The creation, use and analysis of the earned value data element, BCWP, is what makes earned value management systems unique. BCWP is the value of completed work expressed in the same units of measurement as the budget value assigned to that work. This is equal to the sum of the budgets for completed work packages, completed portions of open work packages, apportioned effort earned on the base tasks, and the value of Level of Effort (LOE) activities. BCWP is synonymous with Earned Value.
At the work package level, BCWP is earned in the same manner that BCWS was established. That is, if work were planned Budgeted Cost of Work Scheduled (BCWS) using the milestone technique, BCWP must be earned using the milestone technique.
The variance calculations using this earned value data element are described below.
A cost variance (CV) is calculated by the formula earned value (BCWP) minus actual costs (ACWP). The CV is an assessment of the cost performance for work accomplished. A negative CV indicates an overrun condition, and a positive CV indicates an underrun.
The percent CV is calculated by dividing the CV by BCWP and multiplying the resulting quotient by 100. A percentage cost variance less than 100% indicates an overrun condition, and a percentage cost variance greater than 100% indicates an underrun.
A cost performance index (CPI) is calculated by dividing earned value by actual costs. The index indicates the cost efficiency at which the work has been performed. A CPI less than 1.0 indicates unfavorable cost performance.
A schedule variance (SV) is calculated by the formula earned value (BCWP) minus budget (BCWS). While the cost variance provides an accurate assessment of performance, the SV should only be used as an indicator because it does not consider the criticality of tasks, only their associated dollar or hour values. Nor does the SV provide insight to relative time variances. When an SV is required to be reported, the Control Account Manager (CAM) reviews the control account's schedule status to ensure that the actual schedule issues are sufficiently addressed. A negative SV indicates that less work was performed than was planned to be performed. A positive SV indicates that more work was performed than was planned.
The percent SV is calculated by dividing the SV by BCWS and multiplying the resulting quotient by 100. A percentage schedule variance less than 100% indicates that less work was performed than was planned to be performed, and a percentage schedule variance greater than 100% indicates that more work was performed than was planned.
A schedule performance index (SPI) is calculated by dividing earned value by budget. The index indicates the schedule efficiency at which work has been performed. However, the work accomplished may not be the same work that was planned. Therefore, this is only an indicator and the schedule must be reviewed to determine schedule status. An SPI less than 1.0 indicates unfavorable schedule efficiency, and an SPI greater than 1.0 indicates favorable schedule efficiency.
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