Work Breakdown Structure (WBS) is a key element for project management. In program management too, you'll need a WBS - a program WBS. Earned Value (EV) and its associated measurement techniques and metrics are advanced areas to know in project (also in program and portfolio) management. Many don’t know how intricately WBS and EV work together and hence, this post. The content of this post is from the Primavera P6 Pro Live Lessons course.
As noted in this article, the work breakdown structure (WBS) can be defined as:
A WBS is a hierarchical decomposition of the total scope of work to be carried out by the project team to accomplish the project objectives and create the required deliverables.
The above definition is deceptively simple, but packs a punch with information and key terms such as hierarchical structure, decomposition, deliverables and above all, meeting the project objectives. To know more, you can read the above linked article.
Coming to Primavera P6 software, the importance of WBS can’t be starker. Without WBS, you can NOT have:
- Activities added into the work packages in the right manner.
- Proper planning and tracking of your project.
- Formal control with respect to the project considering earned value.
- Cost management at the control account level, among others.
In fact, you as the project manager should FIRST develop the WBS, and then assign activities to the WBS elements in order to perform the work!
To build the WBS, go to Project > WBS and add elements one by one. When completed along with the associated activities, it’ll come as shown below. This is taken from a live project of Primavera P6 Live Lessons course. (Click on the image to enlarge)
As shown, we not only have the WBS Codes and WBS Names, but also the At Completion Cost and At Completion Duration for the WBS elements.
Earned Value (EV)
Earned Value is a well-known and widely used technique in all aspects of management – project or program. It’s also one of the key techniques in portfolio management. For example, in portfolio management, while managing benefits and value from the portfolio components (aggregated at the portfolio level), you can apply EV techniques.
Earned Value is a technique integrates scope, schedule and cost and the measurement happens with respect to the performance measurement baseline (PMB) as noted in this article.
Now, coming to Primavera P6, the first setting for earned value management will happen in the WBS window! If you’ve not done the proper settings, then your calculations with respect to earned value will be incorrect.
WBS and Earned Value
To have proper earned value setting and hence calculation, you’ve to enable the WBS details by right clicking anywhere inside the WBS window and choosing “WBS Details”. (Click on the image to enlarge)
This will enable WBS details in the bottom panel, if it’s not already visible. Next, to have the settings for Earned Value, go to WBS Details Pane > Earned Value tab. There you can make the setting related changes in two areas:
- Techniques for computing performance percent complete
- Techniques for computing Estimate to Complete (ETC).
This is shown below. (Click on the image to enlarge)
The default setting w.r.t to technique for computing performance percent complete will work with “Activity percent complete”.
The complications arise with the default setting w.r.t technique for computing ETC.
Performance Factor (PF) and Estimate to Complete (ETC)
The relationship between PF and ETC must be well-understood before use the ETC technique. I noted the following in this elaborated article:
“ETC is the cost needed to complete the remaining work. It’s driven by a performance factor or performance index. Putting it into an equation, you get:
ETC = Work remaining / Performance factor
or
ETC = (Budget at Completion – Earned Value) / Performance factor
or
ETC = (BAC – EV) / Performance factor
The performance factor could be the cost performance factor or the cost performance index (CPI). It can also be a combination of CPI and schedule performance index (SPI) or a weighted combination of CPI and SPI.”
The default one used in the standard calculation for ETC is the Cost Performance Index. In this case the performance factor (PF) follows this equation.
Performance Factor = 1 / Cost Performance Index, or
PF = 1 / CPI
This setting should reflect while you manage your project with Primavera P6 software. Hence, in your project, it should come as shown below. (Click on the image to enlarge)
Video Demonstration
The below video [duration: 03m: 27s] gives a live demonstration on the settings. Detailed explanation for earned value, its calculations and association with WBS are part of the Primavera P6 Pro Live Lessons. Plug-in your headphones and go full-HD to have a better experience.
Conclusion
The calculations in earned value can vary based on the % complete as the above video explains. Primavera P6 gives a number of options to calculate. In order to master Primavera P6, you need to be familiar with them.
And only with proper settings at the WBS level for earned value, you should go for earned value calculations.
Check the Videos (Before Buying):
References
[1] Primavera P6 Pro Live Lessons Online Course, by ManagementYogi.com
[2] Practical PMP with Oracle Primavera P6, by ManagementYogi.com
[3] Work Breakdown Structure (WBS) in Traditional and Agile Life Cycles with MS Project, by Satya Narayan Dash
[4] Calculating EAC and ETC for Forecasting, by Satya Narayan Dash
[5] Estimate to Complete (ETC) Calculation – Formulas for ETC (Composite), by Satya Narayan Dash
No comments:
Post a Comment
Sign- or Log-in and put your name while asking queries in comments. Any comment is welcome - comments, review or criticism. But off-topic, abusive, defamatory comments will be moderated or may be removed.