Earned Value Management – The Effect of Level of Effort (LoE)

Introduction

Level of Effort is typically chosen where it is difficult to define the work content or scope, Management activities are a typical example here. It is important to note that there can still be a Cost Variance (CV) on LoE type activities.

LoE as defined in Earned Value terms is where the earned work is the same as the planned work (BCWP = BCWS or EV = PV), in other words the Schedule Variance (SV) will always be equal to zero and the Schedule Performance Index (SPI) will always be equal to one.

There are occasions however where this rule may be broken, and when using Level of Effort it is important to understand some potential effects that may impact on the Earned Value calculations.

This is best demonstrated in a set of diagrams:

LoE Operating as it should.

In the below example we have our baseline to date (BCWS or PV) which is shown as the BLUE block. The work achieved to date (BCWP or EV) is represented by the GREEN block and the actual spend to date is shown as the RED block.

This picture shows the data as we would expect a LoE activity to be operating, the achievement (BCWP or EV) equals the baseline to date (BCWS or PV). As expected the SV will be zero.

LoE_1

There may be occasions where the start date of an LoE activity is re-forecasted to start later than initially planned.

Re-Forecasted Start Date

Period One

As you can see from the below diagram, the baseline profile has remained the same yet the activity has now been re-forecasted to start at a later date. The work achieved (BCWP or EV) to date does not equal the baseline to date (BCWS or PV) so the SV is not zero.

LoE_P1

Period Two.

This effect continues through each period and each period that passes the Schedule Variance (SV) only increases.

LoE_P2

Period Three.

LoE_P3

Period Four.

In this period we are about to actually start the re-forecasted LoE activity, just look at the effect in the next period.

LoE_P4

Period Five.

As this is a LoE activity and as we have already described earlier this means that the SV will always equal zero and the SPI will always equal one. Now the activity has started all the total amount of the budget planned to date (BCWS or PV) will be claimed.

Only this period actuals (ACWP or AC) will be claimed as the work has started in this period. Straight away this is giving a false indication of reality, as we move through the periods the position only worsens.

LoE_P5

Period Six.

LoE_P6

Period Seven.

LoE_P7

Period Eight.

In this period it could be assumed that the work has been completed as the work achieved to date (BCWP or EV) equals the Budget At Complete (BAC), however in reality there is still several more weeks to achieve.

Looking at period 8 the data is indicating that the work has been completed and there has been an underspend for the achievement of that work. This is painting a favourable picture when in actual fact spend will still to be accrued until the activity has completed in reality.

LoE_P8

As the SPI and CPI are unreliable in this instance there would be an impact to other calculations such as IEAC1 and IEAC2. As the BCWP is not a true representation of reality the TCPI(E) and TCPI(B) would also be unreliable hindering the predictive capability of Earned Value.

For further articles on Earned Value Management and other Project Control articles please visit our blog on our website www.myxacom.com where knowledge is no weight to carry.

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