Project Management Institute

Earned value analysis

a case study

An expert in Earned Value analysis revisits a December 1995 PM Network article as a case study in the usefulness of this tool.

Zeev Barr, PMP

The management of complex projects requires adequate monitoring and control tools. “Earned Value” is one method of measuring project performance, by comparing the amount of work planned with what was actually accomplished to determine if cost and schedule performance is as planned. It enables the project manager to detect deviations from plan as soon as they occur and to take appropriate corrective actions. Due to its importance in project success, this subject is well covered in project management literature. (See sidebar.)

In the planning phase, a project baseline is set. The work completed at each point in time is then compared to this baseline. Fleming and Koppelman (1995) described the process of establishing the baseline and the level of detail expected for planning each project stage according to its horizon.

When various milestones are reached during the project cycle, they become Earned Value according to the budgeted value of the completed work. At these points the Earned Value is compared to the actual expenditure figures. Fleming and Koppel-man (1996b) discussed project evaluation based on the Cost/Schedule Control Systems Criteria (C/SCSC). These criteria include empirical findings as well as formulas, or utilities, that use project data to determine the health of the project. Utilities are also used to predict the final project performance results (1996a).

In a December 1995 PM Network article, Tom Ingram presented the interesting case of a project that had difficulties and described the way he handled the situation to bring it to a successful conclusion. He explained how he determined the Earned Value of completed activities according to the amounts that had been budgeted and then compared the Earned Value to the actual expenditure.

What should be added to this valuable discussion is a quantitative example of project tracking employing the Earned Value cost management concept that is presented in a practical way for automation with modern computer software. This article reviews the most common project status indicators and describes their use. These utilities are then applied to the data provided by Ingram to illustrate how they help to correctly assess the project status at each stage.

Some Basic Definitions. The three basic values used in Earned Value Analysis are defined as:

  • Budgeted Cost of Work Scheduled (BCWS): The sum of the approved cost estimates for activities scheduled to be performed.
  • Budgeted Cost of Work Performed (BCWP): The sum of the approved cost estimates for activities completed, or the Earned Value.
  • Actual Cost of Work Performed (ACWP): Total costs incurred in accomplishing work.

When a project starts, a Time Phased Budget (TPB) plan is developed, which includes a schedule and a budget with estimated expenditure allocated for various activities during given periods. This Time Phased Budget serves as the Performance Measurement Baseline (PMB) against which the project progress is monitored. At each point in time the analysis is performed for a given period, usually project-to-date. On the date of the analysis, called the “Data Date,” the value of the PMB becomes the BCWS. The BCWS is compared to the BCWP and to the ACWP, all expressed in terms of dollars. The cumulative values for the given period are used in order to establish a trend and to avoid periodical anomalies.

Variances. To measure the project performance until the Data Date, the following variances are used:

Cost Variance is defined as CV= BCWP–ACWP, or the Budgeted Cost of Work Performed less the Actual Cost of Work Performed. For the work performed we compare the budgeted cost with the actual. The variance was defined such that a negative value denotes a cost overrun.

Schedule Variance is defined as SV=BCWP–BCWS, or the Budgeted Cost of Work Performed less the Budgeted Cost of Work Scheduled. Here we compare the work performed with what was scheduled. A negative variance means that the project is behind schedule.

Percentage Variances. The CV and SV show deviations from the plan in terms of dollars. Are these deviations significant when compared to the project value until the Data Date? To evaluate this, the variances are expressed in percentages of the baseline.

Cost Variance (in percentage):


and Schedule Variance (in percentage):


Note that a different definition of the SVP can be found in the literature; for example, see my letter in the September 1996 Project Management Journal.

Example 1. To illustrate the use of the variances, consider a scenario where $100,000 was allocated in the project budget for a worker to produce 100 units of a certain product in 100 working days. If after 50 days (BCWS=$50,000) only 40 units were completed (BCWP= $40,000) and the actual amount spent for doing that was $45,000 (ACWP= $45,000), we deduce that (a) the project is over budget (CV=–5,000; CVP=–13%) and (b) the project is behind schedule (SV=–10,000; SVP=–20%).

Performance Indices. Performance indices are ratios used to determine the status of the project.

Cost Performance Index is defined as


For the work performed, the CPI compares the budgeted cost with the actual. CPI<1 means that the project is over budget.

Schedule Performance Index is defined as


The SPI compares the work performed with what was scheduled. SPI<1 means that the project is behind schedule.

The two indices may give results that seem contradictory; for example, CPI>1 and SPI<1. The project is within budget, which is good, but it is also behind schedule. The money may have been saved because not enough work was done. Can we come back on budget and on schedule by increasing the number of resources employed? To answer this we use the Cost-Schedule Index, which is defined as


CSI<1 is indicative of a problem.

Example 2. As an illustration, consider a second scenario for Example 1: After 50 days only 40 units were completed, but the actual amount spent was only $30,000. This may happen, for instance, if the cost of $1,000 per unit included a performance bonus which was not paid due to slow delivery. Here we deduce that (a) the project is within the budget (CPI=1.33), but (b) the project is behind schedule (SPI=0.80), and (c) the project can be brought on schedule and be within budget by employing additional resources (CSI = 1.07). The assumptions are that the additional resources will cost the same and display a similar performance, and that the particular activity has no influence on the implementation of other tasks.

Forecasting. The utilities discussed above provide information about the project performance until the Data Date. This information can be used to identify problem areas as well as to forecast future project performance by using the performance indices.

The funds required to complete the project are estimated based on the experience gained until the Data Date. The value of remaining work, which is the total budget less the Earned Value, is modified by the Cost Performance Index.

Estimate To Complete is defined as


where BAC is the Budgeted cost At Completion, as approved in the plan.

The Estimate To Complete figure is useful to the project manager for comparison with the funds on hand. A significant difference will usually trigger a review of the cost estimates of future tasks and a search for corrective actions.

The funds needed for the entire project can be calculated by adding the actual costs incurred until the Data Date to the Estimate To Complete. The Estimate At Completion is defined as EAC=ETC+ACWP.

Knowing the Budget and the Estimate At Completion, we can now calculate the Cost Variance At Completion, or its negative quantity, which is more prevalent, the Projected Cost Overrun PCO=EAC-BAC. This can be expressed as a percentage of the original budget in order to assess the severity of the situation:

Projected Cost Overrun (in percentage):


The project manager will explain the situation to senior management and, if necessary, will negotiate additional funds.

Example 3. The Forecast To Complete in Example 1 is $67,500 and the Estimate At Completion is $112,500, with a Projected Cost Overrun of $12,500, or 12.5 percent of the initial budget. In Example 2 a saving of $25,000 is projected, which is 25 percent of the initial budget.

Table 1. Project Data

Date BCWS End Wk WBS ID# Milestones Actual cost Earned Value PM Budget PM Actual ACWP BCWP
1 2 3 4 5 6 7 8 9 10 11
19-Nov-94 2,000 0 0 0
26-Nov-94 3,500 1 445 350 350 445
3-Dec-94 4,500 2 445 350 700 890
10-Dec-94 6,000 3 10000 Base System Installation 13,600 8,500 445 350 14,650 9,835
17-Dec-94 12,500 4 445 350 15,000 10,280
24-Dec-94 14,000 5 445 350 15,350 10,725
31-Dec-94 14,500 6 11000 Functional Design Specs. 11,000 3,000 445 350 26,700 14,170
7-Jan-95 22,500 7 445 350 27,050 14,615
14-Jan-95 27,000 8 445 350 27,400 15,060
21-Jan-95 32,000 9 12000 Mainframe Download Custom… 4,200 4,000 445 350 31,950 19,505
28-Jan-95 37,000 10 445 350 32,300 19,950
4-Feb-95 38,500 11 445 350 32,650 20,395
11-Feb-95 41,000 12 13000 Prototype developed 5,950 13,000 445 350 38,950 33,840
18-Feb-95 47,000 13 445 350 39,300 34,285
25-Feb-95 49,500 14 14000 Application developed 7,600 6,000 445 350 47,250 40,730
4-Mar-95 50,000 15 445 350 47,600 41,175
11-Mar-95 50,500 16 445 350 47,950 41,620
18-Mar-95 51,000 17 445 350 48,300 42,065
25-Mar-95 51,500 18 15000 Production Rollout Assistance 2,500 8,000 435 350 51,150 50,500
1-Apr-95 19 16000 Post Production Review 500 1,000 350 52,000 51,500

In the examples above the indicators are almost self-evident. However, in real projects that involve numerous activities and a multitude of resources, these results are less than obvious and computerized tools are required.

The Data

The utilities reviewed above will now be applied to the case study described by Ingram in his December 1995 PM Network article, in order to illustrate their utility. The data were presented partly in graphs and partly in a table; they have been reproduced in Table 1.

Work performance during project implementation is measured against the TPB plan, which includes all the cost accounts detailed in the Work Breakdown Structure. Ingram's budget curve (Dec. 1995 PM Network, Figure 1, p. 22) provides these cumulative figures. The data read from the curve have been tabulated in Table 1, Columns 1 and 2, and have been reproduced in my Figure 1. The project was scheduled for 18 weeks (Column 3) starting on the week ending November 19, 1994, with a completion date of March 25, 1995. The total budget was BAC=$51,500.

Figure 1. The Project Plan


The values of Actual Cost and Earned Value have been taken from Ingram's Table 1 (Dec. 1995, PM Network, p. 24) for the dates specified with arrows in the graph of his Figure 2 (p. 23) and have been reproduced in Table 1, Columns 4–7.

Figure 2. Graphical Representation of the Project Status on January 28, 1995


Table 2. Project Status Indicators on January 28, 1995

Utility Value Formula Conclusions
1 2 3 4
CV $-12,350 1 The project is over budget…
CVP -62% 3 …substantially
SV $-17,050 2 The project is behind schedule…
SVP -46% 4 ... substantially
CPI 0.62 5 The project is over budget
SPI 0.54 6 The project is behind schedule
CSI 0.33 7 The performance is poor
ETC $51,081 8,12 Compare to the total budget!
EAC $83,381 9,12 Compare to the total budget!
PCO $31,881 10,12 Additional funds will be required…
PCOP 62% 11,12 …a large amount

The $8,000 budgeted cost of Project Management and Miscellaneous (WBS IDs 17000 and 18000) has been distributed evenly over the planned duration of the project (Table 1, Column 8). The Actual total cost of these WBS items was only $6,650. This cost has been evenly distributed in Table 1, Column 9 for a period of 19 weeks. Why? Notice in In-gram's Figure 2 (p. 23) that on 25 Mar the BCWP was still below the budget and that activity WBS ID 16000 was not yet performed. It was arbitrarily assumed that the project was completed on April 1, 1995.

The ACWP at each point in time (Table 1, Column 10) is the cumulative sum of the Actuals (Column 6) and the PM Actuals (Column 9). The BCWP at each point in time (Table 1, Column 11) is the cumulative sum of the Earned Value (Column 7) and the PM Budget (Column 8).

Project Tracking: First Data Date. On January 28, 1995, the information relevant to Earned Value Analysis was the TPB until March 25, as well as ACWP and BCWP up to January 28. These data are plotted in Figure 2. Ingram says: “On the surface it looks under budget. What else do we need to know?” The Actual is indeed lower than the Budget, but the real test is the comparison of the Actual with the Earned Value!

We are now in a position to answer the question posed by Ingram: “Today is January 28. How is this project doing?” The utilities reviewed earlier have been calculated to determine the project performance. The calculation results are summarized in Table 2, Columns 1 and 2; Column 3 shows the formulas employed; Column 4 lists conclusions. The variances show that the project is over budget and behind schedule. When expressed as percentages the variances prove to be significant. The performance indices confirm the poor performance, and the projected cost overrun is substantial.

Project Tracking: Additional Data Dates. The results of the analysis performed for January 28, 1995, revealed problems. At that point the project manager took corrective action and the project status indeed improved.

Two additional analyses have been performed for comparison: for February 25, 1995, after the milestone WBS ID 14000 took place; and for March 25, 1995, the original planned completion date. The data of Table 1 for these dates have been plotted in Figure 3. Notice that now the abscissa extends to April 1, 1995, and that the curves are drawn to the end of the project. The cumulative Earned Value at the end of the project equals the initial budget of $51,500.

The utilities have been calculated again and the calculation results are summarized in Table 3. The basic values for the three Data Dates are listed at the top. The values of the utilities for these dates are shown below. The figures reflect the project situation at the time of each analysis. Notice that the value of the Cost Variance increases from –$12,350 to –$6,520, and then to –$650. The final value was –$500.

Figure 3. Graphical Representation of the Data of the Whole Project


Table 3. Improvement in Project Status

BAC $51,500
Date 28-Jan-95 25-Feb-95 25-Mar-95
BCWS $37,000 $49,500 $51,500
BCWP $19,950 $40,730 $50,500
ACWP $32,300 $47,250 $51,150
CV $-12,350 $-6,520 $-650
CVP -62% -16% -1%
SV $-17,050 $-8,770 $-1,000
SVP -46% -18% -2%
CPI 0.62 0.86 0.99
SPI 0.54 0.82 0.98
CSI 0.33 0.71 0.97
ETC $51,081 $12,494 $1,013
EAC $83,381 $59,744 $52,163
PCO $31,881 $8,244 $663
PCOP 62% 16% 1%

The forecasts are deterministic, based on the data available at a particular time. The closer we are to the end of the project, the more accurate the estimates. The Estimate At Completion, for instance, was $83,381 on January 28. It decreased to $59,744 on February 25 due to the better project status at that time, and decreased again to $52,163 on March 25. The final total cost of the project was $52,000.

Automating the Process. The cumulative value of the project budget until the Data Date becomes the BCWS. The plan is defined at the start of the project and the approved budget figures are entered into the computer. This should not be changed. The exception is contract change orders approved by the project owner. If a change order affects the cost or the schedule, a revised baseline is set.

The cumulative value of activities completed by the Data Date is the BCWP. Information about these activities can be extracted from reports submitted by the implementation teams and needs to be regularly entered into the computer. This is usually done by entering the “percent complete” for each activity and then calculating the aggregate.

The total of the charges to the project as of the Data Date is the ACWP. Information about these charges comes from the cost accountant and also needs to be entered on a regular basis.

The three basic values are automatically calculated by most project management software products. The project status indicators can be calculated from the basic values with a limited amount of data manipulation. All the utilities discussed have been employed in order to demonstrate their use. In practice, a subset may suffice, depending on the reporting requirements or the project manager's preference in collecting the information.

This case study provided a simplified scenario where only the high-level tasks have been considered. In practice, a project consists of many more work packages, execution of which need to be properly controlled. The more complex the project, the more useful the automated quantitative methods become.

After reviewing the utilities used to track project performance, this case study applied them to project data in order to assess the performance at different stages. The quantitative results confirmed the initial difficult situation described by the project manager, as well as the improvements achieved after corrective action was taken.

The calculations necessary to derive the indicators may be automated using modern project management software. By recording the Earned Value and the Actuals on a regular basis, the information received from the use of the Earned Value Analysis for project tracking will prove invaluable for project success. ▪

Zeev Barr, PMP, is a project manager with Motorola Canada, managing mobile radio and SCADA projects. He is a Professsional Engineer with expertise in telecommunications, mainly in the public safety and utility markets.

Resources on Earned Value

Barr, Zeev. 1996. A Note on Schedule Variance Expressed as Percentage. Project Management Journal (September), Letter to the Editor, 3.

Duncan, William R. 1996. A Guide to the Project Management Body of Knowledge, 81, 109, Glossary. Upper Darby, PA: Project Management Institute.

Fleming, Quentin W., and Koppelman, Joel M. 1995. Taking Step Four With Earned Value: Establish the Project Baseline. PM Network (May), 26–29.

Fleming, Quentin W., and Koppelman, Joel M. 1996a. Forecasting the Final Cost and Schedule Results. PM Network (January), 13–18.

Fleming, Quentin W., and Koppelman, Joel M. 1996b. The Earned Value Body of Knowledge. PM Network (May), 11–15.

Ingram, Tom. 1995. Client/Server, Imaging and Earned Value: A Success Story, Part II: The Consultant's Perspective. PM Network (December), 21–25.

Wilkens, Tammo. 1996. Earned Value: How to Measure? PM Network (April), Letter to the Editor, 4–5.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM Network • December 1996



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