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Uses of EVA:
EVA technique used to track the progress and status of a project and forecast the likely future performance of the Project. EVA technique integrates the scope, the schedule, and the cost of a project. EVA technique answers numerous questions to the stakeholders in a project related to the performance of the project. EVA technique can be used to show past performance of the project, current performance of the project and predict the future performance of the project by use of statistical techniques. Good planning coupled with effective use of the EVA technique will reduce a large amount of issues arising out of schedule and cost overruns.
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Functions of EVA
EVA calculates cost, scheduling, and scope measurements to determine productivity and performance indices (as well as schedule and budget variances). Thereby, it provides a COMBINED view of all three areas: time, schedule, performance. Primary functions of EVA are the following:
Determine and document the cause of the variance Determine the impact of the variance Determine whether corrective action should be implemented
Bottom line is that EVA determines the variance in a given project and provides direction whether corrective action should be implemented
Planned Value (PV) or BCWS is the total cost of the work scheduled /Planned as of a reporting date. Calculated: PV or BCWS = Hourly Rate * Total Hours Planned or Scheduled Actual Cost (AC) or ACWP is the total cost taken to complete the work as of a reporting date and tracks costs as they are actually incurred on the project. Calculated: AC or ACWP = Hourly Rate * Total Hours Spent
Earned Value (EV) or BCWP is the total cost of the work completed/performed as of a reporting date. This looks at the work that was performed (for which you paid actual money) and reports what the original budget was for this work. If the project is on time and on budget, then this should equal the BCWS. Calculated as: EV or BCWP = Baselined Cost * % Complete Actual
Key Point: All the three elements are captured on a regular basis as of a reporting date
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AC is the money that has actually been expended to date for completed work
EV is the value of work completed to date compared to the budget
PV is the approved budget assigned to be completed during a given time period EV is the value of work completed to date compared to the budget AC is the money that has actually been expended to date for completed work
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% Completed Actual
% Completed Actual is defined as the percentage of work which was actually completed by the reporting date. Calculated: % Completed Actual = AC / EAC
The formula mentioned above gives the variance in terms of cost which will indicate how less or more cost has been to complete the work as of date. Remember the following:
Positive Cost Variance Indicates the project is under budget Negative Cost Variance Indicates the project is over budget
Cost Variance %
Cost Variance % indicates how much over or under budget the project is in terms of percentage Calculated:
CV % = Cost Variance (CV) / Earned Value (EV) CV % = CV / BCWP
To Complete Cost Performance Indicator is an index showing the efficiency at which the resources on the project should be utilized for remainder of project Calculated:
TCPI = ( Total Budget - EV ) / ( Total Budget - AC ) OR TCPI = ( Total Budget - BCWP ) / ( Total Budget - ACWP )
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Schedule Variance %
Schedule Variance % indicates how much ahead or behind schedule the project is in terms of percentage. Calculated:
SV % = Schedule Variance (SV) / Planned Value (PV) SV % = SV / BCWS
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Remember:
SPI value above 1 indicates project team is very efficient in utilizing the time allocated to the project SPI value below 1 indicates project team is less efficient in utilizing the time allocated to the project
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The formula for calculation of the three methods are as given below:
AC + ( BAC -EV ) AC + ETC ( Estimate to complete ) AC + ( BAC- EV ) / CPI
% Completed Actual
The percentage of work which was actually completed by the Reporting Date Calculated:
% Completed Actual = AC / EAC
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Estimate at Completion
Project Variance
Cost variance Schedule Variance Cost performance index Cumulative cost performance index Schedule performance index Most accurate estimate Typical variances achieved Non-typical variances achieved Flawed estimates to date Typical variances achieved Non-typical variances achieved Overall variance analysis
CV = EV - AC SV = EV - PV CPI = EV / AC CPIc = EVc / ACc SPI = EV / PV Manually calculated ETC = (BAC - EVc) / CPIc ETC = (BAC - EVc) EAC = ACc + ETC (manual) EAC = ACc + ((BAC - EVc) / CPIc) EAC = ACc + (BAC - EVc) VAC = BAC - EAC
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EVA Example
Example Calculation
Assume a project that has exactly one task. The task was baselined at 8 hours, but 11 hours have been spent and the estimate to complete is 1 additional hour. The task was to have been completed already. Assume an hourly rate of $100 per hour.
EAC = AC + ETC
EAC = $1200 (1100 + 100)
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