Objective Estimates are Better than Subjective Ones
The easiest way to determine the degree of completion of a work package is to have it estimated by your work package manager. He will then tell you that the work package is 78% complete. How does your work package manager determine this figure? He probably estimated it subjectively. Such subjective estimates contain a large degree of uncertainty, especially for longer-lasting work packages.
As a project manager, I often overestimate the degree of completion of work packages and often underestimate the amount of work remaining. Is it the same for you? For this reason, Earned Value Management uses methods that are as objective as possible for determining the degree of progress. The following proverb also provides the motive for this:
“The same work under the same conditions will be estimated differently by ten different estimators or by one estimator at ten different times.”
The Earned Value Measurements Methods
The Earned Value is a measure of work performed and a snapshot of work progress at a given point in time for a given unit of work (e.g., a work package). To evaluate work progress of a work package, you can use different Earned Value methods. The chosen Earned Value method has a significant impact on the meaningfulness of the earned value. The methods for measuring work performed are selected during project planning and are the basis for measuring progress during project execution.
The Earned Value method you use to determine the Earned Value depends various factors, e.g., the work package content, the type of work, the resources used, whether there are tangible deliverables and in particular from the duration of the work package. Special attention must be paid to work packages that are still in progress and will not be completed in a single reporting period. In this case, it often is useful to define milestones and intermediate results within the work package. This makes it easier to determine work progress and reduces the risk of misjudging a subjective evaluation.
The EV Methods are divided into three main groups, depending on the type of work defined:
- Discrete Effort or Measurable Effort
- Apportioned Effort
- Level of Effort
On the following sections you will learn more about the most important EV methods. You will learn how the Earned Value and the Planned Value are determined with the individual EV methods.
Percent Start/Percent Finish EV Method 50/50, 25/75, 80/20
If you use the Percent Start/Percent Finish EV method (also known as the Fixed Formula Method), some of the work will be credited as Earned Value (EV) as soon as it starts. The rest when the work is complete.
The Percent Start/Percent Finish EV method is an objective method because the project team members have no influence on the calculation of the degree of completion. The purpose is to prevent the estimation of the degree of completion from making too positive a statement about the progress of the project.
In the following sections you will find the described EV methods visualized with a simple control account with five work packages. When evaluating work performance, the Planned Value (PV) and the Earned Value (EV) are always determined at the status date.
The 50/50 EV Method
The “50/50 EV Method” is used to simplify the determination of work progress of tasks and work packages.
How to determine the Planned Value (PV): At the planned start of the work package, the first 50% of the BAC are credited to the PV. The second 50% are credited at the planned completion to the PV. During the entire duration the Planned Value does not increase. The Planned Value automatically takes on the value 100% if the planned end date of the work package is in the past.
How to determine the Earned Value (EV): The procedure for EV is the same as for PV. However, the effective start and end of the work package are decisive for the credit. At the effective start of the work package, the first 50% of the BAC will be credited as EV. This value does not increase during the remaining duration of the work package. When the work package is completed, the remaining 50% of the budgeted costs will be credited to the EV. The “50/50 EV Method” is essentially a compromise between the 0/100 EV Method and the estimation of the degree of completion.
The 0/100 EV Method
The “0/100 EV Method” is a special case of the “Percent Start/Percent Finish EV Method.” It is used for short work packages/activities that are completed within one reporting period.
The “0/100 EV Method” works with a very careful evaluation of the degree of completion. Therefore, it is unsuitable for projects with few work packages, as this can lead to considerable distortions of reality. For example, the total work progress may be constant for a certain period. If then several work packages are completed at the same time, there is a large jump in the degree of completion. However, this method is very useful for projects with many and small work packages and short reporting cycles.
The “0/100 EV Method” is the most conservative EV Method to evaluate project performance, as it tends to underestimate work progress of the project. This fact makes it the safest of all EV Methods.
Read in the Book Earned Value Management – Fast Start Guide more about the other EV Methods like: Weighted Milestones EV Method, Units Completed EV Method, Apportioned Effort EV Method or the Level of Effort (LOE) EV Method.
Find More Details About How to Calculate the Earned Value in This Book
Earned Value Management – Fast Start Guide
Discover How to Make Your Project Control Even More Effective and Bring More Transparency and Security to Your Projects.
This book is an indispensable manual for beginners in EVM but also for experienced Project Managers, Project Controls Specialists and Project Portfolio Managers who have the first contact with EVM.