Question

Earned Value Management (EVM) is a project management technique for measuring project performance (schedule, cost mainly) and progress in an objective manner in terms of work achieved (Value):

The data identified below was listed in a project’s status report.

At time of status report:

Planned Value of work (PV) = $70,000

Earned Value of work performed (EV) = $50,000

Actual Cost of work performed (AC) = $75,000

Original Planning:

Budgeted cost At Completion (BAC) = $110,000

Original length of the project is 15 months

Using the data, calculate the following:

a)    Cost Performance Index (CPI). (1 mark)

b) Schedule Performance Index (SPI). (1 mark)

c)      Expected cost At Completion (EAC). (1 mark)

d) Estimate To Complete (ETC).

e) The Schedule Variance (SV).

f) Discuss how the project is tracking (e.g. ahead or behind schedule, under or over budget)?

Answer a) through f) in one text box below:

Answer 1

a) Cost Performance Index (CPI).

Earned Value of work performed (EV) = $50,000

Actual Cost of work performed (AC) = $75,000

Cost Performance Index = (Earned Value) / (Actual Cost)

CPI = EV / AC

= $50,000/$75,000

=$0.666666667

Cost Performance Index=66.66%

You are earning less than what you are spending or are over budget if the CPI is less than one.

CPI is less than 1, the task is over budget.

b) Schedule Performance Index (SPI).

Planned Value of work (PV) = $70,000

Earned Value of work performed (EV) = $50,000

Schedule Performance Index = (Earned Value) / (Planned Value)

SPI = EV / PV

=$50,000/$70,000

=$0.714285714

Schedule Performance Index=71.42%

c) Expected cost At Completion (EAC).

Cost Performance Index(CPI)=$0.666666667

Budgeted cost At Completion (BAC) = $110,000

EAC= BAC / CPI

EAC=$110,000/$0.666666667

= $165 000

Expected cost At Completion=$165 000

d) Estimate To Complete (ETC).

Expected cost At Completion (EAC)=$165 000

Cost Performance Index(CPI)=$0.666666667

Actual Cost of work performed (AC) = $75,000

Estimate To Complete (ETC)=(Budgeted cost At Completion (BAC)-Earned Value of work performed (EV) /Cost Performance Index(CPI))

ETC = (EAC – AC)/CPI

= ( $165 000 -$75000)/$0.666666667

Estimate To Complete= $135,000

e) The Schedule Variance (SV).

Planned Value of work (PV) = $70,000

Earned Value of work performed (EV) = $50,000

Schedule Variance = Earned Value – Planned Value

SV = EV – PV

=$50,000-$70,000

=-$20,000

Schedule Variance =-$20,000

You are behind schedule if the Schedule Variance is negative.

f) Discuss how the project is tracking (e.g. ahead or behind schedule, under or over budget)?

SV = EV – PV

As SV is negative we are behind the schedule

Earned Value of work performed (EV) = $50,000

Actual Cost of work performed (AC) = $75,000

CV = EV – AC

=$50,000- $75,000

=-$25,000

You are over budget as the Cost Variance is negative.