CHAPTER 7

DETERMINE MEASUREMENT METHODS

7.1 Introduction

Determine Measurement Methods is the process used to select the appropriate method of progress evaluation for each work package. During the planning process, the project manager and control account manager determine an approach to the measurement of scope accomplishment for each WBS element assigned to the control account manager. This chapter introduces the principal methods used to determine performance. Inputs and outputs are provided in Figure 7-1.

7.2 Inputs

7.2.1 Requirements Documentation

Requirements can include contract requirements, business requirements, standards, technical requirements, performance requirements, legal/regulatory requirements, and any other applicable requirements.

7.2.2 Statement of Work

The statement of work is a description of products, results, or services to be delivered by the project.

7.2.3 Scope Baseline

The scope baseline is the approved version of a scope statement, work breakdown structure, and its associated WBS dictionary, that is used for a basis of comparison. The WBS, as part of the scope baseline, identifies all of the deliverables for the project. The WBS dictionary supports the WBS and provides more detailed descriptions of the WBS components. The WBS dictionary will likely include a description of the control accounts and it may include a description of work packages.

7.2.4 Integrated Master Schedule

The integrated master schedule provides the planned dates for performing activities included in the schedule. As a minimum, the project schedule includes a baselined planned start and a finish date for each activity.

7.2.5 Project Budget

The project budget illustrates the time-phased distribution of funds for the planned work. Thus the project budget and the integrated master schedule are key elements to develop the performance measurement baseline (PMB). PMB is established through a process of selecting and applying an appropriate performance measurement method to each work package.

7.3 Description

Earned value is a measure of work performed and a snapshot of work progress at a given point in time. The methods for measuring work performed are selected during project planning prior to commencing the work, and are the basis for performance measurement during project execution.

The earned value methods are generally assigned and applied to work packages. Each work package has its own unique characteristics; therefore, there is not one single best way to measure progress. To accommodate the different types of work, there are several accepted methods to measure work performance. There are three classes of work, as follows:

• Discrete effort
• Apportioned effort
• Level of effort

Each of these classes has one or more measurement methods available, and each method has its own specific characteristics that determine how it is applied to the work.

7.3.1 Discrete Effort

Discrete effort is an activity that can be planned and measured and that yields a specific output. Discrete effort is directly related to specific end products or services with distinct and measurable points, and outputs that result directly from the discrete effort. Four principal measurement methods are available for assignment to work packages classified as discrete effort. The measurement methods used for discrete effort enable accurate measurement of work accomplished. The four discrete effort measurement methods are:

• Fixed formula
• Weighted milestone
• Percent complete
• Physical measurement

Each of these earned value methods has strengths and weaknesses. The specific circumstances and type of project, phase of the project, or type of work package will determine which method is best suited for the measurement method.

.1 Fixed Formula

A fixed formula assigns a specified percentage of the budget value of the work package to the start milestone of the work packages. The remaining budget value percentage is assigned when the work package is completed. The 50/50 method and the 25/75 method are typical and effective methods for detailed, small and short-duration work. A critical point, necessary to ensure correct usage of any fixed-formula method, is that the sum of the milestones in a work package in any given time period must equal the budget value, that is, the PV, in that time period. The choice of a fixed formula should be made based on the nature of the work being accomplished so that the resulting PV and EV is representative of how the work will be executed.

Another important point is to note is that this method is only used on smaller work packages that are planned to start and end within two reporting time periods. The use of fixed formula makes it easy to plan and measure performance but the arbitrary percentage may not accurately represent work performance.

Figure 7-2 shows a work package (1.1.4 Seat) with a budget at completion (BAC) of $4,400. Using the 50/50 fixed-formula method shows earned value (EV) of $2,200 or 50% of the work planned and credited for the measurement period in which the work begins, regardless of how much work has actually been accomplished. The remaining EV of $2,200 or 50% is credited when the work is completed. The start and finish milestone values summarize to the work package BAC of $4,400.

The same example using the 25/75 fixed formula method credits EV of $1,100 or 25% of $4,400 when the work begins and remaining EV of $3,300 or 75% when the work is completed.

Within the fixed-formula method, the 0/100 technique is different from the other techniques. The 0/100 method does not allow any credit to be earned until the work is actually completed. This method is commonly used for receipt of materials and only used on work packages that are planned to start and end within one reporting time period. The CAM and the project manager may agree to any formula to calculate the EV as long as it produces verifiable results that meet the objectives of the project.

.2 Weighted Milestone

A milestone is a significant point or event in the project. The weighted milestone method divides the work package into measurable segments, each ending with an observable milestone; it then assigns a weighted value to the achievement of each milestone. The weighted milestone method is more suitable for longer duration work packages (i.e., those longer than two time periods) that have intermediate and tangible results, or milestones. To be used most effectively, the weighted milestone technique requires at least one interim milestone for each reporting period and does not permit partial credit for incomplete milestones. Figure 7-3 shows a work package (1.4 Braking System) with three milestones (measurement points) that are assigned a specific weighted value. Earned value is accumulated as milestones are completed.

.3 Percent Complete

The percent complete method shows an estimate of the percentage of work that is complete at the end of each measurement period. This method should be based on objective and quantifiable work completion. The planned value is determined by the time-phased resources required to accomplish the work package. The earned value (EV) is determined by multiplying the work package BAC by the percent complete. Percent complete should be determined in as objective a manner as possible. For example, specifying set criteria, agreed to by relevant stakeholders, for establishing a given percent complete. Figure 7-4 shows a work package (1.3.1 Front Wheel) with a budget of $15,600, when selecting this method. At the end of the second measurement point, 67% of the work (two-thirds of the work) is planned to be completed. Therefore $15,600 multiplied by 67% (2/3) equates to $10,400 for the cumulative PV. In actuality, the organization accomplished 70% of the work at the end of the second measurement point, thus resulting in an earned value of $10,920. It is important to note that work hours expended does not equal deliverables work completed. For example, 50 hours of effort expended on a work package planned for 100 hours does not mean that 50% of the work has been accomplished.

.4 Physical Measurement

The physical measurement, unlike the weighted milestone and the percent complete, can be related more explicitly to the completion of the work. Measurement can include any units that can be explicitly related to the completion of the work. Examples may include the length of cable laid, the area and quantity of concrete poured, and the quantity of spokes in the case of the bicycle's wheel. The method of measurement and specific measurement with the cost or efforts spent should be defined and agreed upon in advance.

7.3.2 Apportioned Effort

Apportioned effort is used for work with a direct, supportive relationship to discrete work. The value for the support task is determined based on the earned value of the referenced base activity. Apportioned effort can include such work as quality assurance, inspection, and testing activities. An apportioned work effort is estimated as a percentage of the referenced discrete work effort. The percent allocation to discrete effort is used when there are sufficient performance records and knowledge of the interrelationship between the apportioned effort and the discrete effort. In Figure 7-5, the discrete effort at the second measurement point is 5,200. The apportioned effort is 10% of the discrete effort. Therefore the apportioned value at the second measurement point is 10% of 5,200 or 520. In actuality, the actual discrete effort accomplished at the end of the second period was 7,800; therefore the apportioned earned value at the second measurement point is 10% of 7,800 or 780.

7.3.3 Level of Effort (LOE)

Level-of-effort (LOE) activities do not directly produce definitive end products that can be delivered or measured objectively. LOE work, such as project or program management and contract management, consume project resources and should be included in the EVM Planning, Executing, and Monitoring and Controlling Process Groups. LOE effort is not necessarily characterized by a uniform rate of work over a period of time. A planned value is assigned to each LOE task for each measurement period, and this planned value is credited as EV at the end of the measurement period. EV is accrued in line with PV which means LOE activities will not have a schedule variance. However cost variance can be incurred because the actual cost (AC) is usually different from EV. It is also important to note that LOE activities can accrue EV in the absence of AC. See Chapter 9 for more information on SV and CV.

Figure 7-6 shows earned value equal to the planned value at all measurement points.

7.4 Outputs

7.4.1 Performance Measurement Methods

The performance measurement method for each work package is selected with careful consideration to the specific characteristics for the type of work. The major drivers to determine the method are duration and the tangibility of the deliverables. Table 7-1 includes guidelines for selecting appropriate measurement methods.

7.4.2 Control Account Plan Updates

Control account plans are established when defining the scope of the project. They are updated with the measurement method information such as:

• Performance measurement method per work package
• Measurement period (e.g., weekly, monthly)
• Measurement unit (e.g., hours, currency, and other measurable unit)

7.5 Considerations

7.5.1 Select the Method

The performance measurement method is selected and determined for each work package based on the duration and physical qualities of the work. A guideline for selecting a method is outlined in Table 7-1.

To select an appropriate method for each unit, several aspects must be considered. Key points for consideration when selecting a measurement method (see Table 7-2) are as follows:

• Characteristics of work (duration and measurability)
• Requirements
• Measurement units (hours, currency, and other measurable units)
• Risk
• Level of accuracy to measure (cost, schedule, and performance)

7.5.2 Rules of Measurement

Organizations may have explicit guidelines or processes for selecting measurement methods. The guidelines should include method selection, measurement accuracy, measurement period, measurement unit, data collection, and reporting.

7.5.3 Measurement of Procurements

The EV for procured materials may be recorded as of the date of receipt, inspection, or installation. When accounting system actual amounts are not available, an estimate of actual costs may be used. The key is to ensure that actual cost is recorded in the same reporting period as the corresponding earned value. The EV for materials should be recorded as close as possible to the point of consumption, but not earlier than receipt.

Table 7-2 Key Points on Measurement Methods

7.6 Summary

The primary goal in choosing a performance measurement method is to have the most objective, accurate, and timely assessment possible of work, schedule, and cost status. There are three classes of work: discrete effort (e.g., measurable work), apportioned effort (e.g., work that is factored to measurable work), and level of effort (e.g., non-measurable work). Within the discrete effort class of work, there are multiple methods for determining earned value. There is only one method for determining earned value within each of the apportioned effort and level of effort classes. Selecting the appropriate method depends on the nature of the work, the duration of the work, and whether or not there are tangible outputs. An incorrect choice of a performance measurement method can result in inaccurate status, and subsequently result in incorrect or ineffective management action.