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SHOULD PROJ/SITE MANAGEMENT BE INCLUDED IN EV FIGURES

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Oliver Melling
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Do you think level of effort costs such project management & site management should be included in the earned value calulations of a project?

Do they intefere with CPI/SPI and give a false sense of security?

Replies

Gordon Blair
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Ther are a number of facets to this, some of which have been addressed above, but here goes:

Firstly, while you clearly need to show a pair of Indices for the job as a whole, it is always good practice to break down the EV figures as far down the WBS as your accounting system will allow. You will then be able to demonstrate financial performance with or without any ’normalising overheads’ and cut the figures whichever way you like (by WP, Operational Area, Team, etc etc)

While your PM activities should have an SPI of 1 (barring any change of delivery philosophy, holds etc) your CPI will be a ’live’ figure, depending on how many liggers attach themselves, like barnacles, to your project. This will need to be tracked on a monthly basis, and the trend reflected in your Cost Forecasts.

While the Project is running, your PM function will be holding meetings, producing reports, getting in the way etc etc as budgeted for every month. The function is entitled to earn this value as long as it keeps holding the expected amount of meetings, and producing the agreed number of reports every month, REGARDLESS OF GENERAL PROJECT PERFORMANCE.
Once the job moves past the Planned completion date, and you have earned your 100% of PM costs, then you are working for free, incurring costs for no value. Your SPI will remain at 1 (as you will have done all of the PM work that you expected to do) and your CPI will start to drop (like a brick, dependent on team size). You can ascertain the likely cost exposure as you have been monitoring your Spends and PM team size on a Monthly Basis.

This PM work after the Baseline end date is essentially additional scope (more meetings, more reports than expected) and who pays for it very much depends on who is responsible for the delay. (it can be handy to Programme the resource in with £0 as a rate, for ’own fault’ slippages to facilitate resource planning within your own business).

To summarise:
Collect EV for everything, but break it down as far as practicable.
Cost Monitoring is just as important for PM as any other area of the job.
Your PM Activities should have an SPI of 1, if not, you should have a pretty obvious reason as to why not.
Try to avoid using LoE activities for PM costs (yep, I know, but it does make sense if you think about it).

... and if you make a whole in the top AND the bottom of the egg Grandma, it makes the sucking far easier ;o)
Dennis Hanks
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IMHO: if you do not produce a deliverable, you should not be included in EVM.

Any cost overruns in mgt or other indirects should be delt with during forecasting.
James Barnes
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we do not track indirect costs in our EV reporting, although I accept that perhaps we should.

If we were to, it would likely be on an easily seperable basis so as to avoid the masking dangers that Andrew mentioned.

OTOH, our execution durations are typically in the order of weeks rather than months or years.

That is not to say that indirect costs aren’t monitored, just not by the central EV schedule.
Patricia Le Clainche
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Thanks Andrew,

I agree with you. Management tasks have to be monitered as well (a specific WP for instance).

Best regards.

Andrew Dick
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Oliver,
In my past experience the costs associated with project management & site management are included in the CBB so you should indeed include them in the EV calculations.

Your right they can mask some figures if you interpret the EV data the wrong way. As always these costs should be separated from the discrete activities within the schedule, by means of cost/control accounts, WBS or some other such delineator.

The cost of project management & site management can quickly spiral out of control if it is not monitored, due to the traditional ’Cast Of Thousands’ that inevitably turn up to ogle the project and suddenly need a code to book time to.

Also if a project is to last a number of years there will be comings and goings of staff and sometimes new people cost more than the old so there is the potential for costs to get out of control there if the budgets are not monitored correctly.

They’re also handy little spots to hide some cash from the PM for a rainy day.

Andy