Earned Value Basics

Start with a status date—simply, the date when you ' re going to take a measurement of how much has been spent on a specific task.

Next, you must understand several different ways of looking at a task' s cost. The first of these is the budgeted cost of work scheduled (BCWS). Generally, you apportion out a task' s total cost evenly over the number of days that the task is scheduled to take. If a task is predicted to take five days and cost $100, for example, each day represents $20 of a task. You arrive at the BCWS by comparing the amount that' s budgeted to be spent on a task between its start date and the status date (not necessarily the same as the end date). For example, if you have a five-day task that' s going to cost $250, then you can break the per-day cost out to fifty bucks a day. If you set your status date to Thursday, for example, you ' ve used four days of the five and your BCWS is $200. Figure 10.3 illustrates this concept.

Figure 10.3: Budgeted cost of work scheduled (BCWS) at status date Another component of earned value is the actual cost of work performed (ACWP). This is the actual cost incurred for each day that you worked on a project within a given period. In our example in Figure 10.3, the project has a budgeted cost per day of $50, for a total of $250 for the task. But what if you spent only $45 on Monday, $30 on Tuesday, $45 on Wednesday, and $35 on Thursday? Then your ACWP for the four days would be $155, even though your BCWS is still $200. Figure 10.4 shows this relationship.

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Figure 10.3: Budgeted cost of work scheduled (BCWS) at status date Another component of earned value is the actual cost of work performed (ACWP). This is the actual cost incurred for each day that you worked on a project within a given period. In our example in Figure 10.3, the project has a budgeted cost per day of $50, for a total of $250 for the task. But what if you spent only $45 on Monday, $30 on Tuesday, $45 on Wednesday, and $35 on Thursday? Then your ACWP for the four days would be $155, even though your BCWS is still $200. Figure 10.4 shows this relationship.

Figure 10.4: Actual cost of work performed

Finally, you have another straightforward calculation you can make: budgeted cost of work performed (BCWP, as mentioned earlier). This figure represents the comparison of the percentage of work performed to the expected, budgeted amount. If by Wednesday you 've met 75% of the task' s budgeted work (even though you' ve got clear till Friday), then the work you ' ve done was budgeted to cost $187.50 even though you've only really spent $120. You ' re comparing the amount you' ve actually spent to the amount you' d expect to have spent based upon the percentage of work completed thus far. Figure 10.5 demonstrates this calculation.

Figure 10.4: Actual cost of work performed

Finally, you have another straightforward calculation you can make: budgeted cost of work performed (BCWP, as mentioned earlier). This figure represents the comparison of the percentage of work performed to the expected, budgeted amount. If by Wednesday you 've met 75% of the task' s budgeted work (even though you' ve got clear till Friday), then the work you ' ve done was budgeted to cost $187.50 even though you've only really spent $120. You ' re comparing the amount you' ve actually spent to the amount you' d expect to have spent based upon the percentage of work completed thus far. Figure 10.5 demonstrates this calculation.

Figure 10.5: Budgeted cost of work performed

Now that we know the differences in these earned value components, we can go forward and calculate some basic financial management variables. The BCWS, ACWP, and BCWP figures you have go into the remaining calculations.

There are two other financial acronyms that you need to be aware of when considering the following formulas. The budget at completion (BAC) represents the budgeted cost of the entire project. The estimate at completion (EAC) is the currently estimated project ' s cost at completion. Notice the difference between the two? With the BAC, we ' re talking about the cost of the project (or task, as the case may be) that we projected at the very start. With the EAC, we' re talking about what we currently estimate the project (or task) will have eaten up at completion. In other words, you take a look at the variances where you ' re really at, apply them to what you thought would happen, and come up with a new prediction. Both the BAC and EAC figures will play into an index described later.

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