Earned Value Analysis
The earned value analysis (also known as earned value analysis , performance value analysis , completion value method or work value analysis referred to) is a tool of the project control . It is used to evaluate the progress of projects . The current schedule and cost situation is described by key figures. The key values are planned value (Engl. Planned value ), actual costs ( actual costs ) and earned value ( earned value ). A trend analysis is possible by tracking the key figures .
The completion value is the key figure in this model for controlling the progress of the project and the associated costs.
Terms
According to DIN 69901 , completion value is the correct German term for the English technical term "Earned Value", colloquially it is also spoken of performance value or work value.
overview
The earned value analysis describes a measurement method with which one can determine and evaluate the progress actually achieved in relation to the planned goal . The completion value (EV) is a measure of the work done and answers the question: "What did the customer get and what did they pay for it?"
The acronyms for designating the variables are largely established from English usage, so that they are not translated into German.
The following steps are necessary to use the completion value as a control tool in projects:
Procedure for determining the completion value (EV)
Determination of the work breakdown structure
In order to determine the tasks of a project , the overall task is broken down into smaller and smaller sub-packages and shown in a hierarchical tree, the work breakdown structure (PSP). The sub-goals with the highest level of detail are the so-called work packages .
Cost calculation
The calculation of the costs that comprise the entire project are calculated on the basis of the PSP. The plan for the chronological sequence of the implementations of the underlying work packages is created, the so-called network plan . The times that are necessary for the implementation of the work packages are then estimated. Finally, the resources (expenditure in man-days, materials, etc.) are determined with which the implementation takes place. In this cost calculation, it must be taken into account that employees with different skills are available or that the project has general conditions imposed: end of the project within a specified time, limited number of available people, limited budget, etc.
Referencing actual progress against the baseline
This original basic calculation (basic cost plan) serves as a reference during the implementation of the project, against which the actual project progress (i.e. the partial results achieved in the project) is measured. This is determined from the time required for this and the costs required for it.
The efficient use of earned value analysis requires software support such as that offered by current project management programs. The key figures are automatically determined from plan and actual values in accordance with the steps mentioned above.
Definitions
Planned costs (PC)
The planned costs (PC, planned cost ) are defined in the work packages at the beginning of the project and distributed over the duration of the project. This results in a planned budget at every point in time in the project, which may be used up by then. If these costs are exceeded, the project runs the risk of exceeding the total budget at the end of the project.
Example:
- A painter should paint a wall in 5 hours.
- The total value of the item is made up of € 100 for wages and € 100 for paint.
- It is planned that after 3 hours (3/5 of the total time) the painter will have consumed 3/5 of the total budget (3/5 of the wages and 3/5 of the material costs) (assuming linear progress):
- PC = 3/5 * (€ 100 + € 100) = € 120
Another term in the earned value methodology is Budgeted Cost of Work Scheduled (BCWS) or Planned Value (PV) . The German term is Soll -kosten der calculated work (SKBA) .
Actual costs (AC)
The actual costs ( actual cost ) are recorded on the variable AC. All wage costs (hourly consumption) and costs for the material incurred up to a point in time are totaled.
Example:
- The painter has already worked for 2 hours and added a trainee (€ 5 / h). The paint was 30% more expensive than expected.
- This results in the actual costs after 2 hours:
- Wage = 2 * € 20 (2 hours of painting) + 2 * € 5 (2 hours of apprentice) = € 50
- Material costs = 2/5 * (130% * € 100) (costs for color) = € 52
- AC = wages + material costs = € 50 + € 52 = € 102
Another term in the earned value methodology is Actual Cost of Work Performed (ACWP) . The German term is actual costs of already completed work (IKAA) .
Completion value (EV)
The earned value (EV ) results from the project work. It is calculated in monetary value or other agreed metrics. It is the amount for the services provided so far that would have been incurred assuming the planned resource costs. Ie the EV represents the total value of the trade corresponding to the work progress / degree of completion. The EV indicates the actual value of the work performed. If one assumes a linear planned progress, this key figure can be calculated from the project budget (PB) and the work progress of the activity:
| Completion value (EV) = project budget * percentage work progress |
Example:
- A wall is about to be painted. The painter commissioned for this requires € 20 an hour. He estimates that the work will take him 5 hours, which means the wall will be painted for € 100 wages. The color costs € 100. The total value (planned) of the trade is therefore € 200.
- After two hours, 3/5 of the wall are already painted. The EV at t = 2 h is therefore:
- EV = € 200 * 3/5 = € 120
The German term for the EV is target costs for work that has already been completed (SKAA) . Another term in the earned value methodology is budgeted cost of work performed (BCWP) .
Plan variance (SV)
In the real project, however, the absolute plan fulfillment is very seldom given. Either you exceed your planned goals or (in most cases) you “lag behind the plan”. A deviation from the planned target occurs, which is referred to as schedule variance (SV ). A negative schedule variance (SV) indicates that the schedule for the entire project cannot be adhered to. So with SV it is not primarily about a cost difference, but about the time delay.
| Plan variance (SV) = completion value (EV) - plan costs (PC) |
As a reminder: The EV corresponds to the value of the work according to the level of progress achieved.
Example:
- The painter worked slowly and after 3 hours only painted 1/5 of the wall. This results in a plan deviation (SV) of:
- EV = (1/5 € 200) = € 40 ... achieved value of the trade after three hours
- PC = (3/5 € 200) = € 120 ... planned value of the trade after three hours
- SV = € 40 - € 120 = - € 80 ... negative value → time delay
Cost variance (CV)
The cost variance (CV, cost variance ) is measured against the actual actual costs of the project.
| Cost variance (CV) = completion value (EV) - actual costs (AC) |
Example:
- The painter worked three hours and added three trainees (5 € / h). The wall is only 1/5 painted. The paint was 30% more expensive than expected; H. the total cost of the material for the trade is € 130. The actual costs (AC) are calculated as follows:
- AC = 3 * € 20 (3 hours of painting) + 3 * 3 * € 5 (3 apprentices à 3 hours) + 1/5 (130% * € 100) (costs for the paint) = € 131
- The EV for 1/5 degree of completion is:
EV = 1/5 (€ 100 planned wages + € 100 planned costs for paint) = € 40 - This results in a negative deviation from the cost plan (CV) after three hours of:
CV = EV - AC = (- € 91) - As can be seen in the diagram, there is an increase in costs (red curve) due to the increased labor costs (each working hour now costs € 35 instead of the planned € 20) and material costs (the paint is 30% more expensive than planned).
- In addition, the EV (green curve), the degree of completion, is smaller (1/5) than planned (3/5) after three hours. This relatively small increase leads to considerable additional costs when updated to the end of the project (linear extension of the red curve), especially since the work will not be completed after five hours as planned, but only after 3 * 5 = 15 hours.
Time Efficiency (SPI)
The time efficiency (SPI, schedule performance index ) defines how far a project is from the target in terms of time. A value greater than 1 indicates that the project is progressing faster than originally planned. Conversely, a value less than 1 results in a project delay. The ratio of EV and PC is formed:
| Time efficiency (SPI) = completion value (EV) / planned costs (PC) |
Example:
- In the painter's original plan, the PC would be € 80 after 2/5 of the time. However, the painter only painted 1/5 of the area, resulting in the following SPI:
- EV = 1/5 * € 200 = € 40
- PC = 2/5 * € 200 = € 80
- SPI = € 40 / € 80 = 0.5
- The SPI of 0.5 ultimately means an extension of the project by 100%. So it will probably take twice the time. The reasons for this discrepancy can be diverse and range from poor planning to inadequate personnel qualifications. It is assumed here that the under-fulfillment of the plan will progress linearly into the future and that the painter will not work quickly or even faster as planned from now on. This would be reflected in an improved SPI at the next reporting date.
Work progress
The work progress in percent serves as the basis for calculating the EV. It indicates the degree to which a process has been completed in relation to the base unit (usually hours or money).
Since the determination of an exact value can be very time-consuming, only fixed steps are used in most cases (e.g. 0% - 25% - 50% - 75% - 100% or 0% - 50% - 100%). If there are too few levels for a long process, there is a risk that reports and analyzes will be falsified during this phase.
The work progress is not a key figure of the EVA.
Cost efficiency (CPI)
The cost performance index (CPI ) measures the value of the work done against the actual costs. A value greater than 1 indicates cost savings in the project, on the other hand, a value less than 1 indicates that the project is developing more expensively than planned. The ratio of EV and AC is formed:
| Cost efficiency (CPI) = completion value (EV) / actual costs (AC) |
Example:
- After two hours the painter has finished 1/5 of the area and has used 2/5 of the paint.
- EV = 1/5 * € 200 = € 40
- AC = 2 h * 20 € / h (wages) + 2/5 * 100 € (color) = 40 € + 40 € = 80 €
- CPI = € 40 / € 80 = 0.5
- This means that the actual costs for completing 1/5 of the work are twice as high as planned. If you extrapolate this linearly, this means that the overall project is 100% more expensive. It is assumed here that the painter also needs double the costs for the rest of the work.
Individual evidence
- ↑ DIN 69901-3: 2009-01, Table 2 - The most important international abbreviations and key figures
- ↑ DIN 69901-5: 2009-01, 3.19 completion value
- ↑ a b Kerzner, Harold (2003): Project Management. A system-oriented approach to planning and control. 8th edition, ISBN 978-3826609831 .