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¶ … project budget of $500,000. The project is a 10-month project and the budget analyst planned to spend $50,000 per month on the project. At month 6, you review the project status and you realize the project is 40% complete. Assume you are at the end of month 6 and will include month 6's work into your EV calculation. The project has spent $425,000 to date. Using the formulas from your book, answer the following questions:
PV = Planned Value is the Scheduled Value = 6 months * $50,000 per month = 300,000
EV = % Complete * Original Budget = 40% * 500,000 = 200,000
AC = Actual Cost of the Work Completed = 425,000 (Given)
SV = EV -- PV = 200,000 -- 300,000 = -100,000
CV = EV -- AC = 200,000 -- 425,000 = -225,000
BAC = Baseline Costs = 500,000 (Given)
EAC = AC + ((BAC -- EV) / CPI) = 425,000 + ((500,000 -- 200,000) / .47) = 1,063,297.83
CPI = Cost Performance Index = EV / AC = 200,000 / 425,000 = .47 = 47%
SPI = Schedule Performance Index = EV / PV = 200,000 / 300,000 = .67 = 67%
Question 2: What does a SPI < 1 indicate?
A schedule performance index that equals a value less than one basically means that the projects schedule is behind its estimated planned baseline. This is evident since the value actually earned is less than the value that was planned to earn at that point in time. If the SPI value is greater than one then that would mean that the project has earned more value at that point in time than it had planned on earning.
Question 3: How does applying earned value calculations help determine project performance in terms of schedule and budget?
Earned value calculation can help gauge a projects performance in a variety of ways. Comparing the earned value to the planned value provides a metric that can help evaluate the project in terms of its scheduling performance. For example, if you planned to earn 80% of the projects value in six months, but you only earned forty percent of that planned value then you would immediately know that you are significantly behind schedule. Determining the cost variance can also utilize the earned value to help provide insights into the project's financial performance. If you projected an earned value that was less than the actual costs then your cost variance would be a negative value and this would represent the fact that the project is under budget for the work performed. These are only a couple examples of how calculations including earned value estimates can serve as a useful metric for any project.
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