Earned Value Management

2011-01-12T02:20:00.000-08:00

It was summer vacation and time for a summer-job. Our house needed a repaint, and incidentally my wife was leaving to a different city for a week-long seminar. This was an opportunity for me to get some knowledge on Project Management!

There are 5 rooms in my house, and the whole job was expected to finish in 5 days.

It was a sunny Friday afternoon, my wife was preparing for a flight journey, busy squeezing her stuff into luggage boxes. I wondered, though, how one could make best use of total fixed volume, and more on those lucky little things how they were excited about the journey in mid-air and being sure that they will never be used during entire week.

I pulled up an mpp on my laptop to prepare for a plan.

Planning Activities:

1. Paint lobby

2. Paint foyer

3. Paint hall-cum-kitchen

4. Paint second bed room

5. Paint master bed room

6. Paint toilets

My mpp showed as below.

Sequencing activities was simple. Paint lobby -> paint foyer -> Paint hall-cum-kitchen -> paint second bed room -> paint master bed room -> paint toilets. All tasks were put in a order by defining appropriate predecessors.

Estimate Activity Resources:

I picked up few contacts from yellow pages to help me on this job. With little negotiation I found two persons agreed to help me in this job, with a condition to make the required material to be made available. They even give me estimate of material required.

Resources needed:

Two helpers
Roll-up papers (buy).
Equipment to press wall-papers (lease)
Paint (cans)
Painting brushes
Adhesive

Resources sheet displayed as follows:

Notice “Type” column to that tells more about the type of resources.

Activities were assigned with necessary resources:

Estimate activity Duration:

Complete schedule:

It is better to inform mpp about project start date -

Cost performance Baseline:

The “cost” column told me the amount of money I needed. I also added few other columns, viz., BCWS, BCWP, ACWP, CPI, SPI, CV, SV and TCPI. They did not made sense at that moment, but expected to tell me more in coming days.

I jumped to baseline the schedule.

See-off party:

That night we booked a lake-side restaurant for see-off dinner. Hot pasta and calzone was on the table, with my laptop showing exhaustive pages with varied colors and texture. My wife selected few of them by matching them with design of my house.

I quickly called helpers, those engaged over telephone for upcoming work, and they promised me to buy required material every day. They also promised me to contact the vendor for leasing equipment to press wall papers. They noted down product codes of the paints and wallpapers my wife just chose.

I did see-off her, after the party, went to an ATM to draw 5240 bucks.

All excited for a busy week!!

Monitoring and Control:

I decided to track end of each day, at least initially.

It was bright Monday morning. Past two days were tiring, had to pack lot of stuff with paper, and put all things safely to avoid splash of paints or adhesives. And the doors knocked. Ahh, why can’t people be so punctual for team meetings, we should learn from the helpers – I thought.

End of Day 1, some basics about earned value:

I was excited to take a stock at the end of day 1. I went back to my laptop, opened mpp, and navigated to “resource usage” view. Surprisingly, first day’s job – to paint job took as much as estimated (should have questioned the helpers). It took exactly the same amount of estimated material. So I updated accordingly.

I did mark “Paint Lobby” tasks as done (100%).

I did see some values for “Paint Lobby” activity for the columns I added before. Here goes some explanation.

BCWS: Stands for “Budgeted cost of work scheduled”, meaning the budgeted money for this particular task. In this case, it is 1020 bucks. Popularly called as PV – Planned Value. Straight forward, isn’t it?

BCWP: Stands for “Budgeted cost of work performed”, meaning the equivalent money for the work done as per what has been thought before. Popularly called as EV – Earned value, the (kind-of monitory) value earned by work that has been completed.

ACWP: Stand for “Actual cost of work performed”, meaning the money spent on the activity. Popularly called as AC – Actual Cost. I gave 1020 bugs to the lead helper, this included his fee, material cost and the lease cost of equipment hired.

CPI: Stands for Cost Performance Index, which is equals to BCWP (EV)/ ACWP (AC). Showed “1”, meaning on track.

SPI: Stands for Schedule Performance Index, which is equal to BCWP (EV)/ BCWS(PV), also showed “1”.

CV: Stands for Cost Variance, which is equals to BCWP (EV) – ACWP (AC), which showed as “0”. Meaning no variance w.r.t cost when compared to what was planned.

SV: Stands for Schedule Variance, which is equals to BCWP (EV) – BCWS (PV), which also showed as “0”

All is well!!

End of Day 2, when problem stated:

Things began moving off-track. Activity of painting foyer took 5 hours against 4 hours that was planned. Also, this activity consumed 2 rolls of wall paper instead of 1.

Because of slip in Paint Foyer activity, helpers could only spend 3 hours for Paint hall-cum-Kitchen activity. I updated Resouce sheet, and marked this activity as 35% done (as per plan 50% of this activity should have been completed.

I did add “Baseline Cost” cost column to compare the difference in overall cost performance.

Some different numbers stated to appear!!

“Paint Foyer” activity showed BCWS (PV) = 580 and BCWP (EV) as 580, SPI =1, SV = 0. Meaning, as on this date the activity is completed as scheduled. ACWP (AC) showed as 700, hence cost variance = BCWP (EV) – ACWP (AC) = -120, shown as (120) at CV column on mpp

“Paint Hall-cum-kitchen” activity showed PV=560, EV = 422, hence SPI = 0.75 and SV= -138, shown as (138) at SV column on mpp. However, this activity is doing good cost-wise, as AC = 359, CV=+63 and CPI=1.18.

Overall at the project level, can be got by adding BCWS, BCWP and ACWP for the tasks, CPI=0.97, SPI=0.94, CV=-57 and SV=-138. Hence the project was performing over budget and slipping.

Now “Cost” column showed as 5270 as compared to baseline cost of 5240 (also called as Budgeted at completion – BAC), hence I understood that I needed more money to complete this project!! But not much of a fuss, though.

Just then my cell rang, my wife had called.

“Howz your project going on?”, she asked. I wanted to keep things simple to avoid too much focus on my underperforming project.

“Yeah, good, ahh… just OK I mean”.

“What is your mpp saying?”.

“Well, I have a small cost over-run, just small not to worry..”, I winked. “Only 30 bucks more to complete”.

“Are the activities on track?”.

“Well, yeah, just a small slip, I think we can manage”. I started doubting.

“Tell me in numbers, what are current CPI and SPI values?”.

I was totally shocked. “Hey, how do you know about all these?”.

“Well honey, you forgot to ask about the seminar I am currently into. I am here on a seminar for project management best practices. And all of these are talked about deeply”.

I sat on a chair, “Well, CPI is .97 and SPI is .94”.

“What about TCPI?”.

I was taken aback, I haven’t looked yet. Quickly I visited my mpp, TCPI shown as 1.02.

“Ah, honey you have to watch on your cost more carefly, got to go now, bye”.

“Bye”… I said.

TCPI stands for To Complete Performance Index. TCPI = (BAC – EV)/(BAC-AC) if TCP is calculated on budgeted cost numbers.

If there is too much variation on actual cost as compared to budget, then TCPI is caculated on EAC (stands for Expected at completion), which is equal to (BAC-EV)/(EAC-AC)

Typically, TCPi is calculated on the project level, as this doesn’t make sense for individual activity level. Sometimes, it is calculated in sub-project level if the plan is a huge one.

EAC as on this date equals BAC/CPI = 5240/.97 = 5402. This means I might end up spending 5402 instead of 5240 if similar cost overrun happens in future.

Finally:

It was more grueling than I thought. It took few more overtime works, more material to complete summer re-paint job. I kept updating my mpp at the end of every day.

Finally, mpp showed the above figures. Total cost was 5590 agains 5240 that was planned, with a CV of 350 and CPI of 0.94, something usually seen in project management. Fortunately, SV and SPI showed 0 and 1, a drawback in day-wise tracking? I was happy, atleast, the project kept on scheduled.

Lessons Learnt:

My wife was already tired of flight journey. As she entered she was pleased, atleast for a moment, to see the fresh look. After a short while she started firing gun-shots – “Where is my mobile pouch?”, “Ahh, my kitchen is ruined, I am unable to locate peeler”, “this color sucks, why didn’t you ask me before you start?”, “Why can’t you remember a single thing in life, how can you forget about my wallet”……….

Catch the falling star

Earned Value Management