Earned value is a powerful technique to measure project performance by combining cost and timing into a single set of measures. In the previous article we reviewed the basic terms and now we will discuss data capture.
There are three pieces of information needed to determine cost and schedule variances and cost and schedule performance indices. To achieve accurate calculations all the data must correlate to the same piece of work and for the same time period.
BCWS of PV
The Budget Cost of the Work Scheduled or Planned Value is derived from the schedule. All tasks must be properly defined and the allocated resources must have defined cost rates. A baseline of the schedule must exist and PV is calculated by using the project start date and the status date which is manually set in Project in the project information menu.
Tasks can be grouped under an accounting code and then the group added to get a total PV for a work package. This technique is useful to align the information with an external financial system.
ACWP or AC
Updating the task as scheduled assuming that the cost is exactly equal to the plan, and defeats the purpose of independently measuring project performance. Therefore the cost of the task must be determined independently. The actual cost can be entered manually for each task or calculated from the work performed on the task.
Using time sheets ensures that work performed on tasks information is captured accurately. To enter work manually, the resource usage view is selected using the work table and actual work in the detail format menu.The list of tasks with the allocated work in the baseline plan is listed under each resource name.
It may not be possible to enter work at a task level when costs are being captured at accounting code levels. EV calculations can still be performed externally. The key is to collect and use data for the same time interval and work package.
BCWP or EV
Earned Value or Budget Cost of the Work Performed is calculated by multiplying % complete by the task budget. The choice of % complete is important because it should not reflect a proportion of spent effort or time but a true estimate of the value accrued by the activity. In Project % complete is the percentage of duration time completed to date, and % work complete is the percentage of the planned work completed to date. Neither of these parameters reflects the actual value accrued by the work performed to-date, although in some cases the assumption that value accrued is proportional to value spent may be adequate.
To overcome this problem there is a special field named Physical % complete. This field is manually updated to ensure that earned value is accurate and reflects what is intended. To use this field for earned value calculations it must be selected it in the Calculations Tab in the Options menu.
There are several methods to estimate % complete used for different types of task. A simple but effective approach is to mark the task at 50% when started and 100% when completed. This method has a good overall accuracy under reasonable assumptions and is very simple to implement.
Another common method is to pre-assign a % complete value to elements of the task, for instance:
- first draft = 30%
- final draft = 60%
- peer reviews = 80%
- approval and sign-off = 100$
A subjective estimate by the project manager should not be used because it can cover problems and potential issues
The critical step is to plan ahead so the correct data required for the calculations can be easily captured. Tracking earned value is one of the best ways to understand project performance and to address problems before they become issues.