Value breakdown structure

Last updated January 02, 2023

A value breakdown structure (VBS) is a project management technique^[1] introduced by Stephen Devaux as part of the total project control (TPC) approach to project and program value analysis.

The concept has similarities with the deliverable-oriented work breakdown structure (WBS) decomposition which is used in project management and systems engineering to break down a project into smaller components in a tree structure that represents how the work of the project will create the components of the final product. Resources and cost are typically inserted into the activities in a WBS, and summed to create a budget both for summary levels (often called "work packages") and for the whole project or program.

Similarly, a value breakdown structure will provide the expected value-added of each activity and/or component of the project (or projects within a program).

Mandatory and optional activities

In most projects (and programs), there are some components and activities (and projects) that are mandatory and others that are optional.

Mandatory activities are required, and have the full value of the project investment, as the project cannot be completed without them.
Optional activities, in contrast, have only the value that they are adding to the project, i.e., their value is equal to the delta between the project/program value if they are included and the value if they are omitted.

For example, in creating an automobile, an engine, a driveshaft and wheels may all be considered mandatory, whereas cupholders are optional. If any of the mandatory activities are excluded, the project's value approaches zero. But the value of the cupholders is only the difference between the value of the car with and without cupholders.

Value contributions may not necessarily be summarized

Values cannot be summed in a value breakdown structure similarly to how costs can be summed up from the branches of a work breakdown structure to provide an overall budget. For example, if the value of an automobile is $25,000, there are many components and activities that are mandatory in generating that value – leave any of them out, and the value of the project approaches zero. Therefore, the fact that the engine, driveshaft and wheels are all mandatory, and each therefore has a value-added of $25,000 does NOT make the value of the automobile $75,000.

Purpose

The main purpose of the value breakdown structure is to prioritize components and work by the value they are expected to add, and to ensure that the value of the project investment is not reduced by the inclusion of work which has a value-added that is less than its true cost, which is the sum of its resource costs and its drag cost. This can often happen if the project's critical path changes so that different activities suddenly acquire critical path drag and drag cost: an optional activity that adds $10,000 to the expected value of the project and has a budget of $5,000 may make sense when it can be performed off the critical path but should probably be jettisoned if on the critical path if they now have a negative value-added due to a drag cost of more than $5,000.

Use in index of project performance

The value from the value breakdown structure should also be used as the basis for tracking project value through Devaux's Index of Project Performance (DIPP). If scope is changed during execution, that change should be input into the value breakdown structure, the numerator in computing the Actual DIPP adjusted, and the DIPP Progress Index thus updated.

Related Research Articles

Earned value management (EVM), earned value project management, or earned value performance management (EVPM) is a project management technique for measuring project performance and progress in an objective manner.

Project management is the process of leading the work of a team to achieve all project goals within the given constraints. This information is usually described in project documentation, created at the beginning of the development process. The primary constraints are scope, time, and budget. The secondary challenge is to optimize the allocation of necessary inputs and apply them to meet pre-defined objectives.

A work-breakdown structure (WBS) in project management and systems engineering is a deliverable-oriented breakdown of a project into smaller components. A work breakdown structure is a key project deliverable that organizes the team's work into manageable sections. The Project Management Body of Knowledge defines the work-breakdown structure as a "hierarchical decomposition of the total scope of work to be carried out by the project team to accomplish the project objectives and create the required deliverables."

The critical path method (CPM), or critical path analysis (CPA), is an algorithm for scheduling a set of project activities. It is commonly used in conjunction with the program evaluation and review technique (PERT). A critical path is determined by identifying the longest stretch of dependent activities and measuring the time required to complete them from start to finish.

Project management software (PMS) has the capacity to help plan, organize, and manage resource tools and develop resource estimates. Depending on the sophistication of the software, it can manage estimation and planning, scheduling, cost control and budget management, resource allocation, collaboration software, communication, decision-making, quality management, time management and documentation or administration systems. Numerous PC and browser-based project management software and contract management software products and services are available.

The program evaluation and review technique (PERT) is a statistical tool used in project management, which was designed to analyze and represent the tasks involved in completing a given project.

In project management under the PRINCE2 methodology, a product breakdown structure (PBS) is a tool for analysing, documenting and communicating the outcomes of a project, and forms part of the product based planning technique.

In project management, a schedule is a listing of a project's milestones, activities, and deliverables. Usually dependencies and resources are defined for each task, then start and finish dates are estimated from the resource allocation, budget, task duration, and scheduled events. A schedule is commonly used in the project planning and project portfolio management parts of project management. Elements on a schedule may be closely related to the work breakdown structure (WBS) terminal elements, the Statement of work, or a Contract Data Requirements List.

In project management, float or slack is the amount of time that a task in a project network can be delayed without causing a delay to:

<span class="mw-page-title-main">OpenProj</span> Open-source project management software

OpenProj was an open-source project management software application.

In the United States Department of Defense, the Integrated Master Plan (IMP) and the Integrated Master Schedule (IMS) are important program management tools that provide significant assistance in the planning and scheduling of work efforts in large and complex materiel acquisitions. The IMP is an event-driven plan that documents the significant accomplishments necessary to complete the work and ties each accomplishment to a key program event. The IMP is expanded to a time-based IMS to produce a networked and multi-layered schedule showing all detailed tasks required to accomplish the work effort contained in the IMP. The IMS flows directly from the IMP and supplements it with additional levels of detail——both then form the foundations to implement an Earned Value Management System.

A glossary of terms relating to project management and consulting.

Total project control (TPC) is a project management method that emphasizes continuous tracking and optimization of return on investment (ROI). It was developed by Stephen Devaux. It builds upon earlier techniques such as earned value management, critical path method, and program evaluation and review technique, but uses these to track and index projected project profitability as well as the more traditional cost and schedule. In this way it aims to manage projects as profit and investment centers, rather than cost centers.

The following outline is provided as an overview of and topical guide to project management:

<span class="mw-page-title-main">Critical path drag</span> Project management metric

Critical path drag is a project management metric developed by Stephen Devaux as part of the Total Project Control (TPC) approach to schedule analysis and compression in the critical path method of scheduling. Critical path drag is the amount of time that an activity or constraint on the critical path is adding to the project duration. Alternatively, it is the maximum amount of time that one can shorten the activity before it is no longer on the critical path or before its duration becomes zero.

The Goals breakdown structure (GBS) is a hierarchical structure linking high-level objectives or goals to more detailed goals. The GBS was originally developed for project management, but applies to product development and the organization as a whole. The concept is based on the Work Breakdown Structure (WBS) popular in the project management discipline. Like the WBS, project goals exhibit a hierarchical structure. The highest-level defines the overall goal or mission for the project. The next level down sets the goals the organization intends to achieve from the project. These might include such items as profit, market share, etc. The next layer down defines the features the products must exhibit to achieve the organization's goals. The next layer down defines the specifications each product or component of the product must have to meet the products features.

Drag cost is a project management metric developed by Stephen Devaux as part of the Total Project Control (TPC) approach to project schedule and cost analysis. It is the amount by which a project’s expected return on investment (ROI) is reduced due to the critical path drag of a specific critical path activity Task or other specific schedule factor such as a schedule lag or other delaying constraint.

Devaux's Index of Project Performance is a project management performance metric formulated by Stephen Devaux as part of the total project control (TPC) approach to project and program value analysis. It is an index that integrates the three variables of a project into a single value-based index where:

Breakdown structure may refer to:

References

↑ Devaux, Stephen A. Total Project Control: A Manager's Guide to Integrated Project Planning, Measuring, and Tracking. John Wiley & Sons, pp. 93 - 102, 1999. ISBN 0-471-32859-6.