Project Portfolio Scorecard in EVM

Earned Value Management
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Jose Daniel Esterkin
CEO, Argentina

Project Portfolio Scorecard in EVM

Let us suppose you are managing a portfolio of projects in an IT department of a Bank. Many IT departments like this have literally hundreds of projects. How could you know the real status of each project in the portfolio? The best way would be to build a Portfolio Scorecard with two street lights (red, yellow, green) for every project, describing how the project is doing in terms of Time and Budget.

A good practice is to collect the values of the four basic variables in EVM (BAC, PV, EV, AC) for all projects in the project portfolio at the end of the month.

BAC = Budget at Completion, the total budget of the project.
PV = Planned Value, the sum of all planned taks until today.
EV = Earned Value, the degree of progress in every deliverable until today.
AC = Actual Cost, how much have we spent un the porject until today.

Then, with these four variables, we could build CPI, SPI, EAC and other EVM indicators.
CPI = Cost Performace Index = EV / AC.
SPI = Schedule Performace Index = EV / PV.
EAC = Estimated at Completion = AC + (BAC - EV) / CPI.

If SPI is greater than 1, then the project is doing fine in terms of time (green street light), if it is between 0.95 and 1.00 then we'll put a yellow light, and if it is below 0.95 we will put a red light. The same rationale can be applied with CPI and street lights to describe budget instead of time.

In this way we could have a full Portfolio Scorecard at the end of each month. If we had 40 projects in the portfolio, P1,... P40, we could have all the EVM indexes for each one (CPI1, SPI1, EAC1,...,CPI40, SPI40, EAC40) and make smarter decisions: for instance, if SPI is less than one the project is delayed, if CPI is less than one, we are not getting enough return on investment (project progress).

We would use this portfolio scorecard to report to the Board of the company and to execute corrective and preventive actions in our portfolio.


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