Earned value analysis was a popular topic at the PMI Rocky Mountain chapter 2008 Spring Symposium. People in the audience nodded knowingly as presenters chanted the EVA mantra. But I’ve heard plenty of folks managing projects ask what earned value analysis is all about. The first step is understanding earned value measures and how they convey project performance. Then, if you use Microsoft Project, there’s the challenge of making the program report earned value the way you want.

Those pesky project sponsors, customers, and stakeholders are always asking where a project stands. Earned value analysis is the darling of project management circles because it goes a long way toward providing answers. And if you analyze earned value before you’re asked, you may be able to correct course and sidestep delivering bad news.

Quick Intro to Earned Value Measures

In the earned value analysis universe, progress is measured by how much of the project value (project cost, not the value that the completed project provides) has been earned (that is, completed) so far. Let’s look at an example.

Suppose you’re running a ferret roundup to move the herd to their summer legging quarters. The roundup project schedule calls for four weeks and a cost of $10,000. Here’s how the basic earned value measures play out:

•Planned value is the original estimated (baseline) cost for the work that was scheduled to be complete as of the date for which you are calculating earned value, a.k.a. the status date. If the ferret project cost is allocated evenly over the duration, after two weeks the planned value is $5,000. In Project, the field for this measure is still called BCWS for budgeted cost of work scheduled, but the title you see in a table covers all the bases: Planned Value - PV (BCWS).

•Earned value is the project cost you’ve earned by completing work as of the status date. If you’ve rounded up only 25% of the ferrets after two weeks (quick little buggers), the earned value is only $2,500. The Project field is BCWP (or budgeted cost of work performed) and the title is Earned Value - EV (BCWP).

•Actual cost is easy; it’s what you actually spent as of the status date. For example, say you shelled out extra money for ferret-bite-resistant work gloves, so your actual cost at the two-week mark is $3,000. The Project field is ACWP for actual cost of work performed and the title you see is AC (ACWP).

I’ll go into more detail about earned value calculations in a later post, but the quick and dirty analysis is this. Earned value greater than the planned value means the project is ahead of schedule. That’s because you’ve completed more work (earned value) than you planned (planned). In the example, you planned for $5,000, but the earned value is only $2,500; the project is behind schedule.

Earned value greater than actual cost means the project is under budget. You’ve actually spent less on the completed work (actual value) than you budgeted for the completed work (earned value). In the example, the actual value is $3,000 and the earned value is $2,500, so the project is, alas, also over budget. Sounds like it’s time to hire a professional ferret herder.

Getting Project Ready for Earned Value

To evaluate earned value in Project, you have to set up several things.
Before you can calculate earned value measures, you have to a save a baseline of your original values in your Project file. Otherwise, you won’t have any planned values to compare to. If earned value fields equal zero, you know you forgot this step. You have to enter actual values, too. To calculate earned value correctly, you have to save the baseline before you enter any actual values!

Project uses the status date for earned value calculations. Choose ProjectProject Information. In the Project Information dialog box, set the date in the “Status date” box.

Project uses values in the Baseline fields to calculate earned value measures. If you want to calculate based on a different baseline, choose ToolsOptions. In the Option dialog box, select the Calculation tab, and then click Earned Value. In the “Baseline for Earned Value Calculations” drop-down list, choose the baseline you want and then click Close.

The PMI Body of Knowledge (PMBOK) recommends two different ways to define “complete” for earned value calculations: “all or nothing” or “unstarted, started, complete”. With all or nothing, a task is considered complete or unstarted, the equivalent of 100% and 0% in Project. The other option is to leave unstarted tasks at 0% and completed tasks as 100% with tasks in progress set to 50%. Although these two approaches are inaccurate, you’re never off by more than a few days if you keep your work package tasks to a maximum of two week duration.

Always the over-achiever, Project offers three definitions for complete. Out of the box, Project calculates earned value based on the % Complete field. One small problem with using % Complete is that this field represents the percentage of duration that’s complete, not the percentage of work.

If you want to use PMI’s recommendations, you have to tell Project to use the Physical % Complete field to calculate earned value. Physical % Complete is a value you enter, so you are in total control. For example, you can set Physical % Complete to 0%, 50%, or 100% depending on whether tasks are unstarted, in progress, or complete. Or, you can copy the values from the % Work Complete field into Physical % Complete cells.

To use Physical % Complete, choose ToolsOptions. In the Option dialog box, select the calculation tab, and then click Earned Value. In the “Default task Earned Value method” drop-down list, choose Physical % Complete and then click Close.

Changing this setting applies to only tasks you add in the future, when what you really want is to apply that method to the ones you want to evaluate. You can add the Earned Value Method field to a table and then change the values in the cells to Physical % Complete.