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Guidelines for Accurate Earned Value Management

To ensure that management decisions are based on accurate information, it is important that there is a sound representation of the value of the work earned. It is also important to reduce the subjective nature of statusing long work packages.

You can avoid problems by carefully planning the budget baseline, considering multiple different factors.

Work Package Duration

By definition, a work package is a short, well-defined amount of work. The word short however, is open to interpretation and depends on the level of detail that you intend to maintain in your system. A good rule of thumb is four to six weeks. If the work package is too short, the value gained from the extra detail does not outweigh the time it takes to maintain the data. For example, you would not want to enter a work package that is shorter in duration than the time it takes you to enter, status, and report on the work package. Conversely, if the work package is very long, the subjective nature of statusing the work package over multiple periods can cause errors in the earned value.

By keeping the work package short, you can help ensure the accuracy of the earned value calculation. For example, assume that an error was made in entering the status of a work package during one period. Since a work package with a short duration would actually be completed during the next period, the earned value would equal the budget at that point. This would, in effect, correct any inaccuracy that was previously entered.

In addition, short work packages typically use the 50-50 or the user-defined percentage progress technique. These progress techniques can be used to eliminate the subjective nature of estimating the percent complete of a work package. When using the progress technique of 50-50, only the activity start and finish dates are used in calculating earned value.

Collecting Actual Costs at the Control Account Level

It is important to remember that Cobra allows you to collect actual costs and forecast at a level higher than the work package level. This approach allows for accurate earned value calculation without the extra overhead of having multiple charge numbers. You can then manage the schedule variance at the work package level and the cost variance at the higher, control account, level. However, you can actually use this level as the charge number level and then use a code on the control account or a level of the work breakdown structure (WBS) to represent the level at which you submit your variance analysis, which is the control account level.

If you choose to use a code to represent the control account, use the General tab of the Application Preferences dialog box to rename the term control account to control account or charge number to avoid confusion. Users can then select the control account code in the filter pane to see all of the control accounts associated with the selected control account.

Homogeneous Resource Spread

Most progress techniques derive a percent complete for the work package and calculate earned value for each resource. For this reason, unless the budget spread for each resource is homogeneous, the earned value calculations can yield unexpected results.

For example, assume that the following three tasks are required in building a house:

  • Pour the slab: Performed by the concrete expert
  • Frame the house: Performed by a carpenter
  • Build the roof: Performed by a roofer

Further assume that each of these tasks must be completed before the next task can begin.

The rules of earned value state that status is determined at the work package level. Thus, if all of these tasks are summarized into a single work package, and the house is 50% complete, then 50% of the budget of each of the resources is also earned. In other words, 50% of the concrete expert’s budget is earned, 50% of the carpenter’s budget is earned, and 50% of the roofer’s budget is earned. When you analyze the earned value by resource, it is difficult to understand why, for example, 50% of the budget for the roofer is earned when no work on the roof has actually begun.

In the same example, using three short work packages instead of a longer work package provides the following advantages:

  • The earned value is more accurate because estimating the percentage complete of the entire house being built is more difficult than estimating the percentage complete of a single task, such as the slab being poured.
  • When 50% of the slab is poured, 50% of the work assigned solely to the concrete expert is earned.
  • The subjective nature of estimating status can be removed by using progress techniques such as 50-50 for the shorter work package.

In addition, because Cobra supports the collection of actual costs at the control account level, it is possible to have short work packages without the proliferation of unnecessary charge numbers.

For some projects, you may want to use the Resource %Comp progress technique. This progress technique allows you to enter the percent complete status for each resource. By statusing at the resource level, you can accurately report the exact amount of work that has been accomplished by each resource.