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Project management systems – Earned value management – part 3



Earned value management – part 3

Terminology

  • General terms
Terminal element

This is a term used in Earned Value Management that refers to an individual task or work package that the project manager must allocate a cost to.
The cost would be the Budget At Completion (BAC) for the individual task.


Planned Value

The project manager must know the cost of each of the tasks that are in the schedule.
This is sometimes referred to as Performance Measurement Baseline (PMB) for large projects.
It is a value given to each of the tasks (also known as a terminal element) from the work breakdown structure.

This would be the Budget At Completion (BAC) for each of the tasks.
All subsequent Earned Value calculations will be based on this amount.
In addition to the Budget At Completion, each task should also have a specific duration, which provides the basis for monitoring actual costs and physical progress.

For the overall project it shows the budgeted cost of scheduled work at a given date.

Any costs attributed to tasks should reflect all of the key non-productive manpower costs associated with a project.
For example, administration costs.

Earned Value (EV)

Earned Value indicates how much of the budget and time should have been spent, with regards to the amount of work done to date.
The Earned Value can then be compared to Actual Cost (AC) and Planned Value (PV) to determine project performance and predict future performance trends.

When considering the entire project this can be considered as Budget At Completion (BAC) x Percent Complete for a given point in time.
Or, for an individual task it would be Budget At Completion (BAC) (assigned for the task) x Percent Complete for that task.

Earning rules

The progress of tasks are tracked in terms of their status in terms of completion.
These rules can vary. See ‘Simple implementations’, Step3 [see Project Management Systems – part 11].

Actual Cost of Work Performed (ACWP)

This is often used instead of Actual Cost (AC).

It is the actual cost of the work done (in a given time period) and it may be different from that budgeted.

Actual Cost (AC)

Total amount spent on a task up to the current date.
See also Actual Cost of Work Performed (ACWP).

Budget at Completion (BAC)

The total Planned Value (PV or BCWS) at the end of the project.
If a project has a Management Reserve (MR), it is typically in addition to the BAC.

Estimate At Completion (EAC)

This is the manager's projection of total cost of the project at completion.

Estimate To Completion (ETC)

This is the estimate to complete the project.

Budgeted Cost of Work Scheduled (BCWS)

This can be used in place of Planned Value where no currency units are used.

It is the value of work that should have been done (Planned) at a given point in time.
It indicates the budget at a given point.
Budgeted Cost for Work Performed (BCWP).

This can be used in place of Earned Value where no currency units are used.

It is the value of work actually done at a given point in time.
It takes the work that has been done and the budget for each task and indicates what portion of the budget should have been spent to achieve it.
This is sometimes referred to as Earned Value.

Independent Estimate At Completion (IEAC)

This is a metric to project total cost using the performance to date to project overall performance.
This can be compared to the Estimate at Completion (EAC), which is the manager's projection.

Estimate at Completion (EAC)

This is the Actual Cost (AC) + (Budget At Completion – Earned Value (BAC-EV) / Cost Performance Index (CPI)).
A forecast of total costs that will be accrued by project completion based on past cost performance trends.

Variance at Completion (VAC)

This is the Estimated at Completion (EAC) – Budget At Completion (BAC).
The difference between the new Estimate at Completion and the original Budget at Completion.

Level of Effort (LOE)

In traditional Earned Value Management standards, non-discrete effort is called ‘level of effort’ (LOE).
If a project plan contains a significant portion of LOE, and the LOE is intermixed with discrete effort, Earned Value Management results may be contaminated.

Percent Complete

Task progress, related as either Earned Value / Budget At Completion, or simply physical progress shown by the fill of a task bar.

ANSI EIA-748A

In the United States, this is the primary standard for full-featured Earned Value Management systems.
It was published in May 1998 and reaffirmed in August 2002.
The standard defines 32 criteria for full-featured Earned Value Management system compliance.
Other countries have established similar standards.

PRINCE2® 2009 describes project monitoring within the Progress theme.
The purpose of the Progress theme is to establish mechanisms to monitor and compare actual achievements against those planned; provide a forecast for the project objectives and the project’s continued viability; and control any unacceptable deviations.
Two of the principles of PRINCE2 [see ‘The Complete Project Management plus PRINCE2’] are managing by stages and continued business justification.
The Progress theme provides the mechanisms for monitoring and control, enabling the critical assessment of ongoing viability.
[see Progress - purpose]

PRINCE2® is a Registered Trade Mark of the Office of Government Commerce in the United Kingdom and other countries.

Non - PRINCE2 information