A True Rival to EVM?
Glen B. Alleman was kind enough to respond to one of my recent posts, taking exception to my assertion that a simple, calculated estimate at completion (EAC) is probably the most powerful underused tool at the project manager's disposal.
He laid out a scenario where a varied time-phased budget (Budgeted Cost of Work Scheduled, or BCWS) would introduce a sufficient level of error into the calculated EAC so as to significantly reduce its effectiveness.
I must disagree, if, for no other reason, than the time-phased budget isn't part of the calculation.
As I discussed in that earlier post, the classic cost performance index divided into the budget at completion formula can be algebraically simplified to dividing cumulative actuals by the estimated percent complete. With those two data points, remarkably accurate management information can be gleaned and used to avoid project catastrophe.
To support my argument, I would like to ask: What other options are out there? What other methods can rival the simple earned value management (EVM) version?
After suffering through semesters and semesters of accounting, and semesters and semesters of finance, I can say with a fair degree of certainty that there's nothing in the accountant's toolbox that can even come close to the accuracy of the simple EVM method.
As counter-intuitive as this may sound, the person who has been through a 40-hour EVM class is in a far superior position to relay accurate at-completion project costs than is the accountant, who, of course, needed years and years of post-secondary education.
I intend to speak on this at the EVM World 2009 conference being put on by the PMI College of Performance Management this week. If you're in attendance, look me up. Otherwise, leave a comment. I'll see it, I promise.
|Vojislav Car, PMP|
|Glen B. Alleman|
|Project Management Hut|
|Hemant Kishor Anand|
Some areas where there are limitations that I have faced:
1. If the final budget is unknown, as mentioned by Octavio, but there is an added scope.
2. In terms of sensitivityâ€”is an SPI of 0.8 any better than an SPI of 0.75?
3.If the expectation of accuracy is +/- 10% is it reasonable to forecast a EAC when CPI is 0.8
By tying time collection with ETC collecting (rather than percent complete) our CPM output becomes more a credible vehicle to collect an accurate EAC. Further, by training the project team to think about "how many hours are left" rather than "I planned for X, I have used <X, therefore there is the delta between planned & actual remaining, the ETC becomes a stronger view of the health of the project and flags early on those resources that do not understand the importance of an accurate (over a pleasant) ETC in project management, allowing for early corrections while the burn rate is still low.
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