PM FPX 5333 Assessment 2 Earned Value Analysis Report

Name

Capella University

PM-FPX 5333 Project Budgeting, Procurement, and Quality

Prof. Name

Date

PM FPX 5333 Assessment 2 Earned Value Analysis Report

Introduction

Earned Value Management (EVM) is an essential project management technique for evaluating project progress, identifying budget overruns, measuring schedule performance, and forecasting final costs. In the NearlyFree.com New Employee Orientation (NEO) project, earned value analysis reveals significant cost and schedule problems that require corrective action. The project is approximately 43% complete, yet its actual spending exceeds the value of the work accomplished, and its progress falls behind the original schedule.

NearlyFree.com is developing an automated, web-based training system to streamline new employee orientation, reduce administrative workload, and minimize the staff resources required to train new employees. However, the project has encountered financial and scheduling challenges that threaten its successful completion. The original project plan established a 92-day timeline and an approved budget of $22,300, while the broader project description also refers to an initial budget of $25,000. These figures should be reconciled to establish the correct approved cost baseline.

PM FPX 5333 Assessment 2 Earned Value Analysis Report

The current earned value figures indicate that the project has completed $12,373.95 worth of budgeted work while incurring $16,373.95 in actual costs. The resulting negative cost and schedule variances suggest that the project is spending more than planned for the work completed and delivering less work than scheduled. Based on the current cost performance index, the estimated final cost is approximately $29,434.54 if the same cost efficiency continues.

This report examines the Earned Value Management technique, calculates the project’s primary performance indicators, evaluates the expected final cost, and recommends corrective actions to improve project control and support a successful turnaround.

Understanding the Earned Value Management Technique

Earned Value Management is a project control method that combines scope, schedule, and cost information to evaluate performance against an approved baseline. It helps project managers determine whether the work completed is consistent with the amount of time and money allocated to the project.

Unlike reviewing expenditures alone, EVM compares the budgeted value of completed work with planned progress and actual costs. This comparison helps identify inefficiencies early and supports more realistic forecasts of the project’s remaining work and final financial requirements (Peng, 2018; Haughey, 2020).

For NearlyFree.com, EVM provides a structured way to assess the NEO system’s development progress, understand why spending has exceeded the value delivered, and determine whether the current completion target remains achievable.

Key Inputs Used in Earned Value Analysis

Three primary values are required to calculate the project’s performance indicators.

Earned Value (EV) represents the budgeted value of the work actually completed at the reporting date. It measures progress in financial terms based on the original cost baseline.

Planned Value (PV) represents the budgeted value of the work scheduled to have been completed by the reporting date. It provides the baseline for evaluating schedule performance.

Actual Cost (AC) represents the actual amount spent to complete the work performed by the reporting date. It provides the basis for evaluating cost efficiency.

The original project documentation uses the older terms Budgeted Cost of Work Performed (BCWP), Budgeted Cost of Work Scheduled (BCWS), and Actual Cost of Work Performed (ACWP). These correspond to Earned Value, Planned Value, and Actual Cost, respectively.

Current Earned Value Data for NearlyFree.com

The project analysis uses the following figures:

Performance measure	Amount
Earned Value (EV)	$12,373.95
Planned Value (PV)	$20,453.95
Actual Cost (AC)	$16,373.95
Budget at Completion (BAC)	$22,300.00

These figures indicate that the value of completed work is substantially below the planned value. Actual spending is also higher than earned value, suggesting that the project is experiencing both schedule delays and unfavorable cost performance.

Schedule Variance Analysis

Schedule Variance (SV) measures the difference between the budgeted value of completed work and the budgeted value of work scheduled by a particular reporting date. It helps determine whether the project has delivered more or less work than planned.

The formula is:

[
SV = EV – PV
]

Using NearlyFree.com’s project data:

[
SV = $12,373.95 – $20,453.95
]

[
SV = -$8,080.00
]

The negative schedule variance of $8,080 indicates that the project has completed less work than planned. The team should investigate the activities responsible for the delay, including development tasks, technical dependencies, testing, and unresolved requirements.

A negative schedule variance is measured in budgeted monetary units rather than calendar days. Therefore, this result identifies a performance shortfall but does not, by itself, establish the exact number of days the project is behind schedule.

Cost Variance Analysis

Cost Variance (CV) compares the budgeted value of work completed with the actual cost incurred to complete that work. It helps determine whether the project is delivering work efficiently relative to its planned cost.

The formula is:

[
CV = EV – AC
]

For NearlyFree.com:

[
CV = $12,373.95 – $16,373.95
]

[
CV = -$4,000.00
]

The negative cost variance of $4,000 indicates that the project has spent $4,000 more than the budgeted value of the work completed. This result means the project is experiencing an unfavorable cost variance and is not currently meeting its cost efficiency targets.

The project manager should investigate the causes of the overrun, including underestimated labor requirements, rework, technical problems, resource allocation, and delays that increase development costs. Corrective actions should focus on improving productivity and controlling remaining expenditures without compromising the quality of the NEO system.

Schedule Performance Index Analysis

The Schedule Performance Index (SPI) measures the proportion of planned work value that has actually been completed. It provides a relative measure of schedule efficiency.

The formula is:

[
SPI = \frac{EV}{PV}
]

Using the project data:

[
SPI = \frac{$12,373.95}{$20,453.95}
]

[
SPI \approx 0.61
]

The SPI is approximately 0.61, meaning the project has earned about 61 cents of budgeted work value for every dollar of work value scheduled by the reporting date. Because the SPI is below 1.00, the project is behind its planned schedule.

This result highlights the need for a more detailed review of unfinished activities, dependencies, staffing, and development estimates. The project manager should identify tasks that are delaying progress and develop a realistic recovery schedule based on the remaining work.

Cost Performance Index Analysis

The Cost Performance Index (CPI) measures cost efficiency by comparing the budgeted value of completed work with actual expenditure. It helps estimate how efficiently the project is using its financial resources.

The formula is:

[
CPI = \frac{EV}{AC}
]

For NearlyFree.com:

[
CPI = \frac{$12,373.95}{$16,373.95}
]

[
CPI \approx 0.76
]

The CPI is approximately 0.76, indicating that the project is earning about 76 cents of budgeted work value for every dollar spent. Because the CPI is below 1.00, cost performance is unfavorable.

If this level of efficiency continues, the project may require additional funding to complete its remaining work. Management should therefore review spending commitments, assess the reasons for inefficiency, and prioritize corrective measures that improve productivity while preserving essential functionality and testing requirements.

Budget at Completion

Budget at Completion (BAC) represents the total approved budget allocated to complete the project. It serves as the baseline against which actual expenditure and forecast costs are evaluated.

For the NearlyFree.com NEO project, the stated BAC is:

[
BAC = $22,300
]

The project documentation also refers to an initial budget of $25,000. Before finalizing financial forecasts, management should confirm whether $22,300 is the formally approved baseline and whether $25,000 represents an earlier estimate or a separate spending limit. Consistent baseline information is necessary for reliable project reporting and decision-making.

Estimate at Completion Analysis

Estimate at Completion (EAC) forecasts the total project cost based on actual performance to date and the expected cost efficiency of the remaining work. It allows management to assess whether the current budget is sufficient to complete the project.

When current cost efficiency is expected to continue, the following formula can be used:

[
EAC = AC + \frac{BAC-EV}{CPI}
]

Using the project’s current values and the unrounded CPI:

[
EAC = $16,373.95 +
\frac{$22,300-$12,373.95}
{$12,373.95/$16,373.95}
]

[
EAC \approx $29,505.90
]

The forecast is approximately $29,505.90 when calculated using the supplied EV, AC, and BAC figures. The original estimate of $29,434.54 is slightly different because it uses the rounded CPI of 0.76. Using the unrounded ratio produces a more internally consistent estimate.

The revised forecast exceeds the $22,300 baseline by approximately $7,205.90. This represents a projected cost increase of about 32.3% if current cost efficiency persists.

The EAC is a forecast rather than a guaranteed final cost. It should be updated as the project manager obtains better information about remaining tasks, resource requirements, technical risks, and the effectiveness of corrective actions.

Project Turnaround and Corrective Action Plan

Earned Value Analysis helps NearlyFree.com understand the current condition of the NEO project and identify actions needed to improve performance. The negative schedule variance, negative cost variance, SPI below 1.00, and CPI below 1.00 collectively indicate that the project is behind schedule and spending inefficiently.

The project should not rely solely on extending the deadline or increasing the budget. Instead, management should develop a recovery plan that addresses the causes of poor performance, establishes achievable milestones, and maintains appropriate quality standards.

Reassess the Project Schedule

The project manager should review the work breakdown structure and evaluate the time and resources required to complete each remaining activity. Dependencies, incomplete requirements, testing requirements, and potential bottlenecks should be documented in an updated schedule.

Any revised completion date should be based on a realistic assessment of remaining work rather than an arbitrary extension. Progress should be reviewed regularly against the updated schedule baseline.

Improve Cost Control

Management should investigate why actual costs exceed the earned value of completed work. The review should consider labor costs, unplanned rework, resource utilization, technical difficulties, and inefficient development processes.

The team should also prepare a revised estimate of the remaining work and determine whether the project needs additional funding. If a budget increase is necessary, it should be supported by documented estimates, a clear business justification, and formal approval.

Strengthen Project Monitoring

The project manager should monitor EV, PV, AC, CPI, and SPI at regular reporting intervals. These indicators should be supplemented with information about completed deliverables, unresolved defects, resource availability, and risks affecting the project.

Regular reviews will help management determine whether corrective actions are improving performance or whether further changes to the project plan are needed.

Prioritize Essential Requirements and Quality

The project team should confirm which features are essential for the initial release and which enhancements could be deferred to a later phase. Any proposed reduction in scope must be approved by the appropriate stakeholders and must not undermine the system’s core purpose, security, usability, or training requirements.

Testing and acceptance criteria should remain clearly defined. Accelerating the schedule by skipping essential validation could introduce defects that create additional costs and undermine the project’s intended benefits.

Improve Stakeholder Communication

The project manager should provide stakeholders with transparent updates about cost performance, schedule delays, major risks, and proposed corrective actions. Reports should explain the difference between the approved budget and the current forecast, outline decisions requiring approval, and identify responsibilities for resolving outstanding issues.

Clear communication will help management make timely decisions, maintain stakeholder confidence, and align expectations with the project’s revised delivery plan.

Conclusion

The Earned Value Management analysis of NearlyFree.com’s New Employee Orientation project identifies significant challenges in cost efficiency and schedule performance. The project has earned $12,373.95 in budgeted work value while incurring $16,373.95 in actual costs and accumulating a negative schedule variance of $8,080.

The calculated SPI of approximately 0.61 indicates that the project is behind schedule, while the CPI of approximately 0.76 indicates that completed work is costing more than planned. Using the supplied values and assuming current cost efficiency continues, the estimated final cost is approximately $29,505.90, exceeding the stated $22,300 budget baseline.

To improve the likelihood of success, NearlyFree.com should reassess the remaining work, investigate cost overruns, develop a realistic recovery schedule, strengthen project monitoring, and maintain transparent stakeholder communication. A revised budget or timeline may be necessary, but any changes should follow a documented assessment and formal approval process. These actions can help the organization make better decisions, control remaining costs, and complete the automated training system with its essential requirements intact.

Frequently Asked Questions

What is Earned Value Management in project management?

Earned Value Management (EVM) is a method for measuring project performance by comparing the budgeted value of completed work with planned progress and actual costs. It helps project managers identify cost overruns, schedule delays, and potential problems with the final project budget.

What is the current status of the NearlyFree.com NEO project?

The project is experiencing both cost and schedule problems. Its earned value is $12,373.95, compared with an actual cost of $16,373.95 and a planned value of $20,453.95. These figures indicate unfavorable cost efficiency and progress behind the original schedule.

What does a negative cost variance mean?

A negative cost variance means that the actual cost of completed work exceeds its budgeted value. NearlyFree.com’s cost variance is −$4,000, indicating that the project has spent $4,000 more than the budgeted value of the work delivered.

What does an SPI of 0.61 indicate?

An SPI of approximately 0.61 indicates that the project has earned about 61 cents of budgeted work value for every dollar of work value scheduled. This suggests that the project is progressing more slowly than planned, although SPI does not directly translate into a specific number of days of delay.

What does a CPI of 0.76 mean?

A CPI of approximately 0.76 indicates that the project is earning about 76 cents of budgeted work value for every dollar spent. This unfavorable result suggests that the project is using its financial resources less efficiently than planned.

What is the estimated final cost of the NearlyFree.com project?

Using the stated budget at completion of $22,300 and assuming current cost efficiency continues, the estimated final cost is approximately $29,505.90. This is a forecast based on current performance, not a guaranteed final expenditure.

How can NearlyFree.com improve project performance?

NearlyFree.com can improve performance by reviewing the remaining work, investigating the causes of cost overruns, improving resource allocation, establishing realistic milestones, monitoring earned value indicators, and communicating risks promptly. Essential software testing and quality requirements should remain in place during schedule recovery.

Why is Earned Value Analysis important for project turnaround?

Earned Value Analysis provides measurable evidence of project performance. It helps management identify deviations from the original plan, forecast the final cost, evaluate corrective actions, and determine whether the project requires an approved budget or schedule revision.

References

Cullen, S. (2016, August 2). Earned value analysis. Whole Building Design Guide. https://www.wbdg.org/resources/earned-value-analysis

Haughey, D. (2020, July 26). What is earned value? Project Smart. https://www.projectsmart.co.uk/what-is-earned-value.php

Peng, B. (2018, April 10). The earned value method. ProjectEngineer. https://www.projectengineer.net/the-earned-value-method/

Usmani, F. (2020, August 18). Planned value (PV), earned value (EV) and actual cost (AC) in project cost management. PM Study Circle. https://pmstudycircle.com/2012/05/planned-value-pv-earned-valueev-actual-cost-ac-analysis-in-project-cost-management-2/