Rinat Galyautdinov : Earned value in microsoft project

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Earned Value in Microsoft Project - Extract
You may have heard that earned value analysis is complicated. But aside from the many
acronyms, it's not. And it can help you answer questions like, "Is there enough money
left in the budget?" and, "Will we finish on time?"
Want to know more about how Project handles earned value analysis? Read on.
What is earned value analysis?
What else does earned value measure?
How do I interpret earned value?
How does % complete versus physical % complete affect earned value?
Which earned value quantities can I show or calculate in Project?
Where in Project do I see earned value data?
What is earned value analysis?
At the root of earned value analysis are three fundamental values calculated for each
task (task: An activity that has a beginning and an end. Project plans are made up of
tasks.):
The budgeted cost of tasks as scheduled in the project plan, based on the costs of
resources1
assigned to those tasks, plus any fixed costs2
associated with the tasks. Called
"the budgeted cost of work scheduled," BCWS3
is the baseline cost4
up to the status
date5
you choose. For example, the total planned budget for a 4-day task is £100 and it
starts on a Monday. If the status date is set to the following Wednesday, the BCWS is
£75.
The actual cost6
required to complete all or some portion of the tasks, up to the status
date. This is the actual cost of work7
performed (ACWP). For example, if the 4-day task
1
Resources: The people, equipment, and material that are used to complete tasks in a project.
2
Fixed cost: A set cost for a task that remains constant regardless of the task duration or the work performed by a
resource.
3
BCWS: The earned value field that shows how much of the budget should have been spent, in view of the
baseline cost of the task, assignment, or resource. BCWS is calculated as the cumulative time phased baseline
costs up to the status date or today's date.
4
Baseline cost: The original project, resource, and assignment cost as shown in the baseline plan. The baseline
cost is a snapshot of the cost at the time when the baseline plan was saved.
5
Status date: A date that you set [rather than the current date] for reporting the time, cost, or performance
condition of a project.
6
Actual cost: The cost that has actually been incurred to date for a task, resource, or assignment. For example, if
the only resource assigned to a task gets paid £20 per hour and has worked for two hours, the actual cost to date
for the task is £40.

actually incurs a total cost of £35 during each of the first 2 days, the ACWP for this
period is £70 (but the BCWS is still £75).
The value of the work performed by the status date, measured in currency. This is
literally the value earned by the work performed and is called the budgeted cost of work
performed (BCWP). For example, if after 2 days 60% percent of the work on a task has
been completed, you might expect to have spent 60 percent of the total task budget, or
£60.
With me, so far? Let's go on.
Earned value analysis is always specific to a status date you choose. You may select the
current date, a date in the past, or a date in the future. Most of the time, you'll set the
status date to the date you last updated project progress. For example, if the current day
is Tuesday, 9/12, but the project was last updated with progress on Friday, 9/8, you'd set
the status date to Friday, 9/8.
Here is one example of how to analyze project performance with earned value analysis.
Let's say a task has a budgeted cost (BCWS) of £100, and by the status date it is
40 percent complete. The earned value (BCWP) is £40, but the scheduled value (BCWS)
at the status date is £50. This tells you that the task is behind schedule—less value has
been earned than were planned. Let's also say that the task's actual cost (ACWP) at the
status date is £60, perhaps because a more expensive resource was assigned to the task.
This tells you that the task is also over budget—more cost has been incurred than were
planned. You can see how powerful such an analysis can be. The earlier in a project's life
cycle you identify such discrepancies between ACWP, BCWP and BCWS, the sooner
you can take steps to remedy the problem.
One common way of visualizing the key values of earned value analysis is to use a chart.
Start with a simple chart showing a steady accumulation of cost over the lifetime of a
project:
The vertical y-axis shows the projected cumulative cost for a project.
7
Work: For tasks, the total labour required to complete a task. For assignments, the amount of work to which a
resource is assigned. For resources, the total amount of work to which a resource is assigned for all tasks. Work
is different from task duration.

The horizontal x-axis shows time.
The planned budget for this project shows a steady expenditure over the
lifetime of the project. This line represents the cumulative baseline cost.
After work on the project has begun, a chart of the key values of earned value analysis
may look like this:
The status date determines the values Project calculates.
The actual cost (ACWP) of this project has exceeded the budgeted
cost.
The earned value (BCWP) reflects the true value of the work
performed. In this case, the value of the work performed is less than
the amount spent to perform that work.
What else does earned value measure?
In addition to measuring BCWS, ACWP, and BCWP, earned value analysis
measures:
Cost variance (CV)8
the difference between a task's estimated cost and its
actual cost (the formula CV = BCWP - ACWP). Take our earlier example
where the total planned budget for a 4-day task is £100 and it starts on a
Monday. When the status date is set to the following Wednesday, the BCWS
is £75, the ACWP for this period is £70, and the BCWP is £60. In that case,
the task's CV is -£10.
8
CV: The difference between the budgeted cost of work performed [BCWP] on a task and the actual
cost of work performed [ACWP]. If the CV is positive, the cost is currently under the budgeted
amount; if the CV is negative, the task is currently over budget.

Schedule variance (SV)9
the difference between the current progress and the
scheduled progress of a task, in terms of cost (the formula SV = BCWP -
BCWS). In the example above, the task's SV is -£15.
The cost performance index (CPI)10
the ratio of budgeted costs to actual costs
(the formula CPI = BCWP / ACWP). In the example above, the task's CPI is
about .86, or 86 percent.
The schedule performance index (SPI)11
the ratio of work performed to work
scheduled (the formula SPI = BCWP / BCWS). In the example above, the
task's SPI is .80, or 80 percent.
The to complete performance index (TCPI)12
the ratio of the work remaining
to be done to funds remaining to be spent as of the status date, or budget at
completion (the formula TCPI = [BAC - BCWP] / [BAC - ACWP]).
How do I interpret earned value?
Earned value indicators that are variances or ratios can help you determine if
there is enough money left in the budget and if the project will finish on time.
Variances13
, such as a cost variance (CV), can be either positive or negative:
A positive variance indicates that the project is ahead of schedule or under
budget. Positive variances might enable you to reallocate money and
resources from tasks or projects with positive variances to tasks or projects
with negative variances.
A negative variance indicates that the project is behind schedule or over
budget and you need to take action. If a task or project has a negative CV,
you might have to increase your budget or accept reduced profit margins.
Ratios, such as the cost performance index (CPI) and the schedule
performance index (SPI), can be greater than 1 or less than 1:
9
SV: The difference between the budgeted cost of work performed [BCWP] and the budgeted cost of
work scheduled [BCWS]. This is calculated as follows: SV = Budgeted Cost of Work Performed -
Budgeted Cost of Work Scheduled.
10
CPI: Ratio of budgeted costs of work performed to actual costs of work performed [BCWP/ACWP].
The cumulative CPI [sum of the BCWP for all tasks divided by the sum of the ACWP for all tasks]
can be used to predict whether a project will go over budget.
11
SPI: The ratio of the budgeted cost of work performed [BCWP] to the budgeted cost of work
scheduled (BCWS), which is often used to estimate the project completion date. This is calculated as
follows: SPI = BCWP/BCWS.
12
TCPI: The ratio of the work remaining to be done to funds remaining to be spent, as of the status date
[BAC - BCWP]/[BAC - ACWP]. A TCPI value greater than one indicates a need for increased
performance; less than one indicates performance can decrease.
13
variance: The difference between baseline and scheduled task or resource information, they usually
occur when you set a baseline plan and begin entering actual information into your schedule.
Variances can occur in work, costs, and schedule.

A value that's greater than 1 indicates that the project is ahead of schedule or
under budget.
A value that's less than 1 indicates that you're behind schedule or over
budget. For example, an SPI of 1.5 means that you've taken only 67 percent
of the planned time to complete a portion of a task in a given time period,
and a CPI of 0.8 means that you've spent 25 percent more time on a task
than was planned.
How does % complete versus physical % complete affect earned value?
You can specify whether Project should use each task's percent complete14
value or physical percent complete value for earned value calculations related
to BCWP. (Remember, other values are calculated from BCWP, so your
decision affects the entire earned value analysis.)
Percent complete may be calculated by Project or entered directly by you,
depending on how you track actual work.
Physical percent complete is always entered directly by you. Use physical
percent complete when percent complete would not be an accurate measure
of real work performed or remaining.
Here's a simple example of how the two values may differ: a project of
building a stone wall that consists of 100 bricks stacked 5 high. The first row
of 20 bricks can be laid in 20 minutes, but the second row would take
25 minutes because you have to lift the stones up one row higher, so it takes
a little longer. The third row would take 30 minutes, the fourth 35 minutes,
and the last row would take 40 minutes to lay 150 minutes total. After laying
the first three rows, the project could be said to be 60 percent physically
complete (you laid 60 of 100 stones). However, you only spent 75 of
150 minutes; so in terms of duration, the job is only 50 percent complete.
Depending on how you get paid for the work how the value is earned (by
the brick or by the hour) you may choose the percent complete value or the
physical percent complete value to properly reflect this in the earned value
analysis.
Which earned value quantities can I show or calculate in Project?
With Project, you can show:
Actual cost of work performed (ACWP)15
shows actual costs incurred for work
already performed by a resource on a task, up to the project status date or
14
percent complete: A field that you use to enter or display how much of a task has been completed.
This value is expressed as the percentage of the task duration that has been completed.
15
ACWP: Shows actual costs incurred for work already performed by a resource on a task, up to the
project status date or today's date.

today's date. Normally Project correlates actual costs with actual work. Only if
you enter actual costs independent of actual work or change resource pay
rates16
will actual cost be out of step with scheduled cost.
Budget at completion (BAC)17
shows an estimate of the total project cost.
Budgeted cost of work performed (BCWP)18
shows how much of the budget
should have been spent given the actual duration of the task. BCWP is also
referred to as "earned value." Note that Project calculates BCWP at the task
level differently than it does at the assignment level. For best results, use the
task-level BCWP values, which are the values Project rolls up to summary
task19
and the project summary task 20
BCWP values. This value is calculated
for each individual task but analyzed at an aggregate level (typically at the
project level).
Budgeted cost of work scheduled (BCWS)21
shows how much of the budget
should have been spent in view of the baseline cost of the task, assignment,
or resource. BCWS is calculated as the cumulative time phased baseline costs
up to the status date or today's date. (Budgeted cost values are stored in the
baseline fields, or if you've saved multiple baselines, in fields Baseline1
through Baseline10.)
Cost variance (CV)22
shows the difference between the budgeted cost of work
performed (BCWP) on a task and its actual cost (actual cost of work
performed or ACWP). If the CV is positive, the cost is currently under the
budgeted (or baseline) amount; if the CV is negative, the task is currently
over budget.
16
pay rate: Resource cost per hour. Project includes two types of pay rates: standard rates and overtime
rates.
17
BAC: An estimate of the total project cost.
18
BCWP: The earned value field that indicates how much of the task's budget should have been spent,
given the actual duration of the task. Note that Project calculates BCWP at the task level differently
than at the assignment level.
19
summary task: A task that is made up of subtasks and summarizes those subtasks. Use outlining to
create summary tasks. Project automatically determines summary task information [such as duration
and cost] by using information from the subtasks.
20
project summary task: A task that summarizes the duration, work, and costs of all tasks in a project.
The project summary task appears at the top of the project, its ID number is 0, and it presents the
project's timeline from start to finish.
21
BCWS: The earned value field that shows how much of the budget should have been spent, in view
of the baseline cost of the task, assignment, or resource. BCWS is calculated as the cumulative time
phased baseline costs up to the status date or today's date.
22
CV: The difference between the budgeted cost of work performed [BCWP] on a task and the actual
cost of work performed [ACWP]. If the CV is positive, the cost is currently under the budgeted
amount; if the CV is negative, the task is currently over budget.

Schedule variance (SV)23
shows the difference between the budgeted cost of
work performed (BCWP) and the budgeted cost of work scheduled (BCWS). If
the SV is positive, the project is ahead of schedule in cost terms; if the SV is
negative, the project is behind schedule in cost terms.
Variance at completion (VAC)24
shows the difference between the budget at
completion (BAC) and the estimate at completion (EAC). In Project, the EAC is
the Total Cost field and the BAC is the Baseline Cost field from the associated
baseline.
Cost performance index (CPI)25
is the ratio of budgeted, or baseline, costs of
work performed to actual costs of work performed (BCWP/ACWP).
Cumulative cost performance index (CPI)26
is the sum of the BCWP for all
tasks divided by the sum of the actual costs of work performed (ACWP) for all
tasks. Cumulative CPI is often used to predict whether a project will go over
budget and by how much.
Schedule performance index (SPI)27
is the ratio of work performed to work
scheduled (BCWP/BCWS). SPI is often used to estimate the project
completion date.
Estimate at completion (EAC)28
is the expected total cost of a task or project,
based on performance as of the status date. EAC is also called forecast at
completion, and is calculated like this: EAC = ACWP + (BAC - BCWP) / CPI.
To complete performance index (TCPI)29
is the ratio of remaining available
budget to be spent to the remaining scheduled cost as of the status date.
TCPI is calculated like this: TCPI = (BAC - BCWP) / (BAC - ACWP). A TCPI
23
SV: The difference between the budgeted cost of work performed [BCWP] and the budgeted cost of
work scheduled [BCWS]. This is calculated as follows: SV = Budgeted Cost of Work Performed -
Budgeted Cost of Work Scheduled.
24
VAC: The earned value field that shows the difference between the budget at completion [BAC] and
the estimate at completion [EAC]. In Project, the EAC is the Total Cost field, and the BAC is the
Baseline Cost field.
25
CPI: Ratio of budgeted costs of work performed to actual costs of work performed [BCWP/ACWP].
The cumulative CPI [sum of the BCWP for all tasks divided by the sum of the ACWP for all tasks]
can be used to predict whether a project will go over budget.
26
CPI: In earned value, the sum of all the budgeted costs of work performed [BCWP] for all tasks
divided by the sum of all the actual costs of work performed [ACWP]. CPI is often used to predict
whether a project will go over budget, and by how much.
27
SPI: The ratio of the budgeted cost of work performed [BCWP] to the budgeted cost of work
scheduled (BCWS), which is often used to estimate the project completion date. This is calculated as
follows: SPI = BCWP/BCWS.
28
EAC: The expected total cost of a task or project, based on performance as of the status date. EAC is
calculated as follows: EAC = ACWP + (BAC-BCWP)/CPI.
29
TCPI: The ratio of the work remaining to be done to funds remaining to be spent, as of the status date
[BAC - BCWP]/[BAC - ACWP]. A TCPI value greater than one indicates a need for increased
performance; less than one indicates performance can decrease.

value greater than 1 indicates good projected performance for remaining
work; less than 1 indicates poor projected performance.
Where in Project do I see earned value data?
You can see earned value information in any sheet view by applying the
Earned Value table or the Earned Value Cost Indicators table.
The Earned Value table shows you BCWS, BCWP, ACWP, SV, CV, EAC, BAC,
and VAC. Use this table to see consolidated earned value information,
including the key variance fields. Use EAC, BAC, and VAC to evaluate the
difference between your scheduled and budgeted costs. Compare CV, which
shows the difference between your budgeted and actual cost? of work, with
SV, which shows the difference between the budgeted cost of work and the
actual cost of work.
The Earned Value Cost Indicators table shows you BCWS, BCWP, CV, CV%,
CPI, BAC, EAC, VAC, and TCPI. Use this table to analyze cost variances. Check
the CPI and TCPI to see how the project is progressing against its budget and
how the rate of work compares with the expected rate. If CPI is less than 1,
you are getting less work per dollar than planned. The TCPI tells you how
much of an increase in performance you'll need on the remaining tasks in
order to keep within budget.

Rinat Galyautdinov : Earned value in microsoft project

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Rinat Galyautdinov : Earned value in microsoft project