Hi Jim:
The Earned Value Management is independent of whether project is revenue generating or not. All it considers is the approved project budget and schedule, that is the baselines.
Please also note that there are projects which do not incur direct costs, hence no AC. For example, if I am managing a project internally for my organization that requires development of a reporting system, it won’t cost me anything except me and my team’s time. One can argue that a portion of our salaries contributes to this project as its cost, but that’s indirect cost. Usually for internal projects that do not require capital investment, AC is not recorded.
Coming back to your question whether AC and EV be equal for projects having direct costs; yes they can be equal, but that will be a very rare and unlikely situation. If the project budget and schedule was very well defined, and everything goes as planned, then you might have both these values be equal.
Imagine if we are exactly completed half of the project work having an approved budget of $100,000, what would be our current EV? That is, how much ‘value’ have we earned so far in comparison to the approved budget? 50% of it right? So the EV is $50,000. Now, what is our AC? Is it $50,000 as well? No, it can’t be determined by that. AC is independent of the baselines; it is the amount we have spent so far. The AC can be $40,000 or $60,000 or anything else depending upon how much we have actually spent.
So, here are the answers to your questions:
1. No, AC and EV totals are generally not the same.
2. EV is based on the ‘value’ of work completed in comparison to the BAC.
3. AC is the actual costs incurred to date; independent of EV or BAC.
4. EV, and AC are not related to project revenues at all. Both, revenue-generating and non-revenue-generating projects have EV and AC.
5. Your definitions of EV and AC are correct.
Please feel free to let me know if I have failed again in clearing your confusion. If that’s the case, perhaps I have not understood your question. Please try rephrasing your question with some sort of an example.
Regards,
Khurram Hussain, PMP, CSSBB