Earned Value Reporting – Intro Part 1

Some organizations place significant importance on Earned Value Reporting as part of their project management practice while others do not. I personally have yet to work for or with an organization that placed any emphasis on this aspect of PM reporting whatsoever. That’s unfortunate, thought it has made my reporting job easier over the years.

For the purposes of this and the next few articles, we’ll look at EVR and some of the different reporting scenarios that are used to show progress and value for the PM process and the PMO. Much of this information is coming from the book “The Project Management Question and Answer Book” by Michael Newell and Marina Grashina.

What is an earned value report?

An earned value report is the preferred method for measuring progress in projects. It has the advantage of showing on one piece of paper the pertinent performance criteria for a project. From the earned value report the time-phased, planned expenditures for the project can be seen along with the actual cost of the project work that was accomplished and the amount of work that was actually completed. From this report the cost variance and schedule variance can be calculated.

There are several factors in the earned value report that we must know in order to use it effectively. These factors are the budgeted cost of work scheduled (BCWS), the budgeted cost of work performed (BCWP), and the actual cost of work performed (ACWP). These three elements form the basis for the earned value reporting system.

PMI has seen fit to change this almost universally accepted alphabet soup. It remains to be seen whether PMI will be able to persuade the entire project management community to make the change or whether PMI will have to change back to the more widely accepted way of calling things. There are certainly going to be some difficulties since most managers use PV to mean present value and EV to mean expected value. We shall see. In the year 2000 version of the Guide to the Project Management Body of Knowledge (PMBOK), PMI refers to these as follows:

Budgeted Cost of Work Scheduled (BCWS) = Planned Value (PV)

Actual Cost of Work Performed (ACWP) = Actual Cost (AC)

Budgeted Cost of Work Peformed (BCWP) = Earned Value (EV)

We will keep the traditional terms, which are still commonly accepted.

The first one of these factors is the BCWS or PV. This stands for the budgeted cost of work scheduled or the planned value. Once you catch on, you will say that it is just what it says it is. It is a plot of the budgeted cost of the project activities on a cumulative basis over a horizontal axis of time. All project tasks have a task cost that was derived from the estimated cost of each activity and a schedule that says when the activity will take place. The BCWS is simply a plot of these values according to when in time the expenditures are expected to take place. So, this is pretty simple to see, as it is just the project plan plotted out in terms of dollars of budget showing when those dollars are expected to be spent.

This is a method of showing the project plan in an easy-to-see way on a single piece of paper. By showing it in a cumulative way we can see the total expenditures to date for the project as well as the total cost of the project all on the same piece of paper. Notice in Figure 1 that the shape of the curve is similar to the letter S. Nearly all of the planned value curves for projects will have this shape because projects generally start out spending money slowly and then increase the rate of expenditure, reach a peak where money is being expended at its greatest rate, and then reduce the expenditure rate until the project is ended.

FIGURE 1

Next

In Intro – Part 2 we will look at Cumulative Variance Reporting.

Related posts:

1. Earned Value Reporting – Intro Part 2
2. Earned Value Reporting – Schedule Variance
3. Earned Value Reporting – Schedule Performance Index
4. Earned Value Reporting – Cost Variance
5. Earned Value Reporting – Percent Complete and Percent Spent