Earned Value Management (EVM) Overview

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Questions and Answers

What does the Estimate At Completion (EAC) represent?

Total planned value for the project

The estimated total cost of the project upon completion (correct)

The estimated cost to complete the remaining work

The ratio of remaining work to funds remaining

How is the Cost Performance Indicator (CPI) calculated?

CPI = AC / EV

CPI = EV / AC (correct)

CPI = EV + AC

CPI = PV / EV

What does a negative Schedule Variance (SV) indicate?

The project has exceeded its budget

The project is ahead of schedule

The project is behind schedule (correct)

The project is on schedule

If the Actual Cost (AC) is $1200 and the Earned Value (EV) is $800, what does this imply about the project costs?

The project is over budget Signup and view all the answers

What is the planned value (PV) for the completion of side 1 of the project?

$1000 Signup and view all the answers

What does the To-Complete Performance Index (TCPI) indicate?

It represents the cost efficiency required to complete the remaining work to meet a budget target Signup and view all the answers

What is the overall project completion status indicated after Week 1?

20% Signup and view all the answers

What does the Schedule Performance Indicator (SPI) of 0.8 signify?

Work is behind schedule compared to planned value Signup and view all the answers

What is the primary purpose of Earned Value Management (EVM)?

To provide a health check on project performance Signup and view all the answers

Which of the following is NOT a prerequisite for implementing EVM?

Risk management plan Signup and view all the answers

What does Schedule Variance (SV) measure?

The difference between earned value and planned value Signup and view all the answers

Which of the following correctly defines Earned Value (EV)?

The estimated monetary value of the work accomplished Signup and view all the answers

What does Cost Performance Index (CPI) indicate?

The ratio of earned value to actual costs Signup and view all the answers

Which step is NOT involved in the application of EVM?

Create stakeholder communication plan Signup and view all the answers

What does Budget At Completion (BAC) represent?

The total budget for all project work Signup and view all the answers

Which of the following is a measure of schedule efficiency?

Schedule Performance Index (SPI) Signup and view all the answers

What is the formula used to calculate the Cost Performance Index (CPI)?

CPI = EV / AC Signup and view all the answers

What does an SPI value greater than 1 indicate?

The project is ahead of schedule Signup and view all the answers

Which limitation of Earned Value Management (EVM) suggests that project quality might not be adequately captured?

No indication of Project Quality Signup and view all the answers

In a project with an SPI of 1.03 and a CPI of 0.81, what does the CPI indicate?

The project is over budget Signup and view all the answers

What does the To-Complete Performance Index (TCPI) help determine?

The budget needed to complete the remaining work Signup and view all the answers

If a project has an actual cost of $20,000 and an earned value of $18,000, what is the CPI?

0.8 Signup and view all the answers

What does a Schedule Variance (SV) of zero indicate about a project?

The project is perfectly on schedule Signup and view all the answers

What is one reason why EVM may be difficult to implement in R&D projects?

Such projects often have poorly defined outcomes Signup and view all the answers

Study Notes

Earn Value Management (EVM)

EVM is a project management technique used to track project progress and performance
Time is not regarded as time but cost, time is money
EVM helps in project health check, schedule performance, cost performance, forecasting, issue identification (estimation problems, scope creep, inefficiency), and communication
Pre-requisites for EVM include a well-defined scope, detailed work breakdown structure (WBS), project management schedule, and management support

EVM Steps

Define work to be done
Assign a monetary value to the work
Apply earning values (e.g., 0/100, 20/80, 25/75, 50/50)
Execute project and measure progress

EVM Terms

Planned Value (PV): Budgeted Cost of Work Scheduled (BCWS), estimated monetary value of planned work at a specific point in time
Earned Value (EV): Budgeted Cost of Work Performed (BCWP), estimated monetary value of completed work
Actual Cost (AC): Actual Cost of Work Performed (ACWP), actual cost spent on the completed work.
Schedule Variance (SV): difference between earned value (EV) and planned value (PV)
Cost Variance (CV): difference between earned value (EV) and actual cost (AC)
Schedule Performance Index (SPI): ratio of earned value (EV) to planned value (PV), measures schedule efficiency
Cost Performance Index (CPI): ratio of earned value (EV) to actual cost (AC), measures cost efficiency
Budget at Completion (BAC): Budget for the entire project, total planned value
Estimate to Complete (ETC): estimated cost to complete remaining work
Estimate At Completion (EAC): estimated total cost of the project when all work is complete
To-Complete Performance Index (TCPI): Ratio of remaining work to remaining budget needed to meet a target

Definitions

Planned Value (PV): Estimated monetary value of planned work at a given time
Earned Value (EV): The estimated monetary value of the work that has been accomplished
Actual Cost (AC): The actual costs incurred for the work accomplished

Schedule and Cost Performance

Schedule Variance (SV): EV - PV
Schedule Performance Index (SPI): EV / PV
Cost Variance (CV): EV - AC
Cost Performance Index (CPI): EV / AC

EV Plot

A graph showing the relationship between earned value, planned value, and actual cost over time

Forecasts

Estimate To Complete (ETC): Estimation of the remaining costs to complete a project
Estimate At Completion (EAC): Estimation of the total cost to complete a project

EAC (Re-estimate)

Original estimate is flawed
Requires additional resources/time to complete the project
Adjusted total cost will reflect additional time and resources allocated

EAC (atypical)

Slippage due to special events (new requirements)
Adjusted estimate based on additional time and resources

EAC (typical)

Current performance to continue
Additional time is required as per the revised schedule and revised estimate to complete the project

ETC (considering CPI and SPI)

Project needs to meet the deadline
Add more resources
Estimate to complete the project

Estimate At Completion (EAC) Formulas

Original estimate is flawed, adjusted estimate due to new factors
Remaining work to be performed at original budgeted rate
Remaining work to be performed at current CPI, different scenario
The project needs to meet the deadline

To-Complete Performance Index (TCPI)

Future cost performance to achieve target BAC or EAC
TCPI = Remaining Work / Remaining Budget
TCPI based on BAC
TCPI based on EAC

Limitations of EVM

Mental block: Time vs cost, focus on cost
Earn schedule (ES) can be a remedy if the project finishes behind schedule
No indication of Project Quality, or Customer Satisfaction
Requires well-defined Scope, WBS, and Schedule
Difficult to implement for dynamic work (like R&D projects)
Benefits are proportional to the size / complexity of the project

Questions

Question 1: CPI of a project, given planned, actual and earned values
Question 2: Why a sponsor is concerned about the project progress, given SPI and CPI
Question 3: Related to project management and cost calculations of developing and installing drivers

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Description

This quiz covers the essential concepts and steps of Earned Value Management (EVM) in project management. Learn about key terms like Planned Value, Earned Value, and Actual Cost, and understand the prerequisites for effective EVM implementation. Test your knowledge on how EVM can enhance project performance tracking and forecasting.