Earned Value Analysis

What is earned value analysis?

Earned value analysis is an approach for measuring how much work has been completed in a project at given point of time and performance.
This analysis can be done by calculating how much time, the work has taken and the resources it has utilised. These values are then compared with the planned values of time and resources. If the time taken to do the particular task is greater than what was planned, it means that the project is running behind schedule. Similarly, if the resources utilized are more than what were planned, it means the project has not been managed efficiently in terms of resources.

Formally, Earned value analysis may be defined as a tool to objectively measure project performance by integrating scope, time and cost data. Earned value management also provides a means to forecast future performance based on past performance.

Earned Value Terminology

Earned Value Analysis (EVA) - It is a quantitative technique using which we can evaluate the performance of project and predict the final results, for this we compare present progress and cost incurred to planned estimations.It is the most comprehensive trend analysis technique.
Earned Value Management (EVM) – It is project management methodology used for monitoring and controlling our project by measuring the performance Work Breakdown Structure (WBS).
Earned Value Analysis terms and Formulae

Earned Value Analysis And Project Management

Earned Value Analysis is a Cost Control tool in Project Management.
It is used as a forecaster and tracker for measuring the progress of the project in terms of work done and resources utilized. It should be noted that both these terms (work done and resources utilized) are inter-related when it comes to execution of a project.

A baseline (original plan plus approved changes) can determine how well the project is meeting its goals and baseline acts as a benchmark.
Earned value technique compares the cumulative value of the budgeted cost of work performed(earned) at the original allocated budgeted amount to both, the budgeted cost of work scheduled(planned) and the actual cost of work performed(actual).

Actual information must be entered periodically to use Earned Value Analysis:

  •  Was each item of the Work Breakdown Structure(WBS) completed or approximately how much of the work was completed,
  •  Actual start and end dates of the activities/tasks,
  • Actual costs of individual activities and tasks.
A "threshold" or tolerance point for the constraints in a project - time, cost and scope may be kept. Actual values should be kept below the tolerance levels. If the project constraints exceed these threshold values, it acts as a "danger sign" and required steps should be taken to address it immediately or at least some changes be made in the future plans to accommodate the discrepancies without much hassle.
Earned value analysis includes some easy mathematical formulae, based on common sense. So if you find these formulae too confusing, and think the only way to remember them is to mug them up, don't worry you will soon master them with the help of little understanding.....

Why is Earned Value Analysis done? Need of EVA in Project Management (PM)

Meeting project deadlines within a reasonable budget is hard to achieve. Focusing on both the parameters is a difficult but a necessary task. Without monitoring and controlling the project, it is nearly impossible to complete it within the scope, time and cost. Compromising on one of these three factors leads to the over utilization of other(s), which is not desirable and may lead to contractual penalties.
To complete a project in the given timeframe and within the given resources, it is necessary to plan for their judicious use, not only at the beginning of a project but also during its execution. This is essential to make the project adapt to external changes and absorb irregularities in the schedule.
This is where Earned Value Analysis comes into the picture. It is used as a tool for cost control as it is very helpful in determining how the project is going, in terms of cost, scope and time. That is, whether the cost is under control and if it will go over our planned budget or in how much time the project would be completed if we continue working at the same pace.
Thus Earned Value Analysis is helpful to plan and make changes in our plan depending on the current scenario and other internal and external factors which may influence the project later on.

Note that Earned Value Analysis calculations for any project can be done at any point of time, but if we are not using earned value management, we might not get accurate results.

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Earned Value Analysis terms and Formulae
Earned Value Management : Advantages and Disadvantages

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