Earned Value Methods
Cobra provides a project option that lets you choose to calculate earned value by budget, by dollars, by time, or by hours SPI.
Select your preferred method for calculating earned value on the Preferences tab of the Project Properties dialog box.
By Budget
The default method for calculating earned value in Cobra is by budget. Cobra sums up the first result across all periods and applies the progress technique. Cobra calculates earned value by moving through the time-phased table up to the time of the calculation, earning the first result and the associated budget. If only a portion of the first result for the last period calculated is earned, Cobra uses ratios to calculate the corresponding portion of the associated budget costs.
In most project management environments, this is the recommended approach for calculating earned value. Estimates of percent complete are typically based on the hours worked, not the amount of actual costs that have been incurred or the number of days that have elapsed since the activity was scheduled to start. Using small discrete measures of progress reduces problems with the schedule variance, which can be further reduced by limiting work packages to a single resource. In cases where multiple resources are required, their budgets should reflect a single work effort. In other words, avoid planning work packages that include resources for dissimilar types of activities that occur at different times over the course of the work package.
To illustrate how the budget method for calculating earned value works, assume that a work package with two resources has a duration of two periods and is assigned the 50-50 progress technique:
| Resource | Period 1 | Period 2 | Total |
|---|---|---|---|
| Labor |
|
|
|
|
10 | 10 | 20 |
|
50.00 | 75.00 | 125.00 |
| Materials |
|
|
|
|
|
400.00 | 400.00 |
If the work package has started, the earned value for the first fiscal period is distributed for each resource as follows:
| Resource | Period 1 | Period 2 | Total |
|---|---|---|---|
| Labor |
|
|
|
|
10 | 10 | |
|
50.00 | 50.00 | |
| Materials |
|
|
|
|
200.00 | 200.00 |
As this example shows, one-half of the direct material dollars has been earned for the first period, even though the original budget spread had all of the direct material dollars planned for the second period.
By Dollars
The dollar calculation method calculates earned value based on total budgeted dollars. The dollars earned are then pro-rated to arrive at the remainder of the resource costs.
To see how this method works, assume that a work package with two resources has a duration of two periods and is assigned the 50-50 progress technique:
| Resource | Period 1 | Period 2 | Total |
|---|---|---|---|
| Labor |
|
|
|
|
10 | 10 | 20 |
|
50.00 | 75.00 | 125.00 |
| Materials |
|
|
|
|
|
400.00 | 400.00 |
If the work package has started, the earned value for the first fiscal period is distributed for each resource as follows:
| Resource | Period 1 | Period 2 | Total |
|---|---|---|---|
| Labor |
|
|
|
|
11.6 | 11.6 | |
|
62.50 | 62.50 | |
| Materials |
|
|
|
|
200.00 | 200.00 |
In this case, one half of the dollars budgeted for the LABOR resource is earned. Earned hours are then calculated by determining the number of hours corresponding to the first $62.50 of the budget as follows:
| Earned Hours | = | (10 hours * (50/50)) + (10 hours * (12.5/75)) |
|---|---|---|
|
|
= | (10 hours * 1) + (10 hours * .16) |
|
|
= | 10 hours + 1.6 hours |
|
|
= | 11.6 hours |
This method is typical of an earlier generation of earned value systems developed by financial rather than scheduling organizations.
By Time
This method bases the calculation of earned value on a percentage of the work package's time-phased budget. Thus, a work package that is 50% complete earns the portion of the work package's budget that corresponds to the first half of that work package's duration. This method has the advantage of forcing budgeted costs to be earned as they were originally planned, particularly in cases where work packages are assigned mixed groups of resources.
To illustrate how this method works, assume that a work package with two resources has a duration of two periods and is assigned the 50-50 progress technique:
| Resource | Period 1 | Period 2 | Total |
|---|---|---|---|
| Labor |
|
|
|
|
10 | 10 | 20 |
|
50.00 | 75.00 | 125.00 |
| Materials |
|
|
|
|
|
400.00 | 400.00 |
If the work package has started, the earned value for the first fiscal period is distributed for each resource as follows:
| Resource | Period 1 | Period 2 | Total |
|---|---|---|---|
| Labor |
|
|
|
|
10 |
|
10 |
|
50.00 |
|
50.00 |
| Materials |
|
|
|
|
0 |
|
0 |
With this method, no value was earned for the second resource since no budget was planned for the first period.
By Hours SPI
The HOURS SPI method is a means to back into the currency amount of earned value so that the schedule performance index (SPI) based on the hours is the same for both hours and the total currency value. To do this, Cobra calculates the earned value or the hours based on the progress technique. Then, Cobra calculates the SPI (SPI = EV / Budget Cumulative to Date). Cobra then calculates the currency value as EV = SPI x Budget Cumulative to Date.
However, if there is no Budget Cumulative to Date, Cobra does not divide by zero.
Cobra follows these additional rules:
- If the resource base unit is Hours, the baseline start date is less than the status date, and the progress technique does not equal the level of effort (LOE), then Cobra uses the percent complete to calculate the hours earned. From this, Cobra calculates the Hours SPI. Cobra then applies this SPI to the remaining results.
- If the resource base unit is Hours, the baseline start date is less than the status date, and the progress technique equals the LOE, then the hours earned equals the Budget Hours, and the SPI is 1, which Cobra applies to the remaining results.
- If the resource base unit is Hours and the baseline start date is greater than the status date, Cobra applies the percent complete across all results.
- If the resource base unit is not Hours, Cobra uses the Dollars method.
However, since it is not always practical to plan work packages with single resources, Cobra offers three alternative methods for calculating earned value.