Earned value analysis

Definition

Earned value analysis (EVA) is a project management technique used to assess a project's performance by comparing the planned progress with the actual progress. This method integrates project scope, schedule, and cost to provide a comprehensive view of a project's health and helps managers identify variances early on. By analyzing earned value, project managers can make informed decisions about resource allocation and scheduling adjustments.

5 Must Know Facts For Your Next Test

1. EVA provides key metrics such as Cost Performance Index (CPI) and Schedule Performance Index (SPI), which help gauge project performance against budget and timeline.
2. By using earned value analysis, project managers can forecast future performance and estimate the likely completion date and cost based on current trends.
3. EVA facilitates early detection of potential issues in both schedule and cost, allowing for timely interventions before problems escalate.
4. The technique requires clear definitions of the project's scope and well-established baseline plans for effective measurement and comparison.
5. Earned value analysis is particularly beneficial in complex projects where multiple variables affect progress, as it offers a clear picture of overall performance.

Review Questions

• How does earned value analysis integrate scope, schedule, and cost in project management?
  • Earned value analysis integrates scope, schedule, and cost by measuring the project's performance against these three key components. It establishes baselines for planned value, allowing for comparisons with actual performance through earned value. By evaluating these elements together, project managers can identify variances and gain insights into whether the project is on track, ahead, or behind schedule while staying within budget.
• Discuss the importance of baseline planning in earned value analysis and its impact on project performance measurement.
  • Baseline planning is crucial in earned value analysis because it sets the standards against which project performance is measured. Without clearly defined baselines for scope, schedule, and costs, it becomes difficult to determine how much work should have been completed at any point. Establishing these benchmarks allows project managers to accurately calculate earned value and make informed decisions about resource allocation and necessary adjustments when discrepancies arise.
• Evaluate the effectiveness of earned value analysis in addressing complex project challenges and improving decision-making processes.
  • Earned value analysis is highly effective in tackling complex project challenges due to its comprehensive approach to tracking progress through integrated metrics. By providing detailed insights into cost efficiency and schedule adherence, EVA enables project managers to identify issues early on and apply corrective actions proactively. This enhanced visibility supports better decision-making processes by allowing managers to allocate resources more effectively, adjust timelines accordingly, and ultimately drive projects toward successful completion despite potential obstacles.

Related terms

Planned Value (PV): The estimated value of work that was planned to be completed by a specific point in time.

Actual Cost (AC): The total cost incurred for the work completed by a specific point in time.

Cost Performance Index (CPI): A measure of cost efficiency that calculates the ratio of earned value to actual cost, indicating how well the project is staying within budget.