earned value - BCWP

[liz217]

I have two questions regarding earned value calculations in Microsoft
Project. Our actual costs are tracked separately from hours worked, so I
have unchecked the box "Actual costs are always calculated by Microsoft
Project." I will manually enter the costs at the end of the month. Our
actual costs will be provided by our accounting department.

1. I have set my project to calculate earned value using Baseline2 and %
Complete. We are tracking the project using actual work hours. I have
entered actual costs for January and actual work hours to date (through Feb.
18). No matter what I set the status date to, the BCWP is the same.
Shouldn't it be different for Jan. 31 vs. today since there has been work
done in February?

2. When I go to the task usage view to see the time-phased BCWS and
Baseline2 Cost, something odd is happening. On only a few of my tasks, when
I enter a cost for Baseline2, say $1400, the BCWS is $1400 for one or two
days and then goes back to $0. No other costs are showing for Baseline2 on
that task and I have my status date set to the end of the project. Is the
BCWS the accumulated Baseline cost? Why would it go to $0 after a value has
been entered in the baseline cost?

Any advice will help. I'm wondering if it would be easier to track the
earned value in an Excel file. We have specific costs (actual & budgeted)
that we need entered on specific dates and Project seems to want to calculate
everything.

Thanks,

Liz

 

[liz217]

After reading other posts, I think I can restate my question more simply:

I enter actual hours in the task usage view. My work % complete for a task
is 100%, the baseline costs is $1750, so why is my BCWP $0? (I've checked
the status date, I've entered the correct baseline for calculating earned
value, and I have the box checked task status updates resource status.)

Any advice, I'd appreciate.

Thanks,

Liz

 

[liz217]

Sorry, I keep adding to my own question. I did some more testing. It has
something to do with the task usage view. Is it because I am trying to tell
it when the budgeted cost will hit and Projects wants to match it to the
schedule?

Here's my test:

Baseline 1 - I entered the cost in the table and then saved the baseline.
Project spread the baseline cost over the course of each task. BCWP
calculates correctly.

Baseline 2 - I went to the task usage view and entered the baseline cost
according to what week we budgeted it. The BCWP is $0.

I went back to Baseline 1 in the Task Usage View and moved the baseline
costs to match Baseline 2 (specific weeks), and now it does not calculate
correctly. My actual hours, % complete, etc. have not changed.

Liz

 

[Steve House [MVP]]

Earned value is always matched to the schedule. Think about it a sec and
just look at the names - Budgeted Cost of Work Schedule and Budgeted Cost of
Work Performed. Think about a task starting Monday and running for 5 days
and is running right on schedule. At the end of the day on Mon, the BCWS
and BWCP will be the costs you had scheduled and the costs you had spent for
Mon. At the end of the day on Tues the BCWS and BCWP will be the costs for
Mon plus the cost for Tues. At the end of the day Wed, the costs will be
the sum of the costs for , Tue, and Wed. And so forth.

At one point you said your "Our actual costs are tracked separately from
hours worked." It sounds more like you are tracking expenditures instead of
costs. If I work tomorrow, my employer's obligation to pay me for the day
is incurred on the day I do the work. He won't actually cut the cheque
until the end of the pay period, probably mid-March. If tomorrow's work was
part of the cost of doing a project, when should it be entered into the
project's books - i.e., its budget? I suggest it should be posted on the
date it is incurred, not the date it is paid.

I know it sounds like a broken record, but Project is not an accounting or
financial management system. It is a work scheduling and budgeting
application. The earned value metrics are best used to indicate your degree
of success with your planning. You sit down in a meeting on Friday and say
"How is the Big Project coming? Are we on track with our plans? Are we
ahead of or behind schedule; are we over or under budget?" Remember what
you get when you divide BCWP by BCWS? It called the Schedule Performance
Index, measuring the amount of work accomplished by a status date against
the amount of work you were supposed to accomplish. For that to be an
accurate measurement of schedule performance, those costs must be associated
with the schedule of the work itself.

 

[liz217]

Steve,

Thanks for your response. I have read several of your posts and respect
your input. Actually, when I'm looking for an answer in the discussion
group, I look for posts that you have replied to.

Your point is well taken, and I agree that sometimes we are trying to make
Project an accounting software. Our current accounting software is used to
track hours associated with each project. At the end of the month we get a
report that shows our costs (hours billed) for each project. The problem I'm
currently having is that we want to track hours worked in Project, but track
the cost associated with the work in another progrem. (I see how asinine
this sounds now, but explaining it to my manager won't be easy!) So we are
entering actual hours daily, but costs monthly, as if they are independent,
which they are not. I can see how we are confusing Project.

I think for what my manager is wanting, Excel will make more sense. I can
use the % Complete values from Project and input them into my Excel
spreadsheet.

Thanks again.

Liz

 

[Steve House [MVP]]

Just another thought for the brew you're considering ... You said "At the
end of the month we get a report that shows our costs (hours billed) for
each project." I suggest that "hours billed" and "costs" are two entirely
different critters. In many situations where you are doing a project for a
client there will be a mix of billable and non-billable hours. But the
non-billable hours are not free - you still have to pay someone to do that
work even though you cannot pass it on to the client. Suppose you are a
graphic arts firm preparing advertising illustrations for the client. Your
bid includes "Drawings, 2 days @ $500/day." Joe Artist spends 2 days on a
drawing and takes it to his supervisor for approval before sending it on to
the client. The supervisor looks at it, says "This is crap! - what in the
world were you thinking?" and hands it to Susie Graphist for a redo. That
remake takes Susie 2 days as well. Note it wasn't at the client's request,
the need for a redo was occasioned by your own internal approval process.
Now, what do you bill the client for, 2 days or 4 days of work? What do you
pay your employees for, 2 days or 4 days of work. In better run companies
you'd only bill the client the 2 days you originally estimated - you don't
expect him to pay for your screw up, that would be terrible customer
service. But whether the extra 2 days are billable or not, there's no doubt
that your costs are for all 4 days of work - in most jurisdictions where
I've worked, you simply can't legally refuse to pay Joe for his work just
because it was rejected, be he employee or contractor.

I'd venture to say this sort of thing is very commonplace and can be a
source of financial disaster. It's said that the Devil is in the details,
or in the case of a project, bankruptcy is in the costs incurred but not
captured. IMHO, if handled properly Project does a good job of estimating
the internal costs of doing the project in order to come up with its budget
and tracking performance against that budget. But when used for client
billing, revenue tracking, and profitability reporting, I take its numbers
with boxcar loads of salt - there's just too much needed to be taken into
account in those figures that Project doesn't deal with effectively or at
all.

--
Steve House [MVP]
MS Project Trainer & Consultant
Visit http://www.mvps.org/project/faqs.htm for the FAQs