The concept of Earned Value Management (EVM) isn’t novel – it may be dated back to the mid-1960s.
Yet it has taken a long time for the Project and Program Managers to entirely embrace this methodology due to the lack of advanced tools that could seamlessly link the project’s scope, budget and progress made to determine a project's health.
However, project managers/stakeholders nowadays rely exceedingly on the Earned Value Metrics to manage their project risks and successfully execute the portfolios.
EVM has become one of the key components of any tier 1 Project Management application.
Oracle has been leading this space with several Project and Portfolio Management (PPM) Solutions such as Primavera unifier, E-Business Suite, and Fusion Project Management Cloud. Most of its PPM solutions provide out-of-the-box capabilities to address the EVM needs of Projects of all shapes and sizes.
This article focuses primarily on how some of these earned value metrics are calculated in Oracle Project Management Cloud Aka Fusion Projects. To get more information about Earned Value Management, I suggest you go through our earlier blogs in this series.
· Introducing Earned Value Analysis for Projects
· Discussing Earned Value Metrics for Dummies
· 8 Top Benefits of Earned Value Management You Should Know About
Calculation of Earned Value Metrics in Oracle Project Management Cloud comprises the following Steps:
Step 1 Calculation of the ETC and EAC values –
Before we get into the calculation of ETC and EAC values, here is a quick explanation of what ETC and EAC imply.
Estimate to Complete (ETC) is the expected remaining cost to complete the project. It is not the total cost of the project but the expenditure amount from now to the end of the project.
Estimate at Completion (EAC) is the estimate of the final project cost based on its past performance.
In Oracle Project Management Cloud, ETC and EAC values are derived based on the Progress ETC Method assigned to the task or task assignment.
If the ETC Method is Remaining Plan, Oracle Projects Cloud performs the calculation as per the following steps:
1. EAC Quantity is set equal to the Current Planned Quantity for the project plan at the time of capturing the progress.
2. ETC Quantity is calculated by subtracting the Actual Quantity from the EAC Quantity
3. ETC Quantity is then used to determine ETC Effort, ETC Cost
4. EAC Amount is calculated by adding ETC Amount and Actual Amount.
5. After calculation, both ETC and EAC values are rolled up the task hierarchy.
Step 2 Calculation of the Physical Percent of Completion -
Physical Percent Complete is calculated based on the Physical Percent Complete Calculation Method Selected at the lowest-task Level. One has the following options to choose from:
If the method is Cost or Effort, then the application derives Physical Percent Complete from the ratio of Actual Cost or Effort to date against the latest EAC Amount.
If the method is Manual Entry, one needs to manually enter the progress percentage at the lowest task level.
Step 3 Calculating Earned Value Metrics -
After progress is captured, Earned Value Cost and effort are calculated at the lowest-task level by multiplying Physical Percent Complete and baseline planned cost or effort.
Here are some earned value metrics that get calculated at the task level and further get rolled up the hierarchy to the project level.
Baseline Planned Cost to Progress As-of Date = (Baseline Planned Cost / Duration in Days based on Baseline Dates) * Number of Days to Progress As-of Date based on Baseline Start Date
A company has a Project with start and end dates of 01 September 2020 and 31 July 2021 respectively. Let us assume Project is 37.5% completed in February 2021
From the above values, the derived metrics are calculated in the following table:
EVM acts as an enabler for the Project Stakeholders to be able to effectively measure performance. It often provides a foundation for corrective action and risk mitigation—which is a game changer. Advanced analytics, integrated with EVM capabilities, is the key to flipping the paradigm from EVM as a tedious requirement to a prized asset for industries such as energy, infrastructure, aerospace, defence, and beyond.
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