how to use earned value management using msproject 2007

7/30/2019 How to Use Earned Value Management Using MSProject 2007

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How to use Earned Value Management using MSProject 2007

PART I INITIAL SET-UP CALENDARS, TASKS AND MILESTONES

As project managers, we all are aware of Earned Value Management to help control costs. The PM

a good fundamental description in Earned Value. Using this concept to track a real time project is

useful and gives an instant feel about the performance of the project. Earned Value Manageme

effectively used with the help of MS Project 2007.

In this article, I have used the Earned Value concepts in tracking a project using MS Pr

(Professional edition).

Before I start, let me clarify certain assumptions.

The project I considered is a software development project that I took from the MS Project tem

then modified it by changing the timings, constraints, Costs etc to help better visualise the Ear

concepts.This article can be used especially by MS Project 2007 beginners or even professionals who do

chance to load resources/costs into their projects due to organisation policies or constraints.

However, this is not an article to explain how to use MS Project; but, if I came across any usef

and tips, I have added them as we move along.

1) CALENDARS

Standard Calendar- is of duration from 9 to 6 PM with Monday to Friday as working days. Satu

Sundays are holidays. (This can be set-up from Tools Change Working Time).

Project Calendar - is of duration from 9 to 6 PM with Monday to Friday as working days. Satu

Sundays are holidays. This has an exception of 5 PM to 6 PM every Friday of non-working hours

teams are engaged in taking backups and thereby, technical tasks cannot be executed. (This can

set-up from the Project Guide Feature or from Tools -> Change Working Time)

Resource Calendar is based on the Project Calendar for each resource taking into considera

individuals timings/holidays etc.


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2) TASKS All Tasks are based on Fixed - Unit i.e., Task durations are inversely proportional to no. of

resources and are resource or effort driven. This can be set-up from the Options dialog, Schedule Tab as

shown below.

However, if an individual task is not effort driven, this can be applied at the individual task level in the Task

Information dialog by unselecting the Effort Driven check box as shown below:

However, one can also use Fixed - Duration - Task where the task will take same time irrespective of no. of

resources.

3) MILESTONES

Milestones have been set-up as follows:

Tasks with zero duration OR a task that has been marked as milestones in Task information -Advanced tab

PART II INITIAL SET-UP RESOURCES

4 - RESOURCES


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An important area in the initial planning phase is how to allocate resources across the project.

MATERIAL RESOURCES are items that are consumed while working on a project. Material resources

use materials such as gasoline or wood as opposed to time. When you assign a material resource to a

task, you specify the amount of the material resource that you intend to use in units that are appropriate for

the material resource.

WORK RESOURCES are people or equipment that consumes time when working on a task.

GENERIC RESOURCES resources (as defined by you) that aren't specific people, equipment, or

materials, but rather descriptions of the skills that you need for a task when you don't know what specific

resources are available

COST RESOURCE - Using a cost resource, you can add a fixed cost to a task without making the cost

depend on work performed. If one or more tasks in your project require that you rent a storage unit during

part of the project, you can set up the storage unit as a cost resource that you can assign to tasks during the

appropriate periods to account for the cost of the storage unit as part of the task. Or, suppose that a

resource needs to fly from Salt Lake City to Chicago to complete a task; you can set up the airline tickets as

a cost resource and add them to the task.

You also can set-up a budget resource. Budget resources give you the opportunity to specify how work or

costs will be allocated during the project. Suppose, for example, that you want to budget for the cost of a

storage unit required during the life of your project. You would create a resource for the storage unit, setting

its type as Cost, and then check the Budget check box on the General tab of the Resource Information

dialog box to make it a budget resource.

If you set up a cost resource as a budget resource, you

can use it to budget for your project.

MS Project doesn't allow you to enter any cost information

for a budget resource on the Resource Sheet. To assign a

value to the budget resource, you first assign it to the

project summary task and Project won't let you assign a

value as you assign the budget resource. Then, you

supply a value by adding the Budget Cost field to the table

in the Task Usage view or the Resource Usage view.

Here, I have set-up 15 PCs for the project team and 2

laptops for the project manager and analyst as budgetresources.

FIXED COST - Some tasks are fixed-cost tasks, that is, you know that the cost of a particular task stays the

same regardless of the duration of the task or the work performed by any resources on the task.


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5) RESOURCE USAGE

After the plan is complete and the resources loaded, you would normally find that resources would be over

allocated primarily due to parallel tasks, or sequential tasks with leads/lags. The first thing to do is to check if

resources can be re-allocated, or utilised in a different way. I checked for this and found many situations

where certain resources were being used simultaneously in various tasks. The resource usage view gives a

convenient way of identifying such situations that are not so easily visible.

Next, check if certain tasks can be completed at a comparatively lesser time. Another option is to check for

free slack- i.e., free float existing in each task, then to check if it can be done by relatively giving less

duration per day.

However, if the budget and customer deadline is stringent, then one will have to opt for resource over time

(to a realistic level).

In this project, I have considered a situation where the project deadline is stringent. And that over allocationof resources was inevitable especially during the development phase.

To achieve this, go to the Tracking Gantt Entry table view. Use Windows Split option and opt for Resource

Work view.

As you move from one task to another, you can clearly see the resources allocated along with the time

duration. You will get the option to put Ovt. Work (Overtime work). I have attached a sample view below for

better clarity.

Resource levelling should be the last option since it will move the project schedule date to the right and

cause delay in the project completion date.

PART III DEALING WITH BASELINES

6) BASELINES

Some projects, particularly shorter ones that run only a few weeks or even a couple of months, may have

one baseline set at the outset and may proceed close enough to your estimates that they can run their

course against that single baseline. Other projects, especially longer ones, may require you to set several

baselines along the way, particularly if the original estimate is so out of line with what has transpired in the

project that the original is no longer useful. You can modify the entire baseline if changes are drastic and

occur early in the project, or you can modify the base-line estimates only going forward from a particular

point in the project.

When we set a baseline, MS Project automatically baselines the Costs involved as the Baseline Budget i.e.,

Cost Performance Baseline or Performance Measurement Baseline or also referred as Budget at Completion


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BAC . Ma e a note o t s as t s w e use u n ater sectons w en we scuss Earne Vaue

Management.

Note: You can create your own custom views in the Entry View of Tracking Gant like the one I have set

above.

Costs can change a baseline, too. For example, what if you save a baseline that is set to fit within a

$100,000 budget and, before you start work, cost-cutting measures hit your company and your budget is cut

to $75,000? It is wiser to make the changes to your resources and costs, and then reset your baseline

before starting the project itself.

Setting interim baselines keeps your projects from varying wildly from your estimates when mitigating

circumstances come into play. When you're ready, you can use the Set Baseline dialog box to save up to 11

baselines and 11 interim plans for your project. Each baseline is a picture of your project at the time that you

save it, and each baseline that you set includes information about tasks, resources, and assignments. For

tasks, Project saves duration, start and finish dates, work, time phased work, cost, and time phased cost.For resources, Project saves work, time phased work, cost, time phased cost, budget work, time phased

budget work, budget cost, and time phased budget cost information with the baseline. For assignments,

Project saves start and finish dates, work, time phased work, costs, and time phased costs.

When you save interim plans, Project saves a set of task start and finish dates that you can compare with

another interim plan or with a baseline plan, thus helping you to keep an eye on progress or slippage.

Saving baselines and interim plans can help you compare current information (found in the start and finish

fields) with baseline information (found in the baseline fields). The distinction between baselines and interim

plans in Project is the amount and type of information that Project saves.

PART IV- EARNED VALUE CONCEPTS

7) TRACKING

Tracking Gantt view helps to show actual progress vs. projections.

Before we actually start tracking and updating the actual of the project, let us relook at the Earned Value

Concepts.

EARNED VALUE CONCEPTS


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Budget at Completion (BAC) = Performance Measurement Baseline = Cost Performance Baseline = Project

Budget (including Contingency reserves). This excludes Management Reserve which is reserves forunplanned risks/changes. Project Manager can spend the project Budget including the contingency reserve

for planned risks/delays. However for spending Management reserves he needs to take specific prior

approval from Senior Management.

Planned Value (PV) = Budgeted Cost of Work Scheduled = BCWS = PV/BAC

Earned Value (EV) = Budgeted Cost of Work Performed = BCWP = (% of work complete) x BAC = EV/BAC

Actual Cost (AC) = Actual Cost of Work Performed = ACWP = AC/BAC

Schedule Variance = SV = EV PV. If > 0, means Ahead of Schedule

Cost Variance = CV = EV AC. If > 0, means Under Budget

Schedule Performance Index = SPI = EV/PV, If > 1, means Ahead of Schedule

Cost Performance Index = CPI = EV/AC, If > 1, means under budget

Estimate at Completion (EAC) = BAC/CPI = AC + (BAC-EV) = AC + (BAC-EV)/ (CPI x SPI)

To complete Performance Index = TCPI initial = Work remaining/ funds remaining = (BAC-EV)/ (BAC-AC).

Higher value means tighter budget. This you can easily infer from the formula itself.

TCPI (later) after revised EAC = Work remaining/ funds remaining = (BAC-EV)/ (EAC-AC). Higher value

means tighter budget

PART V- TRACKING

Now let us see how these concepts can be used in MS Project 2007.

You can record actual information for a project by filling in the following fields for each task that tracks the

progress of your project:

Actual start date

Actual finish date

Actual duration

Remaining duration

Percentage complete

Note: The fields mentioned above are one possible set of fields that you can use to record actual

information; there are other alternatives. For example, some people focus on updating only Actual Work and

Remaining Work.

OPTION I - Set Actual Start Date and Actual Duration (If Actual Start Date is not set, MS Project will


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This will automatically calculate the % complete, remaining duration, Actual Cost and remaining cost till then

for that task.

If you set an actual duration that is greater than the planned duration, Project assumes that the task is

finished but that it took longer than expected to complete. Project adjusts the planned duration to match the

actual duration and changes the Percent Complete field to 100% and the Remaining Duration field to 0%.

As an example, if Actual Duration is filled say, 3d where as total duration is 4d. And say, the work is

completed before time. In that case, enter remaining days as zero. The task will be automatically marked as

100% complete. The Actual Finish Date will be one day before. Also, the actual cost involved only for 3 days

will be added. Then, the project will be ahead of schedule and under budget.

OR

OPTION II - Set Percent Complete

(If Actual Start Date is not set, MS Project will automatically take Actual Start Date as the Baseline Start

Date)

Setting the % complete will automatically calculate the Actual Duration, Remaining duration, Actual Cost and

remaining cost till then for that task.

If you set your options to update resources when you

update tasks, Project also calculates the Actual Cost and

Actual Work values. If you enter 100 in the Percent

Complete column, Project assigns the planned finish date

to the Actual Finish Date column. If this value is not

correct, don't enter a Percent Complete value; instead,

enter an Actual Finish Date.

OPTION III - Set Actual Work and Remaining Work

Sometimes, you must schedule tasks based on the availability of certain resources. In these cases, tracking

progress on a task is easiest if you update the Actual work completed. Updating this value also updates the

work that each resource is performing.

Use the Tracking Table view to enter information into the Act. Work (Actual Work) column, but start in the

Task Usage view so that you can enter actual work performed for specific resources. Choose View -> Task

Usage, right-click the Select All button, and choose Tracking from the short-cut menu that appears. Then,

update the Act. Work column.

This also helps in putting the actual work done by the

resource. For example, the Actual duration might be 2


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days but actual work completed might be ONLY 4 hrs. By

making this more explicit, you can set the remaining

Actual Work to 12 hrs. So MS Project knows that the

project is running behind schedule and will increase the

actual cost. We will look at this kind of scenario and its

affect on the EVM later.

PART VI USING EARNED VALUE IN TRACKING

EARNED VALUEProject can use the % complete method or the Physical %

complete method to calculate earned value. Unless you

specify otherwise, Project uses the % complete method. I

have used % complete method here, i.e., using default

setting of MS Project.

Whenever we update the actual, MS Project calculates the

Actual Costs based on the resources assigned to each

task. If due to some reason, the cost involved is more than

the calculated MS Project cost, you can manually override

it in the Actual Cost column. This can be done by de-

selecting the check box in Tools Options Calculation

Tab.

Earned Value calculation can be viewed from the various

default views provided in MS Project.

The various views available in MS Project for viewing Earned Value Measurements are:

1) Earned Value

2) Earned Value Cost Indicators


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3) Earned Value Schedule Indicators

PART VII APPRECIATING EARNED VALUE

REPORTING

MS Project 2007 has a Visual Report feature to show a graphical trend of PV, EV and AC, including

Cumulative Actual Cost.

In fact, the visual reports can be exported to Excel or Visio. Excel reports have associated Pivot charts. The

default charts can be changed as per your convenience by adding/removing any of the fields in pivot OR by

modifying the trend lines, look and feel of the charts.

You can show the actual progress made so far day wise, while the tasks yet to start can be shown in a

weekly scale and can be expanded as you actually reach there.

To appreciate the EVM better, I have discussed a couple of cases.

For this, let us look at the EVM values. Go to Tools -> Tracking -> Update Project. Update work as complete

through 6-Sep-10.

While tracking the project till 6-Sep-10, it seems to have started on an optimistic note.

Here, the task Secure Cost resources was completed prior to the completion date and the next task conduct

needs analysis also started earlier. Hence the Earned Value is higher. Also, the Actual Cost is lower than the

scheduled budget. So, the SV and CV are greater than zero and SPI and CP I are greater than one.


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Now let us see what happens after the project has progressed for one more week.

Though the task Conduct needs Analysis started before the scheduled baseline start date, it ended much

later than the Actual Finish Date. The baseline duration was 3 days, but the task took 4 days (Actual Work =

24 hrs). However, the baseline Finish Date was 8-Sep-10, and since the activity started a day before, so the

Actual Finish Date was 8-Sep-10. Phew! Saved !!

However, the succeeding task Draft Preliminary software Specifications also took 3 days instead of the

baseline 2 days. However, the tasks have been completed almost well on schedule, because some of theprevious tasks were completed prior to their scheduled completion date.

Now, let us look at the EVM values. Go to Tools -> Tracking -> Update Project. Update work as complete

through 10-Sep-10.


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Now, go to the Earned Value view. The Scheduled Variance (SV) is greater than zero, but the value has

reduced compared to the last week. The Cost Variance (CV) has now become negative.

This clearly shows that the project is ahead of schedule but over budget.

The Earned Value Cost indicator view further reconfirms this. The overall TCPI has gone up to 1.01 (i.e.,

greater than 1). But this is not a huge deviation and the project can be brought under control reasonably with

less efforts.

The Earned Value Schedule indicator view reconfirms the progress related to Schedule. Though the SV is

greater than zero, the progress has been relatively less as compared to last week.

To re-plot the S Curve showing Planned Value, Earned Value, Actual Cost and Cumulative Cost based on

Actual Cost, go to Reports -> Visual Reports.

Redraw the pivots as per your convenience. I have pivoted the PV, EV, AC and Cumulative Cost against the

dates, where the 1st 12 days of the project has been plotted against each day while the rest has been

calculated against weeks.


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The chart changes as you keep making changes to the pivot table to reflect the latest view of the pivot table.

You can change the appearance of the chart to present it the way you want e.g., you can change the

thickness and the presentation of the data points in the chart.

To show the PV, EV and AC more clearly, I have recreated the charts after excluding the Cumulative Cost

from the pivot table.


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how to use earned value management using msproject 2007

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