On Earned Value Management’s Acronyms

April 17, 2011 | Author: PM Hut | Filed under: Cost Management, Economic Evaluation

On Earned Value Management’s Acronyms
By William R. Duncan

In the beginning … the promoters of earned value management used FLAs (Four Letter Acronyms) for the 3 basic measures:

  • BCWS = Budgeted Cost of Work Scheduled
  • ACWP = Actual Cost of Work Performed
  • BCWP = Budgeted Cost of Work Performed

But four letters seemed excessive in the world of TLAs (three letter acronyms), especially when two of them (CW) were the same in all cases. So ’round about 2000, some promoters of earned value management began to advocate for two letters:

  • PV = Planned Value (instead of BCWS)
  • AC = Actual Cost (instead of ACWP)
  • EV = Earned Value (instead of BCWP)

As you can see, it seemed that the promoters wanted to emphasis “value” because … value is good!

Unfortunately, these two measures represent “value” mostly from the perspective of the project team, and most especially if the project team is composed of contractors:

  • Planned value = the contractor’s plans for getting value by getting paid
  • Earned value = the contractor’s actual value from earned payments

But if you are the customer/ client/ user/ owner/ sponsor of the project, your value usually comes after the project is over. There is no business value to you in either planned value or earned value.

But no one really wants to go back to the bad old days of FLAs, so what should we do? In an IJPM article in 2005, Denis F. Cioffi suggested the following:

  • SC = Scheduled Cost (instead of BCWS)
  • AC = Actual Cost (instead of ACWP)
  • EC = Earned Cost (instead of BCWP)

I like it. Makes sense. More accurate. More descriptive. Everyone should start using this nomenclature. Now.

William R. Duncan is the principal of Project Management Partners of Lexington, MA USA. He currently chairs the Board of PMCert, the certification body of the American Society for Advancement of Project Management (asapm). He was the primary author of the original (1996) version of A Guide to the Project Management Body of Knowledge and was one of the founding members of the Global Alliance for Project Performance Standards (GAPPS) which has recently published a framework for performance-based competency standards for project managers.

© 2011 William R. Duncan - http://www.pmpartners.com/

Originally published at http://pmtip.wordpress.com/.

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1 person has left a comment

For those entering the Earned Value domain for the first time, EV’s units of measure are monetary But EV does not measure “value” to the buyer in the way suggested here.

The BCWS of earned value is the budget for the planned work. The BCWP - the earned value - is “earned” as the progress toward completion is measured. This measure is usually in “percent complete,” giving BCWP = BCWS x “percent complete.”

While some have suggested migration to the notation suggested here of PV, EV, AC, the primary users of Earned Value - the US Government and the tools used to report EV are still formatted in the standard notation (BCWS, BCWP, ACWP). The DID 81468 Contract Performance Report contains those named fields.

Project “value” is certainly an important aspect of measuring project performance. The measures of project value are best done through a business management process like Balance Scorecard with its Key Performance Parameters (KPP) and Key Performance Indicators (KPI).

As well Measures of Effectiveness (MoE) and Measures of Performance (MoP) are a means of measuring a projects value to the consumer of the project’s benefits - be they a building or space craft.

Glen B. Alleman wrote on April 18, 2011 - 11:09 pm | Visit Link

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