As a project co-ordinator, I do not have clear picture of the amount of daily salary of each guy in project team. May I know if I could be able to calculate the Cost Variance?
Cost variance can be calculated based on a "blended rate" that is an average rate of pay for the type of employee. I have done that very often, because we do not want to put real salaries into the project plan, for privacy reasons.
You can also do cost variance in terms of work-hours. Treat "one person hour: as a unit of currency, and express your cost variance in "person hours". For some project environments, I have done EVM using that method, too.
Actually, I have never been able to get true, real costs when doing EVM, except for outside consultants' rates. Even then, finance often argues that I should not use the real rates, because some people in purchasing feel that the rates should be private.
EVM is not accounting, so it does not need to be 100% perfect, down to the penny. The most critical thing is to see the trends and approximate progress reflected in the EVM numbers. Saving Changes...
Josh NankivelEngineering Project Manager| AppleSioux Falls, Sd, United States
In a previous organization where we worked with EVM, we did actuals down to the resource level. We took privacy and security very seriously, and took precautions. The raw data was only available to a few individuals who could be trusted with the data and needed it for their work with EVM.
If your organization is not or can not be structured similar to this, or if you can not have access to individual salaries, then Alex's suggestion works well too. The problem with that approach is that you may actually have an error with one or a few people (system error or otherwise) and without that level of detail you can't trace it back to anything. If these aren't found and fixed early, they can have cumulative consequences that are substantial.
Josh makes great points. I have never worked in an environment where the project plans were controlled closely, with tight security. I would love to hear more about the security methods, Josh.
I will add one more disadvantage to the methods I suggest:
You can NEVER reconcile properly to the financial books (general ledger, etc.). Because I was using averages and incorrect rates, the costs according to the EVM reports never reconciled accurately to the projects costs in the finance system.
Of course, I have only rarely worked in places where we could separate out each project's costs in the finance system.
Even if you are doing average rates, I strongly recommend keeping track of each employee's hours separately. So long as you do not average together all the work-hours, it should be possible for someone to reconstruct the correct, accurate costs, using the real rates. Sometimes we did some basic variance analysis, matching our financial totals to the EVM reports. Because we had detail reports by employee, time-period, and so on, we could trace back most of the errors and problems.
Thanks, Josh, and I would really be interested to know more about how you kept the project data so confidential and secure. Who had access to it? Who was allowed to look at it? Were there at least milestone reports that everyone was allowed to see? It sounds like an interesting situation. Saving Changes...
Josh NankivelEngineering Project Manager| AppleSioux Falls, Sd, United States
Thanks Alex. It was using Deltek Cobra for our EVM tool, and only our project controllers had that. Output data was secured using Xerox DocuShare and a fileshare that only project controllers had access to.
Reports external to this group were rolled up to our control account levels for status reporting and at the cost account level for CPR5 variance reporting. This was a big project, so a good amount of rigor went into planning & processes. It was probably the best way to go though, because we could find and fix issues relatively quickly, like when a group's billable rates increased unexpectedly because a PM forgot to factor extra costs due to a switch from at home to office work, where the overhead costs added about 15% for these people. It's one of those things that can turn into several hundred thousands of variance on a large project in a fiscal year.
