# EARNED VALUE ANALYSIS Reading time: 1 minute

In construction industry Earned value analysis (EVA) is the one of the most popular and standard method of measuring a works progress at any given time, also forecasting its final date of completion and completion cost. it is also used to analyze variances in the schedule cost and the actual cost of the project during the progress of the project. Actually it compares the planned amount of work with what actually have been completed to see whether the cost, schedule and progress have been achieved in accordance to the plan. Actually this is an management tool used to detect early signs of deficiency or dangers in an project with respect to cost ,schedule and time . It provides an objective measure of accomplishments, and an early and accurate picture of the project status. It can be as simple as tracking an elemental cost estimate breakdown as a design progresses from concept through to 100% construction documents, or it can be calculated and tracked using a series of mathematical formulae

#### WORK BREAKDOWNSTRUCTURE (WBS):

EVA works most effectively when it is compartmentalized, i.e., when the project is broken down into an organized work breakdown structure (WBS). The WBS is used as the basic building block for the planning of the project. It is a product-oriented division of project tasks that ensures the entire scope of work is captured, and allows for the integration of technical, schedule, and cost information. It breaks down all the work scope into appropriate elements for planning, budgeting, scheduling, cost accounting, work authorization, progress measuring, and management control. The indirect costs of design, oversight, and management must be included in the WBS to reflect the full budget.

#### CALCULATING EARNED VALUE

Earned value management measures progress against a baseline. It involves calculating three key values for each activity in the work breakout schedule (WBS): 1. The planned value (PV), formerly known as the “budgeted cost of work scheduled” (BCWS) or simply called the “budget,” is that portion of the approved cost estimate planned to be spent on the given activity during a given period. 2. The actual cost (AC), formerly known as the “actual cost of work performed” (ACWP) is the total of the costs incurred in accomplishing work on the activity in a given period. Actual cost must correspond to whatever activities or tasks were budgeted for the planned value and the earned value, e.g., all labour, material, equipment, and indirect costs. 3. The earned value (EV), formerly known as the “budget cost of work performed” (BCWP) is the value of the work actually completed. These three values are combined to determine at that point of time whether or not work is being accomplished as planned. The most commonly used measures are the cost variance (CV), which is the difference between EV and AC, and is given by CV = EV – AC and the schedule variance (SV), which is the difference between EV and PV or budget, is calculated as

SV = EV ? PV

These two values can be converted to efficiency indicators to reflect the cost and schedule performance of the project. The most commonly used cost-efficiency indicator is the cost performance index (CPI), which is the ratio of EV to AC, and is calculated as CPI = EV/ AC The sum of all individual EV budgets divided by the sum of all individual ACs is known as the cumulative cost performance index (CCPI) and is generally used to forecast the cost to complete a project. The schedule performance index (SPI) is the ratio of EV to PV, and is calculated as SPI = EV/ PV SPI is often used with the CPI to forecast overall project completion estimates. The general rules in interpreting EVA numbers are as follows: 1. Negative numbers for cost and schedule variance indicate problems in those respective areas. 2. A negative SV calculated at a given point of time means the project is behind schedule, while a negative CV means the project is over budget. 3. CPI and SPI less than 100% indicate problems. SAMPLE CALCULATION IN PRIMAVERA