CHAPTER 9

ANALYZE PROJECT PERFORMANCE

9.1 Introduction

Analyze Project Performance is the process of comparing actual project cost and schedule performance to the performance measurement baseline for the purposes of analyzing the current status of a project. The primary purpose of EVM is to provide management with a rigorous and complete understanding of the project's cost and schedule performance, and a rational forecast of an anticipated end state for each. This understanding is essential for making good decisions while analyzing the project, exploring opportunities, and mitigating undesired variances. Another purpose of EVM data is to allow for early indication of expected final costs and schedule completion. This analysis provides a prediction of future project performance.

By deploying an EVM system on the project, various metrics can be produced that address the project's cost and schedule for past, current, and future conditions. These metrics may be represented in many data forms and graphics and provide an effective means to communicate a common understanding of the project to all stakeholders. (See Figure 9-1 for the inputs and outputs for this process.)

9.2 Inputs

9.2.1 Project Management Plan

The following components in the project management plan are used to analyze project performance:

• Performance measurement baseline (PMB). The performance measurement baseline is used to compare planned performance with actual performance to determine project status.
• Variance thresholds. This indicates the acceptable range of variances.
• Subsidiary management plans. The cost management plan, schedule management plan, scope management plan, and any other management plans that are used to provide guidance in managing and controlling the project.

9.2.2 Work Performance Information

Work performance information includes information about project progress, such as which deliverables have started, what the progress of the deliverables is, and which deliverables have finished. This information is used to determine earned value. It also includes information on costs that have been authorized and incurred. This information is used to determine actual cost.

Earned value management (EVM) relies on four key data points:

• Planned value
• Earned value
• Actual cost
• Budget at completion

The planned value is represented in the performance measurement baseline, as is the budget at completion. The earned value and actual costs are updated as the project progresses. While it is most common to use monetary units to calculate and report earned value, it is possible to convert these to other units such as labor hours for work to be issued and progressed.

.1 Planned Value

Planned value (PV) is the authorized, time-phased budget assigned to accomplish the scheduled work. At any given point on a time line, PV describes how much of the project work was planned to be performed.

.2 Earned Value

Earned value (EV) is the measure of work performed at a specific point in time, expressed in terms of the approved budget authorized for that work.

The earned value of a project can be determined by various methods. The earned value methodology used to plan the baseline should be used consistently to determine the earned value. Figure 9-2 shows the earned value at “time now,” and indicates that less work than planned has been accomplished.

.3 Actual Cost

Actual cost (AC) is the realized cost incurred for the work performed during a specific time period. In order for EVM analysis to be reliable, AC must be recorded in the same time period as EV and for the same activity or work breakdown structure component as EV. For example, recording AC for accomplished work several months after EV has been recorded for the same work could significantly distort the EVM data. Figure 9-2 shows the actual cost at time now, and indicates that the organization has spent more than it planned to spend in order to achieve the work performed to date.

.4 Budget At Completion

Budget at completion (BAC) is the sum of all the budgets established for the work to be performed.

9.3 Description

9.3.1 Performance Analysis

Earned value analyzes project performance by calculating performance variances and performance indices. Common variances include:

• Schedule variance (SV)
• Cost variance (CV)

Common indices include:

• Schedule performance index (SPI)
• Cost performance index (CPI)
• To complete performance index (TCPI)

These variances and indices are summarized in Figure 9-3.

To demonstrate how the various calculations are applied, the following project assumptions will be used as an example to assess work performance (assume data is reported in dollars):

PV = 40 (represents the work planned up to time now)

EV = 32 (represents the work performed up to time now)

AC = 48 (represents the cost incurred for the work performed up to time now)

BAC = 150 (represents the total authorized budget)

.1 Schedule Analysis

Schedule variance is very often misinterpreted as a time-based indicator, for example, are we early or late and by how much? It is not a time-based indicator, but rather an indication of the physical status (how much of the work has been accomplished).

The schedule variance (SV) determines whether a project is ahead of or behind schedule in accomplishing work. It is calculated by subtracting the planned value (PV) from the earned value (EV). A positive value indicates more work has been accomplished than planned; a negative value indicates that less work has been accomplished than planned. For our example:

SV = EV − PV

–8 = 32 − 40

The schedule variance can be expressed as a percentage by dividing the schedule variance (SV) by the planned value (PV):

SV% = SV/PV

−20% = −8/40

This means that 20% of the work planned to have been completed has not been accomplished.

The schedule performance index (SPI) indicates how the project team is working compared with the plan. SPI is calculated by dividing the earned value (EV) by the planned value (PV). For our example:

SPI = EV/PV

0.80 = 32/40

This schedule performance index indicates that work is being accomplished at 80% of the planned rate. A value of less than 1.0 indicates less work is being accomplished than was planned. Additional emerging techniques for time-based schedule analysis using EVM data are described in Appendix D.

.2 Cost Analysis

The cost variance (CV) shows whether a project is in an over-budget or under-budget condition. This measure is determined by subtracting the actual cost (AC) from the earned value (EV). The CV for our example shows:

CV = EV − AC

–16 = 32 − 48

The CV can be expressed as a percentage by dividing the cost variance (CV) by the earned
value (EV).

CV% = C V/EV

−50% = −16/32

In other words, to date, the project is 50% over budget for the work performed.

Earned value and actual cost can also be used to calculate the cost performance index (CPI), which is one of the clearest indicators of the cost efficiency of a project. CPI gages how cost efficient the team is in using its resources. It is determined by dividing the earned value (EV) by the actual cost (AC). With regard to our example, the CPI is:

CPI = EV/AC

0.67 = 32/48

This means that for every $100 expended, $67 of the budgeted value is earned. A value of less than 1.0 indicates that more money is being spent than planned to accomplish the budgeted work and is an overrun condition.

Figure 9-4 shows what the EVM performance measures indicate about a project with regard to its planned work schedule and resource budget.

9.3.2 Forecasting

As the project progresses, forecasts can be developed for cost and schedule performance. Common forecasting data includes:

• Estimate to complete
• Estimate at completion
• Variance at completion
• To-complete performance index
• These forecasts are summarized in Figure 9-3.

.1 Estimate to Complete

The estimate to complete (ETC) is the expected cost needed to complete all of the remaining work for a control account, work package, or the project. There are two ways to develop the estimate to complete (ETC). The most accurate method is to develop a new, detailed, bottom-up estimate based on an analysis of the remaining work. This is sometimes referred to as a management ETC. As a check on these management estimates, organizations can use a calculated or statistical ETC, based on the efficiency-to-date measured by the CPI (and sometimes the SPI). A common equation for the statistical ETC is:

ETC = (BAC − EV)/CPI

Using the sample provided above yields the following:

177 = (150 − 32)/0.667

.2 Estimate at Completion

Estimate at completion (EAC), is the expected total cost of a control account, work package, or the project when the defined scope of work will be completed. The formal EAC for a project should be estimated by the project team; however EACs may also be calculated based on performance to date. The EAC is typically based on the actual cost incurred for work completed (AC), plus an estimate to complete (ETC) for the remaining work. There are two distinct methods for deriving an EAC value: analytical and statistical.

The analytical approach is a manual, bottom-up summation by the project manager and the project team utilizing their expectation of future conditions and challenges to assess an accurate forecast of project costs.

The management ETC can be added to the actual cost (AC) to derive the management estimate at completion (EAC). For this calculation, assume a management ETC of 142.

EAC = AC + ETC

190 = 48 + 142

The statistical approach utilizes EVM data to project an EAC and is often called an independent EAC (IEAC) because it is independent of any future project or environmental conditions. It is merely a projection of the future project outcome based on past data. The IEAC is independent of human intervention, such as corrective action and risk responses. The use of Independent EAC calculations is a good validation of the project EAC; however it should not be substituted as the formal EAC for the project.

The statistical ETC can be used to determine the calculated estimate at completion (EAC), which the team can compare with the management or formal EAC. For our project, the ETC and EAC can be independently calculated as follows:

225 = 48 + 177

Note that this EAC formula is equivalent to the following:

EAC = BAC/CPI

225 = 150/0.667

The obvious conclusion is that if the project continues at the same cost efficiency (CPI) for the remainder of the project (a likely occurrence), the total hours spent will be 225, rather than the 190 that is forecast.

Table 9-1 is a summary of some of the independent EAC calculations that can be performed and the assumptions associated with each.

.3 Variance at Completion

The cost variance at completion (VAC), derived by subtracting the EAC from the BAC, forecasts the amount of budget deficit or surplus at the end of the project. The VAC shows the team whether the project is forecasted to finish under or over budget.

VAC = BAC − EAC

–40 = 150 − 190

Table 9-1. Independent EAC Assumptions and Calculations

Assumption	Example Formula
Future cost performance will be performed at the budgeted rate	EAC = AC + (BAC−EV) Data Example: EAC = 48 + (150 − 32) = 166
Future cost performance will be the same as all past cost performance	EAC = AC + [(BAC−EV)/CPI] = BAC / CPI Data Example: EAC = 48 + [(150 − 32)/0.67] = 150/0.67 = 225
Future cost performance will be the same as the last three measurement periods (i, j, k)	EAC = AC + [(BAC − EV) / ((EVi + EVj+ EVk) / (ACi + ACj + ACk)]
Future cost performance will be influenced additionally by past schedule performance	EAC = AC + [(BAC − EV) / (CPI × SPI)] Data Example: EAC = 48 + [(150 − 32) / (0.67 × 0.80)] = 269.3
Future cost performance will be influenced jointly in some proportion by both schedule and cost indices	EAC = AC + [(BAC − EV) / (0.8 CPI + 0.2 SPI)] Data Example: EAC = 48 + [(150 − 32) / (0.8 × 0.67) + (0.2 × 0.80)] = 218.2

In other words, the project team is forecasting that the project will cost an additional 40 dollars worth of resources than originally planned. This can be expressed as a percentage by dividing VAC by BAC.

VAC% = VAC/BAC = −26.7% = −40/150

.4 To-Complete Performance Index

The TCPI is a comparative measure. It compares work completed to date with budget required to complete the remaining work. The performance efficiency needed to complete the project is often more, sometimes much more than any previous level of performance achieved. The TCPI data can be used as the basis for a discussion which explores whether the performance required is realistically achievable.

The to-complete performance index (TCPI) is the calculated projection of cost efficiency that must be achieved on the remaining work to meet a specified management goal, such as the BAC or EAC. It is the ratio of remaining work to the remaining budget.

Since EAC is clearly a reflection of the expected final cost of the effort, the intent of using the EAC in the formula is clear, that is, EAC − AC equals the remaining budget. The TCPI for achieving the EAC is calculated by dividing the budget for the remaining work by the estimate to complete:

TCPI_EAC = (BAC − EV)/(EAC − AC)

0.83 = (150 − 32)/(190 − 48)

This means that in order for the project to achieve the EAC, performance must improve from the existing CPI of 0.67 to a TCPI of 0.83 for the remaining work.

The TCPI for achieving the BAC is calculated by dividing the budget for the remaining work by the total budget less cumulative AC:

TCPI_BAC = (BAC − EV)/(BAC − AC)

1.16 = (150 − 32)/(150 − 48)

This means that in order for the project to achieve the BAC, performance needs to improve from an already experienced CPI of 0.67 to a TCPI of 1.16 for the performance of the remaining work—not a likely occurrence.

The TCPI is most useful when compared with the CPI. If the TCPI is greater than the CPI, then the specified endpoint (EAC or BAC) may be understated. Increasing the EAC will cause the TCPI to decrease, thereby denoting that the projected cost efficiency will be more in line with the current CPI. Note that since an increase to the BAC requires a commensurate increase in the scope of work, it is not possible to project cost efficiency more in line with the CPI by increasing the BAC. If the TCPI is less than the CPI, then the specified endpoint may be overstated.

If the EAC is used in the denominator of the TCPI, the resulting number shows how efficient the project needs to be in order to achieve the EAC.

If the BAC is used in the denominator of the TCPI, the resulting number shows how efficient the project needs to be in order to achieve the BAC.

These variances, indices, and forecasts can be used to answer key project management questions as listed in Table 9-2.

Table 9-2. EVM as it Relates to Project Management Situations

Project Management Question	EVM Performance Measures
How are we doing timewise?	Schedule Analysis & Forecasting
- Are we ahead or behind schedule?	- Schedule Variance (SV)
- How efficiently are we using time?	- Schedule Performance Index (SPI)
How are we doing cost-wise?	Cost Analysis & Forecasting
- Are we under or over our budget?	- Cost Variance (CV)
- How efficiently are we using our resources?	- Cost Performance Index (CPI)
- How efficiently must we use our remaining resources?	- To-Complete Performance Index (TCPI)
- What is the project likely to cost?	- Estimate at Completion (EAC)
- Will we be under or over budget?	- Variance at Completion (VAC)
- What will the remaining work cost?	- Estimate to Complete (ETC)

9.3.3 Percentage Comparisons

Comparing the percent complete to the percent spent is another way of analyzing the project status. The percent complete is the percent of scope accomplished as compared to the total scope of the project.

%Complete = EV/BAC

21.3% = 32/150

The percent complete is compared to the percent spent, which is the amount of actual costs compared to the total forecast of costs on a project, that is, the EAC.

% Spent_EAC = AC/EAC

25.3% = 48/190

However, similar to the TCPI calculation and the acceptance of all of the limitations therein, it is sometimes useful to compare the actual costs to the total budget for the project.

% spent_BAC = AC/BAC

32% = 48/150

9.3.4 Trend Analysis

Identifying trends in the performance metrics can help a project manager decipher or anticipate a potential performance problem. For instance, a cumulative cost performance index (CPI) that is within an acceptable range, but has been trending down toward a pre-established threshold for that index for several measurement periods, may be cause for some concern and prompt an examination of the underlying cause of the trend. If the trend is seen at the project level, the WBS will enable the manager to “drill down” to lower levels to see what underlies the trend.

9.4 Outputs

9.4.1 Performance Measurement Methods

Performance measurements include the calculated CV, SV, CPI, and SPI values for the various WBS to control accounts. Based on the data of the project, the summary shown in Table 9-3 can be made.

According to the project schedule, $40 of work were completed at this point in time; however only $32 of work has been accomplished. This means the project is $8, or 20%, behind schedule with an SPI of 0.800. The $32 of work accomplished, however, has taken 48 to complete, giving the project a $16 negative cost performance, a cumulative overrun of 50%, and a CPI of 0.667.

9.4.2 Funding Forecasts and Trends

Funding forecasts can include a management EAC and a comparison of a range of calculated EACs (see Table 9-4).

Table 9-4. Funding Forecast Examples

EAC
Management	190.0
Math	166.0
CPI only	225.0
CPI x SPI	269.3
0.8 CPI+0.2 SPI	218.2
VAC
VAC	−40.0
VAC%	−26.7%
TCPI
TCPIEAC	0.83
TCPIBAC	1.16

For the authorized scope of this effort, there is a total budget of $150; however, the project team is forecasting an EAC of $190 for that scope of work. Based on the management EAC, a projected overrun at completion of $40 is expected.

Using knowledge of the past challenges and future conditions, the team developed a management EAC of $190. If the existing variance is the only variance, and the rest of the work comes in on budget, the EAC will be 166. However, if the team continues to perform at the same cost efficiency for the remainder of the project, it will take them a total of $225 to complete. Since the project is behind schedule, the project could take from $218.2 to $269.3 to complete. The management team should be under increasing pressure to revise to a higher number the management EAC, or develop some plausible ways to reduce expected future costs.

The project, in total, is 21.3% complete, and has spent 25.3% of the projected forecast of costs (see Figure 9-5).

9.4.3 Corrective and Preventive Actions

Based on the analysis of project performance and trends, it may be appropriate to conduct a root cause analysis and recommend preventive actions to keep the project from crossing a performance threshold, or recommend corrective actions to bring performance back in line with expected performance.

9.5 Considerations

9.5.1 Management by Exception

EVM provides an organization with the capability of practicing “management-by-exception” on its projects. This practice contributes greatly to the efficiency and effectiveness of project management, by allowing managers and others to focus on project execution and invoke control actions only when and where they are needed. EVM performance measures, used in conjunction with the project work breakdown structure (WBS), provide the objective data needed to practice “management-by-exception.”

Using EVM, an organization can establish acceptable levels of performance for a project and its work tasks. Variance percentages and efficiency indices are most often used. For instance, an organization may consider a cost variance (CV) of plus or minus 10% from the EV to be an acceptable range of variance. For example, some organizations color code their performance thresholds. This in no way suggests that an increasing variance should not and could not be dealt with until it crosses the threshold. The thresholds generally define formal reporting parameters. While a negative variance is potentially problematic, a positive variance may represent an opportunity.

Because EVM is usually measured at the control account level, where the scope, schedule, and cost of work are planned and controlled, “management-by-exception” also starts at this level. EVM performance measures are used to determine whether variance thresholds have been exceeded.

9.5.2 Communication with Earned Value Data

The project team is frequently held accountable for explaining the status of the project using earned value data, and making forecasts as to the probable project outcomes. Often this entails explaining the cost, schedule, and at-completion variances. When communicating variances, it is important that the team describes the cause, impact, and any corrective actions associated with these variances. Responsibility for managing the corrective actions should be assigned to the responsible manager, and the status of corrective actions identified in the past should be addressed.

Earned value management can provide a great deal of useful information to key stakeholders about a project. However, the level and type of information needed about a project may vary greatly from one stakeholder to another. The client, owner, or upper management may simply need a top-line report that indicates whether a project is on time and within budget. By contrast, the project manager will need much more detail in order to make any necessary adjustments to the project. Graphs of variance and efficiency data are helpful tools in communicating earned value analytics. Computer software, especially when developed specifically for project management and EVM, is capable of producing such graphs.

A number of different methods have evolved for presenting EVM data. These methods are designed to address diverse stakeholder needs. Several of these methods may be used on a given project to meet the needs of different stakeholder audiences. This short list of presentation methods is not, by any means, all encompassing. Other methods such as pie charts, dials, scatter grams, and radar or bulls-eye charts, have all been used and can be very effective methods of conveying EVM information. The most commonly used methods include:

• Tables
• Bar charts
• S-curves

.1 Tables

A tabular format can be an effective method for displaying the EVM results by project component. The individual components, for example, WBS elements, of a project could be listed down one side with various EVM calculations going across. A table format provides the project manager and other top-level stakeholders with a complete, concise picture of what is happening with each major component of the project. It can be used as a logical follow-up to an S-curve to provide more detail on where the project is at a given point in time.

.2 Bar Charts

Bar charts can be a useful tool for comparing data such as PV to EV, or AC to EV, etc.

.3 Curves

S-curves, like the ones used earlier in this section, illustrate the cumulative performance metrics of EVM. The typical S-curve is displayed on an X–Y axis with time shown on the X axis and resources shown on the Y axis. This type of display can be very effective for providing a quick look at the overall performance of an activity, a control account, or a project.

9.6 The Bicycle Case Study

A properly designed earned value management system will generate a great deal of data and metrics that are timely, reliable, and useful to management. The purpose is to provide all project stakeholders, both those working on the project team and those outside the project, with information that can be used to monitor the project status, understand the causes of variation, make decisions, and communicate project performance to others. This information not only includes current project conditions and past performance, but it also includes forecasts concerning the project's future performance.

9.6.1 Analyzing the Data

Figures 9-6 and 9-7 are tabular presentations of the bicycle project's data. Figure 9-6 represents the project's earned value data as of the end of Period 6.

From the data, notice that many of the WBS elements have not yet begun while others are already completed. For example, WBS element 1.3.1 (front wheel), has a cumulative EV of $15,600, which is equal to the BAC. Additionally, in this case, the cumulative AC of $5,000 is equal to the EAC. The combination of these two conditions generally implies that the required effort is complete. Also notice that finished elements, such as 1.1.1 (frame) always have an SPI of 1.0, however the cost variance at the time of completion remains. This is an important point. Finishing an effort with a cost underrun or overrun is not an opportunity to remove or add budget in order to mitigate the cost variance. The variance against the baseline must remain. Appendix D on Using EVM Data for Schedule Analysis introduces a time-based SPI that does not revert to 1.0 upon completion.

Figure 9-7 illustrates the periodic, cumulative data at the summary level of the project. This view is necessary to help understand project trends. In this table it is easy to see the change in the project's EV data (PV, EV, and AC); the change in the project's EAC; the trend of cost, schedule, and at complete variances including the associated indices; and the resulting forecast from calculated independent EACs.

Some points to consider regarding the data in Figures 9-6 and 9-7:

• Elements 1.1.1 (frame), 1.1.2 (handlebar), 1.3.1 (front wheel) and 1.3.2 (back wheel) have all been completed.
• There have been no changes to the BAC, which means that there have been no approved changes to the performance measurement baseline either from outside the project or within from management reserves.
• No contingency reserve held in undistributed budget has been used to handle risks under control of the project management team.

9.6.2 Graphical Analysis of the Data

In the following sections we will demonstrate a series of typical graphs to help display the earned value data and forecasts in quick and easy-to-read formats.

.1 Graphical Display of PV, EV, and AC

Figure 9-8 plots the cumulative values for PV, EV, and AC. Viewing the data in graphical form quickly demonstrates trends in the data, and displays the relationship between the data elements.

For example, notice that the PV line is always above the EV line, meaning that this project has always been behind schedule. The “flattening” of actual costs in Period 6 is also apparent. This may be a legitimate trend, but it also should trigger an investigation to ensure that the costs have been appropriately recorded.

Figure 9-9 is another view of the project data which looks at the current or monthly data for PV, EV, and AC.

Looking at the current period data shows monthly values steadily increasing, with the exception of actual costs and, to a lesser degree, planned value in Period 6.

.2 Graphical Display of At Completion Data and Forecasts

Figure 9-10 graphically displays the independent estimates at completion (IEACs) that are reported at the bottom of Figure 9-7. The three IEAC methods are described in detail in Table 9-1, but all follow the same basic formula: AC + (remaining work/performance factor). The remaining work is BAC − EV. The three performance factors are: a) CPI, b) (CPI × 0.8) 1 (SPI × 0.2), and c) CPI × SPI.

Figure 9-10 quickly illustrates that performance on the bicycle project has been improving steadily. As of Period 6, two of the three IEACs are projecting an underrun. In addition, the IEAC values demonstrate a clear trend towards the project EAC and the BAC, as there is a dramatic and steady improvement of statistical forecasts during the life of the project.

.3 Graphical Display Project Variances

Also critical to the understanding of project status is the communication of project variances. Figures 9-11 and 9-12 represent two different methods of displaying the cumulative project cost, schedule, and at complete variances.

Figure 9-11 demonstrates the variance trends, while Figure 9-12 better illustrates those variances that are above and below zero.

Another method of displaying project performance status is the bull's-eye chart shown in Figure 9-13. This graph displays the cumulative cost variance percentage versus the cumulative schedule variance percentage for all periods of the bicycle project. A bull's eye chart can also display CPI cum versus SPI cum to communicate the same information. The center of the graph is always CV% =0 and SV% = 0 (or CPI cum = 1.0 and SPI cum = 1.0).

The lower left quadrant represents a behind schedule and overrunning cost condition, which is where the bicycle project has been in Periods 1–5 (P.1– P.5) and shows that in Period 6 (P.6), the project has begun to underrun but is still behind schedule.

.4 Graphical Display of Project Indices

Figure 9-14 displays the project SPI, CPI, and TCPI indices. Notice that in Period 6, the TCPI dropped below the CPI. If this trend continues, the project team should consider revising the bicycle EAC.

9.6.3 Summary of Data and Graphical Analysis

Even when summarizing the data into graphs and viewing the project performance trends, there is a great deal of information available. At the summary level, you can see that project performance has been improving; however the project had a fairly poor beginning. Looking at both the data in Figure 9-7 and the graphing of the data in Figure 9-9, it's obvious that the reason for the dramatic Period 6 improvements is a decrease in actual cost. Inspection of Figure 9-6 indicates that the largest cost underrun element is 1.3.1 (front wheel), where $15,600 of work was accomplished for only $5,000 of cost. The relationship between the CPI and TCPI is a meaningful measure of the validity of the EAC. As shown in Figure 9-14, the TCPI was consistently greater than the CPI until the last reporting period. And finally, independent statistical forecasts of project costs are finally coming in line with the project's own EAC.

The SPI is still below 1.0, but it is improving. It's important to note that the SPI is merely an “indicator” of the schedule condition. While it is an important and informative indicator, it does not take into consideration nor analyze critical path or logical relationships, and an SPI value at the aggregate level will not demonstrate important detailed activities that are not being accomplished. In short, it is advisable to use the SPI as an aggregate performance indicator, complemented with the use of the project schedule as the primary source for detailed scheduling information.

9.6.4 Management by Exception and Variance Analysis

Section 9.5.1 emphasized the importance of the “management by exception” approach, and the use of variance thresholds to help explain specific variances that are of potential concern and deserve management intervention. Figure 9-15 reports the cost, schedule, and at complete variances for each of the elements, plus percent complete and percent spent.

For example, as of Period 6 the bicycle project is experiencing a $10,426 positive cost variance, $12,944 negative schedule variance, and a $12,890 positive variance at complete. A quick examination reveals that almost all of the positive cost performance can be isolated to a single WBS element: 1.3.1 (front wheel). In addition, almost half of the negative schedule performance is attributable to WBS 1.7.1 (project management).

Variance analysis shows one element, 1.4.1 (braking system), is both significantly overrunning and behind schedule. Based on the degree of the variances, this element would most likely exceed a variance analysis threshold and trigger a required explanation of the variances and further intervention. Such an explanation may take the form as shown in Figure 9-16.

9.7 Summary

The data on project performance is compared to the performance measurement baseline. The project management team can use PV, EV, AC, and BAC to measure current performance and predict future performance. The resulting measurements should be analyzed to understand what is causing variances. Depending on the cause of the variances preventive and corrective actions can be developed to keep the project performance aligned with the baseline.