The chart attached here shows a graphical representation of performance measures and variances explained on the previous page. earned-value-chart
Now we will do a couple of examples to illustrate the earned value analysis
Suppose you received a contract from the city government to install 1000 new self-serving parking meters in downtown Greensboro for a total cost of $200,000. Your project manager estimates that 25 meters can be installed each day. After 18 days 400 meters have been installed and data from time sheets, purchase invoices, etc. show that you have spent $100,000 so far on the project.
Determined the Planned Value, the Earned value, Cost Overrun, Schedule Variance, and Schedule slippage. Determine also the cost at completion if no corrective action is taken.
The budgeted (planned) value of each meter is $200,000/1000= $200. Since the plan is to install 25 meters each day, it means your planned value of work per day = $200x 25 = $5000. So after 18 days, the planned value of value =5000×18 = $90, 000
Since 400 meters have been installed after 18 days, the Earned Value = $200×400 = $80,000
The actual amount of money spend on those 400 meters (this information is obtained from invoices and payroll etc)= $100,000.
We are now ready to determine the performance measures
1. Cost Variance (CV) = EV-AC = $80,000-$100,000=-$20,000. Since the value is negative it means we have a cost overrun or we are over spending on the project.
2. Schedule Variance (SV) = EV-PV=$80,000-$90,000= -$10,000. The negative value means the project is $10,000 behind schedule; it means we are falling behind.
3. Slippage or Time variance: since we expect to do $5000 work every day and we are $10,000 worth of work behind, it means we are 2 days (10,000/5000) behind. The project has slipped by 2 days.
4. Cost Performance Index (CPI)= EV/AC= 80,000/100,000= 0.80
5. Schedule Performance Index (SPI)= EV/PV=80,000/90,000=0.89
6. Estimate at Completion= (AC/EV)x Total Budget= (100,000/80,000)*200,000= $250,000. This means if the current rate of spending continues, the project cost at completion will be $250,000.