Page 465 Question 6

Earned Value Analysis is a management technique to measure project performance and progress. It measures the overall performance by using an aggregate performance measure called earned value. There are several variances on the earned value chart/analysis, mainly of three types.

1> Cost Variance

2> Schedule Variance

3> Time Variance

Cost Variance is the difference between the amount of funds one budgeted for the work that has been performed to date and the actual cost of work. In short, cost variance is the difference of the work that has been accomplished and how much was spent to accomplish it.

Earned Value (EV) – Actual Cost (AC) = Cost Variance (CV)

Schedule Variance is the difference between the funds budgeted for the work that has been performed to date and the cost of work one scheduled to be performed to date (planned value). In short, scheduled variance is the difference between what was planned to be completed and what has actually been completed as of the current date.

Earned Value (EV) – Planned Value (PV) = Schedule Variance (SV)

Time Variance is the difference scheduled for the work that has been performed and the actual time used to perform it. It could also be explained as the time difference between what has been executed and what was expected in the project.

Time scheduled for the work (ST) – Actual Time (AT) = Time Variance

Significance of the variances:

A negative variance is undesirable. Variances are defined in such a way that their negative value suggests that the project is over budget and/or behind schedule. The variances in the earned value chart let the project to be scrutinized and allows the project manager to get the project back on target. Resources can be borrowed from activities performing above expectations. The variances allow the project manager to estimate risks and take necessary actions. This approach also allows one to detect the problems, hold meetings and get the project back in control.

On a personal...