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Topics: Cost Management, Earned Value Management
Looking for advice on how to calculate Earned Value using the PERT Technique
I have been asked to calculate Earned Value using the PERT technique. This is a technique that has fallen out of common use so there is not mush information available on it. The formula for it is EV or BCWP = (ACWP/EAC)*BAC

The difficulty I have with this is that I need BCWP to calculate EAC. Any suggestions or advice?
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Marina

Program Evaluation and Review Technique (PERT) is a three point estimating technique to estimate cost or duration based on weighted average of three points: Optimistic (O), Pessimistic (P) and Most Likely (M).

The formula is (P+4M+O)/6

You need to establish three points to the EAC to be able to calculate the EV using weighted average. If EAC is unknown, then forecast it based on the three scenarios above.

Hope this makes sense.

RK
Thanks for this information Rami. I have been looking at a different definition of PERT. Have you come across this one? https://www.humphreys-assoc.com/evms/pert-...ed-ta-a-57.html

Marina
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1 reply by Rami Kaibni
Feb 02, 2022 11:42 AM
Rami Kaibni
...
I never came across this perspective of using PERT.
Marina -

This is a case where EAC was determined without using EV. For example, if you are in a situation where the past can't help forecast the future, then a team would need to use some other technique to derive their ETC. This is common on projects which possess significant uncertainty or complexity...

Kiron
...
1 reply by Marina Flood
Feb 03, 2022 4:18 AM
Marina Flood
...
Thanks Kiron
Feb 02, 2022 9:10 AM
Replying to Marina Flood
...
Thanks for this information Rami. I have been looking at a different definition of PERT. Have you come across this one? https://www.humphreys-assoc.com/evms/pert-...ed-ta-a-57.html

Marina
I never came across this perspective of using PERT.
This formula is actually a way to calculate EV when you do the algebra.

When you take (AC/EAC)*BAC and use EAC = BAC/CPI you get:

AC * (CPI/BAC) * BAC = AC * CPI; replace CPI with EV/AC:

BCWP = EV

To calculate EAC, you need BAC (total budget) and CPI = EV/AC (% complete)
...
1 reply by Marina Flood
Feb 03, 2022 4:22 AM
Marina Flood
...
Thanks for looking at this Keith. BCWP and EV are different acronyms for the same Metric BCWP is Budgeted Cost of Work Performed. This is another name for EV (Earned Value).
I think I need to look at a way of calculating EAC without using EV.
Feb 02, 2022 10:38 AM
Replying to Kiron Bondale
...
Marina -

This is a case where EAC was determined without using EV. For example, if you are in a situation where the past can't help forecast the future, then a team would need to use some other technique to derive their ETC. This is common on projects which possess significant uncertainty or complexity...

Kiron
Thanks Kiron
Feb 02, 2022 1:20 PM
Replying to Keith Novak
...
This formula is actually a way to calculate EV when you do the algebra.

When you take (AC/EAC)*BAC and use EAC = BAC/CPI you get:

AC * (CPI/BAC) * BAC = AC * CPI; replace CPI with EV/AC:

BCWP = EV

To calculate EAC, you need BAC (total budget) and CPI = EV/AC (% complete)
Thanks for looking at this Keith. BCWP and EV are different acronyms for the same Metric BCWP is Budgeted Cost of Work Performed. This is another name for EV (Earned Value).
I think I need to look at a way of calculating EAC without using EV.
...
1 reply by Keith Novak
Feb 03, 2022 2:09 PM
Keith Novak
...
Marina,
These are the kind of questions that are easier to answer with a whiteboard to draw on and write formulas. :-)

Whichever formulas you use, EAC is the actual cost of work performed, plus the estimated cost of work remaining. It assumes that future performance will be the same as past performance, so if work completed was 20% over/under planned cost (CPI), the remaining work will incur 20% more cost than planned also. (This is where a lecture is handy regarding why those assumptions are often flawed.)

While you don't need to use EV itself to calculate EAC, you need the data that is used to calculate EV. There is no way out of that. It requires 3 data points:

a) What is the total budget?
b) How much of the work is complete?
c) How much money has been spent on the work completed?

EAC = (Money Spent) + (Money Needed to Complete Remaining Tasks)

Money Needed to Complete Remaining Tasks = (Original Est. Cost of Work Remaining) * (% that prior costs were over or under planned effort)
Just trying to add something to above comments my recommendation is taking a look to PMI´s Earned Value Management practice standard.
I agree with Sergio. You can consult with EVM standard.
Rami, Kiron, and Keith made valid points.
Feb 03, 2022 4:22 AM
Replying to Marina Flood
...
Thanks for looking at this Keith. BCWP and EV are different acronyms for the same Metric BCWP is Budgeted Cost of Work Performed. This is another name for EV (Earned Value).
I think I need to look at a way of calculating EAC without using EV.
Marina,
These are the kind of questions that are easier to answer with a whiteboard to draw on and write formulas. :-)

Whichever formulas you use, EAC is the actual cost of work performed, plus the estimated cost of work remaining. It assumes that future performance will be the same as past performance, so if work completed was 20% over/under planned cost (CPI), the remaining work will incur 20% more cost than planned also. (This is where a lecture is handy regarding why those assumptions are often flawed.)

While you don't need to use EV itself to calculate EAC, you need the data that is used to calculate EV. There is no way out of that. It requires 3 data points:

a) What is the total budget?
b) How much of the work is complete?
c) How much money has been spent on the work completed?

EAC = (Money Spent) + (Money Needed to Complete Remaining Tasks)

Money Needed to Complete Remaining Tasks = (Original Est. Cost of Work Remaining) * (% that prior costs were over or under planned effort)
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