174 Project Management
ly impossible. Some project managers track their effort by man-
ually logging labor hours into a cost and schedule management
software tool. Though doing this allows them to track costs, it
can be an extremely labor-intensive process.
An Integrated Approach to Analyzing Schedule and Costs:
The Earned Value Concept
The techniques described above are very helpful in examining
your schedule position and your cost position. However, per-
forming a separate analysis of schedule and cost does not pro-
vide an entirely accurate or comprehensive picture of overall
project status. Evaluating how much work you’re getting done
without considering how much you’ve paid to get that work
done will give you a distorted picture of your cost position.
Similarly, using your rate of expenditure as a measure of project
status will lead to a distorted picture of your schedule position.
Take another look at Figure 9-5. It appears as if we’re under
budget by about 10%. Good news, right?
What if I tell you that the project is nearly completed? Good
news becomes unbelievably great news: we’re nearly done and
we’ve spent only about three-quarters of the money.
Now imagine that the team has just barely gotten started;
not much of anything has been done. This would be a disas-
trous situation.
In each case, the expenditure is identical. What’s different?
The amount of work that’s been done.
The earned value conceptintegrates schedule and cost.
There are a number of formulas associated with rigorous earned
value techniques. Also, many books deal with the topic of
earned value in great detail. For our purposes, however, we’ll
stay at the conceptual level.
At the core of the earned value technique are these three
basic components of measurement:
- Budgeted Cost of Work Scheduled
- Budgeted Cost of Work Performed
- Actual Cost of Work Performed