Earned value analysis is a powerful tool for project managers to track project performance and make data-driven decisions. Here is a detailed breakdown of how earned value analysis is used:
1. Set up your project baseline: Before you can start using earned value analysis, you need to establish a project baseline. This includes defining the project scope, schedule, and budget.
2. Measure actual progress: As the project progresses, track the actual work completed and the costs incurred. This data will be used to compare against the planned values.
3. Calculate Earned Value (EV): EV is the value of the work completed so far, measured in terms of the budget allocated to that work. It gives you a snapshot of how much work has been accomplished compared to the budget.
4. Calculate Actual Cost (AC): AC is the actual cost incurred to complete the work. It provides insight into how much money has been spent to achieve the work completed.
5. Calculate Planned Value (PV): PV is the budgeted cost of the work scheduled to be completed at a specific point in time. It provides a benchmark to compare against the actual progress.
6. Analyze Cost Performance Index (CPI) and Schedule Performance Index (SPI): CPI is a measure of cost efficiency, calculated as EV/AC. A CPI greater than 1 indicates a project is under budget, while a CPI less than 1 indicates over budget. SPI measures schedule efficiency, calculated as EV/PV. An SPI greater than 1 means the project is ahead of schedule, while an SPI less than 1 means behind schedule.
By using these metrics and comparing them against the project baseline, project managers can identify deviations, forecast future performance, and take corrective actions to keep the project on track.