A Practical Guide to Earned Value, Research Paper Example

• Earned Value Calculation

Your project has four activities. Activity A was to have cost $150,000 when complete. Its costs so far are $45,000.  It is 35% complete. The activity has completed 5 weeks of a planned 15-week schedule.   Activity B is at the end of week 2 of a planned 4-week effort.  It is 45% complete. It was estimated to cost $100,000 when finished.  Its costs to date are $50,000. Activity C is finished. It finished 2 weeks late.  It cost $100,000.  And it was planned to have cost $110,000. Activity D is beginning its fourth of a planned 6-week schedule.  It has cost $200,000.  It was estimated to cost $450,000 when finished.  It is approximately 55% complete.

PV, EV, and AC for Each of the Activities and the Complete Project

Activity A has a planned value (PV) of $59.23 per hour x 2520 hours (15 weeks)= $150,000.  Activity A has an actual cost (AC) of $59.23 per hour x 882 hours (5 weeks) = 45,000. Activity A has an estimated value (EV) of $45,000. Activity B has a planned value (PV) of $148.86 per hour x 672 hours (4 weeks)= $100,000. Activity B has an actual cost (AC) of $148.6per hour x 336 hours (5 weeks) = 45,000.  Activity B has an estimated value (EV) of $45,000.  Activity C has a planned value (PV) of $32.74 per hour x 3360 hours (20 weeks)= $110,000. Activity C has an actual cost (AC) of $32.74 per hour x 3360 hours (20 weeks) = 110,000.  Activity C has an estimated value (EV) of $110,000.  Activity D has a planned value (PV) of $446.43 per hour x 1008 hours (6 weeks) = $450,000.  Activity D has an actual cost (AC) of $446.43 per hour x 672 hours (4 weeks) = $247500.92 Activity D has an estimated value (EV) of $247,500.

SV, CV, SPI, and CPIfor Each of the Activities and the Complete Project

Activity A

The schedule variance (SV) is $45,000- $150,000 = -$105,000. The schedule performance indicator is $45,000/ $150,000 = 0.3. The CV is -$105,000. The CPI is 0.3.

Activity B

The schedule variance (SV) is $45,000- $150,000 = -$105,000. The schedule performanceindicator (SPI) is $50,000/ $150,000 = 0.333.  The CV is -$100,000. The CPI is 0.45.

Activity C

The schedule variance (SV) is $110,000- $110,000 = 0. The schedule performance indicator is $110,000/ $100,000 = 1.1. The CV is $10,000.  The CPI is 1.1.

Activity D

The schedule variance (SV) is $247,500- $450,000 =- $202, 500.  The schedule performance indicator is $247,500/ $450,000 = 0.55. The CV is -$202,500. The CPI is 0.55

Assessment

All of the projects are on schedule without costs over runs.  Activity C was completed two weeks late.  The estimated costs was $110,000.  The actual cost was $100,000.  There is a $10,000 surplus.  EVM (Earned Value Management) is an approach that is applied in order to monitor the development and the progress of a project.  EVM enables the forecasting of the future production of a project.  The EVM technique incorporates the costs, schedule and scope of the project.  The EVM approach has the capacity of providing answers to inquiries that may be formulated by the project stakeholdersthat are correlated with the production processes of a project (Budd & Budd, 2010; Dayal, 2008; Project Management Institute, 2011; Solanki, 2009).

Effective planning that is practiced in conjunction with an earned valuemanagement approach willdiminish a substantial quantity of challenges that are derived from cost and schedule overruns.  EVM has evolved into an integral component of all project monitoring.  The evidence derived from the data implies that there will be cause for a celebration (Budd & Budd, 2010; Dayal, 2008; Project Management Institute, 2011; Solanki, 2009).

• Earned Value Calculation

Your project has four activities.  Activity A was to have cost $250,000 when complete. Its costs so far are $165,000.  It is 50% complete.  The activity has completed 7 weeks of a planned 15-week schedule.   Activity B is at the end of week 2 of a planned 4-week effort. It is 65% complete. It was to cost $190,000 when finished. Its costs to date are $150,000.Activity C is finished.  It finished 2 weeks late. It cost $200,000. It was planned to have cost $250,000. Activity D is at the endof its fourth of a planned 6-week schedule. It has cost $350,000. It was estimated to cost $500,000 when finished. It is approximately 55% complete.

PV, EV, and AC for Each of the Activities and the Complete Project

Activity A

Activity A has a planned value (PV) of $99.21 per hour x 2520 hours (15 weeks) = $150,000.  Activity A has an actual cost (AC) of $99.21per hour x 1176 hours (7 weeks) = 116, 671. Activity A has an estimated value (EV) of $125,000.

Activity B

Activity B has a planned value (PV) of $282.73 per hour x 672 hours (4 weeks) = $190,000.  Activity B has an actual cost (AC) of $282.73 per hour x 336 hours (2 weeks) = $94,997.  Activity B has an estimated value (EV) of $123,500.

Activity C

Activity C has a planned value (PV) of $248.02per hour x 1008 hours (6 weeks) = $250,000. Activity C has an actual cost (AC) of $248.02 per hour x 1008 hours (20 weeks) = 250,000. Activity C has an estimated value (EV) of $250,000.

Activity D

Activity D has a planned value (PV) of $496.03 per hour x 1008 hours (6 weeks) = $500,000. Activity D has an actual cost (AC) of $496.03 per hour x 672 hours (4 weeks) = $333,333.33 Activity D has an estimated value (EV) of $275,000.

Calculations of the CV, SV, CPI, and SPI for Each Activity and the Total Project

Activity A

The schedule variance (SV) is $125,000- $250,000 = -$125,000. The schedule performance indicator is $125,000/ $250,000 = 0.5.  The CV is -$133,329. The CPI is 0.467.

Activity B

The schedule variance (SV) is $123,500- $190,000 = -$66,500.  The schedule performanceindicator (SPI) is $123,500/ $190,000 = 0.65. The CV is -$66,500. The CPI is 0.65.

Activity C

The schedule variance (SV) is $250,000- $250,000 = 0. The schedule performance indicator is $250,000/ $200,000 = 1.25. The CV is $50,000.  The CPI is 1.25.

Activity D

The schedule variance (SV) is $500,000- $275,000 =- $225, 000.  The schedule performance indicator is $333,333.33/ $500,000 = 0.667.  The CV is -$166, 666.66.  The CPI is 0.667.

Assessment

Activity A, B and D are on schedule without cost overruns.  Activity B has demonstrated a surplus of $50,000. Activity B was completed two weeks behind its planned schedule. Thisis attributed to the actual expense of the work that had been performed. This is one of the indicators that is applied in the EVM approach (Budd & Budd, 2010; Dayal, 2008; Project Management Institute, 2011; Solanki, 2009).

References

Budd, C.I. and Budd, C.S. (2010). A practical guide to earned value project management (Second edition). Vienna, VA: Management Concepts, Inc.

Dayal, S. (2008). Earned value management using Microsoft Office: A guide for managing any size project. Fort Lauderdale, FL: Project Management Institute, Inc.

Project Management Institute (2011).  Practice standard for earned value management. Newton Square, PA: Project Management Institute.

Solanki, P.  (2009). Earned value management: Integrated view of cost schedule performance. New Delhi, India: Global India Publications Pvt Ltd.