Purpose:
Provide an understanding of the project’s progress so that appropriate corrective actions can be taken when the project’s performance deviates significantly from the plan
Objective:
Establishes organizational expectations for monitoring project progress and performance against the project plan and managing corrective action to closure when actual or results deviate significantly from the plan
Description:
A project’s documented plan is the basis for monitoring activities, communicating status, and taking corrective action. Progress is primarily determined by comparing actual work product and task attributes, effort, cost, and schedule to the plan at prescribed milestones or control levels in the project schedule or WBS. Appropriate visibility of progress enables timely corrective action to be taken when performance deviates significantly from the plan. A deviation is significant if, when left unresolved, it precludes the project from meeting its objectives.
When actual status deviates significantly from expected values, corrective actions are taken as appropriate. These actions can require replanning, which can include revising the original plan, establishing new agreements, or including additional mitigation activities in the current plan.
Entrance Criteria:
When your employees have questions, they want immediate answers. And when different needs arise during the workday, employees are motivated to learn at the moment.
In-the-flow learning delivers real-time education when your employees need it most and unleashes opportunities to:
- Identify skills that need to be developed
- Implement practical approaches to support learning
- Discover how to better support skills development
Here are the training modules for Project Monitoring and Control:
Learn About Earned Value Management (EVM)
Have you ever been asked how far along you were on a project? Of course, you have. If you do not have a valid schedule or are not keeping the schedule up-to-date, you know that your answer is pretty much a guess. If you have a good schedule and are keeping it up-to-date, you should know how much work remains and the projected end date. But are you 50% complete? Or is 90% complete? It is not always easy to know.
Earned value management (EVM) was established to remove the guesswork from determining where you are in relation to your baseline schedule and budget. Using it allows a project manager to know precisely how far along he is, how much work is remaining, what the expected cost will be, and all sorts of other exciting information.
Are you using the Earned Value on your project today? Probably not. You are not using Earned Value because your organization has not adopted it. Implementing earned Value on your project requires tremendous discipline and a standard set of processes. Applying Earned Value one project at a time is challenging since no one else would understand what you are doing and why. It required an organizational focus.
History
Earned Value has not been around for hundreds of years. In the 1960s, the US Department of Defense began to mandate using Earned Value on defense-related projects. As you might expect, if the government is contracting out projects worth hundreds of millions or billions of dollars, they want project progress updates to consist of more than “we seem to be on target.” Earned value calculations can provide a better sense of where the project is against the baseline and give an early warning if the trends indicate that the project is over budget or its deadline.
Even though EVM can be hard to understand initially, the entire model is based on three core values.
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- Actual cost (AC). The actual cost of work completed as of a point in time.
- Planned Value (PV). The budgeted cost of work you planned to complete at the same time.
- Earned Value (EV). The budgeted cost of the work was completed at the same time.
Earned Value is calculated by adding up the budgeted cost of every activity that has been completed. Remember, this is not the “actual “cost of the work activities. This is the “budgeted “cost. Look at the following example:
Today’s Date is March 31
| Completed Activity |
A |
B |
C |
D |
Remaining Work |
| Target Date |
March 10 |
March 15 |
March 31 |
April 5 |
July 31 |
| Budgeted Cost |
20 |
10 |
15 |
5 |
500 |
| Actual Cost |
20 |
5 |
20 |
10 |
? |
Let’s say that as of March 31, you have completed activities A, B, C, and D. Let’s calculate AC, PV, and EV.
-
-
- AC is the actual cost of the work completed. This is 55 (20 + 5 + 20 + 10).
- PV is the budgeted cost of the work planned to be completed. This is 45 (20 + 10 + 15). Activity D is not counted since it was not planned to be completed as of March 31.
- EV is the budgeted cost of the work completed. This is 50 (20 + 10 + 15 + 5).
These three numbers seem interesting, but they do not tell you too much by themselves. So, we must combine and compare the values to determine our status against the schedule and budget. Sorry, but this next bit of information must wait until next week’s email.
Now let’s put these fundamental metrics together to provide Value about the current schedule and budget status.
Schedule Variance (SV)
The Schedule Variance (SV) tells you whether you are ahead or behind schedule and is calculated as EV – PV. In our example above, the EV is 50 (20 + 10 + 15 + 5), and the PV is 45 (20 + 10 + 15). Note that the difference is activity D. Since this activity is completed, it is included in the EV. However, since it was not scheduled to be completed by March 31, it is not included in the PV.
The Schedule Variance is 5 (50 – 45). If the result is positive, you have performed more work than what was initially scheduled at this point. You are probably ahead of schedule. Likewise, the project is perhaps behind schedule if the SV is negative.
Cost Variance (CV)
The Cost Variance gives you a sense of how you are doing against the budget and is calculated as EV – AC. In our example above, the EV is 50. The AC is 55. This means that the budget for the work completed was 50, but it cost 55 to complete the work. Therefore, the Cost Variance is -5 (50 – 55). If the Cost Variance is positive, it means that the budgeted cost to perform the work was more than what was actually spent for the same amount of work. This means that you are acceptable from a budget perspective. If the CV is negative, you may be over budget at this point.
Schedule Performance Index (SPI)
This is a ratio calculated by taking the EV / PV. This shows the relationship between the budgeted cost of the work that was performed and the cost of the work scheduled to be completed at the same time. It gives the “run rate “for the project. If the calculation is greater than 1.0, the project is ahead of schedule. In the example above, the SPI equals (50 / 45) or 1.11. This implies that your team has completed approximately 11% more work than what was scheduled. If that trend continues, you will take 11% less time to complete the project than expected. That is a good thing.
Cost Performance Index (CPI)
CPI is the ratio of taking the EV / AC. This shows the relationship between the Earned Value and the actual cost of the work that was performed. It gives the “burn rate” for the project. If the calculation is less than 1.0, the project is over budget. In our example, the CPI is (50 / 55) or .91. A CPI of .91 means that for every $91 of budgeted expenses, your project is spending $100 to complete the same work. If that trend continues, you will be over budget when completing the project.
Budget at Completion (BAC)
This calculation can be in terms of dollars or hours. It is the Actual Cost (AC) plus the budgeted cost of the remaining work. If the Cost Performance Index (CPI) is not 1.0, it means that you are spending at a different rate than your plan, which also needs to be factored in. So, the better formula for the Budget at Completion (BAC) is the AC + (Budgeted Cost of Work Remaining / CPI). In other words, if you are running 10% over budget to get your work done so far, there is no reason to believe the remaining work will not take 10% more to complete, and your final budget at completion would be 10% over.
In our example above, the AC is 55, and the Budgeted Cost of Work Remaining is 500. The estimated budget at completion would be 55 + (500 / .91) or approximately 604.5. Since our total budget is 550, you will be about 10% over budget.
