Earned Value Reporting – Percent Complete and Percent Spent

In this final article on Earned Value Reporting we’ll look Percent Complete and Percent Spent. For percent complete, we’re looking at the amount of completed work at a given point against the planned budget at completion. For percent spent, we’re simply considering the amount of planned budget that has been spent so far on a given project.

Newell and Grashina’s book is the basis for much of the information in this discussion on percent complete and percent spent.

What is percent complete?

Percent complete is a simple calculation. It is simply the amount of work that has been completed divided by the budget at completion.

% complete = BCWP / BAC

Notice that the percent complete can never be greater than 100. This is because the BAC is the sum of the budget in the project. The individual values of the budgets in each of the project’s activities, the BCWS, are the same as the individual BCWP for each activity. Since the only difference between the BCWS and The BCWP for an activity is whether or not the activity has been completed, at the end of the project the sum of all of the budgets must equal the sum of all the BCWP. If an activity has not claimed its BCWP, the project is not yet completed. As soon as all of the activities in the project have claimed their BCWP, the project is said to be completed.

What is percent spent?

Percent spent is another simple calculation. It is the amount of the budget that has been spent. It is calculated by dividing the actual cost of work performed by the budget at completion.

% spent = ACWP / BAC

Summary

Now that we’ve concluded this review of the various Earned Value Reporting methods as presented by Newell and Grashina in their book “The Project Management Question and Answer Book,” I’d like to hear your ideas on earned value and how much experience you have with using it in your organization. Has it been useful? Has it helped you to better manage your projects? Has it been helpful to your customers? Please feel free to share this information in comments below so all readers can share in this information…thanks.

Earned Value Reporting – Estimate to Completion

In this article on Earned Value Reporting we’ll look Estimate to Completion. As explained in the book “The Project Management Question and Answer Book” by Newell and Grashina, the Estimate to Completion describes the expected cost needed to complete all the remaining work for a schedule activity, work breakdown structure component, or the project.

Newell and Grashina’s book is the basis for much of the information in this discussion on Estimate to Completion.

What is the estimate to completion?

The estimate to completion or the ETC is an estimate of the additional money that will be necessary to complete the project. It is calculated from the estimate at completion that we discussed previously.

The estimate to complete is something that can and should be derived as quickly and as early in the process and/or life cycle of the project as possible because it will help the team budget accordingly. However, if the estimate is done early and there is a need at some point to modify it, this can be done once or – if needed -even more than once during the life cycle of the specific project in question.

Can you get into trouble with estimates at completion? You bet you can. As we have seen in the discussion of the EAC, there are many ways that this estimate can be made. The most common form is the budget at completion divided by the cost performance index. This is only a rough estimate of what the project will cost when it is completed.

Using the estimate at completion predicts that the project will overrun or underrun its budget at the end of the project. While it is a good thing to keep the stakeholders and the managers of your company informed that projects are in trouble, it is a weak support for asking that the project be given additional budget. A good project manager who wants to keep his job will take the EAC and use it as additional supporting information to show that the project budget was originally overor understated. In addition to the EAC, the project manager should have much supporting information as to why the project is in the condition that it is in.

Earned Value Reporting – Other Ways of Calculating EAC

In this article on Earned Value Reporting we’ll at other ways of calculating Estimate at Completion. Again, the Estimate at Completion tells us the forecast value of the project when the project has been completed.

The book “The Project Management Question and Answer Book” by Michael Newell and Marina Grashina is the source for much of this discussion.

Other ways of calculating EAC

Taking the actual cost of work performed and adding it to the remaining work to be done can describe a somewhat more optimistic view of the EAC. This says that the project’s estimate at completion will be the sum of the remaining work to be done at the originally estimated budgets for that work plus the actual accumulated cost of the work already completed. The actual cost of the work already completed is nothing more than the ACWP, and the cost of the remaining work to be done, based on original estimates, is just the difference between the budget at completion and the work that is already completed.

EAC = ACWP + (BAC – BCWP)

Of course, the most optimistic calculation of the EAC is the one that is usually imposed on project managers. It says that in spite of the problems that have occurred on this project to date, the project is not only going to complete all the remaining tasks according to the original plans and estimates but is going to recover the budget overruns already spent. The calculation of EAC is quite simple.

EAC = BAC

While it may seem pessimistic to calculate the EAC by dividing the BAC by the CPI, it turns out that there have been a number of studies that have been done in this area.

Quentin Fleming states: “The cumulative CPI is a particularly reliable index to watch because it has been proven to be an accurate and reliable forecasting device. The cumulative CPI has been shown to be stable from as early as 15 to 20 percent in the project’s percentage complete point”.

From David Christensen: “Researchers found that the cumulative CPI does not change by more than ten percent once a contract is twenty percent complete; in most cases, the cumulative CPI only worsens as a contract proceeds to completion”.

What this is telling us is that the project managers who report that although bad things have happened early in the project, they expect to recover and finish the project within the originally planned budget are not very realistic. Unless they have good reason to defend this position, it should be accepted very reluctantly. The more probable outcome of the project is that the CPI will remain the same or get worse as the project progresses.

It is even rational to think this way. If a project cannot follow the project plan early in the project when the tasks planned were relatively close to the time the planning was done, then how likely is it that the tasks that were planned further in the future will have been estimated more accurately?