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 he planned value is greater than the earned value and the project is behind schedule. A positive variance means that expenditure is ahead of schedule.

The variances can be reported using standard task fields from Project pre-defined reports. There is an earned value report under the Cost section of standard reports that 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.

Tracking earned value results

Tracking earned value results

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 provide 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. When used to adjust the remaining budget it gives an indication of the expected final cost of the project. Project provides EAC as a calculated estimator of total cost using past performance.

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

Conclusion

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