1) Problem Definition
Building new training center and supposed to be complete in 10 months time with the budget of 500,000 Omani Rail. After Five months the project manager decided to measure the performance of the productivity, schedule and expenditure so the project manager decided to use Earn Value method to compare between planed project times and overspend according to the planed cost as per project schedule.
2) Identify the Feasible Alternative.
Selecting earned value Method because it integrates cost, schedule and scope and can be used to forecast future performance and project completion dates. As well it allows projects to be managed better – on time & on budget. It is an “early warning “program/project management tool that enables managers to identify and control problems before they become insurmountable.
The Cost Management focuses on the cost performance of the project. It looks at the relationships between the Earned Value and the Actual Cost.
The Schedule Management focuses on the schedule performance of the project. It looks at the relationships between the Earned Value and the Planned Value.
The Cost Variance (CV) is the difference between the earned values of work performed and the actual cost. The Cost Variance (CV) = (EV – AC) where if the result is NEGATIVE it means that the project is “Overrun and if the result is POSITIVE It means that the project is “Under run”.
The Schedule Variance (SV) is the difference between the earned value of work performed and the work scheduled. Where it tells us the value of work performed less value of work scheduled.
The Schedule Variance (SV) = (EV– PV) If the result is NEGATIVE it means that the project is behind schedule and If the result is POSITIVE it means that the project is on schedule or exceeding the schedule.
The Cost Variance (CV) % = (CV/ EV) where it tells us what percentage cost varies from what has been earned to date.
The Schedule Variance (SV) % = (SV/PV) Where it tells us what percentage schedule varies from what has been planned to date.
The Cost Performance Index (CPI) = (EV /AC) If the result is less than 1.0, cost is GREATER than budgeted If the result is greater than 1.0, cost is less than budgeted.
The Schedule Performance Index (SPI) = (EV/ PV) If the result is less than 1.0, project is “Behind” schedule If the result greater than 1.0, project is “Ahead of schedule”.
3) Development of the Outcome for Alternative.
Figure1 above shows the inputs of this project:-
Figure -1 S Curve
As a consequence from the above figure, each of the above elements has a different definition as per definition below.
- Budgeted Cost of Work Scheduled (BCWS) or Planned Value (PV): The sum of budgets for all work packages scheduled to be accomplished within a given time period.
- Budgeted Cost of Work Performed (BCWP) or Earned Value (EV): The sum of budgets for completed work packages and completed portions of open work packages.
- Actual Cost of Work Performed (ACWP) or Actual Cost (AC): The actual cost incurred in accomplishing the work performed within a given time period.
4) Selection of Criteria.
Earn value method was adopted for the indication of the status of the project are shown in the following table -1.
Table –1 The Status of the Project by Using Earned Value method
5) Analysis and Comparison of the Alternative.
From the table -2 above it shows that project schedule is not on time where its late by two month and the budget is over spend by (18,000) OMR (18%) worth of work over budget.50% of the time of the project was elapsed. many recourses were dedicated to keep the project on schedule and that impacted on cost of the project and caused overrun. The work break down structure (WBS) was not reviewed well.
6) Selection of the Preferred Alternative.
Project Manager has to control the budget even though it is too late to control on the budget because overspend of the project should be observed once the project was accomplished between 30% and 35% (2 months). And the action that should be done duly be identifying the route cause.
7) Performance Monitoring and the Post Evaluation of Result.
Earned Value Analysis is a better method of program/project management because it integrates cost, schedule and scope and can be used to forecast future performance and project completion dates. It is an “early warning” program/project management tool that enables managers to identify and control problems before they become insurmountable. It allows projects to be managed better – on time, on budget. So where it allocate the cost as per schedule and scope.
- Earn Value retrieved Aug 08, 2014 from http://www.projectsmart.co.uk/what-is-earned-value.php
- Earn Value Analysis Aug08, 2014from http://www.technologyuk.net/computing/project_management/earned_value_analysis.shtml.
- Duncan Haughty (2010). What is Earned Value? [ONLINE] Available at: http://cdn.projectsmart.co.uk/pdf/what-is-earned-value.pdf.