EVM Explained

A project manager can track the project and ensure that the project is completed within the given schedule. But unknowingly he might have over run on the cost to achieve the same. So always it is good to track a project based on EVM so that you can ensure that the project cost is also as per the initial estimate only.

 

You estimate a project A can be completed in 10 days by using 5 resources with a cost of 50Rs. This is the planned value of the project. On the 10th day you find that you have not completed 100% of the work, but only 80% of the work. So the estimate to complete 80% of work is 40Rs. So on the 10th day the earned value is 40Rs. In case you have used the same resource loading- the 5 resources and have not spent any extra cost then the actual cost incurred would be 40 Rs. In case you have added more resources in between , then to get the 80% of work done itself you would have incurred an actual cost of say 80 Rs.

 

So now getting the value for keys terms.

PV - Planned value on the 10th day to complete the project = 50Rs.

EV - Earned value on the 10th day when only 80% of work done = 40Rs.

AC - Actual cost incurred by deploying extra resource but still completing only 80% of work = 80Rs.

So EV < PV which means EV-PV is negative so we are behind schedule.

EV< AC EV-AC is negative which means we are overshooting on the cost as well.

SPI = Schedule Performance Index = EV/PV

CPI= Cost Performance Index = EV/AC

SPI > 1 is better

CPI > 1 is better.