Earned Value Management: Measuring a project’s performance

http://www.pmknowledgecenter.com/dynamic_scheduling/control/earned-value-management-
measuring-project%E2%80%99s-performance

Submitted by Mario Vanhoucke on Mon, 12/12/2011

 cost performance index
 cost variance
 Earned value management
 schedule performance index
 schedule variance

Controlling a project is key to the success or failure of the project. Earned Value Management
(EVM) is a well-known technique to control the time and cost performance of a project and to
predict the final project duration and cost. It is an easy tool to generate early warning signals to
timely detect problems or to exploit project opportunities. An overview of the EVM metrics is
given in “Earned Value Management: An overview” and the formulas are summarized in “Earned
Value Management: The EVM formulary”.
This article measures the time and cost performance of a project in progress, based on periodic
information of an example project given in figure 1. This figure displays the planned value line as
well as the earned value and actual cost lines up to week 7. The project has a planned duration PD
= 9 weeks and a budget at completion BAC = € 150.

 Figure 1: The PV, EV and AC S-curves

Project performance

Project performance, both in terms of time and costs, is determined by comparing the key
parameters PV, AC, EV and ES, resulting in a schedule (time) and cost variance, as follows:

 Schedule Variance (SV): Shows the variance in time expressed in monetary terms EV - PV
(see figure 2) and can be interpreted as follows:
o > 0: project ahead of schedule
o = 0: project on time
o < 0: project delay
 Cost Variance (CV): Shows the variance in cost expressed in monetary terms as EV - AC and
is displayed graphically in figure 2. The CV can be interpreted as follows:
o > 0: project under budget
o = 0: project on budget
o < 0: project over budget

Both variances are expressed in monetary units. While this is obvious for a cost variance, the
variance of time should be better expressed in a time dimension rather than in a monetary unit.
To that purpose, the two variances can be translated to two well-known unitless performance
indices, as follows:

 Schedule Performance Index (SPI): Shows the performance of time (EV / PV) in a unitless
dimension:
o > 100%: project ahead of schedule
o = 100%: project on time
o < 100%: project delay
 Cost Performance Index (CPI): Shows the performance of cost (EV / AC) in a unitless
dimension:
o > 100%: project under budget
o = 100%: project on budget
o < 100%: project over budget
Table 1: The three EVM key metrics and the four performance measures
W1 W2 W3 W4 W5 W6 W7 W8 W9

PV 5 10 25 55 85 120 130 140 150

AC 10 20 30 75 120 155 170

EV 3.33 6.67 10 22.5 70 82.5 90

SV -1.67 -3.33 -15.00 -32.50 -15.00 -37.50 -40.00

SPI 0.67 0.67 0.40 0.41 0.82 0.69 0.69

CV -6.67 -13.33 -20.00 -52.50 -50.00 -72.50 -80.00

CPI 0.33 0.33 0.33 0.30 0.58 0.53 0.53

Table 1 shows the three key metrics and the four performance measures for all periods until week
7. The three key metrics have been discussed in “Earned Value Management: The three key
metrics”. Figure 2 shows the S-curves of the three key metrics and the schedule and cost variances
in a graphical way.

 Figure 2: Real life execution (project progress at week 7)

It should be noted that the schedule variance SV and schedule performance index SPI have been
criticized since they are unreliable measures for the time performance of a project. An alternative
variance and performance index has been proposed instead, as discussed in “Measuring Time:
Earned value or earned schedule?”. An overview of different time and cost performance scenarios
during a project’s progress is given in “Earned Value Management: An overview of project
performance scenarios”.