the dynamics of earned value when cost loading a schedule ppt

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San FranciscoSeptember 30–October 4, 2012



September 30–October 4, 2012

P6



P6

Presenting with

The Dynamics Of Earned Value When Cost Loading A ScheduleJustin LaurieSenior Technical Support Engineer

Program Agenda

• What Is Earned Value?• The Benefits Of Utilizing Earned Value

• Earned Value Calculations

• How Baselines Affect Earned Value



• How Baselines Affect Earned Value• How To Integrate Costs Within The Schedule

• Reporting On Earned Value Indicators

What Is Earned Value?

• The focus of Earned Value– Accurately measure physical performance against a detailed plan• Allows for the prediction of the final costs and schedule results for a project.

What is the focus of Earned Value?



Fleming, Quentin W, and Joel M. Koppelman Earned Value Project Management. 2nd ed. Newtown Square, PA: Project Management Institute Inc, 2000. Chapter 2. Print.


• “What we got, for what we spent”• Earned Value requires– Project performance measurement plan, called planned value– Measure earned value against the planned value

Overview



– Measure earned value against the planned value– Physical earned value performed is then related to the actual costs spent to accomplish the physical work• Provides a measure of the project’s true cost performance



• Earned Value approach– Displays thee dimensions of data• Planned value of the work• Earned value of physical work accomplished• Actual cost incurred to accomplish the earned value

Earned Value vs. Traditional Cost Management



• Actual cost incurred to accomplish the earned value– Allows variances to be ascertained• Difference between planned value of work schedule vs. earned value achieved• Relationship of earned value to funds expended to accomplish the work



• Traditional approach – Uses planned expenditures versus actual expenditures

• Projects’ true cost performance cannot be determined because there is no way to ascertain how much of the physical work has been accomplished

– Simply represents the relationship of what was planned to be spent

Earned Value vs. Traditional Cost Management



– Simply represents the relationship of what was planned to be spent versus funds actually spent• Only has significance as a reflection of whether a project has stayed within the authorized funds


Program Agenda








The Benefits Of Utilizing Earned Value

• Utilizing earned value– Allows tracking of performance against a comprehensive plan– Exceptions to plan provide info on cost and schedule efficiency rates

Performance Indices



– Schedule Performance Index and Cost Performance index available 15% to 20% to completion of project



• Schedule Performance Index (SPI)– Earned value divided by planned value– Example• SPI of .5 means for every $1.00 of planned work, only $0.50 was accomplished

Performance Indices



accomplished

• Cost Performance Index (CPI)– Earned value divided by actual cost– Example• CPI of .5 means for every $1.00 spent, only $0.50 of physical work done



• SPI and CPI can be used – To forecast required funds needed for completion• Minimum and maximum funds needed

• Example

Using SPI And CPI To Forecast Results



• Example– Budget of $100, divided by CPI of .67 forecasts $150 minimum needed for completion

– CPI (.67) x SPI (.67) = .4489, and $100 divided by .4489 is ~$220 and represents maximum needed for completion


Program Agenda








Earned Value Calculations

• Earned Value Cost – Portion of the budgeted total cost of the activity that is actually completed as of the project data date

– Method for computing the performance percent complete depends on the Earned Value technique selected for the activity's WBS

How Is Earned Value Cost Calculated?



EV = Budget At Completion * Performance % Complete


• Budget At Completion (BAC)– Always the Total cost from the Baseline– Calculated using the Baseline Budgeted Values or Baseline At Completion values depending upon the 'Earned Value Calculation' setting (Administer, Application Settings, Earned Value). • If the 'Earned Value Calculation' is set to 'Budgeted Values with Planned dates'




• If the 'Earned Value Calculation' is set to 'Budgeted Values with Planned dates' or 'Budgeted Values with Current Dates': BAC = BL Budgeted Labor Cost + BL Budgeted Non-Labor Cost + BL Budgeted Material Cost + BL Budgeted Expense Cost.

• If the 'Earned Value Calculation' is set to 'At Completion Values with Current Dates': BAC = BL At Completion Labor Cost + BL At Completion Non-Labor Cost + BL At Completion Material Cost + BL At Completion Expense Cost.


• What is Performance Percent Complete?– Performance percent complete• Used to compute earned value• May be based on the Activity % Complete, on the 0/100 rule, on the 50/50 rule, WBS Milestone % Complete




50/50 rule, WBS Milestone % Complete• Specifies what percentage of the activity's planned worth has been earned so far

– Summary Performance % Complete is always calculated as (Earned Value * 100) / BAC


• How to control the Performance % Calculation– Select a WBS Element from the Activity View and navigate to the Earned Value tab





• Understanding the Performance % Complete Options– Activity % Complete• Sets Performance % value the same as the Activity %. Activity % is based off the Duration Type of the Activity (Duration, Physical, or Units)

•Use resource curves/future period buckets




•Use resource curves/future period buckets– To override the Activity % Complete type for activities that have a resource curve assigned to at least one of the resource assignments.

– If curve is assigned, Units % Complete is always multiplied by the BAC to calculate Earned Value


• Understanding the Performance % Complete Options:– 0/100• Calculates earned value as 100% only after the activity ends.

– 50/50




• Calculates earned value as 50% after the activity starts and until the activity ends. After the activity ends, earned value is 100%.

– Custom percent complete• Calculates earned value as a user-defined percentage, applied after the activity starts and until the activity ends. After the activity ends, the earned value is 100%.


• Planned Value Cost– Portion of the budgeted total cost of the activity scheduled to be completed as of project data date according to the baseline dates

– Specifies how much of the activity's original duration has been completed so far based on the baseline dates.

How Is Planned Value Cost Calculated?



PV = Budget At Completion * Schedule % Complete


• What is Schedule % Complete?– Schedule % Complete

• Specifies how much of the activity's baseline duration has been completed so far.

• Indicates how much of the activity duration should be currently completed, relative to the selected baseline.

How Is Planned Value Cost Calculated?



relative to the selected baseline.• Computed based on where the data date falls between the activity' s baseline start and finish. – If the data date is earlier than the BL Start, the Schedule % Complete is 0.– If the data date is later than the BL Finish, the Schedule % Complete is 100.

– Summary Schedule % Complete is always calculated as(Planned Value * 100) / BAC


• Actual Cost– Actual total cost incurred on the activity as of the project data date.

Actual Total Cost = Actual Labor Cost + Actual Non-Labor Cost +

Other Calculations



Actual Total Cost = Actual Labor Cost + Actual Non-Labor Cost + Actual Material Cost + Actual Expense Cost


• Cost Variance (CV) – Difference between the Earned Value and the actual cost of that activity. CV = EV - Actual Cost

Other Calculations



• Estimate At Completion (EAC)– Estimated cost at completion for the activity. EAC = Actual Cost + ETC.


• Estimate to Complete (ETC)– Estimated cost left to complete on the activity– Calculation can be customized at the WBS level (On the 'Earned Value' tab in the WBS view)

– Computed as either

Other Calculations



– Computed as either• ETC = Remaining Total Cost for the activity • ETC = PF * (BAC - EV)– Where 'PF' is a multiplier to weight the ETC calculation• Can be either '1', '1/CPI' or '1/(SPI * CPI)' or user defined amount


• How to control the Estimate to Complete calculation– Select a WBS Element from the Activity View, and navigate to the Earned Value tab

Other Calculations




• Cost Performance Index (CPI) – Greater than 1 means that Earned Value is greater than the actual amount spent. – Less than 1 means that the Earned Value is less than the actual amount spent.

CPI = EV / Actual Cost

Other Calculations



• Schedule Performance Index (SPI)– Greater than 1 means that Earned Value is greater than the Planned Value

– Less than 1 means that the Earned Value is less than the Planned Value

SPI = EV / PV

Program Agenda








How Baselines Affect Earned Value

• Each project has its own setting that controls whether the Project Baseline or Primary Baseline is used to calculate Earned Value– Set under Projects, EPS, Set Project Preferences, Calculations

Which baseline is used for Earned Value calculations?



– Set under Projects, EPS, Set Project Preferences, Calculations


• How to control which baseline is used to calculate Earned Value– Under Projects, EPS, right-click a project and select “Set Project Preferences…”, then navigate to Calculations

Which baseline is used for Earned Value calculations?



How Baselines Affect Earned ValueWhich baseline is used for Earned Value calculations?




• Budgeted Values with Planned Dates• Budgeted Values with Current Dates

• At Completion Values with Current Dates

Which data from the baseline is used in the calculations?




• How to control which baseline data is used in the Earned Value calculations:– Administer, Applications Settings, navigate to Earned Value

Which data from the baseline is used in the calculations?



How Baselines Affect Earned ValueWhich data from the baseline is used in the calculations?




• How to control which baselines are assigned to the project– From the Activity View, navigate to Actions, Define Baselines

Assigning Baselines



How Baselines Affect Earned ValueHow Do The Baseline Fields Correspond To Each Baseline?• Project Baseline– Fields begin with BL Project

• Primary Baseline– Fields begin with BL1

• Secondary Baseline



• Secondary Baseline– Cannot calculate Earned Value– Fields begin with BL2

• Tertiary Baseline– Cannot calculate Earned Value– Fields begin with BL3

How Baselines Affect Earned ValueWhat If The Current Project Is Assigned?• When Current Project is assigned as the Project or Primary Baseline

– Baseline dates used in the Earned Value calculations are always the Planned Start and Planned Finish



Program Agenda








How To Integrate Costs Into The Schedule

• Four ways to assign cost in P6:– Labor Cost• Assigned to Labor resources or directly to the activity column

– Non-labor Cost

What Types Of Cost?



• Assigned to Non-labor resources or directly to the activity column

– Material Cost• Assigned to Material resources. Cannot be assigned directly

– Expense Cost• Assigned to expenses. Cannot be assigned directly


• BAC is the Total Cost in the baseline• As noted earlier

– If the 'Earned Value Calculation' is set to 'Budgeted Values with Planned dates' or 'Budgeted Values with Current Dates': BAC = BL Budgeted Labor Cost + BL Budgeted Non-Labor Cost + BL Budgeted Material Cost

How Do These Types Of Costs Affect Earned Value?



BAC = BL Budgeted Labor Cost + BL Budgeted Non-Labor Cost + BL Budgeted Material Cost + BL Budgeted Expense Cost.

– If the 'Earned Value Calculation' is set to 'At Completion Values with Current Dates': BAC = BL At Completion Labor Cost + BL At Completion Non-Labor Cost + BL At Completion Material Cost + BL At Completion Expense Cost.


• Manual entry into Actual Cost fields• Automatically calculate Actual Costs based on Duration % Complete

How To Update Costs




• Manually– Common Project Preferences Calculations:• Link planned and at completion for not started activities• When updating units or costs: Subtract actual from at completion

How To Update Costs



– Users manually update Actual Cost and Percent Complete fields for individual activities


• Automatically– Common Project Preferences Calculations:• Link planned and at completion for not started activities• When updating units or costs: Subtract actual from at completion

How To Update Costs



– Do not use “Fixed Duration & Units/Time” duration type• Recalculate actual units and cost when Duration % Complete changes

– Use “Calculate cost from units” option with Price/Unit = $1– Enter Budgeted Units * Price/Unit ($1/h) = Budgeted Cost

Program Agenda








Reporting On Earned Value Indicators

• P6 EPPM Web BI Report• P6 EPPM and Professional Client Report Wizard

• P6 EPPM Web Portfolios

Where To Report On And Analyze Earned Value?




• Navigate to Reports, Project section– Default report “Project Earned Value” displayed Earned Value,

P6 EPPM Web BI Report



Planned Value, and Actual Cost data


• Navigate to Tools, Report Wizard– Select Activities subject area

P6 EPPM and Professional Client Report Wizard



• Note: Select Time-distributed data to report on Earned Value by time period

– Edit columns to include Earned Value Data


• Portfolio Views – Applied to Portfolios and include Earned Value metrics

• Navigate to Portfolios, Manage Portfolio Views

• Types of Portfolio Views:– Bubble Chart

P6 EPPM Web Portfolios



– Bubble Chart– Histogram– Pie Chart– Scorecard– Side-by-Side Histogram– Stacked Histogram


• Creating a Portfolio View1) Select Create View2) Choose which type of view

(example: Scorecard)3) Input desired Earned Value




3) Input desired Earned Value columns

4) Save View


• Using the Portfolio View– Navigate to Portfolios, Portfolio Analysis– Click the View dropdown menu to apply the new Portfolio View (Scorecard)




Q&A



Q&A

the dynamics of earned value when cost loading a schedule ppt

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