How to Use EVM to Manage a Project

This article will explain how to implement EVM into your Project Management style so that your projects are precise, on schedule, and under budget!!

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Project
• Financial reports
• Recommended Project Approach (Project Plan)

1. First, identify all tasks that need to be accomplished and organize into sub-groups.
2. Second, allocate budget and schedule tasks. Each activity should have planned BAC (Budget at Completion).
3. Third, give each task a SPECIFIC duration
4. EV Report Earned Value is also known as the Budgeted Cost of Work Performed or BCWP. It is how much should have been spent to accomplish the work you actually got done by a given date.
   
   Earned Value is commonly calculated as percent completed * BAC(Budget at Completion).
   * BAC is the overall approved budget for a task.
   * AC(Actual Costs) are the total amnt. spent on a task up to current date
   * Percent Complete is task progress. For example, a task with earned value(budgeted cost of work performed as of current date) of 2520.00 and BAC of 4000.00 then you would have a percent completion of 63%.
5. EV can be calculated weekly, monthly, or as progress is made. The last one is the one that I use most often just to stay organized, keep up with progression, and be able to keep stakeholders informed.
6. Planned Value Graph Next, you must calculate Planned Value (PV), also known as the Budgeted Cost of Work Scheduled or BCWS. This is how much the plan says you should have spent to achieve a task that should have been done by a given date.
7. SV & CV Graph Now that you have established EV and PV, you must now establish SV and CV.
   
   SV is Schedule Variance which is how much work we got done based on how much we planned on getting done. Ex. if we should have completed $1000 worth and we only did $800 then we are $200 behind schedule.
8. CV is Cost Variance which is calculated by taking EV and subtracting out AC. In accomplishing $800 worth of work we may have spent $900. In that case we are $100 over budget.
9. SPI and CPI Report Next is CPI (Cost Performance Index) and SPI (Schedule Performance Index). SPI is EV divided by PV; how we are doing against the schedule. If we have done $800 worth of work when we should have done $1000, then our SPI is 80%. We are now running 20% behind schedule.
10. CPI is EV/AC; how we are doing against budget. If we have spent $900 to do $800 worth of work, then our CPI is 89% and we are 11% over budget.
11. If we have completed 20% of a $5000 project and have a SPI of 80% and CPI of 89%, that is a disturbing trend.
12. Finally, EAC (Estimate At Completion) which is BAC/CPI. This answers the question, "What will the total cost be?" It is also a very important tool in EVM because it helps forecast final project performance and determine if corrective action needs to take place and possibly Senior Mgmt needs to step in.

Tips & Warnings

• Keeping stakeholders and executives (Senior Management) informed of all changes is vitally important to the project and your job!!
• The true power of Earned Value Management can easily be seen.
• Detect risks early and kill them before they grow (The Godzilla Principle of Project Mgmt)
• GOOD LUCK!!
• Being able to predict disaster early in a project is not perfect!
• Always be on the lookout for unexpected risks
• Lookout for Scope Creep; keep your execs and stakeholders informed and signed-off, AT ALL TIMES!