As a PM, I can plan costs

PMPeople implements two complementary techniques to plan project costs:

  • Finance Management (accounting): Project budget is broken down into financial accounts to plan incomes, expenses, reserves, and costs. Control can be performed at each review date by comparing actual versus planned amounts and dates. Cumulated variances and forecasts can be calculated for the project itself and each work package.

  • Earned Value Management (S-Curve): Project cost baseline is broken down into work packages budgets. The cumulated sum of cost in time will produce the project cost baseline, also known as planned value, that can be represented as an S-shaped curve. Control can be performed at each review date by comparing actual and earned values versus planned values. EVM standard allows calculation on cumulated variances and forecasts for the project itself and each work package.

The project cost baseline is the approved version of the time-phased project budget, excluding any management reserves, which can be changed only through formal change control procedures and is used as a basis for comparison to actual results.

Earned Value Management (EVM), is the ANSI 748 standard method to control 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. At project or phase closing, AC equals the total cost spent.

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.

Planning cost in EVM consists of entering the data series for PV. If the project is broken down into work packages, then PV data for the project itself—work package #0— is calculated as the sum of each work package accrued PV up to each review date.

PMPeople makes easy entering PV for each work package as of each review date, by calculating PV using linear interpolation with time. Project Managers can copy this value or enter another one.

Let’s see an example:

  • Work package WP#1 budget is 8000, starting February the 5th and finishing February the 14th. PV series at review dates 5, 9, 13, 16 and 20 are calculated as: 0, 4571, 6857, 8000 and 8000.
  • Work package WP#2 budget is 9000, starting on day 8 and finishing on day 13. PV series at review dates are calculated as: 0, 3000, 9000, 9000 and 9000.
  • Work package WP#3 budget is 12000, starting on day 13 and finishing on day 20. PV series at review dates are calculated as: 0, 0, 0, 7200 and 12000.
  • PV series for the work package WP#0 —the project itself—at review dates 5, 9, 13, 16, 20, are calculated as: 0, 7571 (4571+3000); 15857 (6857+9000); 24200 (8000+9000+7200) and 29000 (8000+9000+12000).

PMPeople show work packages interpolated values as suggestions. It is the responsibility of the Project Manager (PM) to enter the right data.

Project managers (PM), and other managers (PMA, PMO, PfM, PgM), can plan the project cost at PLAN > Plan Cost:

  • Baseline Cost: Committed or authorized budget for the work package.
  • BCWS (Planned Value): The PV data series for the work package.
  • Basis of Estimates: Supporting data outlining the details used in establishing estimates such as assumptions, constraints, level of detail, ranges, and confidence levels.

If there are detailed work packages, then the Baseline Cost, BCWS (Planned Value) series for the project itself—work package #0— are automatically calculated.

If data series BCWS (Planned Value), need to be entered, consider that:

  • PMPeople initializes PV=0 for dates before Baseline Start; and PV=Baseline Cost for dates after Baseline Finish.
  • PV values for review dates between Baseline Start and Baseline Finish must be entered by the Project Manager as the cumulated cost at the work package until that date. Entering these data is quite easy if suggested PV values are copied.

In the example above, if we delete PV at review date 2024-12-24, and try to add it again:

  • If we select review date 2025-12-24, the calculated interpolated value is shown as 3007. This calculation is based on the work package data: Baseline Cost=3500. Baseline Start=2013-09-30 and Baseline Finish=2013-11-01.
  • The Project Manager can accept this value or change it before clicking “plus” icon [+] to add the new entry.

When controlling the costs at CONTROL > Control Cost, PV value is shown as read only compared to EV and AC at each status date.

Frequently Asked Questions
What are the two cost planning techniques in PMPeople?

PMPeople supports Finance Management (budget breakdown by accounts) and Earned Value Management (time-phased cost baseline).

What is the Planned Value (PV) in Earned Value Management?

PV is the authorized budget for scheduled work up to a status date. It represents the cost baseline.

Can PMPeople calculate interpolated PV values automatically?

Yes, PV is suggested via linear interpolation based on budget and dates. Project Managers can accept or override the values.