PM 340 Week 4 Earned Value and Dashboards Example

Week 40 of 62: An Earned Value Analysis and Sponsor Dashboard for a Museum Gallery Running Late

[Student Name]

University of Phoenix

PM/340: Project Delivery and Measurement

Week 4 Assignment

[Instructor Name]

[Date]

Prairie River Museum of Natural History, its earned value data and forecasts are composites written for a model paper.

The Prairie River Museum of Natural History, an invented museum in Omaha, Nebraska, is fitting out its new mammoth and ground sloth gallery on a 62-week schedule ending at a fixed opening before spring break. Week 3 set the baselines and measures. This paper applies earned value management at the end of week 40, when the project manager, Teresa Whitfield, suspected that fabrication delays were pushing the project behind and that cost was creeping upward. It calculates performance, forecasts the outcome, recommends recovery actions and presents a dashboard for the sponsor.

The Three Basic Values

Earned value management compares three amounts at a status date (Project Management Institute [PMI], 2021). Planned value is how much of the budget the schedule says should have been put to work by that date. Earned value is the budget belonging to the pieces that are in fact finished. The third figure, actual cost, records what the museum has paid to get those pieces done. Anbari (2003) described how these three values, set against a time-phased baseline, allow a project's cost and schedule performance to be measured on one scale and forecasts to be made from current trends.

The gallery's budget at completion for measured work is $3,120,000, the $3.42 million cost baseline minus $300,000 of contingency, which is tracked separately. Each work package, such as a case, earns its budget when it passes shop inspection and again when installed, using a 50/50 rule for fabrication and installation. At the end of week 40:

Planned value (PV): $2,050,000.

Earned value (EV): $1,880,000.

Actual cost (AC): $2,010,000.

Variances and Indexes

Schedule variance is EV minus PV: $1,880,000 minus $2,050,000 equals negative $170,000. The project has completed $170,000 less work than planned.

Cost variance is EV minus AC: $1,880,000 minus $2,010,000 equals negative $130,000. The work completed cost $130,000 more than its budget.

The schedule performance index is EV divided by PV: 1,880,000 / 2,050,000 = 0.92. The project is accomplishing about 92 cents of planned work for every dollar of work scheduled.

The cost performance index is EV divided by AC: 1,880,000 / 2,010,000 = 0.94. Each dollar spent is producing about 94 cents of budgeted work.

Both indexes are below 1.0. The cost problem is modest; the schedule problem is more serious given a fixed opening.

Forecasting the Final Cost

Three estimates at completion (EAC) reflect different assumptions:

If current cost performance continues: EAC = BAC / CPI = 3,120,000 / 0.935 = about $3,336,000.

If remaining work proceeds at budget: EAC = AC + (BAC minus EV) = 2,010,000 + 1,240,000 = $3,250,000.

If both cost and schedule performance affect the rest of the work: EAC = AC + (BAC minus EV) / (CPI × SPI) = 2,010,000 + 1,240,000 / (0.935 × 0.917) = 2,010,000 + about 1,446,000 = about $3,456,000.

The first forecast, about $3,336,000, implies a variance at completion of about negative $216,000 and an estimate to complete of about $1,326,000. It fits within the $300,000 contingency. The third, about $3,456,000, would exceed it by about $36,000 and would require the director to release management reserve. The second is optimistic, because nothing in the data suggests cost performance will suddenly improve.

Dividing the budget left for unfinished work by the money left in the budget gives the to-complete index: 1,240,000 / 1,110,000 = 1.12. It shows that finishing within the $3.12 million budget for measured work would require the remaining work to be done 12 percent more efficiently than planned. Since the project has performed at 0.94, that is unlikely. Contingency, not efficiency, will have to cover the overrun.

A to-complete index well above the index achieved so far is a forecast telling the sponsor to stop hoping.

Forecasting the Finish With Earned Schedule

Dollar-based schedule variance has a known flaw: at completion, EV equals PV, so SPI returns to 1.0 even for a late project. Earned schedule measures time instead. In the baseline, planned value reached $1,860,000 at the end of week 37 and $1,920,000 at the end of week 38. The current EV of $1,880,000 falls one-third of the way between, so earned schedule is about 37.3 weeks. The time-based index is 37.3 / 40 = 0.93, and the project is about 2.7 weeks behind. At that rate, the 62-week schedule would take 62 / 0.93, or about 66.4 weeks, finishing roughly four weeks after the opening date.

Vanhoucke and Vandevoorde (2007) tested duration forecasting methods on simulated project networks and reported that forecasts built on earned schedule were, on the whole, more dependable than the methods based on dollar indexes, particularly in the later stages of projects. Lipke et al. (2009) analyzed performance index data from real projects and argued that statistical analysis of earned schedule indexes can give managers early warning of likely outcomes. The museum is in its final third, so the earned schedule forecast deserves more weight than the dollar SPI.

What Is Driving the Results

The variances trace to the fabricator. Eleven cases were scheduled to pass shop inspection by week 40, but only seven have, after a supplier of low-reflection glass shipped late. Overtime at the fabricator to recover part of the delay raised costs, and two cases needed rework after inspection.

Recovery Actions

Whitfield recommends three actions. First, add a second installation crew from the fabricator for weeks 46 to 58, at about $48,000, so that installation can run in parallel on both sides of the gallery. Second, move the media installation, which does not depend on the late cases, two weeks earlier. Third, install the four delayed cases last and accept that the members' soft opening will take place with them covered if necessary. With these changes, the earned schedule forecast falls to about 62.5 weeks, close enough to recover within the remaining float in the final week. The added crew raises the likely EAC to about $3,384,000, still within contingency.

The Sponsor Dashboard

The deputy director receives a one-page dashboard every two weeks. It shows six numbers: SPI, CPI, earned schedule weeks behind, EAC against the $3.42 million baseline, remaining contingency and requirements accepted, each colored green, amber or red against thresholds agreed in Week 3. A three-sentence narrative explains the main problem, the action being taken and any decision needed. This week the dashboard shows SPI and earned schedule in red, CPI and EAC in amber and requirements in green, and asks the sponsor to approve the second crew.

Conclusion

Earned value analysis at week 40 confirms what the project manager suspected and puts numbers on it: the gallery is about 2.7 weeks behind and about 7 percent over cost for the work completed. Forecasts suggest the overrun can be absorbed by contingency, but the schedule cannot recover without action. A second crew, earlier media work and a revised installation sequence give the museum a realistic path to its opening date, and a six-number dashboard gives the sponsor what is needed to approve it.

References

Anbari, F. T. (2003). Earned value project management method and extensions. Project Management Journal, 34(4), 12-23. https://doi.org/10.1177/875697280303400403

Lipke, W., Zwikael, O., Henderson, K., & Anbari, F. (2009). Prediction of project outcome: The application of statistical methods to earned value management and earned schedule performance indexes. International Journal of Project Management, 27(4), 400-407. https://doi.org/10.1016/j.ijproman.2008.02.009

Project Management Institute. (2021). A guide to the project management body of knowledge (PMBOK guide) (7th ed.). Project Management Institute.

Vanhoucke, M., & Vandevoorde, S. (2007). A simulation and evaluation of earned value metrics to forecast the project duration. Journal of the Operational Research Society, 58(10), 1361-1374. https://doi.org/10.1057/palgrave.jors.2602296