Your Definition of LOE is Wrong!

I was having a conversation the other day with a company that has never done Earned Value before. The meeting was with the Finance group and I started to talk about LOE. Confusion ensued.

In the EV world Level of Effort (LOE) has a specific meaning. DAU defines it as “effort of a general or supportive nature that does not produce definite end products or results, i.e., contract for man-hours” and in EVMies we know what that means. That the work will not have discrete ways of measuring progress, so we will take credit for all the work that was planned in a month. All straight forward for those of us that live and breathe Earned Value.

The problem is the rest of the world has a different definition for LOE. To EV muggles, LOE means the same amount of effort will be planned for each period or “Level Loaded”.

While this planning profile can exist for work packages that are identified as LOE in EVMies, they do not have to be. For example, Project Management is typically a LOE work package, but that does not mean you should not have a front-loaded peak resource profile to account for the increased level of planning that occurs at the start of a program (I can dream).

LOE = Earned as Planned

In the EV world, LOE just means that while there may be deliverables associated with PM, they are typically not going to drive the schedule of a project (i.e., missing a status report deadline is bad but does not push the project end date) so you should earn as you planned vs trying to assign a discrete value to the work. So, if you plan 100 hours in a month, you should earn those 100 hours for that month regardless (or maybe in spite of) the deliverables you did or didn’t provide (There are probably better examples of EV LOE work, but they wouldn’t have given me the opportunity to push for more planning up front!) For a great description of LOE from an EV perspective see Humphreys & Associates EVMS Education Center definition here.

So, then the question becomes, who is right?

As much as my instinct is to argue the EV definition, there is part of me that thinks there are more of “them” then us. The concept of level of effort = level load is prevalent in the scheduling, resource mgt, finance, etc. worlds. Maybe we EV’ers should think about using Earn as Planned (EAP) to describe the Earned Value Technique vs LOE?

Not sure this windmill is worth fighting, but it is important to think of Earned Value Management in the context of the audience you are talking with. At a minimum we should recognize that the term LOE means different things to different people, but from an EV perspective LOE means earn as planned, regardless of the shape of the resource profile.

Have an opinion on LOE vs EAP? Leave a comment!