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 – Cost Performance Index

We’ll continue our discussion of Earned Value Reporting by looking at Cost Performance Index in this article. The Cost Performance Index refers to how the project is performing based on the actual spending of the project budget.

Much of the following information came from Newell and Grashina’s book entitled “The Project Management Question and Answer Book.”

What is the cost performance index?

The cost performance index or CPI is a measure of how well the project is doing in terms of spending the project budget. It is a comparison of the actual expenditures to the work that was accomplished. The index is a value that allows projects of different sizes to be compared.

The cost performance index is like the cost variance discussed previously with one important difference. When we calculated the cost variance, the result was a figure in dollars. If the dollars were a negative number, the variance was considered bad, and if the dollars were positive, the variance was considered good. The problem with this method is that it is difficult to compare projects of different sizes to one another. It would be better to have a measure that gave the health of the project regardless of its size. For this purpose we will use indexes.

Instead of subtracting the actual cost of work performed from the budgeted cost of work performed as we did when we calculated the cost variance, we will divide the same two numbers.

CPI = BCWP / ACWP

CPI = EC / AC

We can see that if the project is following its plan, the amount of work accomplished and the amount of money spent to accomplish it are the same, and the resulting value will be one. So, an index of one means that the project is following its project plan.

If the actual cost is greater than what is being accomplished, the denominator in the fraction will be larger than the numerator, and the resulting value will be less than one. This is generally considered to be a bad condition. If the actual cost is less than what is being accomplished, the resulting number will be greater than one and this is considered to be good. Of course any deviation from the project plan is bad even if the deviation is considered favorable. We should investigate to determine why this condition exists.

Example:

Two projects have their cost performance index calculated. Both projects are 10 percent over budget at the time of the calculation. Project One has a budget of $1,000,000, and Project Two has a budget of $10,000. These budget figures are the amounts that should have been spent as of today’s date. We will assume that the project is on schedule at this point in time. What is the cost performance index for each?

Project One is over budget by 10 percent of its budget or $100,000.

Project Two is also over budget by 10 percent of its budget or $1,000.

CPI = BCWP / ACWP

The BCWP is $1,000,000 for Project One.

The ACWP is $1,100,000 for Project One ($1,000,000 + $100,000).

The BCWP is $10,000 for Project Two.

The ACWP is $11,000 for Project Two ($10,000 + $1,000).

CV = BCWP – ACWP

The cost variance for Project One is $1,000,000 ? $1,100,000 or ? $100,000. The cost variance for Project Two is $10,000 ? $11,000 or $1,000 The CPI for Project One is $1,000,000 / $1,100,000 or 0.909. The CPI for Project Two is $10,000 / $11,000 or 0.909.

Notice that the size of the project does not make any difference in the calculation of the index. Projects that are each behind 10 percent have the same value for their cost performance index. This makes assessing the health or sickness of projects of different sizes much easier.