Earned Value Techniques are the different ways through which the performance of a project can be measured and compared against the baseline of the project.
The different EV methods or techniques are
- Level of effort (LOE)
Selection of EV techniques is done in consistent with the way planned work is to be performed.
The different methods under this are;
- Fixed Formula – This is used for short term activities spanning one or two accounting periods. Different rules 0/100, 50/50, 27/75, 75/25, 40/60 etc. is used in this method. The main advantage of this method is that it is simple and has minimal effort whereas the disadvantage is that if the budget spread doesn’t match then it depicts a source of false variance and no partial credit will be there for in-process activities.
- Milestone Technique – Here work packages are defined in terms of interim milestones for at least one accounting period. The milestones are assigned as a portion of the total budget which implies the sum of all milestone budgets is equal to the work package budget. When each milestone is completed 100% of the respective budget is earned. The advantage of this method is that it has an objective measurable milestone that customers prefer. The disadvantage is that there is no partial credit for in-process works.
- Percentage Complete – Here the CAM measures or estimates the actual percentage progress of work. The budget earned is the product of percentage complete and budget at completion. The advantages of this method are that it is a more accurate method and detailed schedule status is available whereas the disadvantage of this method is that it requires elaborate exercise is required and this may result in inaccurate measurement if it is not detailed.
- Milestone with Percentage Complete – This method is a combination of milestone and percentage complete technique. Work packages are defined in a sequential milestone with one per month assigning a portion of the budget. Progress of each milestone is assessed. Here SV is directly traceable to schedule. The advantage of this method is that it has objective milestones which the customer prefers, and partial credit is there for milestones. The disadvantage of this method is that CAM assessment for percentage complete.
- Equivalent/Actual Units Complete – This is primarily used in manufacturing environments having repetitive tasks. This uses standard earned methodology. The disadvantage of this method is that equivalent unit calculation is complicated and actual units complete don’t consider the work in progress.
This method is used to calculate the earned value of tasks that are related in direct proportion to a parent work package.
Level of effort method
This uses activities that are supportive in nature and have no substantial physical product and no schedule impact. The durations is based on the duration of discrete work activity that is supporting. Here EV=PV and SPI is always 1. This value will be more for time related activities. Not more than 20% in a package should use LOE and at project level maximum of 10-20% is desired. The disadvantage of this method is it distorts project trend.