Amacom - Modern Project Management (Ocr) - 2001 ! - (By Laxxuss)

Conceptu te team fly am fl y page 107 ally earned

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Unformatted text preview: ent of project control that compares actual progress and expenditures to the project plan and identifies deviations from the plan. This identification of deviations from the plan is done in a way that isolates the problems so that solutions can be determined. Actual expenditures and the baseline (project plan) are both expressed in labor-hours spread over time, as shown in Figure 4-1. But progress is measured in percent complete, as discussed in the previous chapter. In order to measure progress in the same units as the budget (baseline) and expenditures so that comparisons can be made, one uses the concept of earned value (earned labor-hours). Earned value ( EV WP) for a work package (WP) is defined as: where MBWPdenotes the work package man-hour budget and PCWP denotes the work package percent complete. Conceptu - TE Team-Fly® AM FL Y Page 107 ally, earned value represents the (man-hour) value of work accomplished relative to the (man-hour) budget. To compute earned value for a control package, one simply sums the earned value for all work packages under the given control package. Earned value is a concept that has been in use since the 1960s by project managers and has proven to be one of the two most effective measures available to project management. The other is the measure of productivity, which is discussed in Chapter 5. The concept of earned value is perhaps the most central concept for project management because it also lies at the foundation of Variance Analysis (discussed later in this chapter) and of Productivity Measurement (discussed in Chapter 5). A plot of earned man-hours and actual man-hours expended, compared to the baseline (plan) for a hypothetical project, is shown in Figure 4-1. In this example the baseline curve is labeled ''B," the actual man-hour expenditure curve is labeled "A," and the earned man-hour curve is labeled "E." At the point in time t , the points A(t ), B(t ), and E(t ) on these curves represent the baseline budget todate , the actual man -hour expenditure to- date, and the earned man-hours to -date , respectively. Figure 4-1. Actual vs. Earned labor-hours plotted against the Baseline. Page 108 The amount E(t)– t) is defined to be the cost variance for the project at time t, and the amount E A( (t )– t ) is defined to be the schedule variance at time t. Notice that both concepts of cost variance B( and schedule variance are measured in man-hours. It may seem strange when encountering these ideas for the first time that the schedule variance is measured in man-hours instead of time. As you read on, it should become clear why man-hours are a meaningful measure for the schedule variance. A negative cost variance at time t implies that there is a cost overrun at t, and a negative schedule variance at time t signifies the project is behind schedule at t. Cost and schedule variances are discussed in detail in the next section, which deals with Variance Analysis. Cost and schedule variances are not to be confused with the usage of the term variance as introduced in Chapter 3. It is a...
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This note was uploaded on 01/11/2011 for the course ACC 9 taught by Professor Yeetan during the Spring '10 term at Sunway University College.

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