While most of us use the default Earn Value by: Budget option for calculating earned value in Deltek Cobra, it is useful to have a good grasp of how the other options function. One option may be more appropriate in certain situations than another, so it’s good to have some general understanding of the differences.
This article takes a closer look at the different ways in which we can calculate earned value on a Cobra project using the different options for the ‘Earned value by:’ setting in the Calculate Earned Value dialog. Understanding these will help us choose the fairest and most accurate way to take credit for work achieved.
Earned Value Techniques (EVT) and Resource Curves
The Deltek Cobra on-line help system explains these options very well. However a few diagrams, some examples and some expansion on the overall effect of these different settings will probably be helpful. As always, there are many variables to take into account, but we are going to focus on just two: the EVT being used and resource spreading profiles.
Each Earned value by: option here will be introduced using the wording from the Deltek Cobra help system and shown in quotes.
Earned Value by: Budget
“Select this option to summarize the budget across all periods and to apply the earned value technique (EVT). Earned value is calculated by moving through the time phase table up to the time of the calculation, earning the first result and associated budget.”
Meaning: The earned value will be calculated based upon the work package’s BAC (hours and dollars), and applied to the current period based upon the earned value technique selected.
If you are using linear spread resources on a % Complete work package, and the work package has performed as planned, you will earn more or less your planned value. I say more or less because you may have slightly different values in each period due to the number of productive hours in each, if you are weighting your project by hours. So you may see a slightly higher or lower value for EV compared to the weighted planned hours. For % Complete work packages using the Budget option, the math is simple; EV = BAC x % Complete.
Example A: Linear weighted Four-period % Complete work package calculated using Budget at a status of 25% complete.
Example B: Weighted by Hours, Four-period % Complete work package calculated using Budget at a status of 25% complete.
In the above example, there is a slight difference between the planned value and earned value for the period. This is not an error; it’s just how we told Cobra to calculate earned value. It’s important that we understand this nuance, particularly if we are using resource curves to front, middle or back-load a work package.
Example C: Back-loaded budget, Four-period % Complete work package calculated using Budget at a status of 25% complete.
In the example above, the work package was back-loaded. By calculating using the Budget option, we have grossly overstated our earned value for this work package. To earn value accurately in a resource spread curve situation, you will clearly need to earn value by some other method: namely using the Time option. I’ll get to that option later in this article.
What about Level of Effort Work Packages?
The final point about using the Budget option is that if you are using resource spread curves on Level of Effort EVT work packages, they will calculate correctly regardless of the Earned Value by: setting. Take a look at this screen shot of Cobra where we setup two identical resource profiles on a Level of Effort and % Complete work package.
In the above image, we calculated earned value, again using the Earned Value by: Budget option. Take a look at the Percent Complete column value for Work Package A (LOE) at position (1). Work Package A (LOE) has calculated it’s percent complete based upon the planned hours for the period to date, and calculated 11.75% completion. This method allows it to correctly earn the planned value for the 47 hours in that first period. It is truly earning as planned; which an LOE work package will do by definition.
However, Work Package B (% Complete) has earned exactly 25% of the total BAC, because that’s the % Complete value actually achieved, and therefor Cobra calculates the value of 25% of said BAC, hence the overstated 100 hours (2) and $5,000 for the first period (3).
One last thought about a situation such as this – it could be accurate! Maybe we over-achieved on the work. We only planned to complete 47 hours’ worth of work, and only expected to do about 11% of the work by this point: it was back-loaded for a reason. So this could be more to do with how we ascertained the percentage of work achieved; however this is a different discussion for another article.
Earned Value By: Dollars
“Select this option to calculate earned value based on total budgeted currency. The currency earned is then pro-rated to arrive at the remainder of the resource costs.”
Meaning: to put it simply, this option deals with the total of the currency results only and then backs into the non-currency values. All things being equal you may not see any difference to the results when you use the Dollars option; unless you have factors such as a rate escalation in your rate file that fall in the midst of the work package lifecycle. Then you will see earned values different from the planned values.
For example, if you have a rate increase for the later periods of a work package, then you will see Cobra calculate a higher earned value number for the earlier periods. Take a look at the following:
Example D: Rate Increase, Four-period % Complete work package calculated using Dollars at a status of 25% complete.
In the above example you can clearly see that the earned value for the first period is higher than you might expect. Its planned value was $5,000, for 100 hours of work. When the ‘Earned value by: Dollars’ option was used in this situation, Cobra has calculated the first period EV based upon the total budget of 23,000; and with 25% of completion on the work package, the earned value is $5,750 – one-fourth of the BAC. It has also pro-rated 12.5 extra hours into first the period to balance the equation.
If the Budget option had been used in this rate increase situation, Cobra would have earned only the planned value of $5,000 and 100 hours. It will also continue in this fashion for the duration of the work package, earning only the planned value. However the Dollars option will continue adjusting the earned hours to achieve the percentage of BAC dollars. Take a look at the following work package that earned 25% complete progress in each period. Note how Cobra bumped up the earned hours for the first period, then reduced them in the remaining periods to maintain the $5,750 earned value figure for each period.
You can see the comparison of planned vs. earned in the following diagram.
Earned Value By: Hours SPI
“Select this option to calculate earned value by backing into the currency amount of the earned value so that the schedule performance index (SPI) based on hours is the same for both hours and total currency value.”
Meaning: This option will adjust your SPI figure to keep it the same as your Hours SPI figure. It does this by adjusting the earned value dollars to keep the two figures in sync.
Again, this option becomes useful when you are dealing with work packages that have a rate increase at some point in their lifecycle. The SPI value is calculated based upon Earned Value $ / Planned Value $ and then currency values are backed into once Cobra solves for SPI. If the rates change at some point, then it stands to reason that the SPI and Hours SPI values could get out of sync.
Example E: Rate Increase, Four-period % Complete work package calculated using Hours SPI at a status of 40% complete in the second reporting period.
In the following diagram, you can see how the SPI and Hours SPI can get out of sync when there is a rate increase. This example was calculated using the default Budget option in order to show the issue. The planned value hours are still set to 100 per period. However the rate increase in the second period caused Cobra to calculate a higher $ value for the second period, so the dollars SPI is now lower, while the Hours SPI is unaffected by the rate increase.
Using the “Earned value by: Hours SPI” option causes Cobra to adjust the dollars for the period in order set the SPI value to equal the Hours SPI value. This final diagram on this setting show the adjusted current period (1) and cumulative earned value (2) figures that now cause the SPI and Hours SPI values to match.
Earned Value By: Time
“Select this option to calculate earned value based on a percentage of the work package’s time-phased budget. For example, a work package that is 50% complete earns the portion of the work package’s budget that corresponds to the first half of that work package’s duration.”
Meaning: This option is using the time-phase table to determine the to-date planned value for the work package, rather than earning value by looking at the Hours or Dollars BAC value.
This would be a useful option if you are using resource spread curves and you want to earn value in a way that closely reflects the period-by-period weighting of resource hours on the work package. It will prevent overstated earned value on say, a back-loaded work package as it has fewer hours in the early periods. As we’ve seen, using the Budget option would overstate the EV for this type of work package.
Example E: Back-loaded resource spread, Four-period % Complete work package calculated using Time at a status of 75% complete in the third reporting period.
In the above example you can see how Deltek Cobra has earned very closely to the resource spread curve by taking into account the time-phased value of percent complete in each period of the work package lifecycle. You can see in the lower Earned Value table a slight deviation from the planned value figures for the middle two periods; slightly overstating in February, and then Understating in March. This is due to the different number of days in each of the periods, which formed part of Cobras overall calculation.
Each of these “Eared Value by:” options have their merits, and the use of one option over another will depend on how your EV data is structured. These options are unilateral for the project; it is not possible to run one particular option on a specific work package – it will affect all work packages. As these options mostly affect longer-duration % Complete EVT work packages, this may not be an issue. Nevertheless, it’s good to know what you can expect when you run them. I hope this article has given you more insight.
Here’s a summary of the suggested usage for each option:
Budget – use this option for typical projects that have evenly spread resource assignments on longer duration % Complete work packages.
Dollars – consider this option if you have a longer duration project that includes rate escalations within work packages.
Hours SPI – use this option if you want to keep the SPI and Hours SPI figures equal to each-other; particularly if rate escalation is a factor in your project.
Time – best used when you have resource spread curves on your work packages or you have any time-phased budget profiles; perhaps from integrating with a Primavera P6 or Microsoft Project schedule. This will earn value based upon the time-phased values, not by simply using the % Complete x BAC method.
As I stated at the beginning, in Deltek Cobra there are so many variables concerning “Earned value by:” options that I could be writing for weeks and still not cover them all. EVTs, Resource Spread Curves, calendars, productive hours: the list goes on. In the examples, we used specific factors designed to highlight the main traits of a particular option, and as such have omitted a wider range of discussion topics, such as how these settings affect EVTs other than % Complete and LOE. Nevertheless, I hope you found some of this helpful.