Earned Value Analysis (EVA) is a powerful project management technique used within PRINCE2 7 to measure project performance and progress by integrating scope, schedule, and cost variables. This technique provides project managers with objective data to assess whether a project is on track, ahead, o…Earned Value Analysis (EVA) is a powerful project management technique used within PRINCE2 7 to measure project performance and progress by integrating scope, schedule, and cost variables. This technique provides project managers with objective data to assess whether a project is on track, ahead, or behind schedule and budget.
EVA uses three fundamental values to calculate project health:
1. Planned Value (PV): The authorized budget assigned to scheduled work that should have been completed by a specific date. This represents the baseline plan against which actual performance is measured.
2. Earned Value (EV): The value of work actually completed, measured against the original budget. This indicates how much of the planned work has been accomplished in monetary terms.
3. Actual Cost (AC): The total cost incurred for the work performed during a specific time period. This shows what was actually spent to achieve the completed work.
From these values, key performance indicators are derived:
- Schedule Variance (SV) = EV minus PV: A negative value indicates the project is behind schedule.
- Cost Variance (CV) = EV minus AC: A negative value indicates the project is over budget.
- Schedule Performance Index (SPI) = EV divided by PV: Values below 1.0 suggest schedule delays.
- Cost Performance Index (CPI) = EV divided by AC: Values below 1.0 indicate cost overruns.
Within PRINCE2 7 Progress Practice, EVA supports effective monitoring by providing early warning signals when projects deviate from plans. Project Managers can use these metrics in highlight reports and exception reports to communicate status to the Project Board. The technique enables forecasting of final project costs and completion dates, allowing proactive management decisions rather than reactive responses to problems discovered too late.
Earned Value Analysis Technique - Complete Guide
Why Earned Value Analysis is Important
Earned Value Analysis (EVA) is a crucial technique in PRINCE2 for monitoring project performance. It provides an objective measurement of how much work has been accomplished versus how much was planned and how much has been spent. This technique gives project managers early warning signals about potential cost and schedule problems, enabling proactive decision-making rather than reactive crisis management.
What is Earned Value Analysis?
Earned Value Analysis is a technique used within the Progress practice that integrates scope, schedule, and cost data to provide an accurate picture of project performance. It answers three fundamental questions: - How much work was planned to be completed? (Planned Value) - How much work has actually been completed? (Earned Value) - How much has been spent? (Actual Cost)
Key Terms and Formulas
Planned Value (PV) - The budgeted cost of work scheduled to be completed by a specific date.
Earned Value (EV) - The budgeted cost of work that has actually been completed.
Actual Cost (AC) - The actual amount spent on the work completed.
Performance Indicators:
Cost Variance (CV) = EV - AC - Positive value = under budget - Negative value = over budget
Schedule Variance (SV) = EV - PV - Positive value = ahead of schedule - Negative value = behind schedule
Cost Performance Index (CPI) = EV / AC - Greater than 1 = under budget - Less than 1 = over budget
Schedule Performance Index (SPI) = EV / PV - Greater than 1 = ahead of schedule - Less than 1 = behind schedule
How EVA Works in Practice
1. Establish a baseline plan with scheduled work and associated costs 2. At regular intervals, measure the actual work completed and actual costs incurred 3. Calculate the earned value based on the percentage of work completed 4. Compare EV against PV and AC to determine variances 5. Use the results to forecast future performance and take corrective action
Example Scenario
A project has a budget of £100,000 and is 50% through its timeline. - Planned Value (PV) = £50,000 (work scheduled by now) - Earned Value (EV) = £40,000 (work actually completed) - Actual Cost (AC) = £45,000 (money spent)
Exam Tips: Answering Questions on Earned Value Analysis Technique
Tip 1: Remember the core formula pattern - EV is always the first element in variance calculations. CV = EV - AC and SV = EV - PV.
Tip 2: For index calculations, EV is always the numerator (top of the fraction). CPI = EV/AC and SPI = EV/PV.
Tip 3: Understand that positive variances and indices greater than 1 indicate good performance (under budget or ahead of schedule).
Tip 4: Know that EVA belongs to the Progress practice and is used for monitoring and controlling project performance.
Tip 5: Be aware that EVA provides objective, quantifiable data rather than subjective assessments, making it valuable for reporting to stakeholders.
Tip 6: When faced with calculation questions, write out the formulas first before substituting values to avoid confusion.
Tip 7: Remember that EVA helps identify trends early, allowing for corrective actions before problems become severe.
Common Exam Question Types
- Identifying what each abbreviation means (PV, EV, AC, CV, SV, CPI, SPI) - Calculating variances and indices from given data - Interpreting results (is the project over/under budget, ahead/behind schedule?) - Understanding the purpose and benefits of using EVA in projects