Earned Value Analysis (EVA)

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Earned Value Analysis (EVA)
Earned value analysis is a standard method used in measuring the progress of a project at any particular time, forecasting its cost as well as its completion date. Furthermore, earned value analysis help in the analysis of variance in the budget and the schedule as the project proceeds. It also helps in comparing work planned against the actual work that has been completed. This help in the determination of whether the cost, schedule, and work accomplished at any given time are in progress according to the initial plan. When the project work is complete its value is considered earned. This implies that earned value analysis provides techniques of quantitative analysis alongside indicators of objective performance. Besides, earned value analysis also gives an overview of the steps and the method itself. Some of the key benefits of EVA include increased the supply of information, provide a measure of progress that is uniform in regards to money and time and hence allows a simple measurement to be applied in complex projects. The other benefits include progress comparability in different areas of workflow in a consistent manner it also facilitates decision making as well as mitigation of risk. For EVA to work effectively planed value alongside other key dimension such as actual cost and earned value are essential elements. Therefore, this implies that it is important to compartmentalize the project. That is the project should be broken down into organized WBS.

Some of the key dimension missing in EVA are estimated cost and duration both optimistic and pessimistic ECo, EDo ECp, EDp.
Work breakdown structure is essential dimension as it forms the basic building block that facilitates project planning. This involves division of project in a product-oriented manner to ensure the entire scope of the work is factored in and allowing integration of schedule, technical as well as cost information. With WBS the work scope is broken down into the appropriate element and thus enabling budgeting, planning, scheduling, progress measuring, cost accounting, work authorization as well as management control. In a project management of a complex system there are several tasks of different nature and therefore in such a project, it can be difficult to visualize the full picture and identify the reason for variances. Today with EVA future forecast on performance in a complex project is derived from the assumption that if a task has a variance that variance can be inferred to the other tasks in that project. When such ways are used to make predictions they automatically reduce the accuracy estimate and hence making it less reliable (Batselier et al. 38). For instance, in case a project has a cost variance in any task related to project management earned value analysis creates extrapolations of such variance to the other tasks in a project. Most often this does not affect production and development related tasks. Such problem in making a forecast in EVA necessitate the inclusion of aggregate tasks in EEVA.
Including aggregating tasks implies that tasks are divided into different sets based on their nature. This means that all related tasks are aggregated together and thus they share a common denominator. Such grouping may involve tasks that are executed by the same group of individuals or the performance of the task may be relying on a particular process. The key idea behind aggregating task is that in case a variance occurs in a given task the information derived is utilized as an input to make a new prediction in relation to the other tasks that share the common resource. As a result, extrapolations can now be justified and thus estimate are more reliable. This one of the major benefit of including task grouping. Hence, when a given task in a particular group incurs a variance the variance is inferred only to the other task within the same group with the affected task. Therefore to increase the visibility of variances in a project it is very necessary to include different categories of task. With grouped tasks project managers get is easy to see patterns and this is imperative in decision making. Work break down structure is an essential input in EEVA, because WBS defines the project work and divide it into small related task and hence, enabling task grouping. All planning and task identified by work break down structure are given cost and time estimate. The estimate assigned should very realistic as desirably possible. To ensure duration and cost estimates are realistic, different techniques and software tools can be used. For EEVA to work effectively estimated duration (ED), estimated cost (EC) and estimated time to start and finish a task are required inputs. The sum total of all EC make up the BCA (Budget at completion) this makes up the estimated project cost before the project is started. The shortest possible time a project can finish is presented by SAC (Schedule at Completion). This is established by the aid of CPM critical path method. For any task that does not form part of the CP (critical path) float is identified. Float also known as slack time is the cumulative time a particular task in a project may delay without necessarily affecting other subsequent task or the completion time of the project. To deal with project uncertainty it is important to estimate both pessimistic and optimistic duration and cost that is associated with late or early start and completion of a task (Narbaev et al. 1012). The optimistic and pessimistic estimate should reflect on all task, however, doing so bring in a lot of challenges as a result only relevant few should be assigned these estimates. Relevant few are those tasks in a project that needs extra attention to reduce the likelihood of derailing the project. These tasks are identified by the project manager from five key areas namely; cost, performance, cost, time and external dependencies.
Budget at completion is given by total estimated cost factoring aggregated tasks as well as estimated cost both optimistic and pessimistic the following formula can be used to calculate BAC.
BAC = ΣEC
BACO = ΣEC + ΣECO for tasks ∈ relevant few
BACP = ΣEC + ΣECP for tasks ∈ relevant few
BACCL = ΣECT∈ aggregated tasks
To calculate the SAC, SACo and SACp CPM is used this represents the shortest time possible a project can be finished in. for tasks that are part of relevant few the following inputs are required to use CPM they include EDo EDp and ED beside the estimated finish and start time for tasks. SACCL is separated from time during calculation this implies that all the duration are summed up irrespective of whether they can be executed at the same time or not. The following formula is to calculate SACCL.
SACCL = ΣECT∈ aggregated tasks.
Works Cited
Batselier, Jordy, and Mario Vanhoucke. “Improving project forecast accuracy by integrating earned value management with exponential smoothing and reference class forecasting.” International Journal of Project Management 35.1 (2017): 28-43. Print.
Narbaev, Timur, and Alberto De Marco. “An earned schedule-based regression model to improve cost estimate at completion.” International Journal of Project Management 32.6 (2014): 1007-1018. Print.