Earned Value Management (EVM) is a management strategy that gives any sort of project early visibility into cost and time-related difficulties. By giving managers useful data beyond those of conventional project tracking, EVM empowers proactive management activities and speeds up wise decision-making. Using the notion of earned value, which stands for the budgeted cost of work completed, earned value analysis (EVA), assesses the progress and performance of the project and helps project managers evaluate the success of the project's cost and schedule, create performance indices, and anticipate future costs and completion dates by comparing the earned value to the projected budget.
EVM utilizes three key metrics to assess project performance:Planned Value (PV): This represents the approved budget allocated for the work scheduled to be completed by a specific date. PV serves as a benchmark for measuring progress and determining if the project is on track.
Earned Value (EV): EV reflects the approved budget assigned to the work that has actually been completed by the specified date. It measures the value of work accomplished and provides a tangible assessment of progress.
Actual Costs (AC): AC denotes the actual costs incurred for the work completed up to the specified date. It includes all the expenses associated with the completed work, such as labor, materials, and other resources.
When using Earned Value Management (EVM) to assess your project's schedule and cost performance, the following indicators are utilized:
Schedule Variance (SV): SV measures the variance between the actual work completed and the planned work. This value indicates whether the project is ahead of or behind schedule. A positive SV denotes that the project is ahead of schedule, while a negative SV indicates a delay.
Cost Variance (CV): CV measures the difference between the budgeted cost for the work planned and the actual cost incurred for the work performed. It reveals whether the project is under or over budget. A positive CV indicates cost savings, while a negative CV suggests cost overruns which should be avoided.
Schedule Performance Index (SPI): SPI is the ratio of the budgeted cost for the work performed to the budgeted cost for the planned work. It provides a relative measure of the project's time efficiency. A SPI greater than 1 indicates that the project is ahead of schedule, while an SPI less than 1 signifies a schedule delay.
Cost Performance Index (CPI): CPI is the ratio of the budgeted cost for the work performed to the actual cost incurred for the work performed. It offers a relative measure of the project's cost efficiency. A CPI greater than 1 indicates that the project is under budget, while a CPI less than 1 suggests cost overruns which calls for an action.