Earned Value Management Examples

Earned value management is a great tool to understand the real progress that the team has made. However, for those just coming into the project management field or new to the term, the usage of this system may seem a little confusing. To help out in situations like these, we have gathered 3 Earned value management examples. Starting from the very simple cases and moving on to more complicated processes.

Continue reading to learn how to evaluate the current situation of your project.

Earned value management analysis

Before diving into more complex situations, let’s understand how the earned value analysis is usually done. To evaluate the situation of the project, you first need to calculate 3 main metrics – Planned Value (PV), Earned Value (EV), and Actual Cost (AC).

If you are unsure of how this is done, check out this page about Earned value management.

The three metrics are then used to make further earned value analysis and evaluate your project from various perspectives. Amongst the most used ones, are metrics such as Cost Variance (CV), Schedule Variance (SV), Cost Performance Index (CPI), and Schedule Performance Index (SPI). While one metric may be more important to your specific project, it is always a good idea to track a variety of metrics at all times. Relying just on one may yield a false understanding of the situation.

Here is a full list of the Earned value management formulas.

Earned value management examples

So, to get a better understanding of how this is actually done, let us look at some examples.

Earned value management example – 1

Let’s imagine we are building a wind power plant. The project is set to be completed in 10 months with an estimated cost of $500,000. The project has been running for 5 months now, the team has spent $220,000 and completed an amount of work worth $255,000.

This is how such a project would look on a Gantt chart:

And now let’s analyze this Earned Value Management example, from the point of metrics:

PV = $250,000. 50% of the project time has passed so we calculate 50% of the total project value.

EV = $255,000. This is equal to the estimated value for the work that has been completed.

AC = $220,000. This is equal to the amount of money the team has spent so far.

From here, we can take the analysis further and calculate secondary metrics. For the sake of this example let’s pick CPI and SPI. In the case of these metrics, less than 1, means we are over budget or behind schedule. And anything above 1 means we are under the budget and ahead of schedule. So let’s see what we have for this project.

CPI = 1.16 (CPI = EV / AC) Which means we are under budget for the project and likely to complete the project for a lower cost than expected.

SPI = 1.02 (SPI = EV / PV) Which shows we are slightly ahead of the schedule and likely to complete the project on time or a little earlier.

Some project management timeline tools provide the above calculations for their users. Here is a shot of the Portfolio Overview you can find in Teamhood outlining the same metrics:

• Budget = Estimated value of the entire project
• SPI is calculated automatically
• EV is calculated automatically
• Progress represents the percentage of work completed so far.

So, in the case of our first example, everything is going even better than planned. However, this is rarely the case with most projects, so let’s look at some more examples.

Earned value management example – 2

For the second Earned Value Management example, we are building a solar power plant. The project is divided into 5 stages, each worth $20,000 and estimated to last for 1 month. 2 months have passed and 3 of the project stages have been completed for the cost of $80,000.

This is the same project on a Gantt chart:

In this case, our metrics stand like this:

PV = $40,000. 2 Months into the project, we should have completed 2 stages, each worth $20,000.

EV = $60,000. We have actually completed 3 stages of the project.

AC = $80,000. The actual cost of completed phases.

Here are the same numbers in Portfolio Overview (which is focused on the schedule):

From both, the Gantt and the Portfolio overview, it seems that the project is going fine. However, you can probably already spot the issue with the project. Let’s confirm with further calculations. In terms of SPI = 1.5, we are doing great. However, just looking at this number would give us a false view of the project. As we look into the CPI = 0.75, there is a clear picture, the project is way over the initial budget. If the team continues working this way, there are two outcomes that can be expected, the project will finish early and at a far higher cost.

To have a more precise understanding of the project situation, we should additionally track the AC of each project phase. Here is a reviewed Gantt chart with additional information.

You could do further calculations to estimate the final cost and end date of the project with other earned value management formulas.

If you want to automate the process, consider using Gantt chart software with custom fields that perform the needed calculations for you.

Earned value management example – 3

For the third earned value management example, let’s imagine a hydroelectric power plant. This project is divided into 2 phases, each lasting 1 year. The first phase of the project is valued at $100,000 and the second phase at $50,000. At the current state, 1 year of the project has passed and 90% of phase 1 has been completed. The project team has completed work worth $80,000.

This is the Gantt view we would get with this scenario:

The current situation of the project is as follows:

PV = $100,000. After 1 year, the first phase of the project valued at $100,000 should have been completed.

EV = $90,000. The team has actually completed 90% of phase 1.

AC = $80,000. This actual cost to date.

CPI = 1.125 and SPI = 0.9. From these metrics, it is clear that the project is both – under budget and behind schedule. However, the budget is not reflected in Gantt or Portfolio Overview.

Here is a reviewed Gantt view that allows tracking the AC to have a more precise picture of the project status.

So in this instance, the team has managed to save some money, but that cost them in terms of how fast the work was completed. This leaves the project manager and the stakeholders with a few options – they can accept the project is going to take longer and save some of their planned budget. Or expand the team with the leftover budget and complete the project on time.

The best choice is subject to specific situations, but performing earned value analysis allows the project managers to have such options.

Earned value management analysis with project management tools

With the earned value management examples above, we looked at static situations in the middle of several projects. In reality, the EVM metrics are tracked continuously throughout the project. The managers look for deviations in order to spot issues early.

Project management tool Teamhood was used to illustrate all 3 examples and allows for easy earned value management. As it already holds all of your project data and can provide a live overview of the status at any time. To track and understand the Earned Value of your project, you will most likely use the two views provided in the examples above – the Gantt view and Portfolio Overview. Gantt allows you to see the current situation of the project tasks and phases. As well as track the AC. While the Portfolio overview automatically generates these metrics:

• The start and end date of the project.
• The total budget of the project.
• The Earned Value (EV)
• Schedule Performace Index (SPI)
• And the current progress %

Use the Portfolio Overview to monitor the project schedule and the Gantt view to analyze further.