Earned Value Analysis: Why ?
Earned Value Analysis (or Earned Value Management) is a widely used method for performance measurement of projects. These three areas are considered in this method:
With the EVA the following key questions can be answered:
- Is our schedule on track, do we have a delay ?
- When will be the project completed based on actual status ?
- Are we over or under the planned budget (over-/underspent)
- What are the estimated costs at termination of the project
- How efficiently are we using our resources ?
To achieve the EVA in an accurate way, the following preconditions are necessary:
- Accurate baselining of plan values (time, costs and scope) starting by a WBS, scheduling milestones and assigning Costs.
- Accurate actual cost information: prompt actuals, clear differentiations between booking types (outsourcing costs, person days, software licences …)
- Accurate progress measure: grad of completion calculated based on clear work/scope artefacts (e.g. user stories in agile Teams)
- Realistic estimates to complete gathered from project team
- Budget At Completion – BAC: Total cost of the project
- Planned Value – PV (Called also: Budgeted Cost for Work Scheduled – BCWS): The amount of work expressed in € to be performed as per the schedule plan:
PV = BAC * Planned grad of completion in %
- Planned Value – EV (Called also: Budgeted Cost for Work Performed – BCWP): The amount expressed in € on the actual worked performed:
EV = BAC * Performed grad of completion in %
- Actual Cost – AC (Called also: Actual Cost of Work Performed (ACWP): The sum of all costs (in €) actually booked