The Chapter 16 Assignment: Earned Value Management Explained (Other (Not Listed) Sample)

Chapter 16 Assignment Name: Institution: Response to Question One Summary of articles Dwivedi, U. (2009). Earned Value Management Explained. Retrieved from: /earned-value-management-explained.php The article defines earned value management as a systematic project management process used to find variances in projects based on the comparison of worked performed and work planned. Earned value management is used by managers to measure performance by determining cost and schedule controls as well as forecasting projects. The most important part of an EVM is the project baseline which is a reference point for all EVM activities. EVM was developed by the Defense Department for the purpose of tracking its projects, and it has attracted a lot of organizations to the extent that it is a must-have for the US government. The private sector has also taken an interest in EVM with the following being some of the organizations currently using it: NASA, Project Management Institute, Defense Acquisition University, Federal Acquisition Institute and Acquisition Management. EVM uses variances to measure performance. Some of the key variances include cost variances, schedule variances, and variance at completion. Cost variances determine how much a project is under or over budget by subtracting the actual cost from the earned value. The schedule variance is used to determine how much a project is behind or ahead of schedule by subtracting the planned value from the earned value. Variance at completion is the variance at total cost of the work and expected cost. Deshpande, S. (2014, May 15). What is Earned Value Management and Why is it Important. Retrieved from: https://apmg-international.com/article/what-earned-value-management-and-why-it-important EVM is used by managers to provide early warning systems of cost and time problems. It is beneficial to managers as it provides extra information than normal project tracking by accurately determining at what level of completion a project is as well as to determine its successful completion. By using a value-added approach, EVM gives managers to control and visibility of the project activities allowing them to respond to problems early enough. EVM operates using the basic principle that the value of the piece of work should be equal to the funds budgeted to complete it. It, therefore, uses three main figures to do its comparisons: planned value (PV), earned value (EV), and actual cost (AC). The planned value is the approved budget for the work scheduled to be completed by a set date. The earned value is the approved budget for the work actually completed by a specified date while actual costs are the costs incurred for the work completed. EVM determines the project’s schedule and cost performance by using two indices: the schedule performance index (SPI) and cost performance index (CPI). The SPI is a measure of the project’s time efficiency which is the ratio between EV and PV. It is used to determine whether a project is behind or ahead of schedule.The CPI is a measure of the cost efficiency of the project computed as the ratio of EV and AC. The CPI determines whether a project is under or over budget. Response to Question Two Challenges for a company using only Earned Values to measure success * The earned value may present inaccurate information: critical path schedule may show the project is behind schedule while the EVM schedule shows it is ahead of schedule * It does not reflect customer satisfaction and quality which means it may fail to guarantee the success of the project. * Earned value measures the performance of the project and overlooks the outcomes of the project. This means that it cannot show if the project will achieve high-impact business outcomes but only that the project will be done according to expectations (Ghorbani, 2017). Other Measures * Return on investment: this will complement earned value management by measuring the profit or loss a project will generate relative to the investment. * Cost variance: this helps determine if a project is under budget or over budget. * Schedule variance: it is used together with earned value management to determine whether a project is behind or ahead of schedule (Ghorbani, 2017). Response to Question Three * Projects behind schedule * Encryption SV=EV-PV =250-270 =-20 The schedule variance is negative meaning that less work is being completed than originally planned hence the project is behind schedule. The SPI is also 0.93 which is less than 1 which means the project is behind schedule. * E-sales claims SV=EV-PV =140-150 =-10 The schedule variance is negative meaning that less work is being completed than originally planned hence the project is behind schedule. The SPI is also 0.93 which is less than 1 which means the project is behind schedule. * Procurement net SV=EV-PV =340-400 =-60 The schedule variance is negative meaning that less work is being completed than originally planned hence the project is behind schedule. The SPI is also 0.85 which is less than 1 which means the project is behind schedule. * Currency conversion SV=EV-PV =120-125 =-5 The schedule variance is negative meaning that less work is being completed than originally planned hence the project is behind schedule. The SPI is also 0.96 which is less than 1 which means the project is behind schedule. * Smart card SV=EV-PV =120-125 =-5 The schedule variance is negative meaning that less work is being completed than originally planned hence the project is behind schedule. The SPI is also 0.76 which is less than 1 which means the project is behind schedule. * Air Reservation Net SV=EV-PV =110-145 =-35 The schedule variance is negative meaning that less work is being completed than originally planned hence the project is behind schedule. The SPI is also 0.96 which is less than 1 which means the project is behind schedule. * Pilot internet log system SV=EV-PV =490-540 =-50 The schedule variance is negative meaning that less work is being completed than originally planned hence the project is behind schedule. The SPI is also 0.91 which is less than 1 which means the project is behind schedule. * Projects on schedule or ahead of schedule Projects On Schedule * Supply chain partners SV=EV-PV =90-90 =0 The schedule variance is zero meaning that the work being completed is equal to that originally planned hence the project is on schedule. The SPI is also 1 which means the project is on schedule * Billing system SV=EV-PV =280-280 =0 The schedule variance is zero meaning that the work being completed is equal to that originally planned hence the project is on schedule. The SPI is also 1 which means the project is on schedule * Internet telephone system SV=EV-PV =850-850 =0 The schedule variance is zero meaning that the work being completed is equal to that originally planned hence the project is on schedule. The SPI is also 1 which means the project is on schedule. Projects Ahead of schedule * Digitize fingerprints-FBI SV=EV-PV =3500-3000 =500 The schedule variance is positive meaning that more work is being completed than originally planned hence the project is ahead of schedule. The SPI is also 1.17 which is more than 1 which means the project is ahead of schedule. * Smart tag tracking SV=EV-PV =900-850 =50 The schedule variance is positive meaning that more work is being completed than originally planned hence the project is ahead of schedule. The SPI is also 1.06 which is more than 1 which means the project is ahead of schedule. * Web-based cash flow SV=EV-PV =220-210 =10 The schedule variance is positive meaning that more work is being completed than originally planned hence the project is ahead of schedule. The SPI is also 1.05 which is more than 1 which means the project is ahead of schedule. * Projects Over Budget * E-sales claims CV= EV- AC =140-150 =-10 The cost variance is negative meaning that the budgeted cost to perform the work was less than what was actually spent hence the project is over budget. The CPI is also 0.93 which is less than 1 which means the project is over budget. * Procurement test CV= EV- AC =340-380 =-40 The cost variance is negative meaning that the budgeted cost to perform the work was less than what was actually spent hence the project is over budget. The CPI is also 0.89 which is less than 1 which means the project is over budget. * Smart card CV= EV- AC =110-140 =-30 The cost variance is negative meaning that the budgeted cost to perform the work was less than what was actually spent hence the project is over budget. The CPI is also 0.79 which is less than 1 which means the project is over budget. * Air reservation net CV= EV- AC =490-520 =-30 The cost variance is negative meaning that the budgeted cost to perform the work was less than what was actually spent hence the project is over budget. The CPI is also 0.94 which is less than 1 which means the project is over budget. * Pilot internet log system CV= EV- AC =490-550 =-10 The cost variance is negative meaning that the budgeted cost to perform the work was less than what was actually spent hence the project is over budget. The CPI is also 0.93 which is less than 1 which means the project is over budget. * Projects on budget or under budget On budget * Encryption CV= EV- AC =250-250 =0 The cost variance is zero meaning that the budgeted cost to perform the work was equal to what was actually spent hence the project is on budget. The CPI is also ...