BUS 517 Discussion post responses.
Respond to the colleagues posts regarding:
Discussion: Educating Your Business Sponsor on EVM
• Your Project Sponsor pulls you aside and admits that he has no idea what earned value management concepts (EVM), such as AC, BCWP, and EV mean; he is only concerned that you deliver the project ahead of schedule and under budget. Using the information covered from your readings and other activities, develop a project to educate him, including which EVM performance measures you would educate him on. Provide a rationale for your selection of topics.
BS’s post states the following:
Earned Value Management, or EVM, is a project management tool used to measure project progress and performance in terms of the three core PM elements: scope, time, and costs. Its usefulness is in that it provides quantitative data for project decision making, especially in project forecasting. Managers use the EVM to develop accurate, objective forecasts and can use this tool to determine problems early on and make adjustments before the project derails. EVM implementation includes a project plan that identifies the required work, a valuation of planned work, as well as metrics for quantifying the accomplishment of work. In other words, EVM uses variances in projects based on the comparison of worked performed (EV) and work planned (PV).
To explain this to a project sponsor who does not fully understand the concept, I would begin by explaining that we start with a budget baseline, the PV, which serves as a reference point for all budgeted activities. The next step is to calculate actual costs of the work completed (AC). We multiply these cost by the % complete of actual work, which leads us to earned value (EV). Now we can go ahead and compute the schedule variance (SV) and cost variance (CV) and use these metrics to compare the earned value with the expected schedule value and the earned value with actual costs.
SV = EV – PV
CV = EV – AC
The schedule variance tells us whether the project is running early, on time, or late. The cost variance tells us whether the work accomplished costs more or less than planned. In an ideal situation, both the SV and the CV are positive – it means that the project is on track to be on time and on budget.
These metrics can also be used to calculate performance indexes such as the scheduling performance index
SPI = EV / PV
And the cost performance index
CPI = EV / AC
If the index equals 1, it means the project is on cost / on schedule. An index < 1 indicates the project runs over cost / behind schedule.