How to forecast your project using Earned ValueManagement
Using EVM you can forecast your project in terms of variance in schedule and cost and needed speed or cost reduction to finish on time and on budget.
Let us define new terms which will be used to calculate forecasting which is
Budget at Completion (BAC):is the total budget allocated to the project.
Now let us start forecasting your project:-
Estimate at Completion (EAC):is the estimated cost of the project at the end of the project.
It has two formulas÷
EAC = BAC / CPI (you should use this formula if you are expecting that your CPI is going to continue fixed from now until end of the project)
EAC = AC + BAC – EV (you should use this formula if your previous variances showed as anomaly, but now it is settled down)
Calculating EAC for our example
Formula 1: EAC = 800 / 0.94 = 851$
Formula 2: EAC = 510 + 800 – 482 = 828$ (you can notice that you need less money extra because previous variances were anomaly but now it is settled down, but in formula one it continuing in delaying by the same rate from the point we started calculation).
Variance at Completion (VAC):is the variance on the total budget at the end of the project.
VAC = BAC – EAC.
Using formula 1 for EAC -> VAC = 800 - 851 = -51$ (Over Budget).
Using formula 2 for EAC-> VAC = 800 - 828= -28$ (Over Budget).
To Complete Performance Index (TCPI): To complete Cost Performance
Indicator is an index showing the efficiency at which the resources on the
project should be utilized for the remainder of the project.
TCPI = (BAC – EV) (work left to do) / (BAC – AC) (money left) = (800 – 482) / (800 –
510) = 1.09.
From above result you can understand that your team should be at SPI =
1.09 in achieving their task to finish on time.
Notes (Place Your Notes Here)