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Calculating Earned Value and Estimate to Complete in

Primavera P6

Business Process Outsourcing

Presented By: Eric Costantino

Associate Consultant
 Business Process Outsourcing

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• Introduction to Earned Value

• Calculate Planned Value Costs
• Calculate Actual Costs
• Calculate Earned Value Costs
• Estimate to Completion (ETC)
• Using CPI/SPI to calculate your ETC
• Questions?
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What is Earned Value?

• Combines Measurements of
• Scope
• Your Original Plan
• Schedule
• Current Plan
• Cost
• Budget vs. Actual
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Primavera Variables

• Planned Value
• Cost & Schedule information comes from baseline
• Actual Value
• Actual cost
• Earned Value
• What has physically been built
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A Simplified Example: (PV)

10 Day Project to build 10 Concrete Forms
• 1 Form Per Day
• $100 Per Day
Time

$100 $100 $100 $100 $100 $100 $100 $100 $100 $100
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At the end of day 5

• 5 Forms Completed
• $500
• Planned Value – (PV) = 500
Time

$100 $100 $100 $100 $100 $100 $100 $100 $100 $100
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Let’s Just Say..

• Day 5
• Only 3 Forms Completed
• Our Earned Value – (EV) = 300
Time

$100 $100 $100 $100 $100 $100 $100 $100 $100 $100
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Let’s also say we have a cost over-run..

• Day 5
• Only 3 Forms Completed
• Each form cost $200 to build
• Actual Cost – (AC) - ($200 x 3 Days) = $600
Time

$200 $200 $200 $100 $100 $100 $100 $100 $100 $100
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We now have our variables to compute Earned Value

• Day 5
• (PV) = 500
• (EV) = 300
• (AC) = 600
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• Day 5
• (EV) – (PV) = Schedule Variance
• 300 - 500 = -200
• Behind Schedule
• (EV) – (AC) = Cost Variance
• $300 - $600 = $-300
• Over Budget
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Cost & Schedule Indices

• Schedule Index
• A ratio of what was earned vs. what was planned
• An index less than 1 is behind schedule
• An index greater than 1 is ahead of schedule
• EV/PV = SPI (Schedule Performance index)
• 300/500 = .6
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Cost & Schedule Indices

• Cost index
• A ratio of what we Earned vs. the Actual Cost
• An index less than 1 is over budget
• An index greater than 1 is under budget
• EV/AC = Cost Performance Index
• $300/$600 = .5
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Step 1. Add Activities, Tie Logic, Set % Complete to

Physical
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Step 2. Add Resource Assignments

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Step 3: Maintain Baseline and Assign to Project

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Step 4: Customize Columns for analysis

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Step 5: Update Physical % Complete

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Step 6: Update Resource Actual Units (Or Expenses)

Step 7: Schedule Project, Advance Data Date

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On Day 5, We can now analyze our “Earned Value”

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Conclusions Based on Earned Value Analysis

• Schedule Performance
• The baseline indicates that 50% of the work should be complete.
With only 30% Performance % Complete (Actual Labor Units)
This shows the project is behind schedule.
• Cost Performance
• The baseline indicates that $500 worth of work should be complete
(Planned Value Cost)
As of the Data Date, (Actual cost) is $600 to achieve $300 worth of
work (Earned Value Cost).
This shows the project is over budget
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Using CPI/SPI to analyze project efficiency

• Cost Performance Index relates the amount of Physical
Work completed vs. the $ spent to accomplish the work
• CPI = (EV)/(AC)
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Using CPI/SPI to analyze project efficiency

• Schedule Performance Index relates to the Physical Work
completed vs. the amount of work planned
• SPI = (EV)/(PV)
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Using CPI/SPI to calculate your “Estimate to Complete”

• Set at the WBS Level
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What is it going to cost to complete this project?

• ETC uses one of two formulas
• ETC = Remaining Cost of the activity

• ETC = Performance Factor*(Budget at Completion – Earned

Value Cost)
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Performance Factors
• 4 Optional Methods

• PF = 1 *Optimistic Result
• ETC = (PF * (Budget at Completion – Earned Value Cost
• PF = 1/CPI *Most likely Result
• ETC = (1/CPI)* Budget at Completion – Earned Value Cost
• PF = 1/CPI*SPI *Pessimistic Result
• ETC = [1/(CPI * SPI)] * Budget at Completion – Earned Value Cost
• PF = ____
• ETC = your custom PF * Budget at Completion – Earned Value Cost
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Using Remaining Costs for Activities to Calculate (ETC)

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Using CPI to Calculate (ETC) – Yields an Optimistic Result

• PF = 1/CPI *Most likely Result

• ETC = (1/CPI)* Budget at Completion – Earned Value Cost
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Using CPI/SPI to calculate ETC – Worst Case Scenario

• PF = 1/CPI*SPI *Pessimistic Result

• ETC = [1/(CPI * SPI)] * Budget at Completion – Earned Value Cost
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Key Concepts:
• Perform Earned Value Analysis to compare the budgeted cost of the
work to the Actual Cost

• Calculate the Planned Value, Earned Value, and Actual Cost to

determine how much work should have been completed, How much
work was completed, and how much the completed work cost to build

• Use Estimate to Completion to calculate what the remaining cost of

the activity(s) in progress will be
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Questions?
Eric Costantino
Associate Consultant
ecostantino@drmcnatty.com
T. (877) 367-7990 x7998
Web www.drmcnatty.com