Earned Value-Microsoft Project
Earned Value-Microsoft Project
Earned Value-Microsoft Project
1. INTRODUCTION
If you cant measure it, you cant manage it. Whether one trusts the validity of
this common phrase most of the time or all of the time, measuring the true progress of a
project presents a formidable task. Given a baseline plan, projects typically report a
measure of the completed work and compare it to that scheduled. Similarly, most projects
can and do measure the current cost and compare it to the planned spending. But for a
more comprehensive view, how does one measure the progress of a project against the
triple constraint of cost, schedule, and scope? The two simple measures above separate
schedule and cost and include scope only indirectly, as a function of schedule.
In this framework, the mere contemplation of the budgeted cost of work performed
cries out for an immediate comparison to the actual cost. Earned value analysis next brings
the schedule into this common comparison basis by asking how much spending should
have occurred, i.e., according to a projects schedule, at the specific time of any
comparison.
This work was supported by CNCSIS UEFISCSU, project number PNII IDEI code 378/2008
2. OBJECTIVES
The aim is to demonstrate that Earned Value Management (EVM) is a program
management technique that integrates technical performance requirements, resource
planning, with schedules, while taking risk into consideration (Fig. 1). The major
objectives of applying earned value to a contract are to encourage contractors to use
effective internal technical, cost and schedule management control systems, and to permit
the customer to rely on timely data produced by those systems for better management
insight [1]. This data is in turn used for determining product-oriented contract status, and
projecting future performance based on trends to date. In addition, EVM allows better and
more effective management decision making to minimize adverse impacts to the project.
Technical
Perform ance
Schedule
Tim e
Risk
Cost
Resources
the project plan. Steps are: View -> Resource Usage view; Make sure that time scale
window shows 31 Jan 10; Enter the actual hours against task; Save Project Plan.
BCWS for User Interface task: Status Date of the project: 05/02/2010; Planned
Hours (Budgeted hours) for User Interface task till 05/02/2010: 40 hours; Resource
assigned to User Interface task: Sam; Sam Hourly Rate: $12. Planned Cost (Budgeted
Cost) for User Interface task till 05/02/2010: 40 * 12 = $480. BCWS for Database Design
task: Status Date of the project: 05/02/2010; Planned Hours (Budgeted hours) for Database
Design task till 05/02/2010: 40 hours; Resource assigned to User Interface task: Tom; Tom
Hourly Rate: $8; Planned Cost (Budgeted Cost) for Database Design task till 05/02/2010:
40 * 8 = $320.
BCWS for System Design task (Summary task) and project plan: $800 (i.e.
$480 + $320)
BCWP: The BCWP (budgeted cost of work performed) fields contain the
cumulative value of the task's, resource's, or assignments's percent complete multiplied by
the timephased baseline costs. BCWP is calculated up to the status date or today's date.
BCWP value also known as earned value.
Earned value: A measure of the cost of work performed up to the status date or
current date. Earned value uses your original cost estimates saved with a baseline and your
actual work to date to show whether the actual costs incurred are on budget.).
i.e. BCWP = % complete * Baseline Cost till Status Date
Explanation of BCWP values in above example:
User Interface tasks BCWP: % complete till status date: 45.4545%; Baseline cost
for User Interface task: $960; BCWP value = 45 % of $960 = $436.36. Database design
tasks BCWP: % complete till status date: 50%; Baseline cost for Database design task:
$640; BCWP value = 50 % of $640 = $320.
BCWP for project plan: Cumulative cost of BCWP values of User Interface task
and Database design task: $436.36 + $320 = $756.36
ACWP: The ACWP (actual cost of work performed) fields show cost already
done on a task, up to the status date. i.e. ACWP values actual cost incurred till status date.
Explanation of ACWP values in above example:
ACWP of User Interface task: Actual hours done till status date: 32 hours;
Resource (Sam) hourly rate: $12 Actual cost till status date: 32 * 12 = $384. ACWP of
Database design task: Actual hours done till status date: 40 hours; Resource (Tom) hourly
rate: $8; Actual cost till status date: 40 * 8 = $320.
ACWP for project plan is actual cost incurred: $384 + $320 = $704
Schedule Variance (SV): The SV (earned value schedule variance) field shows
the difference in cost terms between the current progress and the baseline plan of a task, all
assigned tasks of a resource, or for an assignment up to the status date or today's date. We
can use SV to check costs to determine whether tasks or assignments are on schedule. SV
is the difference between budgeted cost of work performed (BCWP) and budgeted cost of
work scheduled (BCWS). SV is expressed in currency units. Microsoft Office Project
calculates the SV as follows: SV = BCWP BCWS. If the SV is positive, the task is
currently ahead of schedule in cost terms. If the SV is negative, the task is currently behind
schedule in cost terms. If the SV is zero, the task is on schedule in cost terms.
Explanation of SV values in above example: SV of the User Interface task:
$436.36 - $480 = -$43.64; SV of the Database design task: $320 - $320 = $0.
Cost Variance (CV): The CV (earned value cost variance) fields show the
difference between how much it should have cost and how much it has actually cost to
achieve the current level of completion up to the status date or today's date. We can use
CV to check whether you're under, over, or exactly within your budget for a task. We
might find this useful when assessing budgetary performance in the project to date. CV is
the difference between the task's BCWP (budgeted cost of work performed) and ACWP
(actual cost of work performed). Microsoft Office Project calculates the CV for a task as
follows: CV = BCWP ACWP. If the cost variance is positive, the cost for the task is
currently under the budgeted, or baseline, amount, and your actual costs are less than your
baseline costs for the current level of completion on the task. If the cost variance is
negative, the cost for the assignment is currently over budget, and your actual costs are
more than your baseline costs for the current level of completion on the task.
Explanation of CV values in above example: CV of User Interface task: $436.36
-$384.00 = $52.36 (i.e. we spent less cost than planned till status date on this task.). CV of
Database design task: $320.00 - $320.00 = $0 (i.e no cost variance found between planned
and actual).
SPI: The SPI (schedule performance index) field shows the ratio of the budgeted
cost of work performed to the budgeted cost of work scheduled (BCWP/BCWS). SPI is
often used to estimate the project completion date. SPI = BCWP/BCWS. An SPI ratio
greater than 1 indicates that you're ahead of schedule. An SPI ratio less than 1 indicates
that you're behind schedule.
Explanation of SPI in above example:
SPI of User Interface task:
$436.36/$480.00 = 0.91; SPI of Database Design task: $320.00/$320.00 = 1; SPI of project
is (0.91 + 1.00) / 2 = 0.95.
CPI: The CPI (cost performance index) fields show the ratio of budgeted (or
baseline) costs of work performed to actual costs of work performed, up to the project
status date or today's date. CPI is the ratio of BCWP (budgeted cost of work performed) to
ACWP (actual cost of work performed). CPI = BCWP / ACWP this value indicates
whether you are over or under budget as of the status date. An CPI ratio greater than 1
indicates that you're under budgeted. An CPI ratio less than 1 indicates that you're over
budgeted.
Explanation of CPI in above example: CPI of User Interface task:
$436.36/$384.00 = 1.14; CPI of Database design task: $320/00/$320.00 = 1.00; CPI for
Project is average values of User Interface task and Database design task: (1.14 + 1.00)/2 =
1.07
EAC: The EAC (estimate at completion) field shows the expected total cost of a
task based on performance up to the status date.EAC = ACWP + (Baseline cost - BCWP) /
CPI.
Explanation of EAC values in above example: EAC for User Interface task:
$384 + ($960 - $436.36)/1.14 = $384 + $523.64/1.14 = $384 + $453.33333 = $844.81
TCPI: The TCPI (to complete performance index) field shows the ratio of the
work remaining to be done to funds remaining to be spent, as of the status date. TCPI =
(BAC - BCWP) / (BAC - ACWP). A TCPI value greater than 1 indicates a need for
increased performance for the remaining work of the project in order to stay within budget
(so you may need to give up some quality). A TCPI value less than 1 indicates
performance can decrease to stay within budget, thus creating opportunities to increase
quality or profit.
Explanation of TCPI values in above example: TCPI for User Interface task:
($960.00 - $436.36)/($960.00 - $384.00) = 523.64/576.00 = 0.90909722; TCPI for Project
is average values of User Interface task and Database design task: (0.90909722 + 1.00)/2 =
0.94
5. CONCLUSIONS
Earned value improves on the "normally used" spend plan concept (budget versus
actual incurred cost) by requiring the work in process to be quantified. The planned value,
earned value, and actual cost data provides an objective, quantifiable measurement of
performance, enabling trend analysis and evaluation of any cost estimate at completion
within multiple levels of the project. EVM is a valuable tool in the Project Manager's
"toolbox" for gaining valuable insight into project performance and is the tool that
integrates technical, cost, schedule and risk management. In addition, EVM provides
valuable quantifiable performance metrics for forecasting at-completion cost and schedule
for their project.
With the above presentation, we have explored the What, Why and How of Earned
Value. We have seen that Earned Value is a tool for improving the performance analysis of
a project, by: providing a uniform unit of measure for project progress, enforcing a
consistent method for analysis and providing a basis for cost performance analysis of the
project [4]. The reason for using Earned Value is tied closely to what Earned Value is.
While the manipulation of the vast amount of data that is involved may seem daunting, the
use of available computer tools designed for the purpose, make the implementation a
relatively simple cookbook procedure. If the reader takes one thing away from this
paper, it should be that Earned Value simply represents the budgeted value of the
completed work and is directly related to the per cent complete of the activity or WBS
element under consideration.
REFERENCES
1. Budd, C.I.,
Budd, C.S.
2. Chatfield, C.S.,
Johnson, T.D.
3. Counts, S.,
Kerby, J.
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