TOPIC: Earned Value Analysis

Hi there,

I got a doubt on the earned value concept. While listening to Cornelius podcast I understood that we should only consider the EV of fully completed activities/tasks.
Now while going through Rita's book, in one of her exercises (The Fence 1) it seems that EV shall be counted even if only 50% of a task is completed.
This made wonder what's really the correct way to look at it. Does it perhaps depend on the context? Can someone give some hints on this topic?

Thanks.

Micael:

It can be a little confusing; I will try to explain.

The "Earned Value" can be measured at any time during an actual project or phase. It is that portion of the project that is ACTUALLY completed. For example, if a quarter of a $1000 project is actually complete, the earned value for that project is $250 on that day.

Here's a concrete example in terms of INDEX. You are 3 months into a 6 month project with a total planned value of $1000. You have completed 25% of the project.
Earned value = 0.25 x $1000 = $250
Planned Value = 0.5 x $1000 = $500
SPI (Schedule Performance Index) = EV/PV = $250/$500 = 0.5 = you are BEHIND SCHEDULE.

Likewise, in terms of VARIANCE, SV (Schedule Variance) = EV-PV = $250-$500 = -$250 <-- VARIANCE IS NEGATIVE, you are BEHIND SCHEDULE

Hope that helps.

Harry

Hi Harry,

Thanks for the prompt reaction.

I got your example. In this case we refer to completion of a fraction of the overall project. Which in your example is quantifiable, hence we can count it as earned value. In this context it's clear to me the correct answer.

But if in an exam question the context refers to partial completion of a project 's activity,? Let say that only half of a house foundation was completed for whatever reason (obviously in real life hard to happen, but let's use it as example). What would be the earned value on that particular day knowing that the planned value was defined to be $1000. Shall the correct answer be $500 or $0?

I would be tempted to answer $0 because the completion of half of a foundation does not bring any value to the project given it brings no use.

All in all, should we analyse the context or should we always count any fraction of completed work as earned value regardless ?

Micael

Good morning Micael:

I can see your reasoning and understand your confusion, but I disagree. In your example, if half the foundation has been complete then the EV of that is $500. This makes sense from a index or variance perspective: In order to calculate schedule or cost indices (to see if you're ahead/behind schedule or over/under budget), you need to be able to calculate the EV of a project at a point in time, even if it the whole project is not complete. If not, then you're always behind schedule and over budget until the final deliverable is made since EV is zero and you've spent real time or real dollars. "Complete" does not necessarily mean "deliverable" or "usable" - clearly in your example the foundation is neither deliverable or usable, yet.

I'm certainly not an expert on EVA, so I will invite some other moderators chime in.

Apologies if I have confused the issue more!

Harry

Hi Micael,

I shared the same doubts you have when I first approached EVA, and I understand it could be confusing sometimes.
But I agree with Harry's explanation: the calculation of EV based on percentage of work completed equally applies to single tasks/activities (such as the foundation you mention in your example). What may help you to determine the percentage of completion, is the project schedule - which is typically provided to answer this kind of questions. Then, from there you will be able to derive the percentage of completion for each activity, while their PV are typically given. You sum up all the EVs associated to the completed activities (accounting for their percentage of completion), and you obtain the project EV.

As for the specific example you mention from Rita's book, this is exactly what they do: to compute the project EV, they start to compute the EV of each activity, based on their percentage of completion as of today. The first two activities have been completed, so EV_1 = PV_1 and EV_2 = PV_2. The third activity was expected to be completed by the end of Day3, but it actually was only 50% done at the time, so EV_3 = 50% * PV_3 = 500. You need to account for this effort on activity 3, which tells you that half of the work required for this activity has indeed been done; otherwise you would get misleading results when assessing how much your project is ahead/behind schedule.

Gabriella

Thank you to both for the in depth explanations.

It indeed becomes clearer on how to address this kind of questions on the exam.

Micael

Earned Value for an activity is % of work complete * budgeted cost for that activity (the planned value)

Say you're building a house and you want to know what the current earned value is for an activity.

Let's say 50% of the foundation is complete. You budgeted $5,000 for it. Earned value = (.50*5,000) = $2,500 for that particular activity

To get the cumulative earned value for all the activities for a particular point in time, you just sum up the earned value for all the particular tasks in that time period. So if Rita is asking for the earned value on day 3, you calculate and add up the earned value up to day 3.