15.2 Calculating and Interpreting EVM Indicators

Earned Value Management (EVM) is a powerful tool for tracking project progress. It uses formulas to calculate variances and performance indices, giving you a clear picture of how your project is doing in terms of cost and schedule.

Understanding these metrics is crucial for project success. By interpreting cost and schedule variances, along with performance indices, you can spot issues early and make informed decisions to keep your project on track.

Variance Calculations

Cost and Schedule Variance Formulas

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• Cost Variance (CV) calculated using formula $CV = EV - AC$
  • EV represents Earned Value
  • AC represents Actual Cost
• Schedule Variance (SV) determined by equation $SV = EV - PV$
  • PV stands for Planned Value
• Both variances measured in monetary units (dollars, euros)
• Positive CV indicates project under budget
• Negative CV suggests project over budget
• Positive SV shows project ahead of schedule
• Negative SV indicates project behind schedule

Variance Analysis Techniques

• Variance analysis involves examining differences between planned and actual performance
• Utilizes CV and SV to identify project deviations
• Helps project managers pinpoint areas requiring corrective action
• Involves root cause analysis to determine reasons for variances
• May include trend analysis to forecast future project performance
• Often presented in visual formats (graphs, charts) for easier interpretation
• Variance thresholds typically established to trigger management attention (10% deviation)

Performance Index Calculations

Cost and Schedule Performance Indices

• Cost Performance Index (CPI) computed using formula $CPI = EV / AC$
• Schedule Performance Index (SPI) calculated as $SPI = EV / PV$
• Both indices expressed as ratios, not monetary values
• CPI greater than 1 indicates cost efficiency (under budget)
• CPI less than 1 suggests cost inefficiency (over budget)
• SPI greater than 1 shows schedule efficiency (ahead of schedule)
• SPI less than 1 indicates schedule inefficiency (behind schedule)

Performance Index Applications

• Indices provide quick snapshot of project health
• Used to forecast future project performance
• Help in identifying trends over time
• CPI often used to estimate cost at completion
• SPI assists in predicting project completion date
• Combined analysis of CPI and SPI offers comprehensive project status
• Performance indices frequently included in project status reports
• Can be used to compare performance across different projects or work packages

Interpreting EVM Metrics

Understanding Variance Metrics

• CV interpretation reveals budget performance
  • Positive CV ($5000) indicates project$5000 under budget
  • Negative CV (-$3000) suggests project$3000 over budget
• SV interpretation shows schedule status
  • Positive SV ($2000) means project$2000 worth of work ahead of schedule
  • Negative SV (-$1000) indicates project$1000 worth of work behind schedule
• Magnitude of variance important for context
  • Large variances may require immediate action
  • Small variances might be within acceptable tolerances
• Variances often analyzed as percentages of planned values for better comparison

Analyzing Performance Indices

• CPI interpretation provides cost efficiency insights
  • CPI of 1.05 indicates project earning $1.05 for every$1 spent
  • CPI of 0.95 suggests project earning $0.95 for every$1 spent
• SPI interpretation reveals schedule efficiency
  • SPI of 1.10 shows project accomplishing 110% of planned work
  • SPI of 0.90 indicates project completing 90% of planned work
• Indices trend analysis crucial for project forecasting
  • Decreasing CPI may signal future cost overruns
  • Improving SPI could indicate schedule recovery
• Combined CPI and SPI analysis provides holistic project view
  • CPI > 1 and SPI < 1 might indicate cost savings at expense of schedule
  • CPI < 1 and SPI > 1 could suggest schedule acceleration causing cost overruns