February 8th, 2021
Earned Value Management (EVM) has emerged as one of the most powerful and frequently used methodologies to measure project progress and performance over the last 60 or 70 years. Its early adopters include NASA and the U.S. Department of Defense, who have been using the practice extensively in critical, long-term projects with massive budgets.
Though EVM as we know it is a robust technique, it wasn’t always so powerful. For years, the lens through which EVM could measure project performance was narrow. It wasn’t until relatively recently that earned schedule arrived on the project management scene. Today, earned schedule is an integral component to EVM that has broadened the ways in which teams can measure project success.
In this article, we’ll cover the basics of earned schedule, how it’s calculated, and how it adds value to projects.
What Is Earned Schedule?
Earned schedule is a method that, as its name suggests, helps analyze project performance using units of time, rather than units of cost. By utilizing earned schedule management (ESM)—i.e., the practice of using earned schedule to oversee a project—project managers can calculate whether or not a project is running on schedule. Using ESM, project managers can also visualize project progress, compute schedule delays, and forecast trends with accuracy.
Walt Lipke’s 2003 article “Schedule Is Different,” marked the introduction of earned schedule, establishing it as a significant extension of the traditional EVM theory.
EVM is a broader project management methodology that integrates schedule, costs, and scope to measure project performance. However, unlike earned schedule, EVM expresses this performance in units of cost, not time.
Specifically, EVM expresses two calculations that are integral to tracking project performance, cost variance and schedule variance, in terms of currency. This approach works well for cost variance. It makes sense to say a project is over budget by $2,000. However, for schedule variance, this gets confusing; it’s more intuitive to discuss schedule variance in units of time instead. For example, it makes sense to say a project is behind schedule by four weeks rather than $4,000.
ES rectifies this issue, along with some other challenges in EVM.
Key Metrics and Project Performance
In order to appreciate how ES augments traditional EVM, first we need to know the different metrics and key concepts associated with EVM and how these enable tracking project performance. Let’s take a look at each of these terms.
Planned value (PV), also known as the budgeted cost for work scheduled, is how much you’ve allocated to spend on work at any point in the project. It answers the question: “How much are you planning to get done by X time and how much should that work cost?” It’s expressed in units of currency. Here is the formula for calculating planned value:
PV = Total project cost * % of planned work
For example, say you expect to build 10 bridges in a span of 10 months with a total budget of $100,000. You plan to build one bridge per month. The PV at 10 months, when all of the bridges should be done, is as follows:
PV = Total project cost ($100,000) * % of planned work (100)
PV = $100,000 * 100%
PV = $100,000
However, the PV at four months, when four of the bridges should be complete, is different:
PV = Total project cost ($100,000) * % of planned work (40)
PV = $100,000 * 40%
PV = $40,000
Actual cost (AC), also referred to as actual cost of work performed, is straightforward—it’s the sum of all costs you have incurred in the project so far. It answers the question: “How much have you spent at X point?” This can be more or less than the original budgeted costs, or PV.
Let’s carry on with our 10-month, $100,000 bridge example, looking at costs at the four-month mark. Remember that in this scenario, the PV at four months is $40,000.
Let’s now say that our AC at four months is $25,000. Looking at just the PV ($40,000) and the AC ($25,000), at first glance, it might seem like we’ve spent $15,000 less than we budgeted. But are we actually under budget? Well, that depends on another EVM concept: earned value.
Earned value (EV), also known as budgeted cost for work performed, shows how much you had planned to spend on the work you’ve actually done at the time. It answers the question: “How much work have you done and how much was that work supposed to cost?”
The formula for EV is:
EV = Total project cost * % of actual work
To illustrate this, let’s continue on with our example from above: Completing 10 bridges over the span of 10 months, at a pace of one per month, with a total budget of $100,000. We’ll look again at the four-month mark, at which point we’ve planned to complete 40 percent of the work.
Now, let’s say we’ve only completed 20 percent of the work. What should our EV look like?
EV = Total project cost ($100,000) * % of actual work (20%)
EV = $100,000 * 20%
EV = $20,000
Using EVM Metrics
Now that we have all of our information—PV, AC, and EV—we can determine how well our project is performing. We do this by calculating cost variance (CV), which is expressed in units of currency, and cost performance index (CPI), which is expressed on a scale of zero to one.
Let’s look at our numbers at the four-month mark so far:
PV = $40,000
AC = $25,000
EV = 20,000
Now, let’s first calculate CV; here’s the formula:
CV = EV – AC
Continuing on with our bridge example, here’s the CV at the four-month mark:
CV = EV ($20,000) – AC ($25,000)
CV = $20,000 – $25,000
CV = – $5,000
This negative figure shows that we’re over budget for the amount of work we’ve done.
To put this performance on a scale, we’ll need to calculate CPI. Here is the breakdown of the CPI’s scale:
CPI < (less than) 1 indicates that the project is over-budget
CPI > (greater than) 1 indicates that the project is under-budget
CPI = 1 indicates that the project is on budget
And the formula for CPI is as follows:
CPI = EV/AC
So in our bridge project example, here is what our CPI at four months comes out to:
CPI = EV ($20,000) / AC ($25,000)
CPI = 20,000/25,000
CPI = 0.8
Since our CPI is less than one, we know that we’re over budget. And doing a little more basic math can convert that excess into a percentage:
CPI = [(1 – 0.8) *100]
CPI = 20%
Now we know that at the four-month point of our bridge project, we’re $5,000, or 20% over the budget we had planned for the amount of work we’ve actually done. But herein lies one of the main limitations with EVM: It shows a project’s progress in units of money.
To truly understand our progress, we need to think in terms of time, too. Which is where earned schedule comes in.
See how EcoSys makes EVM easy, efficient and effective.
Earned Schedule Metrics
For earned schedule calculations, we also use PV, EV, and AC. However, we have three additional, schedule-related metrics to consider here that are essentially equivalent to PV, EV, and AC, but they’re expressed in units of time instead of currency.
Planned duration (PD) is the total amount of time allotted for a project. It answers the question: “How long should it take to complete all of your work?”
In our bridge example, the total PD for the project is 10 months.
Much like AC, actual time (AT) is straightforward—it’s just how much time you’ve taken to complete work. You may have planned to complete a piece of work in two months, but the actual time taken may be four months. So then, AT = four months.
Earned schedule (ES) is how long you had planned to take to finish the work that you’ve actually completed. It answers the question: “How much work have you actually done and how long was it supposed to take?”
In our example, we planned to get 10 percent of our work done each month, i.e., build one bridge per month for a total of 10 bridges at the end of 10 months. So at the four-month mark, we’d planned to complete 40 percent of our work. However, we only managed to complete 20 percent of the work at the end of that time.
In this case, earned schedule is two months, as we were expected to complete 20% then. So your project has “earned” two months in the span of four months.
There are a couple of different ways to arrive at this figure. There is a formula for calculating earned schedule, though it can get complex. An easier way is to use a graph of the values (PV and EV) that you already have. Cost should be on the Y-axis, and time units should be on the X-axis, like this:
Then, you can calculate earned schedule by drawing a horizontal line from the EV curve to the PV curve. Next, look at where that intersection falls on the x-axis—that point is your earned schedule.
Earned Schedule Management in Action
Now that we’re familiar with the metrics involved in earned schedule, let’s see how it improves EVM.
We already know how to find cost variance, but that doesn’t tell us how far behind we are on our project timeline. This is where schedule variance (SV) comes in. The formula for SV is as follows:
SV = EV – PV
So if we carry on with our bridge example, what’s our SV at the four-month mark?
SV = EV ($20,0000) – PV ($40,000)
SV = $20,000 – $40,000
SV = -$20,000
A negative SV indicates we are behind schedule, but as it’s expressed in dollars, it’s difficult to know just how behind we are. To figure out how behind we are, we use the schedule performance index (SPI). The formula for SPI is:
SPI = EV/PV
In our example, then, our calculation for SV looks like this:
SPI = EV ($20,000) / PV ($40,000)
SPI = $20,000/$40,000
SPI = 0.5
The scale for SPI is the same as it is for CPI:
SPI < (less than) 1 indicates that the project is behind schedule
SPI > (greater than) 1 indicates that the project is ahead of schedule
SPI = 1 indicates that the project is on schedule
Translating that into a percentage, we realize that we’re 50 percent behind schedule. But we can make this information even more useful by translating it into units of time, or SV(t).
The formula for SV(t) is:
SV(t) = ES – AT
So in our bridge example, where we’ve only completed 20 percent of the work after four months, here’s how we’d find our SV(t):
SV(t) = ES (2 months) – AT (4 months)
SV(t) = 2 months – 4 months
SV(t) = -2 months
This shows that we are behind schedule by two months.
Tracking Overdue Projects
Another scenario where ES outperforms traditional EVM when your project is running past its deadline. The EVM model behaves strangely in these scenarios, making it appear as though you’re always on target even when there are delays. Let’s look at a variation of our bridge example.
In this case, the PD is 10 months, and the PV, or how much you’d planned to spend, is $100,000. You’ve completed the project after 12 months and have spent $100,000. How do the traditional EVM numbers (PV, EV, etc.) look in this case?
First, let’s look at the EV. The formula for that again is EV = Total project cost * % of actual work. So the EV at 12 months is:
EV = $100,000 * 100%
EV = $100,000
Now let’s look at the PV at 12 months. The formula for that again is PV = Total project cost * % of planned work. So the PV at 12 months is:
PV = $100,000 * 100%
PV = $100,000
Next up is traditional SV, expressed as a dollar figure and not expressed in time (SV(t)). The formula again for SV is SV = EV-PV. So in this case, the SV at 12 months is:
SV = $100,000 – $100,000
SV = $0
And when we convert the SV over to SPI (that formula again is SPI = EV/PV):
SPI = 100,000 / 100,000
SPI = 1
The SV and SPI indicate that there is no schedule variance and that we are completely on schedule—but this isn’t true!
Now, let’s check this with the ES approach.
We know that ES is how long you had planned to take to finish the work that you have actually completed. So in this case, ES at the 12-month mark is 10 months. And the AT is clearly 12 months.
If we look at SV(t) (again, that formula is SV(t) = ES – AT):
SV(t) = 10 – 12
SV(t) = -2
We see that we are two months behind schedule.
So even though our regular EVM model showed that our project was on-target, using earned schedule exposes this flaw and shows that we are, in fact, off-target.
Benefits of Using Earned Schedule Management
It’s easy to think of ESM as a bunch of formulas and terminologies. But the key question is—how do these metrics make an impact on projects and make managing them easier?
Here are some of the benefits of using ESM:
1. Allows you to view project performance through the lens of time:
EVM metrics frame things through the lens of currency, which is helpful for staying on budget, but not for staying on schedule. ESM, though, allows you to better assess timelines.
2. Provides better metrics at the end of a project:
As we saw earlier, towards the end of the project, the EVM framework starts failing toward the end of a project; PV remains constant and thus is misleading.
ESM takes a more accurate approach, using earned schedule and AT, which give a better picture of schedule delays.
3. Doesn’t need any extra data other than existing EVM data:
For project managers already familiar with EVM, transitioning into ESM is easier. You continue to use the concept of EV, except now it’s through the lens of schedule rather than currency.
Modern earned value management systems (EVMS) have the ability to calculate earned schedule metrics built into them, too, making it even easier to determine how your project is performing.
4. Supports reporting and forecasting:
The real strength of ESM lies not just in looking at current numbers but its ability to aid in trend analysis and forecast schedule slippages at every level. In essence, it gives a peek not just into the performance of a project, but of a work package or program, too.
For example, ESM defines a metric called schedule adherence factor (also known as ‘p’ factor) which tells if you’re doing the project activities in the right order. You may be doing a task now, for instance, which you may need to rework later, because you started it too early without considering a dependency. ESM can highlight such discrepancies.
Measure, Predict, Improve with Earned Schedule Management Systems
By now, you know the basics behind ESM and how it fills in the gaps that EVM can leave behind. If you’re looking to incorporate earned schedule into your organization, the best way to start is by finding the right software that handles both earned value and earned schedule management.
EVM software that has earned schedule capabilities can be a boon for multiple reasons. In order to accurately analyze and predict performance, you’d need to crunch the numbers on a near-constant basis—an impossible task when you’re managing multiple, enterprise-scale projects. So you’ll need software that can do it for you automatically and provide you with the most accurate, up-to-date forecasting possible.
Also, feeding both EV and earned schedule data into such a system establishes a history of numbers from multiple projects over the years. This repository of rich data enables you to benchmark projects against each other and perform earned schedule analysis for future projects.
Not all software has these capabilities, though. In fact, most legacy systems don’t include an ES functionality.
But EcoSys for Earned Value Management provides extensive support for all EVM efforts, including earned schedule, right out of the box. It integrates and uses all of your cost and schedule data across projects to automate progress measurements. It’s also flexible and easily configurable, allowing you to apply the right amount of rigor for projects of any type and scale.
To learn more about how EcoSys can help you, schedule a consultation today.