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How does earned value give a clearer picture of project schedule and cost status than a simple plan versus actual system? Scheduling systems that only compare actual versus budget do not measure the work that was actually done for the money spent. These systems fail to incorporate the time variable into the equation. Hence, systems that only use actual and planned costs are misleading to both mgmt and the customers when it comes to evaluating project performance and progress. The CV (that is, BCWP – ACWP) by itself is insufficient as it does not measure how much work was done for the money spent. Example of where a traditional scheduling system can produce misleading results: Project Duration = 12 months Do we have a cost overrun of $0.5 million? No way to really be sure. The project may be ahead of schedule where the extra $0.5 million may represent advanced payments made to suppliers. Or, the project may indeed have a cost overrun and be behind schedule. Alternatively, using the same project… ACWP@6mos = $1.5 million Does this indicate the project is coming under budget, is it behind schedule, or both? Again, there is no way to be sure. EV, on the other hand, keeps track of schedules and budget against time and, therefore, overcomes these problems. With an EV cost/schedule system, determining the current status of a project requires three things: BCWS, BCWP and ACWP. From these data, SV and CV can be calculated. A positive variance indicates a desirable condition; negative means there something wrong. The important thing is that variations are per unit time. So we know exactly where we stand at any particular moment of the project. This can be shown visually on a cost/schedule graph. This graph plots all the important EV fields (parameters) in terms of cost (y) vs. time (x). How does a baseline facilitate integrating the planning and controlling of projects? The BCWS (baseline) is an anchor from which the project can be monitored using EV (cost/schedule) methods. This serves as a tool for measuring performance. Specifically, the baseline indicates “the planned cost and expected schedule against which actual cost and schedule performance are measured.” The baseline is a major component input to the EV cost/schedule system and acts as a ‘guide’ throughout the duration of the project. In terms of control, the baseline or BCWS is used to compute the scheduled variance (SV = BCWP – BCWS). The SV indicates an overall assessment of work packages in the project schedule to date. SV, whether + or -, is a good indicator of the direction of work the project is taking after more than 20% is completed. Therefore, this is an important control factor in which the baseline, BCWS, is one of two important control factor for this type of variance. Why is it important for project manager’s to resist changes to the project baseline? If a baseline is changed to disguise poor performance (a practice called rubber baselining), then the original problem is still there – only now it’s hidden. The baseline is a very important parameter in the EV cost/schedule system. Changing it changes others values, such as SV (see no. 3 above). Poor performance may be based on factors other than a poorly-defined original baseline. This can include a change of employee morale or interpersonal conflicts. These types of problems should be effectively managed w/o first resorting to changing the baseline. Some unforeseen changes in terms of cost should, perhaps, rely first on a contingency reserve (as opposed to a baseline change). Under what conditions would a project manager make changes to a baseline? The baseline should be subject to change if: the original baseline was poorly conceived or defined; there exist external changes beyond the control of the project team. External changes could include: change of customer requirements or government requirements. Basically, the baseline should only be “messed with” if the project will fail unless it is changed. When would a project manager not allow changes to a baseline? A project manager should not allow for this if: a contingency reserve could defray unexpected costs (if it was a cost issue to begin with); the project can successfully absorb the impact of unexpected changes. Effort should go into the initial development of a solid baseline with a good foundation. Then, as the project progresses, the team can worry about the other things. On the whole, the project manager should resist baseline changes unless absolutely necessary. How does a project rollup help identify project cost and schedule problems? A project rollup a very complete breakdown of a project’s current status as it illustrates results in terms of deliverables, organizational units and cost accounts. This allows a project manager to quickly determine project status at all levels of WBS and OBS. |
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