17 October 2021

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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