Earned value management Study Guide

📖 Core Concepts Earned Value Management (EVM) – A project‑management technique that integrates scope, schedule, and cost into a single objective performance measurement system. Planned Value (PV / BCWS) – Budgeted cost for the work scheduled to be completed by a specific date. Earned Value (EV / BCWP) – Budgeted cost for the work actually performed by that date, based on a predefined earning rule. Actual Cost (AC / ACWP) – Real money spent for the work performed to date. Performance Measurement Baseline (PMB) – The approved baseline that combines scope, schedule, and budget; it is the reference curve for PV, EV, and AC. Work Breakdown Structure (WBS) – Hierarchical decomposition of the project into mutually exclusive, collectively exhaustive work packages; each package receives a PV allocation. Earning Rules – Methods for assigning EV (e.g., 0/100, 50/50, fixed‑ratio). 📌 Must Remember Key Formulas Cost Variance: $CV = EV - AC$ Schedule Variance: $SV = EV - PV$ Cost Performance Index: $CPI = \dfrac{EV}{AC}$ Schedule Performance Index: $SPI = \dfrac{EV}{PV}$ Estimate at Completion: $EAC = AC + ETC$  or  $EAC = \dfrac{BAC}{CPI}$ (when CPI is expected to continue) Estimate to Complete: $ETC = EAC - AC$ (derived, not simply $EAC - AC$) To‑Complete Performance Index: $TCPI = \dfrac{BAC - EV}{BAC - AC}$ (original BAC) or $\dfrac{EAC - EV}{EAC - AC}$ (revised) Variance at Completion: $VAC = BAC - EAC$ Interpretations $CPI > 1$ → cost underrun (good). $CPI < 1$ → cost overrun (bad). $SPI > 1$ → ahead of schedule. $SPI < 1$ → behind schedule. BAC – Total planned budget at project completion (sum of all PV). 🔄 Key Processes Baseline Setup Build a detailed WBS → assign PV to each work package → roll up to form the PMB (baseline). Earned Value Accumulation (any interval) Determine the earning rule for each package (0/100, 50/50, etc.). When work starts/finishes, credit the appropriate portion of PV to EV. Performance Calculation (weekly, monthly, real‑time) Gather AC for the period. Compute $CV$, $SV$, $CPI$, $SPI$. Forecasting Use current $CPI$ (or other methods) to project EAC. Derive ETC and TCPI to understand needed future efficiency. Reporting Plot cumulative PV, EV, and AC on a baseline chart. Review variances and indices; decide on corrective actions. 🔍 Key Comparisons Planned Value (PV) vs. Earned Value (EV) PV = budget for work scheduled to be done. EV = budget for work actually performed. Cost Variance (CV) vs. Schedule Variance (SV) CV = $EV - AC$ (cost side). SV = $EV - PV$ (schedule side). CPI vs. SPI CPI measures cost efficiency (EV/AC). SPI measures schedule efficiency (EV/PV). EAC (CPI‑based) vs. EAC (BAC‑based) $EAC = \dfrac{BAC}{CPI}$ assumes future performance matches past CPI. $EAC = AC + ETC$ uses a separate estimate of remaining work. ⚠️ Common Misunderstandings “PV = AC” implies on‑track – PV and AC alone hide work progress; EV is essential to know if the schedule is truly on track. Treating all work as 0/100 – Over‑simplifies earned value; may under‑report progress for long‑duration tasks. Assuming CPI will stay constant – Future performance may improve or worsen; always reassess forecasts. Using EAC = AC + (BAC‑EV) – This is a guess; proper EAC uses CPI or a separate ETC derived from objective data. 🧠 Mental Models / Intuition “Money‑as‑Milestones” – Imagine each dollar of budget as a milestone marker. PV tells you where the markers should be on the timeline; EV tells you which markers you’ve actually passed; AC tells you how much you’ve actually spent to get there. “Thermometer Analogy” – PV is the temperature you expect, EV is the temperature you actually measure, AC is the amount of fuel you’ve burned. The gap between EV and PV shows schedule health; the gap between EV and AC shows cost health. 🚩 Exceptions & Edge Cases Agile / Discovery‑Driven Projects – Lack a fixed baseline, so classic EVM may be inappropriate; consider Earned Schedule or adapted “velocity‑based” EV. Level‑of‑Effort (LOE) Work – Continuous effort (e.g., staff support) can distort CV/CPI because it isn’t tied to discrete deliverables. Float‑Driven Metrics – Crediting large non‑critical tasks early can artificially improve schedule variance; use a float‑free baseline (as‑late‑as‑possible dates) for schedule metrics. 📍 When to Use Which CPI vs. SPI for Decision‑Making Use CPI to decide whether to reallocate budget or control costs. Use SPI to trigger schedule recovery actions (fast‑track, add resources). EAC Calculation Method If performance trend is stable → use $EAC = \dfrac{BAC}{CPI}$. If scope changes or performance is volatile → use $EAC = AC + ETC$ with a fresh ETC estimate. TCPI Compare TCPI to current CPI: TCPI ≤ CPI → future performance is achievable. TCPI > CPI → need improvement or budget increase. 👀 Patterns to Recognize Positive CV & Positive SV → project is under budget and ahead of schedule (ideal). Negative CV & Positive SV → cost overrun but schedule ahead (may need cost‑cut measures). Positive CV & Negative SV → under budget but behind schedule (focus on schedule acceleration). Both CV and SV negative → cost and schedule trouble → prioritize corrective actions. 🗂️ Exam Traps Choosing the wrong formula for EAC – The exam may present $EAC = BAC - CV$; this is incorrect unless CV is the only variance factor. Confusing PV with BAC – BAC is the total PV for the entire project; PV is the cumulative PV at a specific date. Mixing up earning rules – A question may imply 0/100 but give partial EV; verify the rule stated. Ignoring float in schedule metrics – If a problem mentions “large‑budget non‑critical activity credited early,” the correct answer will involve using a float‑free baseline or adjusting the schedule variance. Misreading TCPI denominator – Remember the denominator is (BAC‑AC) for original‑budget TCPI and (EAC‑AC) for revised‑budget TCPI; swapping them yields a wrong value. --- Use this guide to review core definitions, memorize key formulas, practice the step‑by‑step EVM workflow, and spot the typical pitfalls that appear on exams.