Applying Earned Value Management to Your Project

If your project is fairly complex, you may consider using earned-value management (EVM) to help control
performance. By providing cost and schedule performance assessments of both the total project and its major
parts, EVM allows you to identify the likely problem areas so you can take the most effective corrective actions.
The following example presents a realistic illustration of how EVM can support insightful analysis of your projects
performance.
Suppose the Acme Company has awarded a contract for the production of two specialized and complex
corporate brochures to Copies R Us. The contract calls for Copies R Us to produce 500 copies of Brochure A
and 1,000 copies of Brochure B. It further states that Copies R Us will produce Brochure A at the rate of 100 per
month and Brochure B at the rate of 250 per month. Production of Brochure A is to start on January 1, and
production of Brochure B is to start on February 1.
Here's the project plan:

Plan for Copies R Us to Produce Brochures A and B

Activity

Start

End

Elapsed
Time

Number of
Copies

Brochure
A

Jan 1

May
31

5 months

500

100,000

Brochure
B

Feb
1

May
31

4 months

1,000

100,000

Total

Total
Cost

200,000

A quick glance reveals that you budgeted 200 a copy for Brochure A (100,000 / 500 copies) and 100 a copy
for Brochure B (100,000 / 1,000 copies).
Suppose its the end of March, and youre three months into the project. Heres what has happened as of March
31:

Project Status as of March 31

Activity

Start

Elapsed
Time

Number of Copies
Produced

Brochure
A

Jan 1

3 months

150

45,000

Brochure
B

Feb
1

2 months

600

30,000

Total

Total
Cost

75,000

Your job is to figure out your schedule and cost performances to date and to update your forecast of the total
amount youll spend for both brochures. Follow these steps:
1.

Determine the planned value (PV), earned value (EV), and actual cost (AC) for Brochure A
through March 31 as follows:
PV = 200 per brochure 100 brochures per month 3 months = 60,000

EV = 200 per brochure 150 brochures = 30,000

AC = 45,000
2.

Determine the schedule variance (SV), cost variance (CV), schedule performance index (SPI),
and cost performance index (CPI) for the production of Brochure A through March 31 as follows:
SV = EV PV = 30,000 60,000 = 30,000
CV = EV AC = 30,000 45,000 = 15,000
SPI = EV / PV = 30,000 / 60,000 = 0.50
CPI = EV / AC = 30,000 / 45,000 = 0.67
Your analysis reveals that you produced only half of the copies of Brochure A you thought you would and
that each brochure cost you 1.5 times the amount you had planned to spend (1 / CPI = 1 / 0.67 = 1.5; also,
actual cost per brochure / planned cost per brochure = [45,000 expended / 150 brochures produced] /
200 per brochure = 300 / 200 = 1.5).

3.

Determine the planned value (PV), earned value (EV), and actual cost (AC) for Brochure B
through March 31 as follows:
PV = 100 per brochure 250 brochures per month 2 months = 50,000
EV = 100 per brochure 600 brochures = 60,000
AC = 30,000

4.

Determine the schedule variance (SV), cost variance (CV), schedule performance index (SPI),
and cost performance index (CPI) for the production of Brochure B through March 31 as follows:
SV = EV PV = 60,000 50,000 = 10,000
CV = EV AC = 60,000 30,000 = 30,000
SPI = EV / PV = 60,000 / 50,000 = 1.20
CPI = EV /AC = 60,000 / 30,000 = 2.00
Your analysis reveals that production of Brochure B is 20 percent ahead of schedule and 50 percent under
budget (1 / CPI = 1 / 2 = 0.5; also, [30,000 expended / 600 brochures produced] / 100 per brochure = 50 /
100 = 0.5).

5.

Forecast the estimate at completion (EAC) for Brochure A.

Assume the remaining work is performed at the originally budgeted rate.
EAC = BAC + AC EV = 100,000 + 45,000 30,000 = 115,000

6.

Forecast the estimate at completion (EAC) for Brochure B.

Assume the remaining work is performed at the originally budgeted rate.
EAC = BAC + AC EV = 100,000 + 30,000 60,000 = 70,000

7.

Determine the overall status of your project by adding together the schedule variances (SV), the
cost variances (CV), and the updated estimates at completion (EAC) for Brochures A and B.
Project SV = 30,000 + 10,000 = 20,000
Project CV = 15,000 + 30,000 = 15,000
Assume the remaining work is performed at the originally budgeted rate.
EAC = 115,000 + 70,000 = 185,000

If project production rates and costs remain the same until all the required brochures are produced youll finish on
budget five months late.