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Earned Value Management in Microsoft Project

February 7, 2009 | Author: PM Hut | Filed under: Cost Management, Economic Evaluation

Earned Value Management in Microsoft Project
By João Almeida

Microsoft Project help describes Earned Value analysis as “a method for measuring project performance.” It indicates how much of the budget should have been spent in relation to the amount of work done so far and the baseline costs for the tasks, assignments, or resources.

At the root of Earned Value analysis are three key values:

  1. The budgeted cost of individual tasks as they are scheduled in the project plan based on the costs of resources assigned to those tasks plus any fixed costs associated with the tasks. This is the budgeted cost of work scheduled (BCWS). BCWS is the baseline cost up to the status date you choose. Budgeted cost values are stored in the baseline fields, or, if you’ve saved multiple baselines, in Baseline1 through Baseline10 fields.
  2. The actual cost required to complete all or some portion of the tasks up to the status date. This is the actual cost of work performed (ACWP). Normally, Microsoft Project correlates actual costs with actual work. Only if you enter actual costs independent of actual work or change resource pay rates will the actual cost be out of step with the scheduled cost.
  3. The value of the work performed by the status date measured in currency. This is literally the value earned by the work performed, and is called the budgeted cost of work performed (BCWP). This value is calculated for each individual task, but is analyzed at an aggregate level (typically at the project level).

Earned Value analysis is always specific to a status date you choose. This may be the current date or any date before the current date.

Microsoft Project gives us out-of-the-box AC, PV, EV, CV, SV, SPI, and CPI, among others. However, the key to using Earned Value is the way we interpret the values. So when EV>0 and PV=0 what should be the result of SPI? For anomalous situations, SPI calculated by Microsoft Project is always 0. This will make the analysis of eventual insertion errors difficult.

If PV > EV >0 and PV = Task Baseline Cost (this means that the task in the initial plan should be finished but due to a delay is still progressing), what should be the result of SPI? For Microsoft Project, it’s EV / PV, but in this case we have a task that is recovering and PV will stay constant with an increasing EV, so SPI is going to improve until the task is finished. This will present us with some misinterpretations since at this time it is better to have SPI with a value that enables us to identify recovering tasks.

João Almeida is currently working for Microsoft Portugal as an Engagement Manager for the Public sector. His personal blog can be found at http://projmblog.blogspot.com/.

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This entry was posted on Saturday, February 7th, 2009 and is filed under Cost Management, Economic Evaluation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1 person has left a comment

Hi Joao,
You have to be VERY careful and well versed when using MSP for Earned Value.

First, the default setting for % complete is based on elapsed time, rather than physical % complete, so unless you change that setting on all activities, you will NEVER get accurate information.

Secondly, MSP does some bizarre things when you have out of sequence progress. Let’s assume you have two activities connected Finish To Start, and in reality, you start them both simultaneously (implying a Start to Start relationship) IF you try to collect the Earned Value on both activities, the program will NOT allow you to do this, unless you correct the logic. Unlike Primavera, which provides an out of sequence progress report to enable you to correct this problem, MSP does NOT, again, resulting in false or misleading EVM information.

Bottom line- Can MSP be used for EVM? Yes, of course. But to do so, you need to be much more than just the “average” or “casual” user.

BR,
Dr. PDG, Jakarta

Dr. Paul D Giammalvo wrote on February 7, 2009 - 10:31 pm | Visit Link

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