Interesting. Further extension of the deep confusion in project management caused by the use of the term "value" to refer to "cost" -- a confusion compounded by PMI in 2004 when they changed "Budgeted Cost for Work Scheduled" (BCWS) to "Planned Value" (PV). I know it's too complicated for PMI to understand, but of course it should be "Planned Cost" (PC).
There is only the most tenuous relationship between cost and value, and the conflation of the terms is part of what is destroying project management. "Cost" is the invested dollars in resources to execute the project investment -- the expected "value" is the REASON for that investment. And, as with every investment, the expected value is ALWAYS greater than the expected cost -- often greater by a gigantic magnitude!
But project management's confusion with earned value is a big part of the reason why ROI, or NPV, or expected monetary value (EMV) -- which is THE prime metric for all OTHER investments -- is so ignored in project management!
As I wrote in Managing Projects as Investments, anyone who doesn't understand the difference between "Cost" and "Value" is hereby invited to a poker game.
Fraternally in project management,
Steve the Bajan
Member for
19 years 5 months
Member for19 years6 months
Submitted by Dinesh Kumar on Sun, 2019-09-08 16:16
May be it is more accurate to say, VoWD is the earned value against EAC at that point of time. For example, if an item price is budgetted originally as $100 and baselined, at 50% milestone payment the EV should be $50. Now assume that during actual procurement process, the item price was qouted and PO/SO issued for $150. Now at 50% milestone the VoWD will be $75. EV is related to BAC whereas VoWD is more related to commitments.
Quoted from Wiki
"Unlike the earnedvalue, which measures the valueof goods and services received as a percentage of the planned value, the VOWD is not measured against the plan, but against the committed cost.VOWD is not solely based on goods and services receipts.
VOWD is not solely based on cash andor invoice payments. VOWD is not simply a milestone based costing valuation. These components are referenced in determining VOWD, however VOWD is a more fulsome valuation determination of the full valueof goods and services committed to and obligated to, at a point in time. Regardless of whether they have been paid for or have been completely received"
Thank you vfery much for your quick replay. I got the diffrences now by your help. I need to know onemore thing if in Primavera P6 we have an activity code can show the VOWD or if there is equations we have to use inorder to calculate the value?
Thank you again
Hanson
Member for
13 years 6 months
Member for13 years6 months
Submitted by Suraj Ghimire on Fri, 2012-04-27 09:57
I agree with Raymund De Laza.Lets clear with example
If u have done 50% of the work that cost $ 100 in total.It means that your earned value is $50. But it doesn't mean that your actual value must be $50. It may or maynot be $50 due to various reasons like escalation in cost, change in work scope etc.
Suraj
Member for
15 years 11 months
Member for15 years11 months
Submitted by Raymund de Laza on Fri, 2012-04-27 09:12
What I understand is they are different as that the Value of Work Done is the Actual Value of what was actually Performed considering the current actual rates and actual quantities while EV is derived from the actual values calculated from the Planned/Scheduled Data loaded in the program.
Likewise Actual Cost and Earned Value Cost are different.
Member for
20 years 7 monthsInteresting. Further
Interesting. Further extension of the deep confusion in project management caused by the use of the term "value" to refer to "cost" -- a confusion compounded by PMI in 2004 when they changed "Budgeted Cost for Work Scheduled" (BCWS) to "Planned Value" (PV). I know it's too complicated for PMI to understand, but of course it should be "Planned Cost" (PC).
There is only the most tenuous relationship between cost and value, and the conflation of the terms is part of what is destroying project management. "Cost" is the invested dollars in resources to execute the project investment -- the expected "value" is the REASON for that investment. And, as with every investment, the expected value is ALWAYS greater than the expected cost -- often greater by a gigantic magnitude!
But project management's confusion with earned value is a big part of the reason why ROI, or NPV, or expected monetary value (EMV) -- which is THE prime metric for all OTHER investments -- is so ignored in project management!
As I wrote in Managing Projects as Investments, anyone who doesn't understand the difference between "Cost" and "Value" is hereby invited to a poker game.
Fraternally in project management,
Steve the Bajan
Member for
19 years 5 monthsHanson,May be it is more
Hanson,
May be it is more accurate to say, VoWD is the earned value against EAC at that point of time. For example, if an item price is budgetted originally as $100 and baselined, at 50% milestone payment the EV should be $50. Now assume that during actual procurement process, the item price was qouted and PO/SO issued for $150. Now at 50% milestone the VoWD will be $75. EV is related to BAC whereas VoWD is more related to commitments.
Quoted from Wiki
"Unlike the earned value, which measures the value of goods and services received as a percentage of the planned value, the VOWD is not measured against the plan, but against the committed cost.VOWD is not solely based on goods and services receipts.
VOWD is not solely based on cash and or invoice payments. VOWD is not simply a milestone based costing valuation. These components are referenced in determining VOWD, however VOWD is a more fulsome valuation determination of the full value of goods and services committed to and obligated to, at a point in time. Regardless of whether they have been paid for or have been completely received"
Hope that clarifies the difference.
Dinesh
Member for
13 years 5 monthsDear Sir, VOWD and EV not the
Dear Sir,
VOWD and EV not the same. for the calculation method is diffrent.
Dan
Member for
13 years 9 monthsDear All, Thank you vfery
Dear All,
Thank you vfery much for your quick replay. I got the diffrences now by your help. I need to know onemore thing if in Primavera P6 we have an activity code can show the VOWD or if there is equations we have to use inorder to calculate the value?
Thank you again
Hanson
Member for
13 years 6 monthsDear Hanson,I agree with
Dear Hanson,
I agree with Raymund De Laza.Lets clear with example
If u have done 50% of the work that cost $ 100 in total.It means that your earned value is $50. But it doesn't mean that your actual value must be $50. It may or maynot be $50 due to various reasons like escalation in cost, change in work scope etc.
Suraj
Member for
15 years 11 monthsHanson,What I understand is
Hanson,
What I understand is they are different as that the Value of Work Done is the Actual Value of what was actually Performed considering the current actual rates and actual quantities while EV is derived from the actual values calculated from the Planned/Scheduled Data loaded in the program.
Likewise Actual Cost and Earned Value Cost are different.
Hope this will help.
Raymund