Earned Value Analysis (EVA) is a powerful project management method that captures project progress, costs, and performance in a single, integrated system. It can help to objectively assess the performance of a project, identify risks, and take timely action. This glossary entry explains the basic terms and concepts of Earned Value Analysis to provide a better understanding of this useful method.
Earned Value Analysis: A Glossary Entry
Earned Value Analysis (EVA) is a proven method in project management that allows systematic and objective monitoring and control of project progress, costs, and performance. EVA combines both temporal and financial aspects, offering a comprehensive view of the current status of a project. This method is particularly useful for early detection of problems and deviations from planned goals and for initiating appropriate countermeasures.
Basic Terms of Earned Value Analysis
Within EVA, various terms and metrics are used to describe and analyze project status. The most important of these are:
- Planned Value (PV): The planned value is the sum of the planned costs for work scheduled to be completed by a certain date. PV serves as a basis for comparison with actual costs and earned value.
- Actual Cost (AC): Actual cost is the actual expenses incurred for work performed up to a certain date. AC provides insight into whether the project is within budget or not.
- Earned Value (EV): Earned value is the value of work actually performed up to a certain date, measured against the planned costs. EV is an indicator of whether the project is on schedule and achieving the planned results.
Metrics of Earned Value Analysis
From the basic terms mentioned above, various metrics can be derived that provide deeper insight into project performance:
- Cost Variance (CV): Cost variance is the difference between Earned Value (EV) and Actual Costs (AC). A positive CV means the project is more cost-effective than planned, while a negative CV indicates higher costs.
- Schedule Variance (SV): Schedule variance is the difference between Earned Value (EV) and Planned Value (PV). A positive SV indicates that the project is progressing faster than planned, while a negative SV suggests delays.
- Cost Performance Index (CPI): The Cost Performance Index is the ratio of Earned Value (EV) to Actual Costs (AC) and indicates how efficiently the project budget is being used. A CPI greater than 1 means that the project is cost-efficient, while a CPI less than 1 suggests inefficiency.
- Schedule Performance Index (SPI): The Schedule Performance Index is the ratio of Earned Value (EV) to Planned Value (PV) and indicates how well the project is adhering to the timetable. An SPI greater than 1 means the project is progressing faster than planned, while an SPI less than 1 indicates delays.
Application of Earned Value Analysis in Project Management
To successfully implement EVA in project management, the planned costs and schedules for all project activities must first be determined and documented. Subsequently, project progress is regularly monitored, and the actual performances delivered and costs incurred are recorded. From this data, the various metrics can then be calculated and analyzed.EVA provides valuable information about the current project status and enables the early identification of problems and risks. Through systematic analysis of the metrics, project managers can take targeted actions to improve performance, reduce costs, or adjust the schedule. EVA can also be used to assess the success of projects and serve as a basis for planning future projects.
Earned Value Analysis is a powerful method in project management that allows for the capture and analysis of project progress, costs, and performance at a glance. Through systematic application of EVA, project managers can detect problems early on and take targeted measures to successfully complete the project. Knowledge of the basic terms and metrics of EVA is therefore of great benefit to any project manager.