Agile earned value management

Variance and trend analysis

Unlike traditional project management methods that evaluate risk and variance and trends in formal meetings, agile incorporates risk analysis and variance and trend analysis into iteration review meetings.
Risk and variance and trend analysis may be performed in agile using information radiators, like a risk burndown chart, and the use of traditional earned value management (EVM) to measure cost and schedule variance (CV and SV, respectively).
[Agile Estimating and Planning. Mike Cohn.]

Earned Value Management (EVM)

EVM or earned value management is a management technique used to evaluate project performance with respect to cost and schedule.
EVM relies on other common financial metrics like :
- Budget At Completion (BAC), BAC is the total project budget.
- Actual Cost (AC), AC is the actual cost incurred to date.
- Planned Value (PV), PV is the planned value of work at a given time in a project
- Earned Value (EV), EV is value of work actually completed or earned (e.g., you have completed 50% of the project by week 5 of a 15 week $15,000 project = $7,500 EV).
- Cost Variance (CV),
- Schedule Variance (SV),
- Cost Performance Index (CPI),
- Schedule Performance Index (SPI).
[Agile Estimating and Planning. Mike Cohn.]

Earned Value Management indicators

Cost Variance (CV) is the difference between what a project has earned to date and cost to date
- CV = EV – AC
Schedule Variance (SV) is the difference between what a project has earned to date and what it was planned to earn to date
- SV = EV – PV
CV and SV can be converted into performance indicators of Cost Performance Index (CPI) and Schedule Performance Index (SPI), respectively, and tracked and charted to show progress over time.
CPI is a ratio that expresses cost performance.
- CPI = EV/AC.
- If CPI > 1, indicates the project is under budget , the project is earning more than spending;
- CPI < 1, indicates the project is over budget
SPI is a ratio that expresses schedule performance.
- SPI = EV / PV.
- SPI > 1, the project is ahead of schedule
- SPI < 1, the project is behind schedule.
[Agile Estimating and Planning. Mike Cohn.]

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