Earned Value Management – Rabio

Earned Value Management (or EVM) is a widely used technique for measuring project performance against the project baseline, in most cases the original budget.

The value calculations achieved are a top priority for studies among all project managers who want to be certified as a Project Management Professional (or PMP). There is no doubt that EVM is one critical area of ​​practice for monitoring project performance from a cost and schedule perspective.

It is common to think of projects with binary thinking:

  • Before a schedule in front of a backlog
  • Above budget versus below budget

Both project performance factors have a direct impact on the overall project cost. What will be the total cost of my project if I am ahead of schedule but my costs are higher than expected? If I fall behind on schedule but my costs are lower? EVM provides great information to help with these questions.

Calculating the value of profit

The procedure of calculating profit value requires the following:

  • Planned value (PV): This is the budgeted amount for the current reporting period.
  • Actual costs (AC)A: All of these are the actual costs recorded so far.
  • Profit value (EV): This is the total project budget multiplied by the percentage (%) of project completion performance.

When these numbers are available, everything is ready for some calculations.

Example of profit value management

We need to look at an example where we are in the middle of a year-long project with a total budget of € 1,000,000. The budgeted amount for this six months is 550,000 euros. The actual cost summary over these six months is 450,000 euros.

so in conclusion:

  • Planned value (PV) = € 550,000
  • Actual cost (AC) = € 450,000
  • Profit value (EV) = (€ 1,000,000 * 0.5) = € 500,000
  • Miscellaneous Schedule (SV) = EV – PV = € 500,000- € 550,000 = – € 50,000 (this is bad because <0)
  • Schedule Performance Index (SPI) = EV / PV = € 500,000 / € 550,000 = 0.91 (this is bad because <1)
  • Miscellaneous Cost (CV) = EV – AC = € 500,000- € 450,000 = € 50,000 (it is good that> 0)
  • Cost Performance Index (CPI) = EV / AC = € 500,000 / € 450,000 = 1.11 (It’s good that> 1)
  • Completion Estimate (EAC) = (Total project budget) / CPI = € 1,000,000 / 1.11 = € 900,000

After negative SV and SPI <1, shows that the project is considered to be behind schedule. Although the project is 50% of the way, we planned to use 55% of the costs. Steps are needed for project performance to catch on in the second half of the project.

After a positive resume and CPI is> 1, shows that the project is considered under budget. Although the project is 50% of the way, the actual costs so far are only 45% of the project budget. By maintaining project performance at this rate, the total cost of the project (EAC) will be only 900,000 Euros, as opposed to our original budget of 1,000,000 Euros.

Traps to watch out for

  • Nedarned value is an excellent early warning system, and looking at prevailing value trends can provide project management with very useful data. It is common practice to report value accrued monthly, but in shorter projects it can be more frequent.
  • Accumulated value helps greatly in measuring project performance relative to schedule and budget, but in any case it does not guarantee project success.
  • It is very important that all actual costs be included in the calculations otherwise one may ignore something (this can happen in indirect wages and in costs that do not involve work).
  • When reporting profit value calculations, keep in mind that recipients need to know what the numbers mean and how and what they are used for. It is advisable to present them in non-project management terms to the project sponsor or other key stakeholders. This practice is much easier than training stakeholders on the subject of “talking project and term projects.”

Profit management with Rabio

Certainly value calculations can help project project management identify problems early and be proactive and responsive. EV metrics must be set as standard, and data must be available for reporting across the project portfolio.

If you have never calculated the profit value of your project or if some time has passed, give it a try. You may be surprised by what you find. Rabio will help you keep track of the budget, actual costs and value earned.

Track your earned value with Rabio

Rabbi is Open source Software designed to manage and control budgets, their costs, and generate reports based on a flexible cost breakdown structure. This is a budget software that can track the profit value and is distributed for free.

You can easily use it for your personal needs or your business. With Rabio’s management system you can design and control your budget and compare it with costs and gain value at any time through the easy internal reporting system.

Furthermore, you can change your budget or create forecast and fund managers and compare new data with the original budget.

The reports below are part of Rabio’s reporting system

Central cost control report with profit value
Cost control center and category report with profit value
Cost control center and category report with profit value
See more sample reports here

You can download the open source version of Rabio here

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