Welcome back to our course on Project 2013 Advanced.
In the previous section we looked at cost reporting.
Towards the end of the section, I changed the schedule for the NFF website development
to reflect the fact that a couple of tasks have had their estimates increased.
Now when we looked at the cost reports as a consequence of these changes, we could see
some increases in cost.
But in general terms and particularly when you’re dealing with much larger and more
complex projects than this one as the project progresses, it’s sometimes very difficult
to work out how significant cost increases are, whether they’re associated with costs
that are running away or whether they’re associated with making better progress than
you’d planned, and there are various other associated issues that can often arise with
larger and more complicated projects.
Now the tools that we’re going to look at in this section are the tools associated with
earned value analysis and what these tools are basically about is saying given the particular
point in the project how are things going really?
Are we really ahead of schedule?
Are we really over budget or under budget?
And these tools together give us some very straightforward indicators and the associated
reports that can really give us a good indication of how things are really going.
Now before we start to look at the tools for earned value analysis in Project 2013 in detail,
I need to explain to you some of the requirements for it to work properly.
You can make this incredibly complicated if you’re not careful and it’s actually relatively
straightforward once you know how to interpret a few key terms.
But let’s start with the basic requirements.
Requirement one is that you’ve actually assigned your resources and cost to your project.
Earned value analysis doesn’t really work at all until you’ve done that.
And if you’ve only partly done it or if you keep changing it because you didn’t
do it right the first time rather than circumstances have changed as the project has progressed,
then you’re going to be looking at some pretty much meaningless figures as you go
along.
So before you start expecting earned value analysis to tell you anything make sure that
you’ve got your project in place, your resources assigned, and the other costs associated as
well.
These include things like fixed cost for tasks.
The second requirement which is closely associated with that one is that you’ve actually saved
a baseline.
You are going to be using comparison with baseline figures.
Now if you take this particular project, the one we’re looking at now, the NFF website
development project, at any point in time I may decide to save a new baseline; either
an additional baseline or one to replace the original, because I may decide that my reference
point needs to change to a new baseline.
That’s absolutely fine, but you do need a baseline.
At the moment, I’m going to stick with the original baseline for the project overall.
The third requirement is that earned value analysis does depend on you having done some
of the work on the project.
It’s basically comparing what has happened with what should have happened.
So it’s only going to have any value at all when you’ve actually recorded that something
has happened.
Now there’s one more thing to cover before we look at earned value in detail and that
is percent complete.
In order to explain this, I’m going to just open this up and we’re going to take a look
at the tracking table.
So I’m going on to View, Tables.
Let’s look at Tracking.
And you’ll see that there are two columns in the tracking table, percent complete and
physical percent complete.
Now at the moment physical percent complete says zero for everything.
Whereas for tasks that have started or indeed started and finished, we’ve actually got
percent completes that are nonzero.
As a matter of course when Project 2013 is doing its calculations on how the project
is going, it uses percent complete values based on how far through each task you are.
So if you’ve got a particular task, say, a 20 day task, and 10 days will have elapsed
it will assume that you’ve done half of the work and the individual resources in it
have done half their work and incurred half the cost.
Bear in mind that when you have costs associated with a task, where the accrual method may
be start or finish or whatever that will change that pattern accordingly.
But basically when it’s working out percent complete, it basically slices up the duration
according to how far you are through the duration of the task.
If, in fact, for one or more tasks you want to be able to record a more accurate reflection
on how far through the task you are.
So for instance, even though only half the time has gone, you may have done 70% or 80%
of the work or maybe 70% or 80% of the way through the task you’ve only done 10% of
the work, you can define a physical percent complete and manually enter that.
One way of manually entering it is to enter it in this tracking table.
And then when Project 2013 comes to do its calculations, its earned value calculations,
it will use the physical percent complete figure rather than the percent complete figure.
Now let me just take one of these tasks and just open up its task information.
Let’s say take this one, database implementation.
If you look on the Advanced Tab, there is an earned value method field here and this
one has got it set to percent complete which means that Project will always base its calculations
for this task on the proportion of the way through the duration of the task and that’s
on the basis on which it will calculate work and cost, bearing in mind the point I made
just now about accrual methods.
Now you may have all or some of your tasks set to percent complete, physical percent
complete.
To set the default, so this is the one that’s applied on all new tasks, if you go into the
Options and down to Advanced.
I’m going to scroll down the advanced options.
Somewhere down there, two sections from the end, Default task earned value method percent
complete.
You can have that set either way.
I should point out while we’re here by the way, baseline for earned value calculation.
Now I did mention a little while ago that you may change your baseline.
If you do change your baseline and you want your earned value method to use the newer
or even the older baseline, then this is how you change which of the baselines the earned
value calculations are made against.
Now the next thing I want to look at in relation to earned value is the Microsoft Project Help.
Now one of the reasons I’m pointing this out to you specifically is that the terminology
of earned value is often the thing that really baffles people.
There’s no need for it because at the end of the day, there are just a few numbers you
need to look at which basically tell you what you need to know.
But partly because of the history of earned value calculations and partly so that you
can really understand what the numbers mean if you really need that level of understanding;
it’s worth knowing what these terms mean.
Now we’re going to start with three terms that are fully explained in the Microsoft
Project Help.
I’m not going to go through them all now.
PV, AC, and EV.
These correspond to the old terms.
The ones that we used in the earlier days of earned value analysis and which you’ll
very often see still.
BCWS, ACWP, and BCWP.
Now in many ways looking at the old terms does help to explain these terms more fully,
but I’m generally going to refer to the new terms beyond this point because the new
terms trip a little bit more easily off the tongue and in many ways they also encapsulate
what they mean.
Let’s start with planned value.
Now in explaining these terms, I’m going to use the example that they use in the online
help and in the online help they basically use an example of a four day task which has
a total value of $100.
When we say a value of $100 that means the cost of performing that task, whether it’s
in terms of materials or work resources or any other costs is $100, $25 per day.
Now if you look at that task at the end of day three of four, the planned value is $75.
And if I look at the longer acronym, BCWS, that’s the budgeted cost of the work scheduled
which means that according to our plan, according to our budget, at this point in time after
day three we should have incurred $75 of cost.
Now the planned value on its own is an important thing to know but it doesn’t tell you how
your project is doing as the comment there says.
So planned value basically says where should we be at this point in time.
It doesn’t tell you anything about where you are.
It only tells you where you should be.
Now one of the reasons for using the example in the online help here is that I believe
there are a couple of errors and I really want to refer to one of those here.
I also think there are one or two errors when you actually come to produce the earned value
reports, just some words that are wrong which can actually be very misleading.
In the case of actual cost, what the actual cost represents is the actual cost of the
work that we’ve done so far.
Now in the example here they talk about the four day task again and they say, “For example,
if the four day task actually incurs a total cost of $35 during each of the first two days
the AC, the actual cost for the period is $70 but the PV is still $75.”
That’s wrong.
I think the PV should be $50 because in two days out of four, you will have incurred $50
worth of cost.
Now read the second paragraph, “However with this value you don’t know how well
your project is doing.
For example, if you plan to get a lot more work done for that same $70, that doesn’t
sound good.”
So I’ve got to the end of day two.
I’ve spent $70 instead of $50.
Maybe I’m just ahead of schedule.
Maybe I’m doing really well and I’m going to finish this task early because I’ve done
the work early.
I’ve got well ahead on this task.
Or alternatively, I may still have another two days work to do.
I may still need to spend another $70 to do the second half of the task in which case
overall on this task I will have overspent considerably.
I will have spent $140 instead of $100.
So the actual cost also doesn’t tell you everything you need to know.
It’s one more piece of the jigsaw.
It’s one more useful piece of information.
It basically says at this point in time in relation to this task what is the actual cost
of the work performed.
It doesn’t tell me what the value of the work is.
It only tells me what it cost to produce it.
And the final piece, the important piece, is the third value that we’re going to look
at next which is the earned value.
In fact earned value is itself a relatively straightforward thing to understand, particularly
if you look at the longer acronym BCWP, the budgeted cost of the work performed.
So let’s suppose that I get to the end of day two of this four day task and I look at
how much of the task I’ve done.
I should have done 50% but let’s suppose that I look at the task and I say, “I’ve
actually done 60% of the work.”
Then the earned value is basically $60.
I’ve done 60% of the work so the value of what I’ve done is $60.
That may be completely different from the cost of doing that work.
I may well not have spent $60 doing it but the value of what I’ve done is $60.
If in fact as the example on the Help there says you’ve spent $80 getting there, then
you’re really not doing very well, whereas if you’ve only spent $40 or $50 getting
there, you’re actually doing pretty well.
So the earned value says let me look at the work I’ve done.
What is the value of that?
What was my budgeted cost?
How much did I think getting that amount of work done would cost?
60% of a $100 task gives it an earned value of $60.
Now in previous times, even before we have the more sophisticated versions of Microsoft
Project that we had now, even if you understood earned value analysis and you were using a
tool like Project to help you to do it, you’d still have quite a bit of calculation and
so on to do.
The good news with Project 2013 is that these values and the values that are derived from
them and the analysis and reporting that we can do is all pretty much highly automated
within Microsoft Project.
And in the next section we’re going to look at how Project can basically juggle all these
numbers for us, give us all these values, and let us get a good insight into how well
or badly a project is going.
We’re going to go into these and these other values in quite some detail.
But the important thing to understand really is these three things because if you understand
the difference between the cost of doing some work and the value of doing that work, so
I may have done this amount of work but what was actually worth to me that’s the important
thing to understand in order to understand what’s happening with earned value analysis.
If you’re new to earned value analysis or you’re new to project management or both,
then this really is well worth getting to grips with because it’s going to give you
an invaluable way of looking at your projects.
So having laid the ground rules down and the things you have to do before you start doing
earned value analysis, we’ve looked at things like the earned value method.
We’ve now looked at these key terms.
In the next section we’re going to apply a bit of earned value analysis to our project.
So please join me for that.