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We all know that some project managers (those that follow PMBOK/PMP) do earned value analysis to know SPI and CPI.

Schedule Performance Index (SPI) = Earned Value ÷ Planned Value -- How are we doing against the schedule?

And

Cost Performance Index (CPI) = Earned Value ÷ Actual Cost -- How are we doing against the budget?

I have two questions :

Suppose we have client X and contractor Y.

X wants to build a website and selected Y as its vendor. The contract signed was of type T&M (time & material).

How does the vendor (Y) do Earned value analysis, and how is it different from that of client (X)?

In short, what parameters does a vendor consider while calculating earned value, planned value and actual cost?

  • surely CPI should include the planned cost somewhere. (EV/PV)/(AC/PC)? – Ewan Sep 27 '16 at 13:14
  • @ewan , my question is "what parameters does a vendor consider while calculating earned value , planned value and actual cost?" – shams Sep 28 '16 at 1:29
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If the vendor is measuring perfomance of 'The' project then its the same calc who ever does it.

If the vendor has an internal project to rent out their employees on a per diem basis then you can see the value and costs would be completely different things.

Value would be money paid for working on projects

Cost would be employee salaries, sales, marketing, taking clients out to lunch etc etc

I can see the thrust of your question though is whether the vendor has the same goal as the client, ie completing the project under budget. Or whether they have a vested interest in it over running (as this would increase money earned)

You can see though that the vendors project is really about getting more and more clients and constantly increasing the day rate they are able to charge. Completing a project under budget and building reputation is the easiest way of doing this.

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Depends on how you set it up.

I would suggest that both parties agree on the WBS & WBSD, and agree at the start on the definition of value. That will make it easier for all concerned.

EVM works if and only if you establish the definition of "value" at the start. If you make value = cost, then you've got a self-licking ice cream cone in which every dollar spent returns a single dollar's value. EVM is simple when you're measuring physical output (meters of wall painted, widgets produced). When you're developing a website it requires some planning.

I think the client/vendor is (or should be) a distractor. The key element is how do you define value.

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the fact you have a client and vendor should (in theory) have no impact on EVM at all but in practice it can if the vendor knows nothing about EVM or the requirement to do EVM is not part of their contract. How you set up EVM is critical and I include contractual obligations to provide periodic data to do EVM, not just how the process and system that are created designed - this is important too. Mark's comments are spot on too. :)

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