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Unformatted text preview: n unfortunate conflict of terminology that is often confusing to the novice, but it is a terminology that has been around for a long time, so we will not try to change it. Unfortunately, the amount E(t)– A( t) is also referred to as the productivity deviation at time t. Fortunately, however, when it is referred to as the productivity deviation, it is in a different context than when referred to as the cost variance, so it should cause us no problems. In Figure 4-1, the earned value graph E and the actual expenditure graph A are not tracking the baseline curve very closely. The fact that the E curve is "trailing" the B curve means the project is behind schedule. The reason for this is that at any time t, B( t ) man-hours' worth of work should have been accomplished, but only E( t ) man-hours' worth of work was actually accomplished. The fact that the E curve is trailing the A curve means that productivity on the project is less than planned, because at any time t, it took A( t ) man -hours to accomplish only E(t) man -hours' worth of work. When a project is not progressing as planned, a common question is: "How far behind schedule is it?" This is different from the question "What is the schedule variance?" because the schedule variance is measured in labor -hours, not time. This Page 109 question can be answered (approximately) by comparing the earned value curve to the baseline curve. For example, at time t, B(t) represents how much value should have been earned at time t. Drawing a horizontal line through B(t) and extending the earned value curve E (linearly) until it intersects the horizontal line through B(t) gives a point "X" and a corresponding time t x at which B(t) value will be earned (if progress continues at its present rate). In other words, it will take until time tx to earn as much value (as many man-hours) as should have been earned at time t. The schedule deviation AS is given by: This is the appropriate answer to the question. Another question is: "How much over (under) budget is the project?" One answer to this question is the cost variance defined earlier. But another, perhaps better answer is as follows. The overrun ( underrun) at time t is defined as A( t)– t). It is just the E( negative cost variance. In Figure 4-1 we can see that B( t) value (labor -hours) will not be earned until time t x. If the actual curve is also extended (linearly) to tx, we get a point Y = A(t x). Now Y laborhours will have been expended by time tx if expenditures occur at the present rate. Consequently, the budget deviation at t is sometimes defined as: In other words, the budget deviation is the overrun corresponding to the time tx at which time B( t ) value will have been earned providing the current trend does not change. The information obtainable from these curves lends itself well to the so-called management-byexception philosophy. If the actual expenditure and earned value curves are tracking the baseline curv...
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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.
- Spring '10