Earned value analysis can be worked out effectively when you have compartmentalized the project or you have made the project with an clear work breakdown structure. Refer to my article on Work breakdown Structure for having an understanding of workbreakdown structure.
Please note that workbreakdown structure has to have the following characteristics:
- Please note that any work breakdown structure component must have scope of work to be achieved, Total
- cost (Direct and Indirect Cost) and time frame for completing the same.
- Each and every WBS item must be assigned to an Individual or an group.
- It must be having an facility to update the % of work completed, whether its an milestone or not.
Now lets get into the actual subject about to be discussed. Too much of wbs..huh...Be patient while we are going to get across to three important terms:
a. BCWS - Budgeted Cost of Work Scheduled - (Budgeted cost of project as per project plan upto the schedule)
b. ACWP - Actual Cost of Work Performed - (Actual expenditure made on the resources for the work actually performed)
c. BCWP - Budgeted Cost of Work Performed (Budgeted cost of project as per the work executed)
An project is schedule to start on 1st Jan and proposed to be completed by 31st March. It has 3 Milestones 1st on 15th Jan, 2nd on 15th Feb and 3rd on 15th March. Now assume that the entire project budgeted cost would be approximately 1,00,000.00. As per the budgeted schedule, we would spend Rs.25,000.00 at 1st Milestone, Rs.50,000.00 at 2nd Milestone and Rs.75000.00 at the 3rd Milestone.
Assume that we are in the second milestone and looking the current project status, the following could be the scenario:
a. BCWS - 50,000.00 (Scheduled)
b. ACWP - 35,000.00 (Actuals ) - Its surprisingly happened with the limited 2 qualified resources we have achived
c. BCWP - 45,000.00 (Budgeted as Per Schedule - We should have actually spend 45,000.00 as per our budget)
We will explore further in my next post.
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