Essential Earned Value Analysis Definitions

You know that feeling when you're watching a movie and they drop a word or concept that you don't understand? You feel like it's supposed to be familiar, but it's just not registering.

This is exactly how many people feel whenever someone starts talking about Earned Value Analysis (EVA). But don’t worry if It's not quite under your toolbelt yet, we’ve pulled together a list of the essential Earned Value Analysis terms you need to know to get the hang of it.

Planned Value

Budgeted Cost of Work Scheduled (BCWS), also called the Planned Value (PV), is the sum of the budget for all work scheduled to be accomplished with a given time period. It also includes the cost of previous work completed and can address a specific period of performance or a date in time.

BCWS = % Complete (Planned) x Project Budget

A Contractor usually reports the Budgeted Cost or Work Performed (BCWP) on all work packages completed for a project. The BCWP is then compared to BCWS to determine if the project is behind or ahead of where it’s projected to be.  If the contractor has not completed all the scheduled work packages on time, then the BCWP will be less than the BCWS.

If you’d like to access our downloadable EVA Cheat Sheet containing a handy list of these calculations and worked examples, click here.

Earned Value

Earned Value is defined as the budgeted cost of work performed. It's the basis for a project's EVA

The budgeted Cost of Work Performed (BCWP) is the budgeted cost of the value of work that has actually been completed to date.

Contractors usually report the BCWP on individual packages within a project and compare it to Budgeted Cost of Work Scheduled (BCWS) to understand if a project or package is being or ahead of where it was projected to be .

If the contractor has not completed all the scheduled work packages on time, then the BCWP will be less than the BCWS.Worked Example

BWCP or EV = Total Project cost * % of actual work complete =  £100,000 * 55% = £55,000.

Actual Cost

The Actual Cost of a project is the total amount of money spent to complete the project. This includes materials, labour and other expenses associated with completing the project.

The Actual Cost is calculated by adding up all of your material and labour costs, then subtracting from that number any discounts or rebates that were received for purchasing large quantities.

Budget at Completion

The Budget at Completion (BAC) is the total estimated cost of the project. It can be a summary of all the work completed, and it's almost always a forecast of the total cost of the project. In other words, it's how much you think it'll cost to complete whatever project you're working on.

BAC is also known as "budget at completion" because it includes all costs incurred so far, plus an additional amount (a contingency) for future tasks that could arise during execution.

Schedule Variance

Schedule Variance (SV) indicates how much ahead or behind schedule the project is. It measures whether a project is on track by calculating actual progress against expected progress and can be calculated using the following formula:

• Schedule Variance (SV) = Earned Value (EV) – Planned Value (PV)
• Schedule Variance (SV) = BCWP – BCWS

This variance indicates how much cost of the work is yet to be completed as per schedule or how much cost of work has been completed over and above the scheduled cost.

• Positive Schedule Variance: Indicates we are ahead of schedule
• Negative Schedule Variance: Indicates we are behind schedule

Cost Variance

Cost Variance is the difference between the Budgeted Cost of Work Performed and the Actual Cost of Work Performed.

For example, if you planned to spend £10,000 on a project and your actual spending was £12,000, then your Cost Variance would be negative £2,000 (= -£2k). If instead, you had spent only £9k on this project (which doesn’t align with the original budget of 10k for the project), then your Cost Variance would still be negative but only by £1k (= -£1k).

Schedule Performance Index

SPI reviews the project performance from a schedule perspective and can be calculated using the following formula:

• SPI = Earned Value (EV) / Planned Value (PV)
• SPI = BCWP / BCWS

SPI value greater than (≥) 1: indicates the project team is very efficient in utilising the time allocated to the project

SPI value less than (≤) 1: indicates the project team is less efficient in utilising the time allocated to the project

Cost Performance Index

The Cost Performance Index (CPI) is a measure of the variance between the Budgeted Cost and the Actual Cost of work performed. The CPI is calculated by dividing the budgeted costs by budgeted dollars-spent and then multiplying that number by 100. It’s a useful tool when you want to know whether your project is ahead or behind schedule.

CPI = Earned Value (EV) /Actual Cost (AC)

CPI = BCWP / ACWP

CPI is an index showing the efficiency of the utilisation of the resources on the project.

Greater than (≥) 1 indicates efficiency in utilising the resources allocated to the project is good.

Less than (≤) 1: indicates efficiency in utilising the resources allocated to the project is not good.

Worked Example

CPI = BCWP / ACWP

CPI = £55,000 / £70,000

CPI = 0.79

0.79 indicating the project expenditures are at 79% of the plan.

What Next?

Now you have a good understanding of the essential Earned Value Analysis definitions, it’s important to start making use of this key measure to track your projects progress.

At Raildiary, we’ve tried to make using Earned Value Analysis as simple as possible. We take the data from your sitediaries and use this to automate Cost of Work Done and Earned Value. This automation allows you to measure key expenditures and progress on site in real-time without any of the manual effort required to calculate these metrics.

If you’d like a demonstration on how Raildiary can be used to automate Earned Value Analysis on your project, book a demo with our product team here.

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