Performance against the Project baseline Research Paper

Performance against the Project baseline - Research Paper Example This involves Earned Value Management technique is employed to measure the project performance against the planned baselines and to forecast any deviations from the planned activities to bring project variations within acceptable limits. Planned expenditures, budgeted expenditures and actual expenditures form the basis of Earned Value calculations. In 1960’s, US Navy formally began to use this technique in their projects. It was later made more user-friendly based on define set criteria by National Defense Industrial Association to effectively employ this technique in public and private sector projects (David, 1994). Earned Value Management is the most commonly employed method, which relates project scope, cost and schedule for measurement of project performance. The most common metrics used to measure the project performance are Cost Variance (CV) and Schedule Variance (SV). The variance in CV and SV decreases as more work is accomplished towards project completion. Also values of acceptable variances in CV and SV can be determined early during the project planning (Charles, 2010). 3.4 Cost Variance (CV). Difference in Earned value (EV) and actual cost (AC) gives the cost variance. At the project completion, cost variance can be calculated as difference of Budget at Completion (BAC) and Actual Cost incurred. 3.6 Cost Performance Index (CPI). Cost Performance Index (CPI) is a ratio of Earned Value (EV) to Actual Cost (AC). CPI value is a cost efficiency indicator showing either a cost overrun (less than 1) or a cost underrun (greater than 1). 4.1 Project Baseline. Earned Value Techniques relate Earned Value against the project baselines. More accurate the project baseline is, more beneficial would be outcome of earned value management, Thus, cost overruns would occur if project is under budgeted and scope creep would occur if project scope baseline is not