How we calculate the Value of Work Done (VOWD)?

Dear Hanson,

P6 also can get VOWD, but need calculation in difffrent indea. VOWD and the EV not the same information in control works.  for ex. the procurement part, VOWD only matls. or equipment delivery to site, the value can be calculated.

you don't need use the p6, actual, we use the excel form.  when you get EV, at the same time, you can get the VOWD, just the cal. idea not the same.

rgds,

DAN

Hi, Suroj.

I certainly understand what you are saying, but cannot agree when you wrote: "In my view, Earned value and VOWD are same things.Both are value of workdone at the instant we consider."

I feel that the terminology is hugely misleading -- earned value and Value of Work Done are only the same if one defines them as such. And if one accepts that terminology and definition, then a hugely important aspect of every project remains undefined: not the cost but the value of its work which, with EVERY OTHER investment EXCEPT projects, is THE most imortant metric -- why is it ignored with projects? Are projects not investments?

First, earned value is a completely misleading term, a confusion that PMI extended in 2000 when it renamed BCWS to PV. Earned value is NOT value, it is COST: as in Budgeted Cost for Work Scheduled, Budgeted Cost for Work Performed, and Actual Cost for Work Performed.  If PMI had named it PC for Planned Cost rather than PV, that would have been both accurate and less confusing.  Now the project management world thinks that the Value of Work Done is the same as Actual Cost, which is simply not true. NO ONE would knowingly spend $10,000 to do work which is valued at $10,000 -- they will only spend $10,000 on something which is worth MORE to them than $10,000. 

Why is this important? Because, very simply, the value (in the true sense of the word!) of the work should be THE driving factor in all project decisions.  Spend more only if the value increases by even more. Accelerate the schedule more only if the result is greater value. Add scope if it increases value, but cut scope if the added value is less than the True Cost of that scope (where the True Cost of Work = Resource Cost plus Drag Cost).

Unfortunately, on every project we spend hundreds of hours planning, analyzing tracking and reporting cost, and approximately ZERO time analyzing:

1. The value of the work, and
2. The value/cost of time.

And then, as project managers, we wonder why we can nev erjustify the additional money we need to do the project properly, i.e., generate the greatest value from the project investment.

If you want to read more about the failure to manage projects as investments, I recommend this series of articles at ProjectsatWork.com:

• The Value-Abled Project
  
   
• Moneyproject
  
   
• Time Is A Crook

Fraternally in project management,

Steve the Bajan

Illustration # 1

Prior to Execution of Project:

Activity Start Date                       : 01 May 2012
Activity Finish date          : 05 May 2012

Budget Amount               : $ 2,650.00 (5 x $ 530.00)
Planned Amount             : $ 2,650.00 (5 x $ 530.00)

During or After Execution of Project:

Activity ActualStart Date              : 01 May 2012
Activity ActualFinish date            : 05 May 2012

Earned Value Amount                  : $ 2,650.00 (5 x $ 530.00)
Actual Amount                            : $ 2,650.00 (5 x $ 530.00)

In the Above Illustration # 1, you can conclude that if the works had progressed as scheduled without any changes in the Quantity and Unit Price, the Earned Value Amount is equal to Actual Amount.

Illustration # 2

Prior to Execution of Project:

Activity Start Date                       : 01 May 2012
Activity Finish date          : 05 May 2012

Budget Amount               : $ 2,650.00 (5x $ 530.00)
Planned Amount             : $ 2,650.00 (5 x $ 530.00)

During or After Execution of Project:

Activity ActualStart Date              : 01 May 2012
Activity ActualFinish date            : 05 May 2012

Earned Value Amount                  : $ 4,240.00 (8 x $ 530.00 - Contract Unit Price)
Actual Amount                            : $ 3,960.00 (8 x $ 495 - current market price index)

In the Above Illustration # 2, you can conclude that if the works had progressed as scheduled but with changes in the Quantity and Unit Price, then the Earned Value Amount is not equal to Actual Amount.

For Graphical Presentation... you will be having a Curve for the Amount with respect to Time:
1. Planned/Budget Amount
2. Earned Value Amount
3. Actual Amount

Whatever Terminology used to define the 3 items above... The Schedulers/Controllers Visual Presentation of their reports will be the basis for the satisfaction of the benificiaries of the reports.

Dear Hanson,

In my view, Earned value and VOWD are same things.Both are value of workdone at the instant we consider.However,you mentioned that VOWD is depend on the resources we used in the schedule. But I don't think so.VOWD depends upon the quantity of workdone rather than resources. If the schedule is properly loaded with resources, then Actual cost will deppend on the resources we used.

Regards,

Suroj

Just asking -- so if the value of the work is the same as the AC (and, ultimately, budget), what is the value of:

1. The small office building we construct for a big client for $1M (and with a profit of just 5%) that we bid on in the belief that, if the client is pleased, there is a 90% chance he'll give us the contract for the BIG office building he's planning that will result in a $10M profit if we get the contract?  Is the value of the work really $1M? Or $1M X 5%, or $50,000? Or does the 90% probability of a $10M profit play any part in assessing the small project's value, and perhaps even in making decisions? Isn't the value (as opposed to the cost) of the work not hugely important?
2. The causeway, with a $30 million budget, to the developer's luxury vacation island complex that, once completed, is expected to generate (through hotels, restaurants, glof course and marina) $100 million in profit annually? Is the value of the causeway really only $30M, or should the huge ROI on the luxury complex, which would be impossible without the causeway, play a role in our setting the value of the causeway's work, and making decisions (including delay costs on the causeway project and Drag Costs on its Critical Path activities)?    

It's sad, but until project management starts to understand that all projects are investments, and that there is almost invariably a significant and VERY important difference between cost and value, bad decisions will continue to be made, and project management as a discipline will continue to undervalued and underrewarded.

Fraternally in project management,

Steve the Bajan

For a cost engineer / QS, VOWD = invoices paid + invoices acrrued - disallowed costs

For Primavera, VOWD = Actual Cost

Hanson,

Use excel to calculate then import it in P6 Actual Cost or use a UDF then equate it with Actual Cost using Global Change.

Hope this will help.

Dear Hanson,

If you schedule is loaded with cost then u can calculate the value of work done directly from Primavera P6 by selecting Earned Value cost.

Hope this is wht u r looking for.