Cost Control of Projects:
An Introduction to Earned Value Analysis
Earned value analysis is a method of performance measurement. Many project managers manage their project performance by comparing planned to actual results. With this method, one could easily be on time but overspend according to the plan. A better method is earned value 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.
Different traditional approach like performance
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c) Schedule Variance (SV) – Difference between BCWP and DCWS. d) Cost Variance (CV) – Difference between DCWP and ACWP. This will shows the project either overrunning or underrunning its estimated cost. e) Cost Performance Index (CPI) – The ratio of BCWP to ACWP. If CPI greater than 1 means that the actual cost is less than planned budgets where else if CPI less than 1 means the actual cost is more than planned budgets. CPI of 1 means the actual cost is matched to the planned cost. f) Schedule Performance Index (SPI) – The ratio of BCWP to BCWS . If SPI greater than 1 means that the actual performed work is more than planned performed work where else if SPI less than 1 means that the actual performed work is less than planned performed work. g) Estimate At Completion (EAC) – A forecast techniques used to measure the total project costs based on project performance. Initially, BAC and EAC will be equal and only start vary when ACWP vary from BCWP. Some common variations for EAC were listed below: 1. Actuals to date plus the estimation for all remaining work. This approach is most often used when past performance shows that the original estimating assumptions were fundamentally flawed, or they are no longer relevant to a change in conditions. 2. Actuals to date plus remaining budget. This approach is most often used when current variances are seen as atypical and the project management