One of the difficulties of Project Management is figuring out whether a Project is providing the anticipated Value. This problem can be solved through Earned Value Analysis while the Project is in development. Throughout the 1960s, the U.S. Department of Defence Developed a strategy called PERT (Project Estimation and Review Technique). Together with CPM (Critical Path Method), PERT gave an objective evaluation of Project development. It also indicated whether the Scrum Project was on track.

At first there was some resistance to using this technique. It was quite troublesome. It went through some modifications and became Earned Value Management as we understand it today. In the 1980s, the building and engineering markets were the very first to adopt EVM for Project Management. It slowly entered into the toolset suggested for Scrum and was included as an ANSI EIA Standard 748-A, which was released in 1998. This suggests it is still a relatively new approach.

Earned Value Analysis (EVA) – the Theory Behind it

The objective of EVA is to measure a Scrum Project according to the interaction between the Project Scope, the resources (or expenses) and the time (or Effort) put into it in order to provide the last Product. The fundamental distinction between the 2 approaches is that Scope is fixed. Time and cost are variable, while an Agile Project has the inverse approach.

The Traditional Approach to Earned Value Analysis

To get a manage on Earned Value Management, here is a brief description of Earned Value Analysis. Traditional EVA relies on various formulae using the variables specified listed below, noted in alphabetic order:-.

‘ AC’=’ Actual Cost’ – the overall of the costs sustained in achieving Work on the activity in a given period.
‘ EV’=’ Earned Value’ – the Value of the Work in fact completed.
‘ PC’=’ Percentage Complete’ – which can be defined in a different way according to the Organization’s choice.
‘ PV’=’ Planned Value’ – that portion of the approved cost Estimate Planned to be spent on the offered activity throughout a given duration.

Figuring Out the Planned Value.

For Traditional Projects, a comprehensive Work Breakdown Structure (WBS) must be determined. Each Work breakdown output must be designated a Value, which is normally Man-Days or Man-Hours of Effort. When this has been Done, the Planned Value is the amount of Value of all the Work Breakdown Tasks that are to be analysed. This might be for the entire Project, a Project stage such as Requirements definition, or a subset such as system Testing.

Project Completion for Earned Value Analysis

There are various techniques for determining completion, varying from all-or-nothing to assigning some Value for having actually started a WBS item. The Organization must pick the category that best fits the type of Work and type of Project. Here are the commonly used variations, or “earning rules”:-.

• 0/100 guideline. No revenues are accounted for unless a Task or activity is finished.
• 50/50 rule. If a Task has actually been started, 50% of the overall Task Value is made. This is the Riskiest evaluation, due to the fact that the Task might be very far from half-completed.
• 25/75 or 20/80 guideline. This acknowledges where a Task has been begun, and gives some credit and motivation to the resource( s) included. It tries not to be too optimistic about the Work that remains to be completed.

We found these books great for finding out more information on Agile Scrum:

Does EVA Work in an Agile Environment?

Earned Value Analysis is important for Agile Projects. It is an unbiased approach for demonstrating whether an Agile Project is delivering the expected Value both during and on completion of the Project. The Agile Values and Principles promote the early and frequent delivery of Value by the development team. There needs to be a means of assessing whether this is the case. Stakeholders are then given a choice of actions prior to the next Sprint. This is based on whether the Value earned to date and the Project costs are aligned with the Planned Value. In a scrum project the Product Owner is responsible for ensuring earned value. The development team deliver this value, and the Scrum Master protects the team to ensure they can deliver this value.