Using Earned Value Analysis

This tutorial describes:
• Earned Value metrics and Settings
• How to select earned value columns to display in the view
• Cost and Schedule Performance Index (CPI, SPI)
• Earned Value technique for measuring performance
• Planned Value, Earned Value and Actual Cost
• Example Earned Value Analysis

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1. Earned Value.
Use earned value metrics to analyze your project on the Activities page. Earned value is a method for assessing project performance by comparing actual progress against planned progress at any point in the schedule. 

2. Earned Value analysis Settings.
First, use the Settings page in Project Summary and Settings to select a baseline for earned value analysis. Primavera Cloud uses a baseline to define planned progress for the project.Select the original baseline, the current baseline, or a supplementary project baseline. 

3. Earned Value columns.
Next, select earned value columns to display in the view. As project progress is updated, view earned value performance for individual activities which roll up to the WBS level and to the project.

4. Cost and Schedule Performance Index.
A cost performance or schedule performance index of less than 1 indicates that the project is underperforming. It is running over budget and behind schedule. The Estimate To Complete column displays the estimated cost to complete the project from the point of the earned value analysis. Let's take a deeper look at how earned value is calculated.

5. Earned Value technique for measuring performance.
Earned Value is a technique for measuring project performance. It compares actual costs and schedule progress against planned costs and progress. Earned Value provides an objective evaluation of project performance at any point in the project schedule and an accurate forecast of a project's final cost and finish date. Earned Value calculations are based on three essential performance variables measured at any point after the project has started.

6. Planned Value.
Planned Value Cost is the monetary value of the work that should have been accomplished by the data date if the project had proceeded according to the baseline plan. How much work should have been done? 

7. Earned Value.
Earned Value Cost is the monetary value of the work actually performed by the data date. How much work was actually done?

8. Actual Cost.
Actual Cost is the actual total cost incurred for the work accomplished by the data date. How much did the completed work cost? 

9. Example - Earned Value Analysis.
Let's use a simple example for earned value analysis. A 10 day project to build 10 clocks for $1,000. One clock per day, $100 per clock for a total value of $1,000.
Next, we will calculate the three essential earned value performance variables starting with planned value cost. After day five of the project, five clocks should have been built. What is the value of those clocks that should have been built? 5 times $100 equals $500 planned value cost.
Next, earned value cost - after day five of the project, how many clocks have actually been built? Three. What is the value of the clocks that actually have been built? Three times $100 equals $300 earned value cost.
Finally, Actual Cost - after day five of the project, how much did it actually cost to build three clocks? $600. Five days, three clocks, $600 actual cost.

10. Performance Values Summary.
Let's summarize the Performance Values. After day five of the project, Planned Value cost is $500. Earned Value cost is $300. Actual Cost is $600. Next, let's use those performance values to calculate Variances that will tell us how much the project is ahead or behind schedule and how much is it over or under budget.

11. Schedule Variance (SV).
Use earned value to calculate two Variances - Schedule Variance and Cost Variance. Schedule variance is the difference between what was Earned and what was Planned. Earned Value minus Planned Value equals Schedule Variance. In our example, $300 earned value minus $500 planed value equals negative $200 schedule variance. A negative number indicates that the project is behind schedule.

12. Cost Variance (CV).
Cost Variance is the difference between what was Earned and the Actual cost. Earned value minus actual cost equals cost variance. In our example, $300 earned value minus $600 actual cost equals negative $300 cost variance. A negative number indicates that the project is over budget.

13. Schedule and Cost Performance Indices (SPI, CPI)
Schedule and cost variances merely indicate how much a project is ahead or behind schedule or over under budget. For example, a variance of $300 is significant on a $1,000 project, but is considerably less significant on a $10 million project. 

14. Schedule Performance Index (SPI).
Schedule and Cost Performance Indices each provide a ratio that relates variances to overall project dimensions and accurately gauges performance regardless of project size.

The Schedule Performance Index is a ratio of what was earned to what was planned. Earned Value divided by Planned Value equals Schedule Performance Index. In our example, 300 earned value divided by 500 planned value equals 0.60. A number less than 1 indicates that the project is behind schedule. For every dollar of physical work this project had planned to accomplish, only $0.60 was actually completed.

15. Cost Performance Index (CPI)
The Cost Performance Index is a ratio of what was Earned to the Actual cost. Earned value divided by Actual cost equals Cost Performance Index. In our example, 300 earned value divided by 600 actual cost equals 0.50. A number less than 1 indicates that the project is over budget. For every project dollar spent, only $0.50 in physical work was accomplished.

16. Estimate To Complete (ETC)
Estimate To Complete identifies how much money it will cost to complete a project from the point at which the Earned Value analysis is performed. It is calculated using one of two formulas. Estimate To Complete based on the Remaining Cost for an activity - this is calculated as the Remaining Units times resource price per unit. Or Estimate To Complete based on a Performance Factor - this is calculated as Performance Factor times Budget At Completion minus Earned Value Cost. The performance factor is calculated in one of four ways. [MUSIC PLAYING]