Project Management. Planning Phase. Costs

In this post I will speak only about several costs’ calculations that can help us to track project expenses. I would like to put all calculation in one table and then make some comments to presented data. Also, I would dwell only on labour calculations, but it would be rather easy to expand them to any project costs.

PV (Planned Value) – hours4 0004 000Amount of hours we planned for the project.
EV (Earned Value) – hours480960Calculates as PV * %Completed Work. In the example – on Feb 26 we have done 12% and on March 26 – 24% from total amount of work.
AC (Actual Costs) – hours440900Amount of real hours we spent till the moment.
PV (Planned Value) – $40 00040 000Costs – multiplication of hours from the previous section on hours cost. To simplify calculations – I’ve taken the value $10. These labor calculations are rather useful as can be used without additional efforts in project reports.
EV (Earned Value) – $4 8009 600
AC (Actual Costs) – $4 4009 000
EVM Earned Value Management26.02.201326.03.2013
CV (Cost Variance) – hours4060EV – ACShows us whether we are in budget or not. When this number is negative, that means we have spent more than has been planned. In the described case – we make some savings.
SV (Schedule Variance) – hours-3 520-3 040EV – PVHow many work we still have to do.
CPI (Cost Performance Index)109%107%EV / AC %Is linked to CV coefficient but gives us an opportunity to make an absolute analysis of budget savings or losses. You can see that 60 is larger then 40, but in percents we are losing positions as from 109% we moved to 107%.

The main idea of the described coefficients is to signal to project manager on the very early project state, that we have some cost issues and project can miss budget targets. When CV parameter is below 0 and CPI – below 100%, it’s time to intervene and make some corrections in project management. Also, it’s usually very useful to build a chart, showing the changes of CPI.

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