Project management

Jun 17, 2022 | 3 Minute Read

Guidelines For Cost And Schedule Monitoring Using EVM

By: Jaspreet Singh, Project Manager - L2

Table of Contents

It is essential to monitor the cost and schedule of the project. One way to achieve this is by applying the Earn Value Management (EVM) technique.

The EVM technique helps forecast costs and schedule variance so preemptive actions can be taken to correct deviations. But before applying this technique, there is a lot to learn, like:

  • Basics of EVM
  • Various formulas for evaluating project performance
  • Tracking cost and schedule

End your search for efficient project management today by learning about EVM and how it can be implemented across the different phases of a project.

Prerequisites

  • Be open to learning
  • Basic Excel Knowledge
  • Quantitative Aptitude
  • Project monthly consumption report

Key Terms And Definitions

 

 

Key Terms

Definition

Example

BAC

Budget at completion

Calculated budget to complete a project

 

PV or BCWS

Planned value or budgeted cost of work scheduled

The cost incurred as per the scheduled time

Planned Budget

AC or ACWP

Actual cost or actual cost of work performed

The actual cost incurred as per the current status of the project

 

EV or BCWP

Earned value or budgeted cost of work performed

The value of completed work as per the current status of the project

 

CV

Cost variance

Measure the cost performance of the project

If the CV is 0, the project is on budget

If the CV is +ve, the project is under budget

If the CV is -ve, the project is over budget

SV

Schedule variance

Measure the time performance of the project

If SV is 0, the project is on schedule

If SV is >1, the project is ahead of schedule

If SV is <1, the project is behind the schedule

CPI

Cost performance index

Measure the value of work done as per the actual cost spent

If CPI is 0, the project is on budget

If CPI is >1, the project is under budget

If CPI is <1, the project is over budget

SPI

Schedule performance index

Measure the performance of the project as per the planned schedule

If SPI is 0, the project is on schedule

If SPI is >1, the project is ahead of schedule

If SPI is <1, the project is behind the schedule

EAC

Estimate at completion

The estimated total cost to complete the project depends on the current cost situation and the progress of the work

 

ETC

Estimate to complete

The cost required to complete the remaining work of the project

 

TCPI

To complete the Performance index

It is the future CPI required to complete the project as per the BAC or EAC

 

Formulae

Terms

Formulae

Examples

PV or BCWS

% of planned work * BAC

 

EV or BCWP

% of work completed * BAC

 

CV

EV-AC

 

SV

EV-AC

 

CPI

EV/AC

 

SPI

EV/PV

 

EAC

BAC/CPI

If the project needs to be completed maintaining the current cost incurred

EAC

AC+( BAC- EV)

If the budgeted cost exceeds the current stage and the remaining work needs to be completed on time

EAC

AC+ [(BAC-EV) / (CPI * SPI)]

If the budgeted cost and time exceed the current stage and the remaining work needs to be completed on time

EAC

AC + bottom-up estimate to complete

If the cost of the remaining work is newly estimated

ETC

Bottom-up cost estimation

If the cost of the remaining work is newly estimated

ETC

EAC - AC

Depending on EAC calculation

TCPI

(BAC-EV) / ( BAC-AC)

If the project is currently under budget

TCPI

(BAC-EV) / ( EAC-AC)

If the project is currently over budget

Project Scenarios

Several scenarios will come up throughout a project. A deeper dive into these scenarios is necessary for effective project management.

Ideal Scenario

Details Available

Budget

$1,00,000.00

Completion Time

12 Months

Time Completed

3 Months

% Work Completed

25%

Cost Incurred Till Now

$25,000.00

Over Budget And Behind Schedule

Details Available

Budget

$1,00,000.00

Completion Time

12 Months

Time Completed

6 Months

% Work Completed

30%

Cost Incurred Till Now

$60,000.00

Over Budget And On Schedule

Details Available

Budget

$1,00,000.00

Completion Time

12 Months

Time Completed

6 Months

% Work Completed

50%

Cost Incurred Till Now

$60,000.00

Calculation Of Cost Incurred

The steps required for calculating the total cost incurred are:

  • Find the value of the percentage profit margin of the last year
  • Once the % profit margin of last year is known, then reduce the % profit margin from the hourly cost of the project

For example, if the hourly project cost is $50, then the actual figure will be

$50 - 10 % profit margin = $45 per hour

(Reference Template)

Actions for Efficient Implementation

Some action steps that can be taken to utilize the EVM technique learned today are:

  • Define the cadence of EVM calculation monthly or every sprint
  • Publish the EVM report on the cadence to your stakeholders
  • Share the report in project review, account manager (1-1), service area lead, common channel, and with other stakeholders
  • If there is a deviation, then raise the risk, add actions, and suggestions 
  • Monitor the Trend from the start of the project, the Previous month, or sprint

Corrective Actions

If there is a deviation in schedule and cost, then there is an expectation from a Project Manager and Account Manager to mitigate the risk collaboratively. In both scenarios, some action steps can be taken to deal with the variance. These action steps are listed below.

Scheduling Variance

  • Raise risk ticket
  • Discuss the risk with relevant stakeholders 
  • Share the risk with the client for visibility
  • Identify staffing or technical debt 
  • Review the scope
  • Analyze the committed vs. delivered work

Cost Variance

  • Raise risk ticket 
  • Analyze the root cause 
  • Identify the opportunity for automation, like introducing a bot for DSM
  • Identify staffing or technical debt
  • Review the scope

Key Takeaway

After understanding the concept of EVM, budget control, and monitoring, users can start taking precautions. This can be done by following cost and schedule variance measures. It will help users mitigate the risk on time.

About the Author
Jaspreet Singh, Project Manager - L2
About the Author

Jaspreet Singh, Project Manager - L2

Nickname: Jazz. Family man, obsessed with watching, playing, reading about cricket—if you play a round of "snooker" with him, prepare to lose.


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