Project Phases: Month 1 To Month 4 Status At The End

Project Phasesmonth 1month 2month 3month 4status At The End Of Month

Project Phases Month 1 Month 2 Month 3 Month 4 Status at the end of Month 3 Requirements Definition S ---------- F Complete, spent $10,000 Architecture and Design S --------- PF -------- F Complete, spent $12000 Development and unit testing S ----- PF 50% done, spent $9000 System testing and Operation Not yet started Earned Value Problem Here is an example of a software development project with four (4) phases. Each phase should take one month to complete and it is estimated that each phase will cost $10,000 per phase. The phases are planned to be completed one phase after the other. Today is the end of month three (3). Please calculate EV, CV, SV, CPI, SPI, TCPI and EAC (explain what the EAC results means to you) ... Please note that EV = (%C)*(PV). EAC is equal to BAC/CPI. 1

Paper For Above instruction

In project management, particularly within the realm of Earned Value Management (EVM), the ability to assess project performance through various metrics is essential. These metrics help project managers understand whether a project is on schedule, within budget, and performing as planned, enabling informed decision-making for corrective actions if necessary. This paper discusses the calculation of key EVM parameters—Earned Value (EV), Cost Variance (CV), Schedule Variance (SV), Cost Performance Index (CPI), Schedule Performance Index (SPI), To-Complete Performance Index (TCPI), and Estimate at Completion (EAC)—using a practical example of a software development project segmented into four phases over four months.

The project comprises four phases: Requirements Definition, Architecture and Design, Development and Unit Testing, and System Testing and Operation. Each phase is scheduled to take one month and cost $10,000, with phases planned consecutively. At the end of the third month, the project status indicates that the Requirements Definition phase is complete with a spent of $10,000, Architecture and Design is almost complete with a spent of $12,000, and Development and Unit Testing is halfway done, having spent $9,000.

Calculation of Earned Value (EV)

Earned Value represents the budgeted cost of work that has actually been completed at a given point in time. The formula EV = (% of work completed) * PV (Planned Value) is used. Using the project's data:

  • Requirements Definition: 100% complete. PV = $10,000. EV = 1.0 * $10,000 = $10,000.
  • Architecture and Design: Nearly complete, approximately 95%. PV = $10,000 (planned for this phase). EV = 0.95 * $10,000 = $9,500.
  • Development and Unit Testing: 50% complete, with PV = $10,000. EV = 0.5 * $10,000 = $5,000.

Total EV at the end of month three sums to: EV = $10,000 + $9,500 + $5,000 = $24,500.

Calculations of Cost Variance (CV) and Schedule Variance (SV)

CV = EV - AC (Actual Cost)

SV = EV - PV

  • For Requirements Definition: AC = $10,000. CV = $10,000 - $10,000 = $0; SV = $10,000 - $10,000 = $0.
  • For Architecture and Design: AC = $12,000. CV = $9,500 - $12,000 = -$2,500; SV = $9,500 - $10,000 = -$500.
  • For Development and Unit Testing: AC = $9,000. CV = $5,000 - $9,000 = -$4,000; SV = $5,000 - $10,000 = -$5,000.

Performance Indices: CPI and SPI

CPI = EV / AC; SPI = EV / PV.

  • Requirements Definition: CPI = $10,000 / $10,000 = 1.0; SPI = $10,000 / $10,000 = 1.0.
  • Architecture and Design: CPI = $9,500 / $12,000 ≈ 0.79; SPI = $9,500 / $10,000 = 0.95.
  • Development and Unit Testing: CPI = $5,000 / $9,000 ≈ 0.56; SPI = $5,000 / $10,000 = 0.50.

To-Complete Performance Index (TCPI)

TCPI = (BAC - EV) / (BAC - AC), where BAC is the Budget at Completion. Given BAC for each phase is $10,000, total BAC is $40,000.

  • Overall: TCPI = ($40,000 - $24,500) / ($40,000 - $24,000) = $15,500 / $16,000 ≈ 0.97.

This indicates the efficiency required to complete the remaining work within the original budget.

Estimate at Completion (EAC)

EAC = BAC / CPI = $40,000 / 0.78 ≈ $51,282.

An EAC of approximately $51,282 suggests that, given the current cost performance, the project will likely exceed its original budget by around $11,282, signaling a need for corrective measures to improve cost efficiency.

Implications of EAC Results

The EAC provides a forecast of the total project cost based on current performance trends. The significant increase from the original BAC indicates cost overruns, mainly resulting from the Architecture and Design phase being over budget and the underperformance in development. This necessitates revisiting project management strategies, including resource allocation, scope management, and risk mitigation, to bring the project back on track. It also highlights the importance of continuous monitoring and adjustment throughout project execution to prevent further overruns and ensure successful delivery within acceptable cost thresholds.

Conclusion

Effective application of Earned Value Management metrics such as EV, CV, SV, CPI, SPI, TCPI, and EAC enables project managers to gain real-time insights into project health, forecast future performance, and make informed decisions. The case study exemplifies how these calculations reveal cost and schedule variances and predict potential overruns. Proactive use of these tools can significantly improve project success rates, especially in complex, multi-phase projects where variances can compound rapidly.

References

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