W2_Ocharlie_Why cost oriented WBS gives problem when used for EVM

Problem definition

Determine why a WBS oriented by element of cost or organisational element cause problems when used for earned value management

Feasible alternatives

WBS with cost element orientation

WBS with organisational orientation

WBS with product-oriented

Develop the outcome of each alternative

 

Fig. 1 Cost Oriented WBS

 

 Fig. 2 Product oriented WBS

 

Fig. 3 Organisation oriented WBS

 

Selection of criteria

Ease of assessment of progress status

Ease of communication

Bases for historical data

Analysis of alternatives

Consider figs 1,.2 and 3 above,

With the product oriented approach of fig 2, the logical level 2 WBS elements were Skid, Pipe spools and paint. Questions on status of the project are easily explained by the status of the skid, the spools and paint. A glance on the report shows where the project is.

The cost oriented WBS shown in fig.1, the status of the skid, pipie spools and paint is fragmented into multiple control accounts of equipment, materials, labour, indirect and administrative. Obtaining the status for the skid for instance entails collecting data from all the cost legs and summing up. This becomes cumbersome where you have multiple key elements of the project.

The organisational oriented approach of fig. 3 contains some redundant information. The 2 main element in the project skid and pipe spools cannot be easily assessed as this is not the function of OBS. Using OBS in WBS negates the value purpose as information are duplicated.

Selection of preferred alternative

Earned Value Measurement is a project control tool that focuses on earned value of work performed as project progresses and allows for effective measurement of the status in terms of both cost and schedule. In the three scenarios in figs. 1 to 3 it is clear that only fig.2 gives a visible status of the project in terms of the 2 main level 2 elements- skid and pipe spool fabrications. Therefore product oriented WBS is unambiguous project control tool in earned value measurement.

Performance monitoring and evaluation

With the product oriented WBS, the 2 main level elements of the project can be taken down to level 3 comprising handrails, skid frame, pipe supports and pipe spools 1, 2, 3, etc and progress tracked both in terms of schedule and cost.

References

Humphreys, G. C. (2011). Project Management Using Earned Value, Project Management Using Earned Value  (2nd ed.), (PP. 31-42) CA, Humphreys & Associates,  Inc.

Humphreys, G. C. (2011).  Definition of Scope, Work Breakdown Structure (WBS) and WBS Dictionary,  Project Management Using Earned Value  (2nd ed.), (PP. 45-58) CA, Humphreys & Associates,  Inc.

Humphreys, G. C. (2011). Relating Organisations, Responsibility, and Work Scope, Project Management Using Earned Value  (2nd ed.), (PP. 91-100) CA, Humphreys & Associates,  Inc.