Monitoring earned value

Having created the baseline budget, the next task is to monitor earned value as the project progresses. This is done by monitoring the completion of tasks (or activity starts and milestone achievements in the case of the other crediting techniques). Elapsed days

Figure 9.11 Amanda's baseline budget.

Elapsed days

Figure 9.11 Amanda's baseline budget.

Figure 9.12 shows Amanda's earned value analysis al Che siart of week 12 of the Exercise 9.3 project. The earned value (RCWP) is clearly lagging behind the baseline budget, indicating that the project is behind schedule.

By studying Figure 9.12, can you tell exactly what has gone wrong w ith her project and what the consequences might be? Elapsed days

Figure 9.12 Amanda's earned value analysis al week 12.

Elapsed days

Figure 9.12 Amanda's earned value analysis al week 12.

As well as recording BCWP. the actual cost of each task can be collected as actual cost of work performed. ACWP. This is shown in Figure 9.13, w hich. in this case, records the values as percentages of the total budgeted cost.

Figure 9.13 An earned value tracking chart.

Figure 9.13 also illustrates the following performance statistics, which can be shown directly or derived from the earned value chart.

Budget variance This can be calculated as ACWP - BCWS and indicates the degree to which actual costs differ from those planned.

Schedule variance The schedule variance is measured in cost terms as BCWP -BCWS and indicates the degree to which the value of completed work differs from that planned. Figure 9.13 also indicates the schedule variance in time, which indicates the degree to which the project is behind schedule.

Cost variance This is calculated as BCWP - ACWP and indicates the difference between the budgeted cost and the actual cost of completed work. It is also an indicator of the accuracy of the original cost estimates.

Performance ratios Two ratios are commonly tracked: the cost performance index (CPI = BCWP/ACWP) and the schedule perfonmm e index (SPI = BCWP/ BCWS). They can be thought of as a 'value-for-money* indices. A value greater than one indicates that work is being completed better than planned whereas a value of less than one means that work is costing more than and/or proceeding more slowly than planned.

In the same way that the expenditure analysis in Figure 9.9 was augmented to show revised expenditure forecasts, we can augment the simple Earned Value tracking chart w ith forecasts as illustrated in Figure 9.14. Figure 9.13 An earned value tracking chart. Month nuffiber

Figure 9.14 An Earned Value chart with revised forecasts.

Month nuffiber

Figure 9.14 An Earned Value chart with revised forecasts.

Earned value analysis has not yet gained universal acceptance for use with software development projects, perhaps largely because of the attitude that, whereas a half-built house has a value reflected by the labour and materials that have been used, a half-completed software project has virtually no value at all. This is to misunderstand the purpose of earned value analysis, which, as we have seen, is a method for tracking what has been achieved on a project - measured in terms of the budgeted costs of completed tasks or products. 