Extra on EVA & Trend Analysis | My Assignment Tutor

Module 1Extra on EVA & Trend AnalysisPROJ6003 – PROJECT EXECUTION AND CONTROLIbrahim Abdallah[email protected]Learning FacilitatorMaster of Global Project Management• EVA: SV (Schedule Variance) and SPI (SchedulePerformance Index=EV/PV) are used to assess themagnitude of variation of the original schedulebaseline. Measures efficiency of the work performedcomparing the earned value to the planned value. If inSPI, ratio is greater than 1, than the project is ahead ofschedule.• VERY GOOD VIDEO that summarises EVA:https://www.youtube.com/watch?v=U313VMm2r7QControl Schedule – Tools & TechniquesEarned Value Analysis – SV & SPIControl Costs – Tools and TechniquesPlanned valueEarned valueActual costSchedule Variance =EV-PVCost Variance = EV – ACSchedule performanceindex = EV/PVCost performance index =EV/AC• It is just a standard way to measure a project’s progress at any point in timeusing money figure.• Earned Value is necessary to provide a realistic estimate of performanceagainst a time-phased budget.• Compares the Performance Measurement Baseline to the actual schedule andcost performance.• EVM integrates the scope, schedule and cost baselines to form thePerformance Measurement Baseline.• EVM develops and monitors three key dimensions for each work package andcontrol account:• Earned value = budgeted cost of work performed = the % of work completed using theoriginal budget• Planned value = budgeted cost of work scheduled• Actual cost = actual cost of work performed4EVA explained…1. Earned Value Management (Technique)EVM is an objectivetechnique to measure theproject performance.The underpinning notion is thatany amount of completedproject work creates valueof the project.Using EVM, the current projectperformance is measured bycomparing the EV against thebaseline or Planned Value(PV).Larson and Gray (2011, p. 459)• Planned Value (PV) is the value of what should have been completed (what hasbeen planned).• Earned Value (EV) is the value of what work has been completed.• Actual Cost (AC) is the actual cost or how much we have currently spent.• Schedule Variance (SV) is the difference between Earned Value (what has beencompleted) and Planned Value (What has been planned or should have beencompleted).• The formula is SV = EV – PV and if the result is negative, then the project is behindschedule.• Cost Variance (CV) is the difference between Earned Value (what has beencompleted) and Actual Cost (how much we have currently spent).• The formula is CV = EV-AC and if the value is negative then we are over budget, ie wehave spent more than we should have.6In other words…PMI, 2017, p. 267Larson and Gray (2011, p. 462)CV = EV – ACCV = 200 – 340CV = -140Negative = OverbudgetSV = EV – PVSV = 200 – 300SV = -100Negative = Behind ScheduleEarned Value Interpretation PracticeLarson and Gray (2011, p. 463)EV < PVSV = NEGATIVEBehind scheduleEV < ACCV = NEGATIVEOver budgetEV > PVSV = POSITIVEAhead scheduleEV > ACCV = POSITIVEUnder budgetEV > PVSV = POSTIVEAhead scheduleEV < ACCV = NEGATIVEOver budgetEV < PVSV = NEGATIVEBehind scheduleEV > ACCV = POSITIVEUnder budgetEarned Value Example 2Status ReportPlanned valuesRemember:CV = EV – ACSV = EV – PVUsing Indexes instead of absolute values todetermine the efficiency ratios:Percentage Complete Index (PCIB) = EV/BACPCIB indicates the work accomplished inpercentage of total $ budgeted (BAC)Cost Performance Indicator (CPI) = EV/ACMeasures cost efficiency of the workaccomplished. It is the most accepted index used.It is very accurate, reliable and stable.Schedule Performance Indicator (SPI) = EV/PVMeasures schedule efficiency to date.Another Way of Monitoring ProgressPercentage Complete Index (PCIB) = EV/BACGraphical Interpretation of the values from theprevious example using End of Period 7.Earned Value Practice ActivityPlanned Budget:Actual:Planned Gantt-Chart:AC EV PVSolution: https://www.youtube.com/watch?v=z7b3SYQuqJMAs the project progresses, the project team may develop a forecast for the estimateat completion (EAC) that may differ from the budget at completion (BAC) based onthe project performance.• Forecasting involves making projections of conditions and events in the project’sfuture based on current performance information and other knowledge available atthe time of the forecast.• Forecasts, thus, are generated and updated as a result of the work performancedata (which means, you will need to perform a EVA prior to forecast the project).• There’s a range of EAC calculations that can be used to representdifferent risk scenarios…2. Trend Analysis (Technique)Forecasting – Estimate At Completion1.0 EAC = AC + Bottom-up ETC• This formula is used when original estimation is based on wrongdata/assumptions or circumstances have changed. It calculates actual costsplus new estimate for the remaining work.• ETC (Estimate to Complete) – expected costs to finish all the remaining work.• Required to reestimate the remainder work from bottom up.2. Trend Analysis (Technique) Cont’d2.0 EAC forecast ETC work performed at the planned rateEAC = AC + (BAC – EV)• This method accepts the actual performance to date (favourable or not).• The variance is caused by a one-time event and is not likely to happen again.This formula is used if the future work (ETC) will beaccomplished at the planned rate.• It considers that the BAC can still be used as a means to project future.2. Trend Analysis (Technique) Cont’d3.0 EAC forecast for ETC work performed at the present CPIEAC = BAC / CPI• This formula is used when original estimation is met without any deviation. Itmeans that your project is going well and what it has been predicted to date willbe expected in the future.• CPI is expected to be the same for the remainder of the project.• You are maintaining the CPI and SPI as 1 and you have to continue the projectin the same way. It is always good for a project manager if he or she ismaintaining the CPI and SPI as 1 or more than 1.2. Trend Analysis (Technique) Cont’d4.0 EAC forecast for ETC work considering both SPI and CPI factorsEAC = AC + [(BAC – EV) / (CPI x SPI)]• This formula is used to calculate actual cost to date plus the remaining budgetchanged based on the performance. Not everything is good, you have irregularindexes, so you need to put into the EAC this index to see how much moneyyou will need to finish up the project.• In other words, if both the CPI and SPI influence the remaining work.2. Trend Analysis (Technique) Cont’d3. To-Complete Performance Index (Technique)A measure of the costperformance that is required tobe achieved with the remainingresources in order to meet aspecified management goal.This ratio measures the amountof value each remaining dollar inthe budget must earn to staywithin the budget.TCPI = Work remaining / Funds RemainingTCPI = (BAC-EV)/(BAC-AC)TCPI = (EAC-EV)/(EAC-AC)Any Questions or Concerns?PROJ6003 – PROJECT EXECUTION AND CONTROLDon’t forget!I’m here to facilitate your journey, the rest is up to you!But, when in need, don’t hesitate to contact me via theAsk the Facilitator Forum or at [email protected]

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