Old Technique, New Twist

Earned Value Management (EVM) is a technique that has been around for decades. Simply put, EVM assigns value to work that is planned and to work that has been completed. Planned Value is the budgeted cost of the work to be performed. Earned Value is the budgeted cost of the work times the percent complete. Cost performance is measured by comparing earned value and the actual cost of the work performed. Schedule performance is measured by comparing earned value and planned value.
 
Studies have repeatedly shown that EVM accurately assesses project cost performance. It is not, however, as successful in assessing schedule performance. First, schedule performance is expressed in terms of cost, rather than time, making the measurement less intuitive. Worse, because schedule performance metrics compare Earned Value and Planned Value, they ultimately break down. At the end of a project, the Earned Value equals the Planned Value, by definition. Consequently, even if a project completes three months late, it shows zero Schedule Variance (the difference between Planned Value and Earned Value), and it has a perfect Schedule Performance Index (Earned Value divided by Planned Value). 
 
A new twist on EVM has emerged over the past few years, and it resolves these problems. Credit Walt Lipke. His approach utilizes the traditional concepts of Earned Value and Planned Value but relates them directly to time. The idea is simple and elegant. The amount of time that is earned on a project is measured by correlating Earned Value, Planned Value, and timeline. The metric is then used to assess schedule performance.

Earned Schedule
The following chart shows how Lipke correlates value and time to measure what Lipke calls Earned Schedule.

PV_vs_EV.jpg

To find the amount of time that has been earned, first determine the value that has been earned at an actual time (the pink star in Figure 1). Next, map that value onto the cumulative planned values for the project. The dotted line in the chart points to the equivalent value on the planned value curve.
 
The point where the two values are equal implies the amount of time that has been earned. To quantify it, drop a line from the intersection point to the timeline. This represents the amount of time it took to get to the planned value at the intersection point. Call this the target time.
 
Now, sum the time segments: count the number of periods between the project start and the target time. The Earned Schedule is the total of those periods. In the chart above, the Earned Schedule is Jan-May, five months. 

Practical Application
Applying the theory to an actual project, we can clearly see the schedule performance risk that is emerging. The top line (blue) shows the cumulative amount of time used in the baseline schedule. Plotted against it, the bottom line (pink) shows the amount of time earned each week — the Earned Schedule.

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Baseline_vs_ES.jpg

When the earned schedule is tracking below the baseline schedule, it indicates poor schedule performance — the schedule is running late. The wider the gap between the two curves, the worse the performance. The chart shows that there are signs of a gap opening up, but is it serious? We need to know in order to assess the severity of the schedule risk.
 
The next chart helps determines the severity of the risk.

 SVt_and_SPIt_4.jpg

 
The top line (blue) in the chart shows the amount of variance between the Baseline Schedule and the Earned Schedule. The bottom line (pink) shows the ratio between the two. Reading the left-hand scale, the variance is below zero (not good) and dropping. Reading the right-hand scale, the schedule performance index is below one (also not good) and is dropping. Both confirm that a problem is emerging. Of greater concern, the slope of the lines shows that it has worsened more quickly over the past two weeks. If that trend continues, the problem will soon become unrecoverable. The risk is severe enough to warrant immediate action.

For more information on Earned Schedule, see www.EarnedSchedule.com.