Rule of Thumb

Project management is complex enough to provide a nice sandbox for experimenting with all kinds of novel ideas. Earned Value Analysis is not very novel any more, but I haven’t seen it used much around. So I looked into it.

I am using Microsoft Office Project Standard 2003, which sound a bit outdated, but it’s a start.

I entered two tasks, each of them lasting 10 days, each of them having a single, but different resource 100% allocated to that task. In effect, both resources will work on their tasks 8 hours a day for two weeks. For simplicity, I used round number of 10 €/hr for resources standard rates.

Both tasks will take 80 hours to complete, costing 800€ each. Now let’s save the baseline for the entire project, set the status date (Project, then Project Information and Status Date) past the last date of this sample project, entered Actual Work of 4 hr for Day 1 on both tasks and let’s look at the Task Usage view plus Earned Value table.

It shows a couple of fascinating numbers.

Let’s decipher acronyms first:

• BCWS - Budgeted Cost of Work Scheduled - Cumulative timephased baseline costs up to the status date or today’s date.
• BCWP - Budgeted Cost of Work Performed - Cumulative value of the task’s, resource’s, or assignments’s percent complete multiplied by the timephased baseline costs.
• ACWP - Actual Cost of Work Performed - Costs incurred for work already done on a task, up to the project status date or today’s date.
• SV - Schedule Variance - Difference in cost terms between the current progress and the baseline plan of a task, all assigned tasks of a resource, or for an assignment up to the status date or today’s date. Actually, it is BCWP-BCWS.
• CV - Cost Variance - Difference between how much it should have cost and how much it has actually cost to achieve the current level of completion up to the status date or today’s date. Actually, it is BCWP-ACWP.
• EAC - Estimate At Completion - Expected total cost of a task based on performance up to the status date. EAC is also called forecast at completion (FAC). It is calculated as ACWP + (Baseline cost - BCWP) / CPI.
• BAC - Budget At Completion - Total planned cost for a task, a resource for all assigned tasks, or for work to be performed by a resource on a task.
• VAC - Variance At Completion - Difference between the BAC (Budgeted At Completion) or baseline cost and EAC (Estimated At Completion) for a task, resource, or assignment on a task.

In the above example, since status date was moved past the expected end of tasks, BCWS is equal to the total Baseline Cost, or BAC (which is actually the same field under two different names) of the entire tasks, which is 800 €.

ACWP equals to 4 hr x 10 €/hr = 40 €. Makes sense.

What about BCWP? 76,18 €? Funny number. Where does it come from? The key to the answer lies in the percent complete part of the formula, which says: BCWP = [Percent complete] x [Baseline Cost]. And percent complete is calculated as [Actual Duration] / Duration. Let’s see the numbers:

The fun comes from Duration, which increased by half a day because resource A only did half of the work on the first day. Percent complete is therefore 1 / 10,5 = 0,9524 (rounded to 10% by MS Project) and if we multiply this with Baseline Cost of 800€ we come to 76,18 € for BCWP.

OK, one mystery down, plenty to go. Take a look at assignment data. That’s the line under the task, with resource A. BCWP is with 40€ value way different than tasks BCWP 76,18 €. The reason for this is the fact, that MS Project uses % Work Complete to calculates assignment BCWP, which is calculated as [Actual Work] / [Work]. Assignment BCWP is calculated as [Assignment % Work Complete] x [Assignment Baseline Cost]. In numbers, % Work Complete = 4 hr / 80 hr = 5% and BCWP = 5% x 800 € = 40 €.

Instead of heaving two different calculations of basically the same data, you can change how MS Project calculates Earned Values from % Complete to Physical % Complete. You can change this individually for each task by adding Earned Value Method column into the view and modifying its values, or you can modify default setting in Tools, then Options, Calculation, Earned Value and Default task Earned Value Method. This only affects new tasks.

Compare now T1 with % Complete method and T2 with Physical % Complete:

Neat.