In this part, we will show you the insights of project tracking with and without Earned Value Management (EVM).
TRADITIONAL PROJECT TRACKING: cost control is independent of schedule control. This kind of method involves the following concepts:
- Planned Value (PV) or Budgeted Cost of Work Scheduled (BCWS)
- Actual Cost of Work Performed (ACWP/AC)
- Cost Variance (CV). In the traditional cost control method, CV is conceived as the difference between the planned and the actual value, which is also the Budget Variance (BV).
CV = BV = PV – AC = BCWS – ACWP
If CV > 0, there is a slow disbursement.
The traditional method cannot tell which parts of the work or which works were completed with the cost budgeted. The Cost Variance according to the traditional method does not include the difference in the value of funding due to the change of work schedule compared to the plan.
PROJECT TRACKING WITH EVM
Earned Value is actual cost spent on the work, which has been done by the time of reporting.
Budget At Completion (BAC): PV or BCWS, up to the end of the project. If a project has an MR (Management Reserve), it is usually added to BAC.
PV = BAC * % of planned work (achieved according to the plan of tracking)
EV = BAC * % of actual work (achieved at the time of tracking)
Cost Variance due to Schedule Variance (SV)
SV = EV – PV = BCWP – BCWS, >0: ahead of due time
Schedule Performance Index (SPI)
SPI = EV/PV = BCWP/BCWS, >1: ahead of due time
Cost Variance (CV) - ie Total cost due to plan deviations
CV = EV - AC = BCWP - ACWP, > 0: within budget
CV = (EV - PV) + (PV - AC) = SV + BV
Cost Performance Index (CPI)
CPI = EV/AC = BCWP/ACW , > 1: within budget
CPI < 1: the cost of completing the job is higher than planned (over budget, harmful)
CPI = 1: the cost of completing the job as planned (beneficial)
CPI > 1: the costs of completing jobs are less than expected (below budget, good but sometimes harmful).
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