Fundamentals Of Project Management

Would be behind schedule and overspent figure 8 5

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Unformatted text preview: at 40K. This means the project is behind schedule and under budget. However, because the project spending is 40K and work value is 40K, spending is correct for what is being accomplished. There is a schedule variance but not a spending variance. Figure 8-3 Cumulative spending for sample bar chart. Figure 8-4 Earned value analysis—behind schedule, overspent. Figure 8-5 Earned value analysis—ahead of schedule, spending on target. Figure 8-6 Earned value analysis—behind schedule, spending on target. In our last example, shown in Figure 8-7, the graph looks like that in Figure 8-4, except that the ACWP and the BCWP curves have been reversed. Now the project is ahead of schedule and underspent. Earned Value Analysis Using Hours Only In some organizations, project managers are held accountable not for costs but only for the hours actually worked on the project and for the work actually accomplished. In this case, earned value analysis can be conducted by stripping the dollars off the figures. This results in the following changes: BCWS becomes Total Planned (or Scheduled) Hours BCWP becomes Earned Hours (Scheduled hours × % work accomplished) ACWP becomes Actual Hours Worked Figure 8-7 Earned value analysis—ahead of schedule, underspent. www.erpvn.net Using hours only, the formulas become: Schedule Variance = BCWP - BCWS = Earned Hours - Planned Hours Labor Variance = BCWP - ACWP = Earned Hours - Actual Hours Worked Tracking hours only does lead to some loss of sensitivity. ACWP is actually the composite of a labor rate variance times a labor hours variance. When only labor hours are tracked, you have no warning that labor rates might cause a project budget problem. Nevertheless, this method does simplify the analysis and presumably tracks the project manager only on what she can control. RESPONDING TO VARIANCES It is not enough simply to detect a variance. The next step is to understand what it means and what caused it. Then you have to decide what to do to correct for the deviation. Following are some general guidelines. • When ACWP and BCWP are almost equal and larger than BCWS (see Figure 8-5), it usually means that extra resources have been applied to the project, but at the labor rates originally anticipated. This can happen in several ways. Perhaps you planned for weather delays, but the weather has been good and you have gotten more work done during the analysis period than intended but at the correct cost. Thus, you are ahead of schedule but spending correctly. • When ACWP and BCWP are nearly equal and below BCWS (see Figure 8-6), it usually means the opposite of the previous situation; that is, you have not had enough resources applied. Perhaps resources were stolen from you, perhaps it has rained more than you expected, or perhaps everyone has decided to take a vacation at once. The problem with being in this position is that it usually results in an overspend when you try to catch up. • When ACWP is below BCWS and BCWP is above BCWS (se...
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This document was uploaded on 09/27/2013.

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