As a PM, I can control project cost

Project managers, or any other management role (PMA, PMO, PfM, PgM), can control project cost at CONTROL > Control Cost, using the web application and the mobile application:

Earned Value Management (EVM), is the ANSI 748 standard method to measure the project cost performance. According to EVM standard, we can measure three data values to measure the project cost performance, as of each status date:

  • Planned Value (PV) or Budgeted Cost of Work Scheduled (BCWS) is the authorized budget assigned to scheduled work, up to status date. At project or phase closing, PV equals Budget at Completion (BAC).
  • Earned Value (EV) or Budgeted Cost of Work Performed (BCWP) is the measure of work performed expressed in terms of the budget authorized for that work, up to status date. At project or phase closing, EV equals Budget at Completion (BAC), so as the PV.
  • Actual Cost (AC) or Actual Cost of Work Performed (ACWP) is the realized cost incurred for the work performed on an activity up to status date.

EVM allows to measure cumulated variations up to status date and to forecast actual cost at closing. This information helps the project steering committee to make decisions and request preventive or corrective actions.

When using EVM, you need to get familiar with some acronyms and terminology:

You can control cost performance for the whole project (work package #0) or for each decomposing work package. You need to select the status date and update these data:

  • Qualitative traffic light on cost management.
  • Percent of budget spent: If there are detailed work packages, then work package #0 value is automatically calculated.
  • Short explanation by the project manager.
  • Baseline Cost: This field can be updated at Plan > Cost. See 2.2.2.11.
  • Planned Cost: Project manager’s best estimate of total cost for this work package.
  • BCWS (Planned Value): PV value for this status date for this work package. The complete PV data series can be updated at Plan > Cost. See 2.2.2.11.
  • BCWP (Earned Value): Depending on the type of effort, project manager can enter EV value using measurement methods such as percent complete, weighted milestone, fix formula, physical measurement, apportioned effort, level of effort, etc.
  • ACWP (EV): Actual Cost of Work Performed up to this status date.
  • EVM calculations for this work package: See note #4.

The first three fields can be updated also at Health Check.

Note #1: Percent of budget spent should be equal to Actual Cost/Planned Cost:

  • If the user changes percent, then the Planned Cost is recalculated.
  • If the user changes Planned Cost or Actual Cost, then percent is recalculated.

Note #2: When work package is done, EV=Baseline Cost and Actual Cost=Planned Cost:

  • If EV is entered equal Baseline Cost, then percent=100 and Planned Cost=AC.
  • If percent is entered equal 100, then updated EV=Baseline Cost and Planned Cost=AC.
  • If AC is entered equal to Planned Cost, then updated percent=100 and EV=Baseline Cost.

Note #3: When work package is just started, percent=0 and EV=0:

  • If percent is entered equal to 0, then EV=0.
  • If EV is entered equal to 0, then updated percent=0.

Note #4: Data values calculated according EVM (Earned Value Management) can be analyzed for each work package:

  • Actual Time: Net work days from the project baseline start to status date.
  • SPI(t) (Schedule Performance Index time): If greater than 1, it means ahead schedule. If less than 1, it means behind schedule.
  • SV(t) (Schedule Variance time days): If positive, it means the number of days ahead of schedule. If negative, it means the number of days behind schedule.
  • CPI (Cost Performance Index): If greater than 1, it means under budget. If less than 1, it means over budget. For instance, CPI=0.7 means we complete €0.70 for each euro spent.
  • CV (Cost Variance): If positive, it means under budget. If negative, it means over budget. For instance, CV= –$2,000 means we are $2,000 over budget so far.
  • ETC (Estimate to Complete): The expected cost to finish all the remaining project work.
  • EAC (Estimate at Completion): The expected total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete.
  • VAC (Variance at Completion): A projection of the amount of budget deficit or surplus, expressed as the difference between the budget at completion and the estimate at completion.

Note: Schedule indicators SPI(t) and SV(t) are not taken from EVM standard, properly, but from an extension named Earned Schedule. These indicators have proven a better behavior to measure schedule performance. Besides, they are easier to communicate. For these reasons, we have implemented them in PMPeople.