DefenseEarned Value Analysis (EVA) is also called “Budget cost of work performed”. It is considered a refinement of the cost-monitoring technique. This analysis was first carried out USA’s Department of Defense (DOD). In this analysis, a “value” is assigned to each track or work package based on the expenditure forecast. The value assigned is known as the “planned value (PV)”. The work that has not yet begun is given a value known as the “earned value of zero”. The total value credited to a project is called “earned value(EV)”, which is also represented as “money value”.
Methods For Earned Value Analysis
- 0/100 Technique: The technique where a task is assigned a value of zero until such time that is completed when it is given a value of 100% of the budgeted value.
- 50/50 Technique: The technique in which a task is assigned a 50% value as soon as it is started and then given a value.
- 75/25 Technique: The technique where a task is assigned 75% on starting and 25% on completion.
- Milestone Technique: The technique where a task is given a value based on the achievement of milestones that have been assigned values as part of the original budget plan.
- Percentage Complete: In some cases, there may be a way of objectively measuring the amount of work completed.
Stages in Earned Value Analysis
- Creating the baseline budget: This is the first stage in setting up EVA. This budget is based on the project plan. It predicts the earned value through time. Normally, it is measured in person hours or workdays, for example: in a software development project.
- Monitoring Earned Value: The second stage is monitoring the earned value as the project progresses. This is achieved by monitoring the completion of each task. Actual cost(AC) is the actual cost of each task and it can be analyzed and collected.
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Schedule Variance(SV): This is the third stage which is measured in cost as EV-PV which is the deviation between planned work and completed work.
Example: Consider these values,
PV =40000
EV=35000
SV=35000-40000 = -5000Here the calculated SV value is negative and hence we conclude that the project is behind the original schedule.
- Time variance(TV): The difference between the current time and the time when the achievement of the earned value was planned to occur.
- Cost Variance(CV): This value is the difference between the actual cost and the earned value. Using this value we can estimate the accuracy of the original cost scheduled for the project. If the CV values are found to be negative, we conclude the project is over cost.
Advantages of Earned Value Analysis (EVA)
- Project Performance Measurement: EVA provides a comprehensive method for measuring and assessing the performance of a project. It helps project managers gain a clear understanding of how well a project is progressing in terms of cost and schedule.
- Objective Performance Metrics: EVA relies on objective metrics, making it less susceptible to subjective interpretations. This can lead to more accurate assessments of project performance.
- Integration of Cost and Schedule: EVA combines cost and schedule performance, allowing project managers to see the relationship between these two critical aspects of project management. This integration can help in identifying issues early and making informed decisions.
- Early Issue Identification: EVA can highlight problems in project execution early, enabling project managers to take corrective actions promptly. This can prevent cost overruns and schedule delays.
- Benchmarking: EVA allows for benchmarking project performance against planned targets and historical data. It helps project managers assess whether their project is on track compared to similar projects.
- Effective Communication: EVA provides a standardized way to communicate project performance to stakeholders. Charts and reports generated from EVA data can make it easier for stakeholders to understand the project’s status.
Disadvantages of Earned Value Analysis (EVA)
- Complexity: EVA involves complex calculations and terminology, which can be challenging for project teams to understand, especially for smaller projects or teams with limited expertise.
- Resource-Intensive: Implementing EVA requires tracking detailed data and maintaining comprehensive records. This can be resource-intensive, and some organizations may lack the necessary tools or resources for effective EVA implementation.
- Subjectivity in Earned Value Calculation: The “earned value” itself can be subject to interpretation, especially in situations where there are gray areas regarding the completion of work packages or milestones.
- Assumption of Linear Progression: EVA assumes linear progression, which means that it may not work well for projects with irregular or non-linear progress patterns, such as research and development projects.
- Time-Consuming: Calculating and updating EVA metrics can be time-consuming, which may not be suitable for projects that require quick decision-making and frequent changes.
- Focus on Metrics vs. Problem Solving: Overemphasis on EVA metrics can sometimes lead to a focus on numbers rather than addressing the underlying issues causing performance problems.
FAQs on Earned Value Analysis
1. What is the primary purpose of Earned Value Analysis (EVA) in project management?
Earned Value Analysis (EVA) in project management integrates cost and schedule data to evaluate project performance. It gives project managers quantifiable criteria to assess budget and schedule progress.
2. Can Earned Value Analysis (EVA) be effectively applied to all types of projects, or are there specific project types where it may not be as suitable?
Earned Value Analysis (EVA) works best for projects with clear plans and measurable tasks. It may not be ideal for irregular or non-linear progress patterns, such as research and development projects, where projecting completion percentages is difficult. EVA works best with a baseline budget and project plan.
Conclusion
Earned Value Analysis (EVA) organizes and evaluates project performance. Objective measurements, cost-schedule integration, early issue discovery, and stakeholder communication are its benefits. EVA is complicated and resource-intensive, hence it may not work for all projects. To use EVA effectively in project management, businesses must assess the pros and cons and determine the optimal method for their projects.