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Topics: Earned Value Management
Earned Value
Network:19



There is any aproach tu calculate the project earned value when the expenses are not lineal,? i.e. the projects cost are not always growing, but in certain stages the decreases.
I have foud when the project expenses are not lineal, the earned value formulas do not reflect correctly whats is happening with the project and the make a bad forecast for the project.
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Network:1011



Brian -

I'm confused. What do you mean that costs are not always growing? In most projects you will see a typical S curve where costs will start out slow, then increase and then slow down again. Are you in a situation where there is cost recovery happening such that actuals are being re-stated?

Kiron
Network:19



Thanks Kiron for your reply.
I meant that the costs are not growing in lineal way. For example, in the first month the accumulate cost are USD 1000, in the second USD 1500, the third 3000 and the fourth 3100. The rate of cost grwing is not lineal, and I think that the formula assumes that it is.
Thanks again.

Brian.
...
2 replies by Karan Shah and Natalie Wooldridge
Mar 07, 2018 7:03 PM
Natalie Wooldridge
...
Brian, no project I know of has "lineal" (linear?) expenses...i.e. actual costs which grow in a straight line.

Month to month, the actual costs will vary sometimes by a lot. The important question is "Do your actual costs match your planned costs?".

Earned Value is simply an answer to the question "What did you plan to do this month? And, what did you actually do?"
If you expected to achieve $3,000 in work and only received costs for $1,500, the EV formula would tell you you're only getting 50% of the work done. However, sometimes, your project will have $1500 in actuals against $3000 in work, even though $3000 in work was actually done, but a team member or contractor is late reporting their progress! Happens all the time.

In this case, you best have a documented approach to reconciling the actual work costs to the monetized value of the planned work.

In an EIA-748 certified organization like mine, we allow changes to be made to financials for the current month in any of the next 2 financial reporting periods. We don't allow changes to "past history"...once the month is finished, it's finished. But the financials can be adjusted in future months to show progress and EV for the month. Cumulative EV is far more important than month to month, IME.

I hope that makes sense?

Natalie
Mar 08, 2018 11:42 PM
Karan Shah
...
The confusion arises because most EVM methodologies work on a cumulated number, and not necessarily a month-to-month number.

To build on your example:

Monthly Actual Costs (USD):
Month 1: 1000
Month 2: 1500
Month 3: 3000
Month 4: 3100.

As of the end of Month 4, your total actual cost (cumulated) is USD 8600.

Now, let us assume when you build your project plan, you had planned for ad-hoc resources in months 2 and 3. So your planned tasks and the costs associated with the planned tasks - which, to simplify, can be considered the planned *value* of execution - come out like this:

Monthly Planned Value (USD):
Month 1: 800
Month 2: 2000
Month 3: 3500
Month 4: 2500

As of the end of Month 4, your total planned value (cumulated) was USD 8800.

Let's also throw in the earned value, here. Extending the example further: The resources worked at a higher rate of efficiency than planned. The tasks they completed have the following value amounts attributed.

Monthly Earned Value (USD):
Month 1: 1100
Month 2: 2000
Month 3: 3500
Month 4: 2500

As of the end of Month 4, your total earned value (cumulated) was USD 9100.

So we have, at the end of Month 4:
PV = 8800
EV = 9100
AC = 8600

Plug these into the EVM formulae and you get:
CV = EV - AC = 500
SV = EV - PV = 300
CPI = EV / AC = ~1.06
SPI = EV / PV = ~1.03

(And all other metrics of EVM can feed off the above values.)

So, as of the end of Month 4, your project is both ahead of schedule and ahead of costs. Make sure to get your project team to party hard. They've deserved it.
Network:13443



Which formula assumes that the cost is not linear? Not EV. EV is just what it is. Do you mean some formulas under EVM that assume different scenarios like EAC forumulas depending on the state of your budget or whether CPI will continue at the same rate? No formulas assume you have had non-linear costing patterns to date, but some formulas (ie. EAC) can be used based on what you "expect" the future state to be.
Network:1011



Brian -

Sante is correct in that real life is rarely linear about anything! While EV examples you might have seen for PMP practice usually are based on a simple linear cost model, the technique can handle any shape of cost curve. What this means is that your calculation of EV & PV do need to be supported by sufficiently detailed work package-level cost estimates.

Kiron
Network:198



Mar 07, 2018 2:30 PM
Replying to Brian Freyle
...
Thanks Kiron for your reply.
I meant that the costs are not growing in lineal way. For example, in the first month the accumulate cost are USD 1000, in the second USD 1500, the third 3000 and the fourth 3100. The rate of cost grwing is not lineal, and I think that the formula assumes that it is.
Thanks again.

Brian.
Brian, no project I know of has "lineal" (linear?) expenses...i.e. actual costs which grow in a straight line.

Month to month, the actual costs will vary sometimes by a lot. The important question is "Do your actual costs match your planned costs?".

Earned Value is simply an answer to the question "What did you plan to do this month? And, what did you actually do?"
If you expected to achieve $3,000 in work and only received costs for $1,500, the EV formula would tell you you're only getting 50% of the work done. However, sometimes, your project will have $1500 in actuals against $3000 in work, even though $3000 in work was actually done, but a team member or contractor is late reporting their progress! Happens all the time.

In this case, you best have a documented approach to reconciling the actual work costs to the monetized value of the planned work.

In an EIA-748 certified organization like mine, we allow changes to be made to financials for the current month in any of the next 2 financial reporting periods. We don't allow changes to "past history"...once the month is finished, it's finished. But the financials can be adjusted in future months to show progress and EV for the month. Cumulative EV is far more important than month to month, IME.

I hope that makes sense?

Natalie
Network:764



Mar 07, 2018 2:30 PM
Replying to Brian Freyle
...
Thanks Kiron for your reply.
I meant that the costs are not growing in lineal way. For example, in the first month the accumulate cost are USD 1000, in the second USD 1500, the third 3000 and the fourth 3100. The rate of cost grwing is not lineal, and I think that the formula assumes that it is.
Thanks again.

Brian.
The confusion arises because most EVM methodologies work on a cumulated number, and not necessarily a month-to-month number.

To build on your example:

Monthly Actual Costs (USD):
Month 1: 1000
Month 2: 1500
Month 3: 3000
Month 4: 3100.

As of the end of Month 4, your total actual cost (cumulated) is USD 8600.

Now, let us assume when you build your project plan, you had planned for ad-hoc resources in months 2 and 3. So your planned tasks and the costs associated with the planned tasks - which, to simplify, can be considered the planned *value* of execution - come out like this:

Monthly Planned Value (USD):
Month 1: 800
Month 2: 2000
Month 3: 3500
Month 4: 2500

As of the end of Month 4, your total planned value (cumulated) was USD 8800.

Let's also throw in the earned value, here. Extending the example further: The resources worked at a higher rate of efficiency than planned. The tasks they completed have the following value amounts attributed.

Monthly Earned Value (USD):
Month 1: 1100
Month 2: 2000
Month 3: 3500
Month 4: 2500

As of the end of Month 4, your total earned value (cumulated) was USD 9100.

So we have, at the end of Month 4:
PV = 8800
EV = 9100
AC = 8600

Plug these into the EVM formulae and you get:
CV = EV - AC = 500
SV = EV - PV = 300
CPI = EV / AC = ~1.06
SPI = EV / PV = ~1.03

(And all other metrics of EVM can feed off the above values.)

So, as of the end of Month 4, your project is both ahead of schedule and ahead of costs. Make sure to get your project team to party hard. They've deserved it.

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