Ihab Saad – Example on Earned Value Analysis
AI: Summary ©
The speaker explains that they will use certain numbers to calculate the cost of work performed by the end of week nine. They will use the AC (a cost analysis) and the earned value ( BC or budgeted cost and visible value) to calculate the actual cost. They will also use the network and a line to measure the activity of the project. The speaker discusses how they can calculate the actual cost and the actual value for each segment of the network, and how they can solve the cost variance problem by solving the problem.
AI: Summary ©
Calculate that number, and we are given these numbers so but just by
adding these values, we are going to get the total actual cost. Now
this is by the end of week nine. This is not at the end of the
project, because these were collected at the end of week nine.
So this is the AC or AC WP by the end of week nine. And that's the
first of three numbers that we're going to need remember to solve
this problem we're going to need initially, the main ingredients
are going to be the AC or acwp, the bcwp or earned value, and the
BCWS or planned value. These are the three numbers that can be
manipulated to reach the variances and the indices and get all the
analysis done. So. Step number two, just add the numbers to
calculate the AC, or actual cost for work performed.
Step number three, we need to calculate now the earned value,
the earned value or BC, WP, what are the two ingredients of bcwp?
It's BC, budgeted cost and WP were performed. Do we have these two
ingredients? Yes, we do. In the first step, we calculated BC or
the budgeted cost and were performed, or WP was already given
to us at the end of week nine, which is this column here, the
percent complete. Percent Complete represents the work performed by
the end of week nine. So all we need to do now is basically
multiply these two columns. So we're going to take the budgeted
cost, total budget, times the work performed for each activity, and
that's going to give us the earned value, or budgeted cost for work
performed so for activity, a, 690 times 100%
B, 1680, times 100%
C, 2700 times 75% and that gives 2020, 5d
2880 times 0% that gives zero and so On. So by adding these numbers
now we get 6717
which is the budgeted cost for work performed by the end of week
nine. So so far, we calculated budgeted cost, we calculated
actual cost, and we calculated the earned value, or budgeted cost for
work performed. As you can see here, we have an empty column for
BCWS, or the planned value. This is something that we have not
calculated yet, and we need to calculate in order to reach the
three ingredients that are going to be used to solve this problem.
But from the initial an initial look here, just looking at these
numbers, we have here earned value, bcwp, and we have here
acwp, or actual cost. What do you think about these two numbers?
What do they say? It shows initially, so far, that the actual
cost for work performed exceeds the budgeted cost for work
performed for the same amount of work, which is work performed,
which can be removed, set aside. Now we have actual cost versus
budgeted cost. It seems apparent here that the actual cost is
greater than the budgeted cost. So it seems that this project, at
least when it comes to cost, is over budget. But how is it doing?
Schedule wise, we are still gonna find that in a couple of minutes.
So this is the end of step number three. Step number four. We're
going to draw that network. So we are given activities, as we have
here in this slide. We are given the durations. We're giving the
present, the precedence. So what we're going to do is we're going
to draw this network, and then we're going to draw a vertical
line at the end of week nine, and measure by the end of week nine,
what amount of work should have been complete? So what should have
been scheduled by the end of week nine?
So we're going to find that activity. A starts on Week Zero,
ends on week 3b. Starts on zero ends on 6c. Follows a, d follow C,
E and F, both of them follow B. So this is basically the durations
that were given. We just plotted them on the time and activity
axes, which is a regular Gantt chart, and then we drew a vertical
line at the end of week nine. So the cutoff date is the end of week
nine, and it shows here that activity B has not started yet.
Activity C, activity e has three weeks already expired from a total
duration of six weeks, so it should have been 50% complete.
Activity f
has already should have been completed by the end of week nine.
So it shows here that the Percent Complete for activities A and B
should have been 100%
for activity C, it should also be 100%
for activity D, 0% has not started yet. Activity e should be 50.
Percent three weeks out of six, and activity f should be 100%
complete. So we're going to take these percentages. These represent
the percentages of work scheduled. We already had the work performed.
Now we have the work scheduled. Think about this for a second.
Now, what do we have? We have the budgeted cost from the very first
step,
we calculated the earned value, we calculated the actual cost, and
now we have the amount or the percentage of work scheduled. If
we multiply that work scheduled times
the budgeted cost, what do we get? We get the budgeted cost for work
scheduled, or what we call the planned value.
So this is basically what that slides slide does us that at the
end of of week nine activities, A, B, C and F should be 100%
complete, e should be 50% done, and D should be 0% complete. So
we're going to take these values, we are going to put them in a
table like this, and then now we need to calculate the budgeted
cost for scheduled or PV and that is going to be basically
multiplying the total budget times the percentages that we have in
this table. And that is going to give us the budgeted cost for
scheduled or planned value. Now again, looking at these numbers,
the planned value,
7530
by the end of week nine, it should have been 7530
the earned value is 6717
so budgeted costs for work scheduled at the end of week 975,
30. Budgeted cost, forward performed at the end of week 967,
17, remove the common term, which is, in this case, budgeted cost,
we end up with work scheduled versus work performed. It seems
that the work scheduled is greater than the work performed, which
means the work performed is less than the work scheduled, which
means we are behind schedule. So from the first comparison here, we
concluded that we are about budget. From the second
comparison, it shows that we are behind schedule. So basically,
this is the double whammy, bad on cost and bad on time as well.
This shows the numbers that we have that we were given BCWS.
That's our S curve. And it shows here the weekly expenditures.
And now we need to start calculating the variances and the
indices from the numbers. The scheduled variance is equal to
earned value minus planned value. The Earned Value is 6717
the planned value is 7530
so we have a negative 813, variance. Negative number means
that we are behind schedule by an amount of work worth $813
as the earned value is
the earned value is less than the planned value.
The cost variance equals earned value minus actual cost.
So 6717 minus 8205
so here again, we have a negative value which is bad. Negative
number means that we are over budget by 1488, as the earned
value is less than the actual cost. Now notice that we have a
typo here. This should be less than, not greater than.
So this number has,
that's the that's the cost variance,
the accounting variance
is equal to actual cost minus planned value. And again, this
number does not have any significance whatsoever, as it
compares apples and oranges,
the SPI or SPR is earned value divided by plant value. We have
here a number that's less than one, which, again, is bad. So
indicates that we are 11.8%
which is the difference between one and point 892, 11.8% behind
schedule, the cost performance ratio, or index earned value
divided by actual cost. Again, it's less than 1.818
which indicates that we are 18.2%
over budget. So this is basically the summary of how this project is
performing. Is not doing very well. Currently, we can reflect
all of this information in a graphical way.
So again, this is the curve that we had drawn before, and it shows
the final number here at the BAC. And now we draw a vertical line at
the end of week nine, and it shows that the earned value is below the
other two points, the planned value and the actual cost.
Remember, just by looking at this curve, if the earned value is the
highest point, that would be great. It would be good and good
if the earned value.
Is the lowest point, it would be bad and bad if it's in between. So
if, for example, it's below the AC and above the PV, it means that we
are bad on cost, but good on schedule. And if they reverse
their order, if the PV is the highest one, the EV is in the
middle and the actual cost is at the bottom, it means that we're
doing well on cost, but we're not doing very well on schedule. But
in this case, unfortunately, it's a bad bad since the EV is the
lowest point,
that's basically the the answer to that earned value problem. I hope
you you do understand now how to solve this problem. You