Use of Earned Value Management Trends to Forecast Cost Risks

Abstract

This article uses earned value management trend analysis to forecast trends in BAC and BCWP. The resulting equations are then used to solve for the expected month at completion. With the month at completion date in hand, the article uses trend analysis to find the EAC at that month along with the BAC at that month far in the future to solve for VAC. By using variance against a baseline, the article shows how much risk this program will incur by the date at completion. A monthly risk burndown chart is developed to illustrate how the program burns down risk during life of the program. It indicates that the rate of risk burndown may very well be more rapid than the rate of accomplishment of remaining work. The article concludes that program managers would be well advised to require analysis of EVM trends to understand how much additional schedule is being added to a contract with each addition of scope as measured by the increase in BAC over time.