But wait, there’s more… – OPEN

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Topic 11.6: But wait, there's more...

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Ok, because it rained on Tuesday, at the end of Wednesday we had only completed the North and East sides of our fence.

We still had to pay our contractors in full ($500) for the lost day, though.

We also had to hire a new post-hole digger for $500, as the other one got left out in the rain.

Let’s used earned value management to look at what impact this has had on project performance, starting with our Gantt chart.

Example Gantt chart...

On Tuesday, no work was completed. Our earned value therefore remained unchanged, even though our actual costs increased by $500 as we had to pay our workers regardless.

On Wednesday, we did manage to catch up to the end of Tuesday’s workload, so our earned value increased, but only to $3,000 which was Tuesday’s PV.

On the cost side, we not only had to pay $500 in labour costs, but $500 for the replacement digger, so our actual costs increased by $1,000 to $3,800 in total.

Intuitively, then, we can guess that we are now behind schedule and over budget – let’s see by how much…

Our cost variance formula (CV = EV – AC) tells us that $3,000 (EV) minus $3,800 (AC) equals (negative) -$800.

Our schedule variance is $3,000 (EV) minus $3,500 (PV) or (negative) -$500.

You could also say our earned value of 2 days minus a planned value of three days gives us a schedule variance of minus one day.

So let’s look at how this plays out on our earned value chart.

A negative cost or schedule variance indicates that we are behind schedule or over budget.

As you can see, the actual cost and earned value lines have crossed over each other (and, of course, by the exact amounts we arrived at in our formulas).

Therefore a similar, at-a-glance reckoning can be applied to this chart.

If the AC line is above EV, as it is now, then our project is over budget, which is not good.

Looking back to day 1 when we were under budget, you can see that AC was below the EV line.

By the same token, when the EV line was sitting above PV at day 1, we thought that was great – we were ahead of schedule.

Now it has dropped below, though, and we are behind schedule, we are a little more concerned.

Note that when earned value equals budget at completion, the project is theoretically finished.