{"id":1816,"date":"2021-11-09T16:33:46","date_gmt":"2021-11-09T16:33:46","guid":{"rendered":"https:\/\/www.rabio.eu\/rabio\/?p=1816"},"modified":"2024-03-15T11:37:28","modified_gmt":"2024-03-15T11:37:28","slug":"earned-value-management","status":"publish","type":"post","link":"https:\/\/www.rabio.eu\/rabio\/2021\/11\/09\/earned-value-management\/","title":{"rendered":"Earned Value Management"},"content":{"rendered":"\n<h1 class=\"wp-block-heading alignwide has-black-color has-orange-background-color has-text-color has-background has-large-font-size\"><strong>Monitor Project Performance Using Earned Value Management<\/strong><\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">Earned Value Management (or EVM) is a technique widely used for measuring project performance against the project baseline, in most cases the original budget. <\/p>\n\n\n\n<h3 class=\"wp-block-heading has-black-color has-blue-background-color has-text-color has-background has-link-color has-normal-font-size wp-elements-1609a297f503363460374b89d6dc9a8c\">A crucial Key Performance Indicator (KPI)<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The earned value calculations is a top priority for studing among all project managers that want to get a Project Management Professional (or PMP) certification. It is a crucial Key Performance Indicator (KPI) especially for construction projects and for sure EVM is one critical practice area for monitoring the performance of a project from both a cost and schedule perspective.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s common to think about projects with binary thinking:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Ahead of schedule vs. behind schedule<\/li>\n\n\n\n<li>Over budget vs. under budget<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Both project performance factors have a direct impact on the total project cost. What will be the total cost of my project if I&#8217;m ahead of schedule but my costs are higher than expected? If I&#8217;m behind schedule but my costs are lower? EVM provides great information to help with these questions.<br><\/p>\n\n\n\n<h4 class=\"wp-block-heading has-black-color has-orange-background-color has-text-color has-background\">Calculating Earned Value<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">The procedure of Earned Value calculations require the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Planned Value (PV)<\/strong>: this is the budgeted amount for the current reporting period.<\/li>\n\n\n\n<li><strong>Actual Costs (AC)<\/strong>: these are all recorded actual costs to date. <\/li>\n\n\n\n<li><strong>Earned Value (EV):<\/strong> this is the total project budget multiplied by the percentage (%) performance of project completion.<\/li>\n<\/ul>\n\n\n\n<p class=\"has-black-color has-green-background-color has-text-color has-background wp-block-paragraph\">When having these numbers available, then it is all set for some calculations.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Schedule Performance Index (SPI)<\/strong>: is the calculation of SPI = EV\/PV.<br>SPI measures progress achieved against progress planned. <br>If SPI value &lt;1.0 indicates less work was completed than was planned. <br>If SPI &gt;1.0 indicates more work was completed than was planned.<\/li>\n\n\n\n<li><strong>Cost Performance Index (CPI)<\/strong>: is the calculation of CPI = EV\/AC.<br>CPI measures the value of work completed against the actual cost.<br>If CPI value &lt;1.0 indicates costs were higher than budgeted.<br>If CPI &gt;1.0 indicates costs were less than budgeted.<br><br>Bot SPI and CPI, when they are &gt;1 it is good, and when they are &lt;1 it is bad. <\/li>\n\n\n\n<li><strong>Estimated at Completion (EAC)<\/strong>: is the calculation of EAC = (Total Project Budget)\/CPI<br>EAC is a forecast of how much the total project will cost.<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading has-black-color has-yellow-background-color has-text-color has-background\">An Example of Earned Value Management<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">We are to look at an example where being halfway through a year-long project that has a total budget of \u20ac1,000,000. The budgeted amount through this six-month mark is \u20ac550,000. Summary of actual costs through this six-month mark is \u20ac450,000.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So, in summary:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Planned Value (PV) = \u20ac550,000<\/li>\n\n\n\n<li>Actual Cost (AC) = \u20ac450,000<\/li>\n\n\n\n<li>Earned Value (EV) = (\u20ac1,000,000 * 0.5) = \u20ac500,000<\/li>\n\n\n\n<li>Schedule Variance (SV) = EV\u2013PV = \u20ac500,000-\u20ac550,000 = -\u20ac50,000 (it is bad because &lt;0)<\/li>\n\n\n\n<li>Schedule Performance Index (SPI) = EV\/PV = \u20ac500,000\/\u20ac550,000 = 0.91 (it is bad because &lt;1)<\/li>\n\n\n\n<li>Cost Variance (CV) = EV\u2013AC = \u20ac500,000-\u20ac450,000 = \u20ac50,000 (it is good because &gt;0)<\/li>\n\n\n\n<li>Cost Performance Index (CPI) = EV\/AC = \u20ac500,000\/\u20ac450,000 = 1.11 (it is good because &gt;1)<\/li>\n\n\n\n<li>Estimated at Completion (EAC) = (Total Project Budget)\/CPI = \u20ac1,000,000\/1.11 = \u20ac900,000<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Having SV negative and SPI &lt;1,  shows that the project is considered behind schedule. While the project is at 50% of the way through but have planned for 55% of the costs to be used. Steps are necessary for the project performance to catch-up in the second half of the project.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Having CV positive and CPI is &gt;1, shows that the project is considered to be under budget. While the project is at 50% of the way through, but actual costs so far are only 45% of project&#8217;s budget. By keeping the project to perform at this pace, then the total cost of the project (EAC) will be only \u20ac900,000, as opposed to our original budget of \u20ac1,000,000.<\/p>\n\n\n\n<h4 class=\"wp-block-heading has-black-color has-yellow-background-color has-text-color has-background\">Pitfalls to watch out for<\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>\u0395arned value is an excellent early-warning system, and looking at earned value trends can provide to project management very useful data. It is a common practice to report earned value monthly, but in shorter projects could be more frequent.<\/li>\n\n\n\n<li>Earned value is very helpful for measuring project performance relative to schedule and budget but in any case it doesn\u2019t guarantee project success.<\/li>\n\n\n\n<li>It is very important that all actual costs are included in calculations otherwise something could be overlooked (this can happen on indirect labor and non-labor costs).<\/li>\n\n\n\n<li>When reporting earned value calculations, keep in mind that the recipients have to know what the numbers mean and how and why they are used. It is recommended to present them in non-project management terms to sponsor of the project or other key stakeholders. This practice is much more easier than training stakeholders on \u201cproject management speak and terms\u201d.<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading has-white-color has-dark-gray-background-color has-text-color has-background\">Earned Value Management with Rabio<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">For sure earned value calculations can help project management on a project to identify problems early and be proactive and reactive. EV metrics have to be defined in a standard manner, and the data must be available for reporting across the project portfolio. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019ve never calculated earned value on your project or if it&#8217;s been a while, try it out. You might be surprised by what you find. Rabio will help you to keep track of Budget, Actual Costs and Earned Value.<\/p>\n\n\n\n<h4 class=\"wp-block-heading has-black-color has-orange-background-color has-text-color has-background\">  Keep track of your Earned Value with Rabio<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Rabio is&nbsp;<a href=\"https:\/\/sourceforge.net\/projects\/rabio\/\" target=\"_blank\" rel=\"noreferrer noopener\">open-source<\/a>&nbsp;software that was designed to manage and control budgets, their costs, and produce reports based on a flexible&nbsp;cost breakdown structure. It is budgeting software that can keep track of Earned Value and it is&nbsp;<a href=\"https:\/\/www.rabio.eu\/rabio\/category\/download\/\">distributed for free<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can easily use it for your personal needs or your business. Using&nbsp;<a href=\"https:\/\/www.rabio.eu\/rabio\/2020\/03\/09\/rabio-managers\/\" target=\"_blank\" rel=\"noreferrer noopener\">Rabio \u2018s managers system<\/a>&nbsp;you can design and control your budget and compare it with costs and earned value at any time using the easy reporting internal system.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Furthermore, you can alter your budget or create forecast and projection&nbsp;<a href=\"https:\/\/www.rabio.eu\/rabio\/2020\/03\/09\/rabio-managers\/\" target=\"_blank\" rel=\"noreferrer noopener\">managers<\/a>&nbsp;and compare new data with the original budget.<\/p>\n\n\n\n<h4 class=\"wp-block-heading has-black-color has-yellow-background-color has-text-color has-background has-link-color wp-elements-dbed5553b28be28da704d041f16bb386\">Sample Reports<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">The reports below are part of Rabio reporting system<\/p>\n\n\n\n<figure class=\"wp-block-image alignwide size-large is-style-twentytwentyone-border\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"327\" src=\"https:\/\/www.rabio.eu\/rabio\/wp-content\/uploads\/2021\/11\/image-1024x327.png\" alt=\"Cost Control Center Report with Earned Value\" class=\"wp-image-2447\" srcset=\"https:\/\/www.rabio.eu\/rabio\/wp-content\/uploads\/2021\/11\/image-1024x327.png 1024w, https:\/\/www.rabio.eu\/rabio\/wp-content\/uploads\/2021\/11\/image-300x96.png 300w, https:\/\/www.rabio.eu\/rabio\/wp-content\/uploads\/2021\/11\/image-768x245.png 768w, https:\/\/www.rabio.eu\/rabio\/wp-content\/uploads\/2021\/11\/image.png 1502w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Cost Control Centers Report with Earned Value<\/figcaption><\/figure>\n\n\n\n<figure class=\"wp-block-image alignwide size-large is-style-twentytwentyone-border\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"473\" src=\"https:\/\/www.rabio.eu\/rabio\/wp-content\/uploads\/2021\/11\/image-1-1024x473.png\" alt=\"Cost Control Center and Categories Report with Earned Value\" class=\"wp-image-2448\" srcset=\"https:\/\/www.rabio.eu\/rabio\/wp-content\/uploads\/2021\/11\/image-1-1024x473.png 1024w, https:\/\/www.rabio.eu\/rabio\/wp-content\/uploads\/2021\/11\/image-1-300x139.png 300w, https:\/\/www.rabio.eu\/rabio\/wp-content\/uploads\/2021\/11\/image-1-768x355.png 768w, https:\/\/www.rabio.eu\/rabio\/wp-content\/uploads\/2021\/11\/image-1.png 1500w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Cost Control Center and Categories Report with Earned Value<\/figcaption><\/figure>\n\n\n\n<h5 class=\"wp-block-heading has-text-align-center has-white-color has-text-color has-background\" style=\"background-color:#38a300\"><a href=\"https:\/\/www.rabio.eu\/rabio\/2021\/06\/18\/construstion-budgeting-sample-reports\/\">See more sample reports here<\/a><\/h5>\n\n\n\n<h4 class=\"wp-block-heading has-black-color has-yellow-background-color has-text-color has-background has-link-color wp-elements-5e26c1a58518c8f864e2304f368b6443\">Rabio is open-source<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>You can download Rabio&nbsp;<a href=\"https:\/\/www.rabio.eu\/rabio\/2020\/10\/06\/rabio-open-source\/\" target=\"_blank\" rel=\"noreferrer noopener\">open-source version here<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Monitor Project Performance Using Earned Value Management Earned Value Management (or EVM) is a technique widely used for measuring project performance against the project baseline, in most cases the original budget. A crucial Key Performance Indicator (KPI) The earned value calculations is a top priority for studing among all project managers that want to get&hellip; <a class=\"more-link\" href=\"https:\/\/www.rabio.eu\/rabio\/2021\/11\/09\/earned-value-management\/\">Continue reading <span class=\"screen-reader-text\">Earned Value Management<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":2381,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":"yes","footnotes":""},"categories":[11,175],"tags":[25,166,171,375,374,377,376,380,379,24,3],"class_list":["post-1816","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-rabio-blog","category-earned-value","tag-budget","tag-budgeting","tag-earned-value","tag-innovation-budgeting","tag-innovative","tag-innovative-budgeting-software","tag-innovative-business-budgeting-software","tag-key-performance-indicator","tag-kpi","tag-management","tag-rabio","entry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.1 - 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