Earned Value and Weighted Milestones

Lesson Objectives
Define earned value Define performance percent complete Review the results of different earned

value techniques Realize the benefits of using earned value techniques

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Earned Value Analysis

A technique for measuring project performance according to project cost and schedule. This technique compares the budgeted (planned) cost of work to the actual cost.

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Planned Value Cost The cost of the work that should have been accomplished as of the data date, if the project had proceeded according to the baseline plan. Planned Value Cost = Budget At Completion * Schedule % Complete
Schedule % Complete specifies how much of an activitys baseline duration has been complete so far.

Answers the question:

How much work should be done?

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Earned Value Cost Earned Value Cost is the monetary value of the work performed by a resource as of the data date. Earned Value Cost = Budget At Completion * Performance % Complete
The method for computing performance percent complete depends on the earned value technique selected at the WBS level.

Answers the question:

How much work is done?

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Actual Cost Actual Cost is the actual total cost incurred for the work accomplished as of the data date. Actual Cost = Actual Labor Cost + Actual Nonlabor Cost + Actual Expense Cost
Actual Cost is the same as the Actual Total Cost.

Answers the question:

How much did the completed work cost?
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Performance % Complete
Performance % Complete can be different from the Activity % Complete depending on the technique used to compute it. These techniques are set at the WBS level.

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Techniques Activity percent complete

Calculated based on the activitys percent complete type

WBS Milestones percent complete

Calculated based on the completion of the WBS elements weighted milestones

0/100
Calculated as 0% after an actual start is assigned, then as 100% after an actual finish is assigned
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Techniques cont. 50/50

Calculated as 50% after an actual start is assigned, then as 100% after an actual finish is assigned

Custom percent complete

Calculated as a user-defined percentage after an actual start is assigned, then as 100% after an actual finish is assigned

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Weighted Milestones
Weighted milestones can be used when higher-level task increments comprise a body of activities and you want to control the activities at the WBS level. When you assign weights to the WBS milestones, the completion of each specific milestone is used to calculate the performance percent complete of the WBS.
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Weighted Milestones cont.

Weight of the milestone can be any number between 0 and 999999. Performance percent complete is calculated based on the relative weights of the completed milestones vs. the incomplete milestones.
The performance percent complete is applied to all the activities under that WBS level, and then rolled back up to the WBS.
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Weighted Milestones cont.

The following option must be set to use weighted milestones:
In the WBS window, select the Earned Value tab in WBS Details. Mark the WBS Milestone percent complete checkbox.

Use when calculating earned value.

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Cost and Schedule Performance Indices

A way to analyze how efficiently the project is progressing is to calculate cost and schedule performance indices.

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Cost Performance Index (CPI) Relates the amount of physical earned value accomplished against the dollars actually spent to accomplish the earned value CPI = Earned Value Cost / Actual Cost
A value of less than one (1) indicates that actual costs have exceeded the value of the work performed.
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Schedule Performance Index (SPI) Relates the amount of physical earned value accomplished against the work that was planned SPI = Earned Value Cost / Planned Value Cost
A value of less than one (1) indicates that less work was actually performed than was scheduled.
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Techniques for Calculating Estimate to Complete (ETC)

P3e contains various techniques for calculating ETC. Techniques take into consideration a delay in the schedule and an overrun in costs. Set at the WBS level.

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Techniques for Calculating Estimate to Complete (ETC)

The ETC identifies how much money you are projected to spend from now to the end of the project. Calculated using two formulas:
ETC = remaining cost for activity
Remaining Units * Resource Price/Time

ETC = Performance Factor * (Budget at Completion Earned Value Cost).

Where Performance Factor is calculated depending on the earned-value technique selected for the WBS.
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Performance Factor
Performance Factor = 1
ETC = Budget at Completion Earned Value Cost Yields an optimistic result

Performance Factor = 1/CPI

ETC = (1/CPI) * (Budget at Completion Earned Value Cost) Yields a most likely resultPerformance Factor = 1/(CPI*SPI) ETC = [1/ (CPI * SPI)] * (Budget at Completion Earned Value Cost) 12-20 Yields a pessimistic result

Performance Factor
Performance Factor = ___
ETC = Performance Factor * (Budget at Completion Earned Value Cost) Calculated according to a Performance Factor that you specify

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Remaining Cost This is the system default and calculates ETC based on the remaining units. This calculation does not take a schedule delay or overspending into consideration.
Historical evidence shows that these trends do not correct themselves over time; they tend to get worse.

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Using CPI to Calculate ETC Represents a reliable indicator of the minimum total required costs
Viewed as the very best the project will do based on its history

ETC = (1/CPI) * (Budget at Completion Earned Value Cost)

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Using CPI and SPI to Calculate ETC Represents a reliable indicator of the maximum total required costs Incorporates the cost overrun to date with a behind-schedule condition to produce a more severe statistical forecast
Viewed as the very worst the project will do based on its history

ETC = [1/(CPI * SPI)] * (Budget at Completion Earned Value Cost)

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