Earned Value

Earned Value Management

Carlos Stanley D'sa India

Hi everyone

I would like to know, when calculating the EV of a project. Do we need to consider upfront costs paid to the vendor as well like for equipment rentals or should we only consider payments paid to the work completed and the percentage of work completed?

Posted: Jul 22, 2024 1:44 PM

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Rami Kaibni

Community Champion

Senior Projects Manager | Field & Marten Associates New Westminster, British Columbia, Canada

Carlos, when calculating EV for a project, and in order to ensure that your EV calculation provides an accurate estimate of the project's financial viability and performance, I recommend you include all costs incurred and expected, whether upfront or spread out over the project's timeline.

Posted: Jul 22, 2024 2:39 PM

Keith Novak Tukwila, Wa, United States

Those one time payments will make your performance look bad at the outset because the rental equipment is charged before it completes any intended work, but they should be included. While you are only getting the value of the tool rentals over time, that fixed cost is already spent and dictates your remaining budget to be managed.

For management purposes, you could use 2 values. One would be the total cost and whether or not your overall effort will provide the expected ROI at the end. The other will be the ongoing cash flow compared to planned work to use the rental equipment and complete the deliverables.

Posted: Jul 22, 2024 3:45 PM

Sergio Luis Conte Helping to create solutions for everyone| Worldwide based Organizations Buenos Aires, Argentina

My recommendation, no matter I believe you are doing the right thing posting here, is to take a closer look to PMI´s EVN standard.

Posted: Jul 22, 2024 4:46 PM

Thomas Walenta Global Project Economy Expert Hackenheim, Germany

EV needs to be adapted to the intended purpose.

If you need to show the financial balance of your project, you should include all costs in currency. However, as they occur at the start, this will result in a critical report showing the depreciation of upfront investments. As a PM, you probably do not need this.

If your purpose is to measure work performance, you might switch to measuring in person hours and only include work-related costs.

Posted: Jul 23, 2024 4:06 AM

Kiron Bondale Retired | Mentor| Retired Welland, Ontario, Canada

Carlos -

context counts (as always).

If you are in a situation where the non-labor costs are fairly predictable and are large enough that they could skew EV analysis of the more unpredictable labor utilization, then I have done EV analysis purely on the labor costs but also provided some overall cost performance metrics to stakeholders.

Kiron

Posted: Jul 23, 2024 8:00 AM

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