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Introduction to EVM - The Frosting

November 20, 2005 @ Project Management Blog from jalme

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The example of last week presents us with some good and bad news. But how much more productive were we and how much behind schedule are we? The EV technique presents us with the results by calculating:

1. Cost Variance (CV): CV=EV-AC;
2. Schedule Variance (SV): SV=EV-PV;

So in our case we saved 440€ in work (CV) and we are 880€ behind schedule (SV; and since we are one day late this actually is correct since it represents the value of a day work of the two resources). If we calculate only the Accounting Variance (AV) we would report 1360€ (PV-AC). What is the meaning of this value regarding project performance? Would it be better if we where less productive therefore decreasing AV? If you know please e-mail me because I don’t.

Therefore, we can draw the following conclusions:

1. CV greater than 0; This means EV greater then AC representing a better productivity than planned (if you prefer it can be interpreted as greater speed of work);
   
2. CV=0; This means EV=AC representing the planned productivity;
   
3. CV lesser then 0; This means EV lesser than AC representing a worst productivity than planned (if you prefer it can be interpreted as lesser speed of work);
   
4. SV greater than 0; This means EV greater than PV representing more work done than initial planned;
   
5. SV=0; This means EV=PV representing that same work done as initially planned;
   
6. SV lesser than 0;This means EV lesser than PV representing less work done than initial planned.

The Earned Value technique calculates also two indexes:

1. CPI (Cost Performance Index)=EV/AC; Represents the level of productivity or speed of the work;
2. SPI (Schedule Performance Index)=EV/PV; Represents the speed of evolution of the schedule;
   

From the usage of these indexes, we can draw the following conclusion:

1. CPI greater than 1; productivity is greater than expected;
   
2. CPI=1; productivity is the same as expected;
   
3. CPI lesser than 1; productivity is lesser than expected;
   
4. SPI greater than 1; schedule speed is greater than expected (ahead of schedule);
   
5. SPI=1; schedule speed is equal to what was expected (on schedule);
   
6. SPI lesser than 1; schedule speed is lesser than expected (behind of schedule).

Next week: Introduction to EVM - The Toppings

J

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