- Planned Value (PV) - Authorized budget that has been assigned to scheduled work.
- Earned Value (EV): Measure of the work performed in terms of the budget for that work.
- Actual cost (AC): Total cost incurred to carry out the work measured by earned value.
- BAC: Budget at completion
- EAC: Estimate at completion
- ETC: Estimate to complete
EAC = AC + (BAC – EV)
ETC = EAC – AC
EV =%Physical Advancement × BAC
Earned Value (EV) is the value of work performed expressed in terms of the approved budget allocated to such work for a scheduled activity or itemized work structure. Earned value is also called Budgeted Cost of Work Performed (BCWP).
If you were the director of the project, and the sponsor of the project asked you today in what situation the project is, what would you say? The first thing you could look at is that the real cost (AC) to date is higher than the earned value (EV), or what is the same, the value of the work done is below its real cost (Cost Variance CV = EV-AC <0). A priori, it might seem that this extra cost is not justified, but in order to reach that conclusion, we need to know what the project's progress status is compared to what was planned. Again, if we compare the earned value with the planned value (Schedule Variance SV = EV-PV <0), we realize that the earned value (EV) is also below the planned (PV), a symptom that the project You are not meeting the initially planned deadlines. Therefore, the project manager will have no choice but to inform the sponsor that the project has cost overruns and is behind schedule. Faced with this assertion, the sponsor asks the project manager what the final cost estimate of the project is upon completion. After making the appropriate calculations considering the current trend, the director / director of the project observes that the final forecast of EAC costs is higher than the project budget (see graph).
The Variation of Schedule SV (Schedule Variance): It is the difference between the EV and PV, that is, we compare the physical progress with that planned at a certain time, as a result we can infer that the project is behind or ahead of the planning:
SV = EV-PV
When SV is positive; ie EV> PV, we are creating more than we planned, we are doing better than expected. 😀
But if SV is negative; that is, EV <PV, we are creating less than we planned; I mean, we are behind. 😢 This is why it is called a schedule variance.
SPI (Schedule Performance Index):
This factor allows us to determine if progress is above or below the planned schedule and by what proportion:
SPI = EV / PV
When SPI> 1; that is, EV> PV, it happens the same as when SV is positive,
When 0 <SPI <1; that is, EV <PV, it happens the same as when SV is negative.
The Cost Variation
For example, it is exposed with the variable CV (Cost Variance), which aims to determine the space that exists between the physical progress and the actual cost executed:
CV = EV-AC
When CV is positive; that is, EV> AC, we are creating more than we spend, we are doing better than expected. 😀
But if CV is negative; that is, EV <AC, we are creating less than we spend; that is, we are over budget. 😢 That is why it is called a cost variance.
Performance Indices
- Schedule Performance Index (SPI). SPI = EV / PV
- Cost Performance Index (CPI). CPI = EV / AC
- To Complete Performance Index (TCPI). TCPI = (BAC - EV) / (BAC - AC).
Forecasts
Estimated at Completion (EAC). It is the forecast of the final cost. It can be calculated in different ways:
EAC = BAC - SV. Future costs will not be the same as those considered in the PMB because the cost variations were atypical.
EAC = BAC / CPI. Future costs will be calculated based on the cost performance efficiency ratio to date.
EAC = BAC / (CPI * SPI). Future costs will be calculated based on cost performance ratios and schedule to date.
EAC = AC + New estimate for remaining work.
Estimated to Complete (ETC). ETC = EAC - AC
Variation at Completion (VAC). VAC = BAC - EAC
VAC% = VAC / BAC
Cost Performance Index at Conclusion (CPIAC). CPIAC = BAC / EAC
There is an emerging approach that takes measurements based on time units rather than cost units to calculate schedule performance:
Time Estimate at Completion (EAC t).
Forecast the duration of the project. It is recommended to obtain it from an analysis of the project network, although an approximate estimate of the final duration could also be obtained using the SPI, in case the trend continues:
EACt = (BAC / SPI) / (BAC / Duration of the PMB) = Duration of the PMB / SPI
Time Variance at completion (VACt). VACt = Duration of PMB - EACt
VACt% = VACt / Duration of PMB
Time Schedule Performance Index at Conclusion (SPIACt). SPIACt = Duration of PMB / EACt
