The dynamics of earned value when cost loading a schedule ppt

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San Francisco
September 30–October 4, 2012
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September 30–October 4, 2012

P6
reserved.
P6
Presenting with
The Dynamics Of Earned Value When Cost
Loading A Schedule
Justin Laurie
Senior Technical Support Engineer

Program Agenda
• What Is Earned Value?
• The Benefits Of Utilizing Earned Value
• Earned Value Calculations
• How Baselines Affect Earned Value
reserved.
• 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?
reserved.
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
reserved.
– 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
reserved.
• 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
reserved.
– 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
reserved.

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
reserved.
– 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
reserved.
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
reserved.
• 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
reserved.

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?
reserved.
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'
reserved.
• 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
reserved.
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
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
reserved.
• 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
reserved.
• 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?
reserved.
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?
reserved.
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
reserved.
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
reserved.
• 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
reserved.
– 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
reserved.

• 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
reserved.
• 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
reserved.

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?
reserved.
– 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
reserved.

reserved.

• 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?
reserved.

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

reserved.

• How to control which baselines are assigned to the
project
– From the Activity View, navigate to Actions, Define Baselines
Assigning 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
reserved.
• Secondary Baseline
– Cannot calculate Earned Value
• Tertiary Baseline
– Cannot calculate Earned Value

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
• 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?
reserved.
• 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?
reserved.
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
reserved.

• 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
reserved.
– 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
reserved.
– 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
reserved.

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?
reserved.

• Navigate to Reports, Project
section
– Default report “Project Earned
Value” displayed Earned Value,
P6 EPPM Web BI Report
reserved.
Planned Value, and Actual Cost
data

• Navigate to Tools, Report
Wizard
– Select Activities subject
area
P6 EPPM and Professional Client Report Wizard
reserved.
• 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
reserved.
– Bubble Chart
– Histogram
– Pie Chart
– Scorecard
– Side-by-Side Histogram
– Stacked Histogram

• Creating a Portfolio View
1) Select Create View
2) Choose which type of view
(example: Scorecard)
3) Input desired Earned Value
reserved.
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)
reserved.

Q&A
reserved.
Q&A

reserved.

The dynamics of earned value when cost loading a schedule ppt

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