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Earned Value Management (EVM)

5 minutes 5 Questions

Earned Value Management (EVM) is a project management technique that integrates scope, schedule, and cost parameters to assess project performance and progress objectively. It provides a set of metrics that enable project managers to quantify the value of work completed up to a specific point in time and compare it against the planned schedule and budget. In the context of schedule performance analysis, EVM helps in identifying variances between the planned and actual progress. Key performance indicators such as Schedule Variance (SV) and Schedule Performance Index (SPI) are derived from EVM data. SV indicates the difference between the earned value and the planned value, highlighting whether the project is ahead or behind schedule. A positive SV means the project is ahead, while a negative SV indicates a delay. SPI, on the other hand, is a ratio of earned value to planned value and shows the efficiency of time utilized. An SPI greater than 1 suggests better-than-expected performance, whereas an SPI less than 1 indicates inefficiency. EVM enables proactive decision-making by forecasting future performance trends based on current data. It helps in predicting the Estimated Time to Completion (ETC) and the Estimated Completion Date (ECD) by considering the project's current velocity. This predictive capability allows project managers to implement corrective actions promptly, reallocating resources, adjusting schedules, or modifying project scopes to align with objectives. Moreover, EVM facilitates effective communication among stakeholders by providing standardized performance metrics. It ensures transparency and accountability, as all parties have access to consistent information about project status. EVM's integration of cost and schedule parameters also aids in balancing project constraints, ensuring that time, budget, and scope are managed cohesively. In summary, Earned Value Management is a vital tool in schedule performance analysis, offering quantitative insights into project progress and enabling informed decision-making to keep the project on track.

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PMI-SP - Schedule Performance Analysis Example Questions

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Question 1

In an EVM analysis, if the project's Schedule Variance (SV) is -$25,000 and the Planned Value (PV) is $100,000, what would be the Schedule Performance Index (SPI) value?

Correct Answer: 0.75

Let's solve this step by step: 1. Schedule Performance Index (SPI) = Earned Value (EV) / Planned Value (PV) 2. We know: - Schedule Variance (SV) = -$25,000 - Planned Value (PV) = $100,000 - SV = EV - PV 3. Using SV formula: -$25,000 = EV - $100,000 EV = $75,000 4. Now we can calculate SPI: SPI = $75,000 / $100,000 = 0.75 This indicates the project is progressing slower than planned, completing only 75% of the planned work. The other answers are incorrect because: - 1.25 would indicate the project is ahead of schedule - The calculation uses EV and PV, not Actual Cost - -0.25 is mathematically impossible for SPI as it's a ratio that's always positive

Question 2

In Earned Value Management (EVM), what is the most accurate way to calculate cost variance at completion (VAC)?

Correct Answer: Subtract BAC from EAC

Cost Variance at Completion (VAC) is calculated by subtracting the Estimate at Completion (EAC) from the Budget at Completion (BAC). The formula is: VAC = BAC - EAC. This calculation provides a projection of the expected budget variance when the project is completed. A negative VAC indicates the project is expected to be over budget, while a positive VAC indicates the project is expected to be under budget. The other options are incorrect because: - Comparing ETC to EAC against baseline mixes different timing aspects of the project and doesn't provide meaningful variance data - Using CPI and TCPI multiplication with BAC doesn't reflect the actual cost variance projection - Adding current period variances only shows historical data and doesn't account for future performance trends

Question 3

In a project using Earned Value Management (EVM), which formula provides the most reliable indication of the project's completion efficiency?

Correct Answer: TCPI = (BAC - EV)/(BAC - AC)

TCPI (To-Complete Performance Index) = (BAC - EV)/(BAC - AC) is the correct formula for measuring the efficiency required to complete the remaining work. This formula shows the performance rate needed to complete the remaining work according to plan, where: - BAC (Budget at Completion) represents the total budget - EV (Earned Value) represents work completed to date - AC (Actual Cost) represents costs spent to date This calculation indicates the cost performance that must be achieved on remaining work to meet the Budget at Completion (BAC). The other formulas contain incorrect combinations of EVM elements: - Mixing EAC with BAC creates inconsistent baseline measurements - Including SPI (Schedule Performance Index) in TCPI calculations is incorrect as TCPI focuses on cost efficiency - Including CPI in the denominator would create a circular reference since TCPI is used to analyze future cost performance

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