’ primary area of application as a tool within project controlling, the extended usability of the method in other key functions of a company is shown. All technical contents are being demonstrated based on illustrative examples.

Definition

Quantitative technique Compares the budgeted project costs, actual costs and value of the work achieved to determine the status of the project the likely completion of the project out-turn cost of the project Estimates work progress and related cost part of Earned Value Management as a tool for project controlling

Earned Value (EV) The percentage of the Total Budget actually completed at a point in time (Lukas 2008)

Planned Value (PV), per Activity Can be determined by allocating a proportion of the total PV to each activity

Value- Related Indicators Cost Variance = EV - Actual Cost Schedule Variance = EV - PV

Cost Performance: Budgeted Cost of work scheduled (BCWS) Budgeted Cost of work performed (BCWP)

KPIs: Schedule Performance Index (SPI) = EV / PV (%) Cost performance Index (CPI) = EV / Actual Cost (%)

Requirements

In order to successfully execute an Earned Value Analysis, the following systematic preconditions and requirements must be fulfilled.

Time-based schedule The measurement of progress is made on the basis of a work schedule, which must be defined and agreed, including a clear timeline and an estimation of

Work Breakdown Structure All tasks and their specific scope must be defined seperately in the form of a work breakdown structure. This is necessary to control the progress of individual activities, as well as for an exact allocation of cost.

Cost Assessment A cost collection system including an appropriate association of cost estimates, which can then be cumulated in order to obtain the the actual cost, as well as the cost for given time periods, e.g. per week/month

Progress measurement An objective, consistent, quantitative method of assessing progress

Responsibility/ authority matrix

Monitoring and review process of all variables in order to identify changes

‘Implementing Best Practice in Hospital Project Management Utilising EVPM methodology’, Raf Dua (1999):

Areas of application

Organizational Level - Earned value management System (EVMS)

Project Controlling

Forecasting

Key Benefits

Example