Earned Value Management (or EVM) is a technique widely used for measuring project performance against the project baseline, in most cases the original budget.
The earned value calculations is a top priority for studing among all project managers that want to get a Project Management Professional (or PMP) certification. It is a crucial Key Performance Indicator (KPI) especially for construction projects and for sure EVM is one critical practice area for monitoring the performance of a project from both a cost and schedule perspective.
It’s common to think about projects with binary thinking:
Both project performance factors have a direct impact on the total project cost. What will be the total cost of my project if I'm ahead of schedule but my costs are higher than expected? If I'm behind schedule but my costs are lower? EVM provides great information to help with these questions.
The procedure of Earned Value calculations require the following:
When having these numbers available, then it is all set for some calculations.
We are to look at an example where being halfway through a year-long project that has a total budget of €1,000,000. The budgeted amount through this six-month mark is €550,000. Summary of actual costs through this six-month mark is €450,000.
So, in summary:
Having SV negative and SPI <1, shows that the project is considered behind schedule. While the project is at 50% of the way through but have planned for 55% of the costs to be used. Steps are necessary for the project performance to catch-up in the second half of the project.
Having CV positive and CPI is >1, shows that the project is considered to be under budget. While the project is at 50% of the way through, but actual costs so far are only 45% of project's budget. By keeping the project to perform at this pace, then the total cost of the project (EAC) will be only €900,000, as opposed to our original budget of €1,000,000.
For sure earned value calculations can help project management on a project to identify problems early and be proactive and reactive. EV metrics have to be defined in a standard manner, and the data must be available for reporting across the project portfolio.
If you’ve never calculated earned value on your project or if it's been a while, try it out. You might be surprised by what you find. Rabio will help you to keep track of Budget, Actual Costs and Earned Value.
Rabio is open-source software that was designed to manage and control budgets, their costs, and produce reports based on a flexible cost breakdown structure. It is budgeting software that can keep track of Earned Value and it is distributed for free.
You can easily use it for your personal needs or your business. Using Rabio ‘s managers system you can design and control your budget and compare it with costs and earned value at any time using the easy reporting internal system.
Furthermore, you can alter your budget or create forecast and projection managers and compare new data with the original budget.
The reports below are part of Rabio reporting system
You can download Rabio open-source version here