Time
5 hours 14 minutes
Difficulty
Intermediate
CEU/CPE
10

Video Description

This lesson focuses on earned value management. This is the concept of tracking where your project is and where it's going to be in the future. When doing this; it is important to consider the following factors:

  • Planned Value (PV) : the actual budget
  • Earned Value (EV) : the work that's complete
  • Actual Cost (AC): the money that paid for the project in the first place

[toggle_content title="Transcript"] Under control, costs there is earn value management, which is tracking where your project is, where it is going to be in the future. Plan value is one of the key inputs as far as earn value and actual cost. You have to understand what each one of these are before we can continue. Plan value is your actual budget. As you are building up your budget, during the planning process, you are coming up with stages. On day one, my project will cost a thousand dollars. Day two my project will cost two thousand dollars. Day 3, three thousand dollars. By the end of my project it might be a 100 thousand dollars after a hundred days. Earn value is the work that is complete. If all the work that I set up for on day one is complete, I got a hundred percent of that. My earn value for day one will be a hundred percent, I get a thousand dollars. If I only have fifty percent of the work done on day one, I will only get five hundred dollar cause I only did fifty percent of the work I set up to do on day one. Earn value is the work that is complete. Actual cost now is where you have to get the concept down. Actual cost is the money that it came out of your wallet to pay for it. On day one my budget was a thousand dollars is what I planned for. The work that got done was that thousand dollars, I got a hundred percent on that work done. I got to pay that amount. What if I use twice the amount of waiver to get that work done, on day one, that is twice the amount of waiver. I planned for a thousand dollars. It is going to cost me two thousand dollars. I am paying two thousand dollars to have the work complete. For control cost you have to understand these three values. Which is plan value, earn value and actual cost. Plan value is what you have done on the planning process. You created a budget. Under plan value I said day one I am going to spend a thousand dollars. Day two , two thousand dollars. I am going to spend a thousand dollars every day on a hundred day project. This last term is budgetary completion. At the end I am going to spend a hundred thousand dollars. Over a hundred days for this project. Earn value is taking your plan value to figure out what work you have completed. You set goals for day one of what needed to be done. When those goals are met you have earned it. If you completed everything you set up for day one, you have received a thousand dollars of earned value. If you did a hundred percent of the work. If you did fifty percent of the work, you say the plan value for day one a hundred and fifty percent, that's only worth five hundred dollars actual cost, this is what confuses many people. We have just talked about plan value which is your budget, earn value which is the work that you have completed, actual cost when you get to think about it, that is the money I am paying out of my wallet to get that work done. If I said my plan was a thousand dollars for day one, my earn value, I got everything done under the plan, so I earned a thousand dollars. But, I used twice the amount of waiver for that first day. So actually it cost me more than what I planned. The actual cost is two thousand dollars. If you look over here I have put five days on the board. I mentioned my plan is to do a thousand dollars a day. Day five, five days into it, five thousand dollars. Earn value is taking assessment of what you have done. On day one I earned a thousand dollars. I did everything I said I was going to do. On day two, I wasn't as lucky, I only earned half a day's worth of work for what I set out. My earn value was only one thousand five hundred dollars. On day three I caught up. I got everything that I set up to do. By day three I got three thousand dollars. On day four, I fell way behind again am five hundred dollars behind what I planned so I only did three thousand five hundred dollars' worth of work. On day five I caught up back again so its five thousand dollars. One thing you are going to try to do, is you are going to try to focus where you are on the future especially at budgetary completion, we are going to those formulas next. Trying to make sense out of this data. On day one I put twice amount of people so cost me twice the amount that I planned. Cost me two thousand dollars. On day two I reduced my waiver, I didn't get as much work done but it only cost me two thousand five hundred dollars for the total part of the project at that point. On day three I increased my waiver, I got caught up so it cost me three thousand five hundred on my wallet. I was only planning to spend three thousand by that time. Day four I added my waiver, cost me five thousand dollars, by day five I spend six thousand dollars when I was only planning to spend five thousand dollars. The next work formula is critical it is what sets everything up. We are a going to look at a certain time. We are going to look at day four to figure out how we are doing. I want to write down the formulas which is schedule variance, which is represented by sv, cost variance which is represented by cv, and schedule performance index and cost performance index. For each one of these I want to make it easy. We are going to start off with earn value. So am going to just write ev and ev. For schedule variance I am looking at time. I am trying to figure out how well am I doing as far as time goes. For cost variance I am trying to figure out how well am I doing as far as my budget. From my schedule variance I have already used that ev and it always be plan value and actual cost. My variances, I am going to use subtraction. From my indexes I am trying to get a ratio so I am going to divide. Schedule variance am dealing with time so between plan value and actual cost, plan value is trying to figure out where am I planning to be, moment of time, according to my budget. Actual cost is trying to figure out cost information. What will that cost be out of my wallet. What makes sense is for schedule variance if you don't know the time I am going to use plan value. If I use plan value for schedule here am also going to use plan value down here for schedule. For cost variance, the only thing left is AC, which is dealing with cost so I am going to use AC here and AC down here. Let's put the numbers in. Earn value for day four is four thousand dollars. Earn value for day four, I was looking at plan value. Earn value is 3500. I am going to subtract plan value which s what I circled and I also have plan value down here so I am going to divide down here by four thousand. I have used earn value and I have used plan value. Actual cost is five thousand dollars. My schedule variance is if I take 3500 and subtract 4000, I am minus $500. That means at that moment on time on day four I am $500 behind of what I planned...where I was planning to be. My cost variance is trying to figure out my budget. If I take 3500 minus 5000 not only am I behind schedule right here, am also doing bad on budget. I am $ 1500 overspent of where I plan to be. My schedule performance index if I have a one, it means I am right on schedule right where I plan to be. I am greater than one means I am doing great. I am ahead of schedule if am less than one I am behind schedule. My sci is 3500 divide by $4000. If I take my calculator I believe that is .875. Going with what I have just said, I am less than 1.0 that means my schedule am behind where I planned to have been Cpi, I am taking 3500 and dividing by 5000 it comes up to .7. Which makes sense, I am less than one, it looks like am over budget. For every dollar am spending, I am losing 30 cents. [/toggle_content]

Video Transcription

00:04
so under control costs, there
00:07
is earned value management, which is basically tracking
00:11
where your project is, where it's gonna be in the future.
00:14
So
00:15
planned value is one of your key inputs, as well as earned value an actual cost.
00:21
You have to understand what each of these are before we can continue
00:25
playing. Value is your actual budget.
00:28
So as you were building up your
00:30
budget during the planning process, you're coming up with stages on day one. My project will cost
00:38
$1000 on Day two. My possible costs $2000 day 3 $3000.
00:44
So by the end of my project, it might be $100,000 after 100 days
00:49
earned value
00:51
is the work that's complete.
00:53
So if all the work that I set up for on day one is complete,
00:57
I got 100% of that.
00:59
So my urn value for day one would be 100%.
01:02
I get $1000.
01:04
If I only had 50% of the work done on day one.
01:07
I only get $500 because I only did 50% of the work I set up to Dio on day one
01:15
earned value is the work that's complete
01:18
actual cost. Now, this is where you have to get the concept down. Actual cost is the money that it came out of your wallet to pay for it.
01:26
So on day one,
01:29
my budget was $1000 is what I planned for
01:32
the work I got done
01:34
was that $1000. I got 100% of that work done, so I'm gonna pay that amount.
01:38
But what if I use twice the amount of labor to get that work done
01:44
on day one?
01:45
That twice among the labor I planned for $1000? It's gonna cost me $2000. I'm paying $2000 to have the work complete.
01:56
So for control costs, you have to understand these three values,
02:01
which is planned value
02:04
earned value, an actual cost
02:07
plan value is what you've done in the planning process. You you created a budget
02:13
so under planet value,
02:15
I said day one, I'm gonna spend $1000
02:17
day to $2000 to spend $1000 a day
02:22
on 100 day project.
02:23
So
02:24
this last term is budget at completion.
02:28
At the end, I'm gonna spend $100,000 over 100 days for this project.
02:34
Earn value
02:36
is taking your plan value to figure out what work you've completed. So you set goals for day one of what needed to be done.
02:44
Um, when those goals are met,
02:46
you've earned it. So if you completed everything you set up for day one,
02:51
you've ah received $1000 off earned value. If you received if you did 100% of the work,
02:57
he only did 50% of the work
02:59
beside the plan value for day one.
03:01
Well, they did 50%. That's only worth $500
03:06
actual cost.
03:07
This is what confuses many people. So we just talked about planned value, which is your budget
03:13
earn value, which is the work that you've completed
03:15
actual costs. If you could think of it. That's the money I'm paying out of my wallet to get that work done.
03:21
So if I said
03:23
my plan was, ah $1000 for day one,
03:27
my urn value,
03:28
I've got everything done that it planned. So I earned $1000.
03:31
But I used twice the amount of labor
03:35
for that first day, so it actually cost me more than when I planned. So the actual cost is $2000.
03:43
Um
03:44
so if we walk over hair,
03:46
I've put five days on the board.
03:50
I mentioned
03:51
my plan
03:52
is to dio $1000 a day.
03:54
So
03:55
day 55 days into it, $5000
04:00
earn value is taking assessment of what you've done.
04:04
So on day one,
04:06
I earned $1000. I did everything I said. I was going to d'oh
04:11
on day two. I wasn't as lucky.
04:14
I only earned half a day's worth of work for what I set out.
04:18
My turn value was only $1500.
04:21
On day three, I caught up. I got everything that I set out to Dio. By day three,
04:28
I got $3000.
04:30
On day four.
04:31
I, um,
04:33
fell a bit behind again.
04:35
So I'm $5 beyond what I plan. So I only did $3500 worth of work
04:42
on Day five. I caught back up again. So it's $5000.
04:46
Um, one thing you're gonna try to do is you're gonna try to forecast where you are in the future, especially at a bunch of that completion,
04:54
we'll get into those formulas next.
04:57
Been, Ah, actual cost.
04:59
So tryingto
05:00
make sense out of the status.
05:02
On day one, I put twice him on people. So
05:06
now it cost me twice the amount of what I plan to cost me $2000
05:11
a day. Two,
05:13
I reduced my labor.
05:14
I think it is much work done,
05:15
but it only cost me 5 $2002
05:18
for the total part part of the projects. At that point
05:21
on day three,
05:24
I, uh, increased my waiver.
05:27
I got caught up,
05:29
so it cost me $3500 on my wallet.
05:31
I was only planning to spend 3000 by that time.
05:35
Day four,
05:38
I added more labor,
05:40
so it cost me $5000.
05:43
By day five.
05:44
I'm at $6000. When I was only playing to spend
05:46
$5000. So the next port formulas air critical. It's what sets everything up.
05:53
So we're gonna look at a sliver in time.
05:56
We're gonna look at day four
05:58
to figure out how we're doing.
06:01
So
06:02
I want to write down
06:04
the formulas which is scheduled variance, which is represented by SP
06:11
cost variance.
06:13
This is represented by CV
06:15
and
06:16
Schedule Performance Index
06:20
and
06:21
Cost
06:23
Performance Index.
06:25
So for each one of these,
06:29
I'm gonna make it easy.
06:30
We're gonna start off with earned value,
06:32
so I'm gonna just write e v
06:35
evey
06:38
e v.
06:40
And even
06:45
so for scheduled Marion's
06:46
I am looking at time. So I'm trying to figure out how long my doing. As far as time goes
06:53
for Constance, I'm trying to figure out how well my doing as far as my budget.
06:58
So if I'm dealing with schedule variants,
07:00
I've already used up E V only least be planned value an actual cost.
07:05
So
07:08
my variances
07:10
I am going to use subtraction
07:14
for my index is I'm trying to get a ratio.
07:15
Someone who divides
07:19
schedule variants.
07:21
I am dealing with time.
07:24
So between plan value and actual cost
07:27
playing value is trying to figure out where am I planning to be
07:31
at a moment of time. Corn in my budget,
07:35
actual cost is trying to figure out cost information. Where did that cost me? Out of my wallet.
07:42
So what makes sense is for schedule variants dealing with time
07:46
use plan value.
07:49
If I use playing value for schedule here.
07:51
I'm also gonna use plan value down here for schedule
07:58
for cause variants.
07:59
The only thing left is a C.
08:01
What's it doing with costs?
08:03
Somebody used a C hair
08:05
and a seat down here.
08:07
So let's put the numbers in.
08:09
Earn value for day for
08:11
is
08:13
$4000.
08:15
I'm sorry.
08:16
Earn value for day four. I was looking at planned value
08:18
Earn values 3500.
08:24
Some of this attract plan value, which is what I circled.
08:30
And I also have planned value down hair, someone to divide down here
08:35
by 4000.
08:37
So I've used earn value and I've used playing there.
08:41
Actual cost is $5000.
08:46
5000.
08:48
So my schedule variants if I take 3500 subtract 4000.
08:52
I am minus
08:54
$500.
08:58
So that means at that moment in time, on day four,
09:03
I am $500
09:05
behind of where I plant where I was planning to be.
09:09
My cost variance is trying to figure out my budget.
09:13
So if I take 3500 minus 5000
09:18
now, we might behind schedule right here. I am also doing bad on budget.
09:22
So I am
09:26
$1500
09:28
overspent where I plan to be
09:31
my schedule performance index.
09:35
If I have
09:37
ah one, it means I am right on schedule. Great Yplan, newbie.
09:41
I'm greater than one. It means I'm doing great. I am ahead of schedule. If I am less than one, I am behind schedule.
09:48
So, Master P, I is 3500 divided by
09:52
$4000. So
09:56
if I take my calculator, I believe that is 0.875 So going with what I just said,
10:03
I am less than one point. Oh, that means
10:07
my schedule. I am behind
10:09
behind where I plan to offend
10:13
c p I.
10:15
I am taking 3500 and dividing my 5000.
10:18
It comes out 2.7.
10:22
So
10:24
which makes sense I'm less than one.
10:26
Looks like I'm ah,
10:28
over budget.
10:30
So for every dollar I'm spending,
10:33
um, I'm losing 30 cents

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