# Earn Value Management

It is the method of calculating the performance of the project. It is done by calculating how much work is being completed vs how much work is left. It basically gives a picture of, are we on track on not?

It is generally calculated at the release level rather than at the overall project level as checking at the larger horizon would lead to misleading calculations because agile welcome changes.

Difference terms of EVM are:

1) **EV**[Earned Value]: Budgeted cost of work performed (BCWP) {Budgeted cost of work done so far}..Consider this, we have a plan for building a lawn for 3 months… Total budget for completing the lawn is around 1500$. Every month the plan was to spend 500$ to meet the schedule. Now we are checking the EV (earned value) after the first month. We find that work is 40% completed.

Hence the Earned value is around 600$…

2) **PV **[Planned Value]: Budgeted cost of work scheduled (BCWS) {budged cost of work schedule}. What is the cost planned for the work at any particular time.

3) **AC **[Actual cost]: Actual cost of work performed at any given point in time.

4) **BAC: **Budget at the completion of the project

5) **SV [Delay in the completion]**: Schedule Variance [EV-PV]. How much work has been completed minus how much was planned.

## SCHEDULE VARIANCE (SV)

Schedule variance (SV) is calculated as the difference between earned value (EV) and planned value (PV). what percentage of work has been completed minus how much did we plan to have spent by this point in the project?

SV = EV – PV

[hint: EV always comes first in the earned value calculations of CV, CPI, SV, and SPI]

If you have a negative balance in your bank account, is that good or bad? It’s bad, right? Remember that holds true with schedule variance as well. If we have a negative schedule variance it means that we are behind schedule.

A positive SV indicates that we are trending ahead of schedule. A variance of zero indicates the project is exactly on schedule (does that really happen?)

6) CV [Cost Variance]: (EV-AC] {expected value of the project – actual value of the project} if in minus then there is cost overrun otherwise it is before schedule.

7) SPI [Schedule Performance Index]: EV/PV {If > 1, then schedule is under control. This means expected cost / actual cost

Considering the lawn example above, if we would like to calculate SPI(schedule performance Index), we need to understand the earned value so far(cost of completed worked) / PV ( cost of planned work)

So SPI = EV/PV = 600$/500$ {if the value is greater than one then we are ahead of schedule and cost wise good, if less than once then we are behind the schedule and cost wise not good.}

8) CPI (cost performance index) = EV/AC = earned value of the worked done so far/actual cost so far >=1 then we are cost wise good.