The Dynamics of Earned Value When Cost Loading A Schedule PDF

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P6
The Dynamics Of Earned Value When Cost

Loading A Schedule
Presenting with
Justin Laurie P6
5 Senior Technical Support Engineer

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reserved.
Program Agenda
• What Is Earned Value?

• The Benefits Of Utilizing Earned Value
• Earned Value Calculations
• How Baselines Affect Earned Value
• How To Integrate Costs Within The Schedule
• Reporting On Earned Value Indicators
reserved.
What Is Earned Value?
What is the focus of 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.
Fleming, Quentin W, and Joel M. Koppelman Earned Value Project Management. 2nd ed. Newtown Square, PA: Project Management Institute
Inc, 2000. Chapter 2. Print.
reserved.
Overview
• “What we got, for what we spent”
• Earned Value requires
– Project performance measurement plan, called planned value
– 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
reserved.
Earned Value vs. Traditional Cost Management
• 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
– 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
reserved.
Earned Value vs. Traditional Cost Management
• 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
versus funds actually spent
• Only has significance as a reflection of whether a project has stayed within the
authorized funds
reserved.
Program Agenda

reserved.
The Benefits Of Utilizing Earned Value
Performance Indices
• Utilizing earned value
– Allows tracking of performance against a comprehensive plan
– Exceptions to plan provide info on cost and schedule efficiency
rates
– Schedule Performance Index and Cost Performance index
available 15% to 20% to completion of project
reserved.
Performance Indices
• 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
• 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
reserved.
Using SPI And CPI To Forecast Results
• SPI and CPI can be used
– To forecast required funds needed for completion
• Minimum and maximum funds needed
• 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
reserved.
Program Agenda

reserved.
Earned Value Calculations
How Is Earned Value Cost Calculated?
• 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
EV = Budget At Completion * Performance % Complete
reserved.
• 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'
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.
reserved.
• 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
• 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
reserved.
• How to control the Performance %
Calculation
– Select a WBS Element from the Activity View
and navigate to the Earned Value tab
reserved.
• 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
– 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
reserved.
• 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%.
reserved.
How Is Planned Value Cost Calculated?
• 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.
PV = Budget At Completion * Schedule % Complete
reserved.
How Is Planned Value Cost Calculated?
• 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.
• 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
reserved.
Other Calculations
• 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 +

Actual Material Cost + Actual Expense Cost
reserved.
Other Calculations
• Cost Variance (CV)
– Difference between the Earned Value and the actual cost of that
activity.
CV = EV - Actual Cost
• Estimate At Completion (EAC)

– Estimated cost at completion for the activity.
EAC = Actual Cost + ETC.
reserved.
Other Calculations
• 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
• 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
reserved.
Other Calculations
• How to control the Estimate to
Complete calculation
– Select a WBS Element from the Activity
View, and navigate to the Earned Value
tab
reserved.
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
• 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
reserved.
Program Agenda

reserved.
How Baselines Affect Earned Value
Which baseline is used for Earned Value calculations?
• 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
reserved.
• 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
reserved.
reserved.
Which data from the baseline is used in the calculations?
• Budgeted Values with Planned Dates
• Budgeted Values with Current Dates
• At Completion Values with Current Dates
reserved.
• How to control which baseline data is used in the Earned
Value calculations:
– Administer, Applications Settings, navigate to Earned Value
reserved.
reserved.
Assigning Baselines
• How to control which baselines are assigned to the
project
– From the Activity View, navigate to Actions, Define Baselines
reserved.
How Do The Baseline Fields Correspond To Each Baseline?
• Project Baseline
– Fields begin with BL Project
• Primary Baseline
– Fields begin with BL1
• Secondary Baseline
– Cannot calculate Earned Value
• Tertiary Baseline
– Cannot calculate Earned Value
reserved.
What 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
reserved.
Program Agenda

reserved.
How To Integrate Costs Into The Schedule
What Types Of Cost?
• Four ways to assign cost in P6:
– Labor Cost
• Assigned to Labor resources or directly to the activity column
– Non-labor 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
reserved.
How Do These Types Of Costs Affect Earned Value?
• 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
+ 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.
reserved.
How To Update Costs
• Manual entry into Actual Cost fields
• Automatically calculate Actual Costs based on Duration
% Complete
reserved.
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
– Users manually update Actual Cost and Percent Complete fields
for individual activities
reserved.
How To Update Costs
• Automatically
– Common Project Preferences Calculations:
• Link planned and at completion for not started activities
• When updating units or costs: Subtract actual from at completion
– 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
reserved.
Program Agenda

reserved.
Reporting On Earned Value Indicators
Where To Report On And Analyze Earned Value?
• P6 EPPM Web BI Report
• P6 EPPM and Professional Client Report Wizard
• P6 EPPM Web Portfolios
reserved.
P6 EPPM Web BI Report
• Navigate to Reports, Project
section
– Default report “Project Earned
Value” displayed Earned Value,
Planned Value, and Actual Cost
data
reserved.
P6 EPPM and Professional Client Report Wizard
• Navigate to Tools, Report
Wizard
– Select Activities subject
area
• Note: Select Time-distributed
data to report on Earned
Value by time period
– Edit columns to include
Earned Value Data
reserved.
P6 EPPM Web Portfolios
• Portfolio Views
– Applied to Portfolios and include Earned Value metrics
• Navigate to Portfolios, Manage Portfolio Views
• Types of Portfolio Views:
– Bubble Chart
– Histogram
– Pie Chart
– Scorecard
– Side-by-Side Histogram
– Stacked Histogram
reserved.
• Creating a Portfolio View
1) Select Create View
2) Choose which type of view
(example: Scorecard)
3) Input desired Earned Value
columns
4) Save View
reserved.
• Using the Portfolio View
– Navigate to Portfolios, Portfolio Analysis
– Click the View dropdown menu to apply the new Portfolio View (Scorecard)
reserved.
Q&A
reserved.
reserved.

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1 Copyright © 2012, Oracle and/or its affiliates.

All rights Insert Information Protection Policy Classification from Slide 8

Build industry capability at

The Dynamics Of Earned Value When Cost

5 Senior Technical Support Engineer

• What Is Earned Value?

• What Is Earned Value?

• What Is Earned Value?

EV = Budget At Completion * Performance % Complete

PV = Budget At Completion * Schedule % Complete

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

• Estimate At Completion (EAC)

CPI = EV / Actual Cost

• Schedule Performance Index (SPI)

• What Is Earned Value?

• What Is Earned Value?

• What Is Earned Value?

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