Overview | Example
Earned value analysis is a procedure of measuring the cost of work performed up to the status date or current date.
Earned value uses the original estimates saved with a baseline and progress of the plan reported on the project to determine whether the project is on track in terms of duration and cost.
Earned value is always specific to a status date. Status date may be the current date, a date in the past, or a date in the future. Setting the status date to the date you last updated project progress is always the best practice.
Earned Value compares the following information:
- Planned Value: How much work you planned to have completed by now (usually calculated in dollars or hours)
- Actual Cost: How much you have actually spent by now (usually calculated in dollars or hours)
Please note that all the following Earned Value terms will be expressed in terms of dollars (cost).
- BAC (Budgeted at Completion): An estimate of the total project baseline cost.
- BCWP (Budgeted cost of work performed): How much did we budget for the work we’ve done?
BCWP is the cost of the task work actually done. BCWP calculation uses the % work complete value. BCWP is also called as Earned Value.
- BCWS (Budgeted Cost of Work Scheduled): How much work should be done by now?
BCWS value is original estimated of budgeted cost till Status Date. It uses the % complete value.
- ACWP (Actual cost of work performed): This field shows the actual cost incurred on a task. (How much did we actually spend till Status Date). This is a cumulative sum of the actual cost incurred on a task as of status date.
- CV (Cost Variance): The difference between the budgeted cost (BCWP) and actual cost (ACWP)is called as Cost Variance.
CV = BCWP - ACWP
If the CV is negative value, it implies that the task is currently over budget.
If the CV is positive value, it implies that the task is currently under the budgeted amount.
- SV (Schedule Variance): The difference between the BCWP and BCWS is called SV.
SV = BCWP - BCWS
If the SV is negative value, it implies that the project is currently behind schedule.
If the SV is positive value, it implies that the project is currently ahead of the schedule in terms of cost.
- CPI (Cost Performance Index): Ratio of budgeted cost of work performed to actual costs of work performed.
CPI = BCWP/ACWP
CPI < 1 indicates an over budget condition
- SPI (Schedule Performance Index): The ratio of the budgeted cost of work performed to the budgeted cost of work scheduled.
SPI = BCWP/BCWS
SPI < 1 indicates a behind schedule condition
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