Chapter 18: Measuring Performance with Earned Value Analysis

Chapter at a Glance

Set the status date and view earned value schedule indicators to evaluate past schedule performance and forecast future performance, page 392. See earned value cost indicators to compare the project’s performance to the baseline plan, page 394. View Earned Value data charted in Excel, page 400.

In This Chapter, You will Learn How To:

• Set a status date and see earned value indicators for schedule performance.

• See earned value cost performance indicators.

• Generate the earned value visual report.

Tip 

Tip Do you need only a quick refresher on the topics in this chapter? See the Quick Reference entries on pages xxv–xlviii.

Looking at task and resource variance throughout a project’s duration is an essential project management activity, but it does not give you a complete picture of the project’s long-term health. For example, a task might be over budget and ahead of schedule (possibly not good) or over budget and behind schedule (definitely not good). Viewing schedule or cost variance alone does not tell you much about performance trends that might continue for the duration of the project.

To get a more complete picture of overall project performance in terms of both time and cost, you can use earned value analysis (also called earned value management, or EVM). The purpose of earned value analysis is to measure the project’s progress and help predict its outcome. Earned value analysis involves comparing the project’s progress to what you expected to achieve (as reflected in a baseline plan) at a specific point in the schedule or budget of a project plan and then forecasting future project performance.

The main differences between earned value analysis and simpler schedule and cost variance analysis can be summed up as follows:

• Simple variance analysis answers the question, “What current performance results are we obtaining?”

• Earned value analysis addresses the question, “For the current performance results we are obtaining, are we getting our money’s worth?”

The difference is subtle but important. Here is an example. Assume that a project has a baseline duration of 160 days and a budget of $82,000. After approximately one-half of the baseline duration has elapsed, the actual costs incurred are about $40,000. But what is the project’s status? You cannot tell based on this information alone. A simple distribution of cost over time would suggest that $40,000 spent by the midpoint of an $82,000 project is just about right. But perhaps the project is running ahead of schedule-more work has been completed by midpoint than planned. That would be good news; the project might finish ahead of schedule. On the other hand, the project might be running behind schedule-less work has been accomplished than was planned. This would be bad news; the project will likely miss its planned finish date, exceed its budget, or both.

Earned value analysis enables you to look at project performance in a more sophisticated way. It helps you to determine two important variables: the true cost of project results to date and the performance trend that is likely to continue for the remainder of the project.

Earned value analysis has its origins in large projects carried out for the U.S. Department of Defense, and it remains an essential project status reporting tool for major government projects. However, because of the usefulness of earned value analysis in predicting future project performance, it is gaining popularity in the private sector and on smaller projects as well.

Important 

Before you can use the practice files provided for this chapter, you need to install them from the book’s companion CD to their default locations. See “Using the Book’s CD” on page xix for more information.