How to handle unequally distributed material cost in EVM

Question

I am looking into Earned Value Management and seem to be unable to find anything useful on how to deal with large material cost, which are not equally spread over the project.

All examples that I have found seem to be along the lines of (from MS project support website):

You are renovating the gardens of 10 homes

• $10,000 is your total budget for all 10 homes.
• $1,000 is budgeted for each home, which means you plan to spend $1,000 per month on the entire project. This includes money spent on plants, tools, and a gardener.
• You plan to complete 1 garden per month

And this is where my problem starts, what if I don't plan to spend $1,000 per month? Lets say I want to buy all my plants and tools at the start of the project? So now I plan to spend $5,500 in the first month, and then on after $500 a month (gardener's salary).

So after 1 month I have finished 1/10 gardens, and spent 5,500 of my 10,000 budget. According to all the sources/explanations I have read, my %completed at that point would be 10%. So my EV = $1,000, my PV = $1,000. However, my AC = $5,500, making it look like I am heavily over budget, even though I am not.

If I would decide, well what if I base my PV on how I plan to spend my budget? So at month 1 my PV should be $5,500, month 2 it should be $6,000, and so forth. In that case, at month 1 both my PV and AC are $5,500, but my % completed is still at 10%, so my EV is $1,000. Making it seem like I am behind schedule, even though I am not.

How would one deal with this in the real world? I had the idea of adding the materials as a 'task' in my project as well, and have it contribute to the % completed as per the cost. So lets say after having bought the materials it contributes to $5,000/$10,000 = 50% of project completed. Each house then contributes to 5% project completion. Then after month 1 I should have 55% completed -> PV = 0.55*10,000 = $5,500. If I have indeed purchased my materials and completed one garden then my EV would also be 0.55 * $10,00. However, ms project for example does not seem to support this, and bases the % completed on the original baselined work. so this makes me wonder if this is common practice or not.

Answer 1

Some organizations buy materiel and inventory it until it is claimed by a project. At that time, the project recognizes the costs as AC. If you can account for costs in that manner, a matter of debits and credits on the books, then you can spread those costs more evenly across your project.

However, that is not your only solution. The problem you are dealing with is % complete. What you are describing is % duration complete and that is not the best way to measure completion using EV. The better way is using physical % complete. And even another way to look at that is physically % spent because this is a cost control method. So in period one, you are planning to be 54% physically complete or spent so your PV is $6,500, and if you finished on time and actually spent that then you EV is $6,500 and your AC is $6,500.

Both methods would allow you to know where you are and forecast accurately and that is the goal of EV.