Alphabet Soup? A Better Idea …
The capability to use earned value measurements is available in most project management software products. But it is rarely utilized, for two primary reasons. First, it asks the user to learn several new terms and acronyms. How about BCWS, BCWP, ACWP, CPI, SPI, CV, SV, BAC, EAC and other alphabet soup terms? Secondly, the use of this feature is usually associated with cost performance analysis, a function that is not universally utilized. But, you need not be scared off by either the terminology or the costing aspects. It is quite easy and practical to employ just part of this earned value protocol, for measuring the rate of work accomplishment against the plan. Here's how.
So, forget about the alphabet soup, except for these two terms: BCWS (Budgeted Cost of Work Scheduled) and BCWP (Budgeted Cost of Work Performed). BCWS is really the value of the work that was planned to be accomplished at any point in time, per the target or baseline schedule. BCWP is the budget for the work times the percent complete, at any point of time. In fact, why don't we rename these terms to Planned Accomplishment and Earned Value (or accomplishment value, if you prefer). You may even find that your software uses these terms, instead of or in addition to the acronyms. You do not have to have a CPM to use this earned value technique. You do have to have a list of all the work to be performed (identified as tasks in your scheduling database), a schedule for the work, and some kind of weight factor for each task. If you are controlling only labor-based tasks, you can use the planned labor hours as the weight factor. If you are using mixed resource values, you will find that the planned task cost is the lowest common denominator,
or weight factor.
To use the EV approach, identify your tasks, assign a cost (or other weight factor) to each task, and schedule all tasks (either manually or by CPM). The computer will calculate the BCWS or
Planned Accomplishment for any point in time, by multiplying the planned percent complete of each task by the value (cost) of the task. If you are using a Work Breakdown Structure (WBS), the computer will roll up the data to any level of detail. By summarizing to the highest level, you can get a weighted planned accomplishment curve for the entire project -- essentially a cash flow
or project expenditure graph.
Now, when it comes time to progress the schedule, just enter the percent complete of any tasks that have started. The system will multiply the percent complete by the budgeted cost, producing the earned value. This gives us a weighted measure of accomplishment, which can be compared to the planned accomplishment. If the earned value (BCWP) is less than the planned accomplishment (BCWS), work is not being accomplished as fast as planned, and you can say that the project is behind schedule.
Monitoring the earned value against the planned accomplishment (the Schedule Performance Index) provides an early trend analysis to guard against poor schedule performance. We can assume that if the overall production rate is below par, that the computed project end date is in jeopardy. This technique also works very well for monitoring the progress of subcontractors. I use a below par SPI to convince subcontractors to put on additional crews to get back on schedule.
Use the Schedule Performance Index (SPI) to plot the rate of work accomplishment. The SPI is the Earned Value divided by the Planned Accomplishment (BCWP/BCWS). You are looking for an SPI of 1.0 or better. If you plot the SPI on a periodic basis, you can see if the rate of accomplishment is improving or faltering. A low SPI, which fails to improve with time, is a clear indication that meeting the schedule objective is in danger.