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DEFINITION
Earned Value is a powerful tool for measuring the Actual Performance of a project against its
Planned Performance. The knowledge from this measure increases a firms ability to boost
performance. The bottom line is that performance improvements drive productivity.
HOW IT WORKS
EV compares and measures the amount of work actually completed and resources actually
consumed at a certain point in a project with the amount of work planned (budgeted) to be
completed and resources planned to be consumed at that same point in the project
CONCEPTS
Earned Value consists of three key concepts:
1.
2.
3.
Budgeted Cost of Work Scheduled (BCWS) is the cost of the work scheduled or planned to be
completed in a certain time period per the plan
Budgeted Cost of Work Performed (BCWP) is the budgeted cost of the work done up to a
defined point in the project
Actual Cost of Work Performed (ACWP) is the actual cost of work up to a defined point in the
project
MATH
VARIANCE METRICS
Schedule Variance:
Schedule Performance Index:
Cost Variance:
Cost Performance Index:
SV = BCWP - BCWS
SPI = BCWP / BCWS
CV = BCWP - ACWP
CPI = BCWP / ACWP
CRITERIA
SV, CV = 0
SV, CV < 0
SV, CV > 0
CPI, SPI = 1
CPI, SPI < 1
CPI, SPI > 1
QUESTION 1
A supplier is contracted to install ten new testers at a semiconductor manufacturing plant. The
project must be completed within 6 weeks duration. 600 man-hours is the estimated labor
resource commitment, at a $10 per hour fully loaded time and materials cost.
Determine Project Status at Week 3 using traditional and earned value methods.
Given Information:
SOLUTION
Traditional Method
QUESTION 2
One employee is tasked with developing six new procedures for a sales group. The project must be
completed within 4 weeks duration. 200 man-hours is the estimated labor resource commitment.
Determine Project Status at Week 2 using traditional and earned value methods.
Given Information:
SOLUTION
Traditional Method
QUESTION 3
One employee is tasked with developing three databases. The project must be completed within
10 weeks duration. 500 man-hours is the estimated labor resource commitment.
Determine Project Status at week 7 using traditional and earned value methods.
Givens:
At week 7, 350 man-hours consumed and 2 databases completed
SOLUTION
Traditional Method