Earned Value Management: Measuring a project’s performance

Submitted by Mario Vanhoucke on Mon, 12/12/2011 - 17:25

Controlling a project is key to the success or failure of the project. Earned Value Management (EVM) is a well-known technique to control the time and cost performance of a project and to predict the final project duration and cost. It is an easy tool to generate early warning signals to timely detect problems or to exploit project opportunities. An overview of the EVM metrics is given in “Earned Value Management: An overview” and the formulas are summarized in “Earned Value Management: The EVM formulary”.

This article measures the time and cost performance of a project in progress, based on periodic information of an example project given in figure 1. This figure displays the planned value line as well as the earned value and actual cost lines up to week 7. The project has a planned duration PD = 9 weeks and a budget at completion BAC = € 150.

?Figure 1: The PV, EV and AC S-curves

Project performance

Project performance, both in terms of time and costs, is determined by comparing the key parameters PV, AC, EV and ES, resulting in a schedule (time) and cost variance, as follows:

Schedule Variance (SV): Shows the variance in time expressed in monetary terms EV - PV (see figure 2) and can be interpreted as follows:
- > 0: project ahead of schedule
- = 0: project on time
- < 0: project delay

Cost Variance (CV): Shows the variance in cost expressed in monetary terms as EV - AC and is displayed graphically in figure 2. The CV can be interpreted as follows:
- > 0: project under budget
- = 0: project on budget
- < 0: project over budget

Both variances are expressed in monetary units. While this is obvious for a cost variance, the variance of time should be better expressed in a time dimension rather than in a monetary unit.

To that purpose, the two variances can be translated to two well-known unitless performance indices, as follows:

Schedule Performance Index (SPI): Shows the performance of time (EV / PV) in a unitless dimension:
- > 100%: project ahead of schedule
- = 100%: project on time
- < 100%: project delay
Cost Performance Index (CPI): Shows the performance of cost (EV / AC) in a unitless dimension:
- > 100%: project under budget
- = 100%: project on budget
- < 100%: project over budget

Table 1: The three EVM key metrics and the four performance measures

	W1	W2	W3	W4	W5	W6	W7	W8	W9
PV	5	10	25	55	85	120	130	140	150
AC	10	20	30	75	120	155	170
EV	3.33	6.67	10	22.5	70	82.5	90
SV	-1.67	-3.33	-15.00	-32.50	-15.00	-37.50	-40.00
SPI	0.67	0.67	0.40	0.41	0.82	0.69	0.69
CV	-6.67	-13.33	-20.00	-52.50	-50.00	-72.50	-80.00
CPI	0.33	0.33	0.33	0.30	0.58	0.53	0.53

Table 1 shows the three key metrics and the four performance measures for all periods until week 7. The three key metrics have been discussed in “Earned Value Management: The three key metrics”. Figure 2 shows the S-curves of the three key metrics and the schedule and cost variances in a graphical way.

Figure 2: Real life execution (project progress at week 7)

It should be noted that the schedule variance SV and schedule performance index SPI have been criticized since they are unreliable measures for the time performance of a project. An alternative variance and performance index has been proposed instead, as discussed in “Measuring Time: Earned value or earned schedule?”. An overview of different time and cost performance scenarios during a project’s progress is given in “Earned Value Management: An overview of project performance scenarios”.

PM Knowledge Center

Earned Value Management: Measuring a project’s performance