earned value and weighted milestones

8/13/2019 Earned Value and Weighted Milestones

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Earned Value and Weighted

Milestones


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Lesson Objectives

Define earned value

Define performance percent complete

Review the results of different earnedvalue techniquesRealize the benefits of using earned valuetechniques

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Earned Value Analysis

A technique for measuring projectperformance according to project cost

and schedule. This technique compares the budgeted(planned) cost of work to the actual cost.

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The cost of the work that should havebeen accomplished as of the data date,if the project had proceeded according tothe baseline plan.

Planned Value Cost =Budget At Completion * Schedule %Complete

Schedule % Complete specifies how muchof an activitys baseline duration has beencomplete so far.

Answers the question: How much work should be done?

Planned Value Cost

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Earned Value Cost is the monetary value ofthe work performed by a resource as of thedata date.

Earned Value Cost =Budget At Completion * Performance %Complete

The method for computing performance percentcomplete depends on the earned valuetechnique selected at the WBS level.

Answers the question: How much work is done?

Earned Value Cost

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Actual Cost is the actual total costincurred for the work accomplished asof the data date.

Actual Cost = Actual Labor Cost + ActualNonlabor Cost + Actual Expense Cost Actual Cost is the same as the Actual Total

Cost.

Answers the question: How much did the completed work cost?

Actual Cost

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Performance % Complete can bedifferent from the Activity % Completedepending on the technique used to

compute it. These techniques are set at the WBS

level.

Performance % Complete

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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 actualfinish is assigned

Techniques

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50/50 Calculated as 50% after an actual start is

assigned, then as 100% after an actualfinish is assigned

Custom percent complete Calculated as a user-defined percentage

after an actual start is assigned, then as100% after an actual finish is assigned

Techniques cont.

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Weighted Milestones

Weighted milestones can be used whenhigher-level task increments comprise abody 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 calculatethe performance percent complete of theWBS.

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Weight of the milestone can be anynumber between 0 and 999999.

Performance percent complete iscalculated based on the relative weightsof the completed milestones vs. theincomplete milestones. The performance percent complete is

applied to all the activities under that WBSlevel, and then rolled back up to the WBS.

Weighted Milestones cont.

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The following option must be set to useweighted milestones: In the WBS window, select the Earned

Value tab in WBS Details. Mark the WBSMilestone percent complete checkbox.

Use when calculating earned value.

Weighted Milestones cont.

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Cost and SchedulePerformance Indices

A way to analyze how efficiently theproject is progressing is to calculate cost

and schedule performance indices.

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Relates the amount of physical earnedvalue accomplished against the dollarsactually spent to accomplish the earnedvalue

CPI = Earned Value Cost / Actual Cost A value of less than one (1) indicates that

actual costs have exceeded the value ofthe work performed.

Cost Performance Index (CPI)

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Relates the amount of physical earnedvalue accomplished against the workthat was planned

SPI = Earned Value Cost / Planned ValueCost A value of less than one (1) indicates that

less work was actually performed than wasscheduled.

Schedule Performance Index (SPI)

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Techniques for CalculatingEstimate to Complete (ETC)

P3e contains various techniques forcalculating ETC.

Techniques take into consideration adelay in the schedule and an overrun incosts.

Set at the WBS level.

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Techniques for Calculating Estimateto Complete (ETC)

The ETC identifies how much money youare projected to spend from now to theend of the project.

Calculated using two formulas: ETC = remaining cost for activity

Remaining Units * Resource Price/Time

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

Where Performance Factor is calculateddepending on the earned-value techniqueselected for the WBS. 12-19


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This is the system default and calculatesETC based on the remaining units. This calculation does not take a

schedule delay or overspending intoconsideration. Historical evidence shows that these trends

do not correct themselves over time; theytend to get worse.

Remaining Cost

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Represents a reliable indicator of theminimum 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)

Using CPI to Calculate ETC

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Represents a reliable indicator of themaximum total required costs Incorporates the cost overrun to date

with a behind-schedule condition toproduce a more severe statisticalforecast Viewed as the very worst the project will do

based on its history

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

Using CPI and SPI to Calculate ETC

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earned value and weighted milestones

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