Project scheduling – Earned Value analysis

Introduction

In the last part of this mini-series on earned value articles we discuss the analysis of results and using the information to manage the project.

Measuring performance and reporting

The project performance is measured using two differences: cost variance CV and schedule variance SV. These variances are converted to percentages for convenience and to compare the performance of projects of different sizes.

\%CV = \displaystyle\frac{BCW\!P - ACW\!P}{BCW\!P}

A negative %CV result means that the project is over-spending and a positive result means that the project is under-spending.

\%SV = \displaystyle\frac{BCW\!P - BCW\!S}{BCW\!S}

A negative %SV means that the project [value] is behind schedule. A positive variance means that expenditure is ahead of schedule. This is an indicator of the timing of expenditures, and although it correlates with the overall project timing, the relationship is not necessarily linear.

The variances can be reported using standard task fields from Project pre-defined reports. The earned value report under the Cost section of standard reports shows key earned value information.

Analysis of results

A useful way to analyse earned value results is to plot cost variance versus schedule variance. At every period one data point is added to a chart and trends can be monitored. In practice %CV and %SV are used together with a pre-determined tolerance band.

EV-chart

A value of +/- 5% is typical for the tolerance band. The data point can sit in one of nine sectors of the chart. These are some suggested interpretations. The red boxes represent serious issues that must be addressed to protect the outcome of the project. The green boxes should offer lessons to improve the quality of future projects.

Forecasting

It is generally agreed that the performance of the project gets established at about one-third into execution and remains relatively constant for the duration of the entire project.

Cost Performance Index (CPI) measures the productivity characteristic of the project;  it provides an indication of the expected final cost of the project when used to adjust the remaining budget. Project provides EAC as a calculated estimator of total cost using past performance.

EAC = ACWP +\displaystyle\frac{BAC - BCW\!P}{CPI} = \frac{BAC}{CPI}

Conclusion

This is the last article in the project scheduling series. The simple tips discussed over the last 12 articles give a basic understanding of project scheduling and the rich functionality offered by most tools. Knowing how to use and understanding scheduling capabilities greatly enhances the management of projects.