Practical – 5

Aim: Report term projects progress using Earned Value Analysis (EVA) report.

Theory:

Earned Value Analysis or Earned Value Management - EVM Analysis is an essential part of project
management. The methodology allows project managers to measure the amount of work done by the
team members and evaluate the value of that work. The analysis is made beyond the fundamental
review of the cost and scheduled reports of the project management. It helps the managers to get a
keen insight into the intensity of the progress that has been achieved.

What is Earned Value Analysis?

(Fig 1 – Cost & Schedule Variants)

Project Earned Value Analysis or EVA is a key tool and technique in Project management. The method
helps in understanding the progress of the project based on a quantitative analysis of the Task Budget
with the actual value of the task that has been completed. It implies gauging progress based on earning
money. The better the progress is, the more money can be earned. Earned Value Calculation is an
objective method to measure project performance. Earned Value Analysis PMP metrics are generally
used in health project performances. This helps the project manager to have a keen knowledge of the
EV analysis and count the progress altogether.

Earned Value Analysis in project management provides the window to evaluate the success to be
achieved. Earned Value Analysis is a very competent way to compute the progress of any project. For
example, Earned Value= Percent Complete (Actual) X Task Budget. If you have completed 50% of your
task and your budget is $10,000 then the earned value analysis of your project will be $5,000.

The Earned Value Analysis formula is solely dependent upon the Task Budget and the progress that
has been achieved so far. The Task Budget talks about the budget that has been set aside by the
project manager for the particular project. The Earned Value Analysis is made by multiplying the Task
Budget with the percentage of projects that have been completed by the project team members.
There are four fundamental indicators of Earned Value Analysis. They are:

 Earned Value (EV)

 Planned Value (PV)
 Actual Cost (AC) and;
 Budget At Completion (BAC).

These indicators help in understanding the progress at large, controlling the cost processes. and
calculating the single period or cumulative for multiple periods of the project or the entire project
altogether. One of the finest Earned Value Calculation examples is work package or control at the
accounts level.

Purpose of Earned Value:

The sole purpose of Earned Value Analysis in the project management technique is to estimate the
progress of the project based on the budget and its schedules. If the purpose of the Earned Value
Analysis is to be matched, then the project would be completed during the given time period by
calculating EVM.

Earned Value Analysis provides concise information about any normal project. It tracks the project in
a precise method which ensures project tracking in a detailed method. It holds greater visibility to
make a proper Earned Value Management analysis and finish the project in the given time. It also
helps you to assess your costs in project management and reach greater heights. Earned Value
Analysis helps you to make informed decisions about your project. It helps you to create a complete
baseline to monitor the projects properly without hassle. Earned Value Analysis is an effective
management method that will allow supervisors to look at the status of their projects. Earned Value
Analysis helps the supervisor to go through documented data and show an effective project budget.

What are the Earned Value Methods Data Source?

Earn Value methods of data source refer to the method of answering the three primal questions:

1. Where were we? (Planned value)

2. Where are we now? (Actual value)
3. Where will we be going? (Earned value of the completed work)

It is a new method of Earned Value Analysis that helps in optimizing the data in a very quantified way.
They help to improve the workflow and have a staunch method to achieve optimal productivity.

There are three primary methods of Earned Value. Let's read to get a keen knowledge of those three
methods.

Planned Value:

Planned Value primarily answers the question, "Where were we?" It describes the extent of the
activities of the project presented on its determined point and cost estimation. It describes the
baseline of the project and how it all started. The cumulative PV or Planned Value is the sum of the
approved budget that has to be performed throughout the project.

Actual Value:

The actual value (AV) is the real cost that has occurred in the execution of the project. The actual value
can either be more or less than the Planned Value. The cumulative Actual Value is the sum of the
actual cost and the planned Value.

Earned Value of Completed Work:

The earned value of the completed work denotes the sum of the planned Value and the actual value.
Planned Value is the speculative value of the work. Earned Value is thereby measured to monitor the
level of work and project the plan. The Earned Value can be calculated by multiplying the percentage
completed by the total budget incurred.

Requirements for Earned Value Analysis:

To have a proper Earned Value Analysis calculator, the calculation needs to be accurate. A solid project
plan needs to be created. The Earned Value Analysis could only be achieved by Work Breakdown
Structure or WBS. This is a deliverable-oriented hierarchical decomposition of work structure. It helps
them to accomplish an objective work structure that can provide the required variables. Earned Value
Analysis table is a scientific method of project management. One of the necessary parameters that
are required for Earned Value Analysis report are:

 A release plan with a proper number of sprints.

 An estimated backlog of a product.
 The actual cost of work that has been performed.
 The estimated development velocity.
EVM Fundamental Concepts:

( Fig 5.2 – Earned Value Analysis Concept )

Earn Value Analysis is a fundamental concept of project management methodology that integrates
schedules and costs. It provides optimal scope to measure project performance altogether. Project
Earned Value Analysis helps to predict the future and adjusts the project accordingly. It is a
quantitative technique that is used to evaluate the performance of the project by analyzing scheduled
cost variances.
Earned Value Assessment uses Earned Value Management (EVM) strategies to work on software
procedures and other templates. These templates are widely used for EVM. The fundamentals of
Earned Value Management can be determined by the guidelines that have been embedded under the
EIA-748 standards. Five broad principles talk about the projection of EVM. These are determined by
the factors of organizational maturity, the size of the project with the contractual requirements. They
are:

1. Organization and Scope of the Project: The organization and the scope of the project are
important to determine the “what” element of the project. They are determined by the work
breakdown structure or WBS with the help of a graphical representation. The EVM also
consists of an Organization Breakdown Structure or (OBS) by making a chart of an organization
that shows the different elements that are involved in the team such as teams, departments
and managers. It shows in a hierarchy of the different roles and responsibilities that are
involved in the project. Finally, it shows the Responsibility Assignment Matrix or RAM that
shows the task performance as a whole. It also determines who has been performing the tasks
and who has completed them. These mappings help to control the accounts in future stages.
2. Planning, Scheduling and Budgeting: This defines the project baseline in concrete methods.
These parameters are monitored and controlled in the lifecycle. This is determined by the
WBS in the planning stage. They ensure multiple activities are grouped in a single package
controlled by a single account. Each account manager monitors the progress and therefore
manages multiple accounts together. They move closely on a time-phased budget allocation
which is proportionate to the total budget of the work package.
 3. Accounting for Actual Costs: Actual Costs determine the original cost that has been incurred
in the project. It focuses on measuring the actual cost and tracks the cost at a work package
level. These costs are allocated much earlier for calculating an earned value or making an
earned value assessment.
4. Analyzing and Reporting on Project Performance: The calculations of PV and EV and AC along
with other variances are described with the help of indexes. The idea is to consistently report
these numbers to the team members for understanding the visibility of the project's progress.
The focus, however, strongly remains on identifying the correlative actions that are taken
against the baseline of reporting numbers.
5. Revision and Data Maintenance: Each and every baseline cannot be revised all the time.
However, in some scenarios, these guidelines require revision. If there is room for changing
the authorized baseline of the scope, cost or schedule of the project, then that should be
made immediately to ensure seamless project management.

Principles of EVM:

Certain principles should be abided by to have a concise method of EVM. The principles have
seven breakdown structures that enhance the process of keen Earned Value Management.
They are:

1. Planning all Work Scope into Completion: With the help of a work breakdown
structure, Earned Value Analysis table becomes easier to handle. When the work
scope is planned at ease, the determination of actual costs will be easier in the future.

2. Breaking Down the Program Scope into Finite Pieces, which can be Assigned to a
Particular Person or an Organization: These roles are assigned to the person or an
organization to do the work with utmost scrutiny. These scheduling functions include
network scheduling with horizontal and vertical traceability. This scheduling ensures
the work is done within the proper period of time with a proper Task Budget.

3. Integrating the Program Work Scope, Schedule and Cost Objectives: This will help in
having an optimal performance measurement baseline. This can integrally control the
changes in the baseline promptly.

4. Using the Actual Costs that Have been Incurred to Accomplish the Work
Performed: The actual costs are accumulated in a formal accounting system that has
been properly planned and budgeted. This is done with the help of an integrated
coding system that allows summarizations through higher levels of WBS.

5. Assessing the Work Performance Level Objectively: This helps to get a proper insight
into getting the work done in a much more objective method. This can be achieved if
the value assessment is fine once every month.

6. Analyzing the Significant Variances from the Plan, Forecast Impacts, or Making an
Estimate of Completion Based on the Work Performance: This principle acts according
to the Cost Performance Index or CPI and Schedule Performance Index or SPI. The To-
Complete Performance Index (TCPI) is encouraged for this principle. This is correlated
to writing a proper variance report for the Program Managers.
 7. Using Earned Value Information for the Company's Management Procedures: This
helps the Program Management to use the data and further manage the program's
technical scheduling and cost issues. They help in understanding the data in a proper
decision-making process.

How is Earned Value Analysis Calculated?

Earned Value Measurement talks about the work that has been completed. It talks about the
value of the project that has been produced. It helps to make a comparative analysis between
the completed work and the work that has been done, initially. This reduces any kind of
documentation that is needed. This provides flexibility in managing the necessary programs.
With the help of the above seven principles, it becomes easier to have a proper compliance
review. Here are some ways to calculate the Earned Value or perform projected earned value
analysis.

Earned Value= Percentage Completed (actual) X Task Budget

Here, Planned Value is also denoted as the Budgeted Cost of Work Scheduled or BCWS that
should have been completed. Therefore, the formula thereby becomes:

PV= Percentage Completed (Planned) X Task Budget.

EVA Report:
To report the Campus Vehicular Traffic Security Software (CVTSS) project progress using Earned
Value Analysis (EVA), we’ll follow a structured approach by evaluating the project performance
based on the budget and work completion status.

Steps for Earned Value Analysis:

1. Planned Value (PV):

o PV is the budgeted cost for the work that should have been completed by this point
in the project timeline.

2. Earned Value (EV):

o EV is the budgeted cost of the work that has actually been completed at this point in
time.

3. Actual Cost (AC):

o AC is the actual cost incurred to complete the work performed up to this point.

4. Budget at Completion (BAC):

o BAC is the total planned budget for the entire project.

Project Data:
Let’s assume the following hypothetical budget and completion data for each activity (representing
the term project’s progress):
Activity Budget (Planned % Complete (Earned Actual Cost
Activity Name
ID Value) Value) (AC)

A Project Initiation $3,000 100% $2,800

B System Design $5,000 100% $4,900

C Database Setup $4,000 100% $4,200

D UI Design $6,000 80% $5,500

E Backend Development $8,000 60% $6,000

Integration of Camera
F $3,000 50% $2,200
Input

Cybersecurity
G $4,000 50% $2,500
Implementation

H Testing $6,000 0% $0

I User Training $2,000 0% $0

J Final Deployment $3,000 0% $0

(Table 5.3 – Project Data)

Step-by-Step Earned Value Calculation:

1. Planned Value (PV) Calculation

PV is calculated by summing the planned values (budgets) of tasks up to the current reporting date.
Let’s assume the reporting date is set after Activity G.

 PV for completed work up to Activity G:

o A+B+C+D+E+F+G

o PV = $3,000 + $5,000 + $4,000 + ($6,000 × 80%) + ($8,000 × 60%) + ($3,000 × 50%) +

($4,000 × 50%)

o PV = $3,000 + $5,000 + $4,000 + $4,800 + $4,800 + $1,500 + $2,000 = $25,100

2. Earned Value (EV) Calculation

EV represents the value of work actually completed as per the budget.

 EV for the work completed:

o A+B+C+D+E+F+G

o EV = $3,000 + $5,000 + $4,000 + ($6,000 × 80%) + ($8,000 × 60%) + ($3,000 × 50%) +

($4,000 × 50%)
 o EV = $3,000 + $5,000 + $4,000 + $4,800 + $4,800 + $1,500 + $2,000 = $25,100

3. Actual Cost (AC) Calculation

AC represents the actual cost incurred to complete the work up to the reporting date.

 AC for completed work:

o A+B+C+D+E+F+G

o AC = $2,800 + $4,900 + $4,200 + $5,500 + $6,000 + $2,200 + $2,500 = $28,100

4. Variance Analysis

Now, let's calculate the Cost Variance (CV) and Schedule Variance (SV):

 Cost Variance (CV): CV = EV - AC

o CV = $25,100 - $28,100 = -$3,000

o The project is $3,000 over budget.

 Schedule Variance (SV): SV = EV - PV

o SV = $25,100 - $25,100 = $0

o The project is on schedule in terms of planned vs. earned work.

5. Performance Indexes

Next, we calculate the Cost Performance Index (CPI) and Schedule Performance Index (SPI):

 CPI: CPI = EV / AC

o CPI = $25,100 / $28,100 ≈ 0.89

o For every dollar spent, the project is earning only $0.89 worth of value, indicating
cost inefficiency.

 SPI: SPI = EV / PV

o SPI = $25,100 / $25,100 = 1

o The project is on schedule as SPI is exactly 1.

6. Estimate at Completion (EAC) and Variance at Completion (VAC)

 EAC (Estimate at Completion): EAC gives the forecasted total cost of the project based on
the current performance. It is calculated using the formula:

o EAC = BAC / CPI

o Let’s assume the Budget at Completion (BAC) for the entire project is $44,000.

o EAC = $44,000 / 0.89 ≈ $49,440

 Variance at Completion (VAC): VAC tells us how much over or under budget we expect the
project to be at completion:
 o VAC = BAC - EAC

o VAC = $44,000 - $49,440 = -$5,440

o The project is forecasted to be $5,440 over budget.

7. Conclusion (EVA Report Summary)

 Planned Value (PV): $25,100

 Earned Value (EV): $25,100

 Actual Cost (AC): $28,100

 Cost Variance (CV): -$3,000 (Over Budget)

 Schedule Variance (SV): $0 (On Schedule)

 Cost Performance Index (CPI): 0.89 (Cost inefficiency)

 Schedule Performance Index (SPI): 1 (On schedule)

 Estimate at Completion (EAC): $49,440

 Variance at Completion (VAC): -$5,440 (Over budget)

This EVA report gives a clear picture of where the project stands in terms of cost and schedule,
helping to manage future steps effectively.

Rubric wise marks obtained:

Sr. Needs
Criteria Acceptable Good Very Good Total
No. Improvement
Analysis [1] [2-3] [4-5] [6-7]
No basis for Poorly Fairly Clearly understand
1 EV understands EV understands EV EV estimation and
estimation. estimation. estimation. factors affecting EV
estimation.
Formula/ [1] [2-3]
Calculation Correct Correct
application of application of
2
formula and formula and
calculation. calculation with
detailed steps.

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