EVM – Do You Really Know What the
Numbers Mean?
Seth Huckabee
EVP, PMP, PMI-SP
Booz | Allen |Hamilton
Agenda
• Part I: The Project Management Context
• Part II: Earned Value Management Overview
• Part III: Earning Value
– Metrics, Variances, Root Causes, and Variance Analysis
• Scenario I: Work Package with 0/100 EVT, On Time and
Over Budget
• Scenario 2: Work Package with 0/100 EVT, Behind
Schedule and Over Budget
– Forecasting
• Scenario 3: Two Similar Work Packages Implemented
Sequentially
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Agenda
 Part I: The Project Management Context
• Part II: Earned Value Management Overview
• Part III: Earning Value
– Metrics, Variances, Root Causes, and Variance Analysis
• Scenario I: Work Package with 0/100 EVT, On Time and
Over Budget
• Scenario 2: Work Package with 0/100 EVT, Behind
Schedule and Over Budget
– Forecasting
• Scenario 3: Two Similar Work Packages Implemented
Sequentially
3
Where We Are in the Project Lifecycle
• Initiating efforts are complete (other than those related future baseline
changes)
• Planning efforts are complete
• Executing is underway
• EVM is part of Monitoring and Controlling, which is underway
PM Metrics
Produced
Initiating
Planning
Executing
Monitoring
&
Controlling
Closing
4
Sample WBS with Control Accounts,
Work Packages, and Planning Packages
5
An Integrated PM System
Was Created During the
Planning Phase
All data in PM artifacts
align with WBS elements
directly or indirectly
WBS Element
Contract Line Item Responsible Organization Estimated Cost
1.0 Project X
1.1 Design, Code, Unit Test
1.1.1 Design (CA)
1, 4, 6
1.1.1.1 WP #1
1.1.1.2 WP #2
1.1.2 Code and Unit Test (CA)
2, 5, 7
1.1.2.1 WP #1
1.1.2.2 PP #2
1.2 System Integration, Move to Production (CA)
3, 8
1.2.1 PP #1
1.2.2 PP #2
1.2.3 PP #3
1.2.4 PP #4
Work and Planning Packages
represent tasks in schedule
Aligned with
Statement
of
Work
Org element #1
$100K
Org element #2
$300K
Org element #3
$50K
Aligned with
Organizational
Breakdown
Structure
Aligned
with
Cost
Estimate
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The Performance Measurement Baseline
• A Performance Measurement Baseline (PMB) has been established,
against which we measure progress
• The PMB has been broken into periods of time for metrics and
reporting purposes (i.e. weeks, months, or quarters)
• The PMB has been broken into Control Accounts with associated
technical requirements, cost estimates, schedule durations, resources,
risks, etc.
• We measure progress on the Work Packages within each Control
Account
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Agenda
• Part I: The Project Management Context
 Part II: Earned Value Management Overview
• Part III: Earning Value
– Metrics, Variances, Root Causes, and Variance Analysis
• Scenario I: Work Package with 0/100 EVT, On Time and
Over Budget
• Scenario 2: Work Package with 0/100 EVT, Behind
Schedule and Over Budget
– Forecasting
• Scenario 3: Two Similar Work Packages Implemented
Sequentially
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What Is the Essential Difference between
Traditional Management and Earned Value Management?
• Q: Which two data sources does Traditional Management use to
derive its status?
A: Budgeted Cost and Actual Cost
• Q: Which three data sources does Earned Value Management
use to derive its status?
A: Budgeted Cost, Actual Cost and Earned Value
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The Data We Need for EVM
• How much work should have been completed by now – the planned
value of the work
– Based on cost estimates
– Budgeted Cost of Work Scheduled (BCWS) or Planned Value (PV)
– Budget at Completion (BAC) is the planned value for a given WBS level
• How much work has actually been done – the earned value
– Progress measured in terms of hours/dollars, at the budgeted value
– Budgeted Cost of Work Performed (BCWP) or Earned Value (EV)
• How much has the completed work actually cost – the actual cost
– Extracted from the accounting system
– Actual Cost of Work Performed (ACWP) or Actual Cost (AC)
• From these three data points, we are able to calculate all the
metrics needed for Earned Value Management
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Example of Traditional Management: Three
Months of Activity on a Single Work Package
Jan Feb Mar BAC
WP #1
BCWS
ACWP
200
220
200
• BCWS = Planned Value (derived from cost estimate)
• ACWP = Actual Cost (from accounting system)
• BAC = Budget at Completion (total planned value for the WP)
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Agenda
• Part I: The Project Management Context
• Part II: Earned Value Management Overview
 Part III: Earning Value
 Metrics, Variances, Root Causes, and Variance Analysis
• Scenario I: Work Package with 0/100 EVT, On Time
and Over Budget
• Scenario 2: Work Package with 0/100 EVT, Behind
Schedule and Over Budget
– Forecasting
• Scenario 3: Two Similar Work Packages Implemented
Sequentially
12
How Do We Earn Value on a Work Package?
• The type of effort and the time-phasing of the resources are
usually the determining factors in deciding which Earned Value
Technique (EVT) to assign to a work package
• Some frequently used EVTs are listed in the table below:
EVT
0/100
Time Span of Work
One reporting period
% Start, % Finish Two reporting periods
(e.g. 50/50, 25/75,
etc.)
Weighted
Milestones
Level of Effort
How Value is Earned on the Work Package
100% of budget is earned when work package is completed
Start percentage of budget is earned when work package begins
Finish percentage of budget is earned when work package is
completed
Three or more reporting periods The budget associated with each milestone is earned once the
milestone is completed
Any
No interim milestones exist; budget is earned with each
reporting period's completion (BCWP = BCWS)
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Scenario 1: Work Package with 0/100 EVT,
On Time and Over Budget
Jan
Feb Mar BAC
WP #1
EVT
BCWS
BCWP
ACWP
0/100
200
200
220
200
• WP is expected to start and finish within one reporting period,
so EVT is 0/100 (zero% earned at start; 100% at finish)
• BCWS = Planned Value (derived from cost estimate)
• The WP actually did finish in January, as planned, so Jan BCWP = 200
• ACWP = Actual Cost (from accounting system)
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Variances and Metrics – Cost
• Cost Variance (CV)
– The arithmetic difference between BCWP and ACWP to perform work
– CV = BCWP – ACWP
– Positive is favorable (work cost less than planned for the period)
– Negative is unfavorable (work cost more than planned for the period)
• Cost Performance Index (CPI)
– Cost variance as a ratio; indicates how efficiently budget is being spent
– CPI = BCWP / ACWP
– Above 1.0 is favorable (work is being accomplished more efficiently
than planned)
– Below 1.0 is unfavorable (work is being accomplished less efficiently
than planned; for example, if the CPI is .50: for every dollar spent, the
project has earned 50 cents worth of completed work)
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Variances and Metrics – Schedule
• Schedule Variance (SV)
– The arithmetic difference between BCWP and BCWS; relates the
schedule status in terms of dollars (Earned Schedule uses time)
– SV = BCWP – BCWS
– Positive is favorable (planned work was completed ahead of schedule)
– Negative is unfavorable (planned work was not completed as planned)
• Schedule Performance Index (SPI)
– Schedule variance as a ratio; indicates how efficiently work is being
accomplished
– SPI = BCWP / BCWS
– Above 1.0 is favorable (more work was accomplished than planned
work during the period)
– Below 1.0 is unfavorable (planned work was not completed as
planned; the project may be behind schedule if the incomplete work is
on the critical path)
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Scenario 1: Work Package with 0/100 EVT,
On Time and Over Budget With Calculations
Jan
Feb
Mar
BAC
WP #1
EVT
0/100
BCWS
200
200
BCWP
200
ACWP
220
Variances and Metrics by Period
CVcur
-20
CPIcur
0.91
SVcur
0
SPIcur
1.00
Calculations
BCWP - ACWP
BCWP/ACWP
BCWP - BCWS
BCWP/BCWS
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Potential Root Causes of Unfavorable Cost
Performance (CV < 0 or CPI < 1.0)
• Poor planning – cost estimate was flawed
• Unclear requirements or scope creep
• Work more complex than anticipated
• More revisions and rework than anticipated
• Cost of labor or material more than anticipated
• Improper earned value technique used
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Potential Root Causes of Favorable Cost
Performance (CV > 0 or CPI > 1.0)
• Poor planning – cost estimate was flawed
• Unexpected cost efficiencies were realized
• Work less complex than anticipated
• Fewer revisions and rework than anticipated
• Cost of labor or material less than anticipated
• Improper earned value technique used
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Potential Root Causes of Unfavorable
Schedule Performance (SV < 0 or SPI < 1.0)
• Manpower shortage
• Scope creep
• Late vendor delivery
• Delayed customer/sponsor feedback/direction/acceptance
• Work more complex than anticipated
• More revisions and rework than anticipated
• Improper earned value technique used
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Potential Root Causes of Favorable
Schedule Performance (SV > 0 or SPI > 1.0)
• Realized efficiencies
• Work less complex than anticipated
• Fewer revisions and rework than anticipated
• Subcontractor ahead of schedule
• Improper earned value technique used
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Scenario 1: Work Package with 0/100 EVT,
On Time and Over Budget With Variance Analysis
Jan Feb Mar BAC
Status for the January Period
WP #1
Cost: The Work Package is exceeding
EVT
0/100
its budget, has a negative cost variance
BCWS
200
200
($20), and has a cost performance
BCWP
200
index of less than 1.0 (.91).
ACWP
220
Variances and Metrics by Period
Calculations Schedule: The Work Package is on time
CVcur
-20
BCWP - ACWP (in dollar terms), has a zero schedule
CPIcur
0.91
BCWP/ACWP variance, has a schedule performance
SVcur
0
BCWP - BCWS index of 1.0. Must check schedule for
SPIcur
1.00
BCWP/BCWS status in terms of time.
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Scenario 2: Work Package with 0/100 EVT,
Behind Schedule and Over Budget
Jan
Current
Feb
Current
WP #1
EVT
0/100
BCWS
200
BCWP
0
ACWP
0
Variances and Metrics
CV
0
CPI
0.00
SV
-200
SPI
0.00
Status
Behind
Schedule
(by $200)
Mar
Current
0
200
220
-20
0.91
200
N/A
Over Budget No Activity
(by $20)
& Ahead of
Schedule
(by $200)
BAC
200
Calculations
BCWP - ACWP
BCWP/ACWP
BCWP - BCWS
BCWP/BCWS
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Agenda
• Part I: The Project Management Context
• Part II: Earned Value Management Overview
 Part III: Earning Value
– Metrics, Variances, Root Causes, and Variance Analysis
• Scenario I: Work Package with 0/100 EVT, On Time and
Over Budget
• Scenario 2: Work Package with 0/100 EVT, Behind
Schedule and Over Budget
 Forecasting
• Scenario 3: Two Similar Work Packages Implemented
Sequentially
24
Forecasting Performance
• The main purpose of EVM is to provide more accurate predictions about
the future than would otherwise be the case
• The previous slides have described the past only (CV, CPI, SV, and SPI)
• These historical metrics and variances, along with our Integrated PM
System, allow for an empirical approach to evaluating the past, assessing
our current status, and, most importantly, forecasting the future
• Estimate to Complete (ETC)
– The expected future cost needed to complete an activity, a group of
tasks, or the project
– Usually involves adjusting the BAC for performance to date
– ETC = BAC – EV or ETC = (BAC – EV)/CPI
• To-Complete Performance Index (TCPI)
– A value indicating how we must perform for the remainder of the
project in order to meet our desired cost goal
– TCPI = (BAC – BCWP) / (EAC – ACWP)
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Forecasting the Finish
• Estimate at Completion (EAC)
– The expected total cost of an activity, work package, control account,
or the project at the completion of its scope
– Usually involves adjusting the BAC for performance to date
– EAC = BAC/CPI or EAC = AC + (BAC-EV)/CPI
– (BAC-EV) is sometimes called Work Remaining (WR)
• Variance at Completion (VAC)
– The arithmetic difference between the Budget at Completion (BAC)
and the Estimate at Completion (EAC)
– VAC = BAC – EAC
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Recall Scenario 1: 0/100 Work Package
On Time and Over Budget With Calculations
Jan
Feb
Mar
BAC
WP #1
EVT
0/100
BCWS
200
200
BCWP
200
ACWP
220
Variances and Metrics by Period
CVcur
-20
CPIcur
0.91
SVcur
0
SPIcur
1.00
Calculations
BCWP - ACWP
BCWP/ACWP
BCWP - BCWS
BCWP/BCWS
27
Scenario 3: Two Similar Work Packages
Implemented Sequentially
• The project’s scope is to install two steering wheels on two
similar vehicles between January and April
• Each steering wheel installation is a Work Package and has the
same estimated cost ($200) and same EVT (0/100)
• Today’s date is the first day of March
• WP #1 was described in Scenario 1: we exceeded our estimate
by $20 (CV), have a CPI of less than 1.0 (.91) and finished the
work on time
• WP #2 is scheduled to be completed in April
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Scenario 3: Forecasting
Historical Data
Jan
WP #1
EVT
0/100
BCWS
200
Future Plan
Forecast
April
April
WP #2
WP #2
EVT 0/100 EVT 0/100
BCWS 200 BCWS 200
BCWP
200 BCWP ?
ACWP
220 ACWP ?
CVcur
-20 CVcur
?
CPIcur
0.91 CPIcur
?
SVcur
0 SVcur
?
SPIcur
1.00 SPIcur
?
Forecast
Project Finish
Calculations
BAC
400
200 + 200
EAC
440 220 (AC) + 220 (ETC)
VAC
-40
400 - 440
On time based on SV of 0
and SPI of 1.0 from WP
BCWP 200 #1
Over Budget based on CV
of -20 and CPI of .91
ACWP 220 from WP #1
Based on cost
CVcur
-20 performance on WP #1
Based on cost
CPIcur 0.91 performance on WP #1
Based on schedule
SVcur
0 performance on WP #1
Based on schedule
SPIcur 1.00 performance on WP #1
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Overview of EV Metrics and Variances
Project Start
Past
Reporting
Periods
Project Finish
Today's Date
Future
Period 1
Current
Period
Cumulative to Date
Variances,
Metrics, and
Calculations
30
Questions?
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Contact Information
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Recommended EVM Educational Sources
•
A Practical Guide to Earned Value Project Management, Second Edition,
by Budd, C. I., & Budd, C. S. (2010). Vienna, Va.: Management Concepts.
http://web7.pmds.com/mConcepts_ebiz/ProductDetail/tabid/55/Default.aspx?ProductId=182.
•
DAU EVM ‘Gold Card’ (Nov 2010), https://acc.dau.mil/CommunityBrowser.aspx?id=19577.
•
Earned Schedule, by Walter H. Lipke (2009). Lulu Publishing.
http://www.earnedschedule.com/.
•
EVM Classes by Ray Stratton, http://www.mgmt-technologies.com/seminars.html.
•
GAO Cost Estimating and Assessment Guide - Best Practices for Developing and
Managing Capital Program Costs (GAO-09-3SP). (2009). U.S. Government Accountability
Office. Free download at http://www.gao.gov/products/GAO-09-3SP.
•
Project Management Using Earned Value, Second Edition, by Humphreys & Associates,
https://humphreys-assoc.com/product_view.php?product_id=3.
•
Ray Stratton's EVPrep™ Earned Value Professional (EVP) Exam Study Guide,
http://www.mgmt-technologies.com/EVPguide.html.
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Recommended EVM Certification
• Earned Value Professional (EVP) by the Association for the
Advancement of Cost Engineering International (AACEI),
http://www.aacei.org/educ/cert/EVP/.
– Experience Required: At least 8 full years of professional
experience, of which up to 4 years may be substituted by a
college/university degree.
– The EVP examination consists of four parts (1 hour 45
minutes each).
– Current 191 individuals worldwide hold the certification, 10 of
whom are employees of Booz Allen Hamilton.
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