The #1 Overlooked Capability in Microsoft Project

#1 Overlooked Capability in Microsoft Project">

TRACKING EARNED VALUE AND ITS TRENDING DURING A PROJECT ARE PERHAPS THE MOST IMPORTANT FUNCTIONS A PROJECT MANAGER CAN PERFORM…

I work in the yacht and commercial vessel construction sector. As you might expect, I've seen lots and lots of MS Project Gantt charts. And task maps. And calendar overviews. And resource allocation reports. And so on, and so forth.  But,

I've rarely, if ever seen a report that calculates and tracks Earned Value or the way it is trending.

Calculating and tracking Earned Value, and the way it is trending during a project, are perhaps the most important functions a project manager can attend to — especially when it comes to complex, long-duration projects such as the building of a mega- or super-yacht.

Yet, most project managers in the yacht building sector overlook or ignore the critical nature of these two metrics...

The term "Earned Value" is frequently accompanied in discussion by a plethora of acronyms and jargon for related concepts (e.g., PMB, OBS, ACWP, BAC, EAC, IEAC, and so on, almost ad infinitum). And there are a number of alternative ways to define the term "earned value". However, to my mind, Earned Value can be a relatively straightforward conceptual tool for evaluating project status, provided you adopt the definition I recommend here.

Simply stated, the rate of Earned Value can be defined as the ratio of the percent of project completion to date, divided by the percent of budget expended to date. For example, if at a given time you have completed, say, 30% of the project, but spent 35% of the total budget, the rate of Earned Value is 0.857, or approximately 85%. This means that expenditures made on the project to date have only accomplished 85% of what they were budgeted and expected to accomplish. In other words, the budget expenditure to date has only bought you 85% of what it was budgeted to buy in terms of value.

If the rate of Earned Value is less than 100%, the project is, at best, eating into any planned profit or, at worst, heading to the red-ink zone...

Just as important as the Earned Value calculation itself is the projection of its trend out to project completion. For Example, suppose that at the 1/4 mark of completion, the project's rate of Earned Value is 94%. Suppose also that at the 3/8 mark, the Earned Value is 92%. In such a case, unless serious measures are taken to reverse, or at least halt the downward trending of Earned Value, the project will end up at a very serious cost overrun -- in this example, at roughly 18% over budget. I don't know about you, but in the business sector I work in, that amount of project cost overrun is a major problem, or just as likely, a total disaster.

Continually calculating and tracking Earned Value, and keeping a close watch on its trending are key in predicting and potentially remedying developing cost overruns...

You can, of course, accomplish both of these project management tasks without Microsoft Project software per se. Indeed, over the years I've personally developed several spreadsheet templates to do just this. But, if like a great number of project managers, you're already using Microsoft Project, you should be aware that the tools you need for calculating and tracking Earned Value and its trending are already present in MS Project's roster of capabilities. And it would definitely be worth your while to check them out.  — Phil Friedman

Author's notes:  I consult on shipyard and marina  operations and business management, and have done so for more than 20 years. I specialize in cost-effective solutions, often based on proprietary systems and software developed in the course of my work, and especially suited to implementation in the flat management structure found in most yacht building and boat yard operations. If you would like to discuss your problems and needs, on a strictly confidential basis, call or email today to make an appointment for a free 1/2-hour consult. 

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