The Value of Work Done (VOWD) is important for oil, gas, and renewable energy projects as it shows a combination of progress and financial performance.

Ensuring the successful completion of a complex project requires comprehensive control over various aspects including quality, quantity, costs, and schedules. Continuous monitoring throughout the project lifecycle is crucial. There are several methods to measure project progress, such as the Critical Path Method (CPM), milestone tracking, and cost spent, along with Earned Value and Value of Work Done.

In this blog we explore VOWD, and how it is crucial for time-based billing businesses. We will examine how to make the calculation and how it helps in tracking project progress, managing budgets, ensuring accurate billing and offering insights into daily productivity.

Comparing VOWD with Earned Value

The project team meticulously plans, budgets, and schedules all work in time-phased increments to form the budget and schedule baseline. Earned Value serves primarily to track progress and compare completed work against planned work. While Earned Value reflects the physical percentage of completion against the approved budget, VOWD represents percent complete against the estimate at completion. VOWD serves as an accrual mechanism based on forecasts, adjusting with actual realizations, whereas Earned Value is an absolute measure of physical percentage of completion.

At Proteus, we find the standard metric for consulting and service companies is Earned Value, which aggregates performance measures. By contrast, our Operator and Developer customers use the value of work done (VOWD) to track project progress.

These operators are the companies like EnQuest who have commissioned the project, and manage the investment. Therefore, they are primarily concerned about getting full visibility over the various work streams they contract out to the service providers. Essentially, they need to follow the money as closely as possible: for fixed-price projects in particular, VOWD needs careful consideration.

While these are general trends, it is also possible for companies to use a combination of both VOWD and EV. The choice between VOWD and EV often depends on factors such as industry standards, project complexity, and organisational preferences.

Calculating VOWD

The key thing to understand about VOWD is that it measures the financial productivity of a team. Therefore, it measures the amount of work completed up to a certain point in time, often expressed in monetary terms.

Here’s a general formula to calculate VOWD:

VOWD=(Percentage of Work Completed)×(Total Contract Value)

VOWD=(Percentage of Work Completed)×(Total Contract Value)

Steps to Calculate VOWD:

1. Determine the Total Contract Value (TCV): This is the agreed-upon amount for the entire project.
2. Assess the Percentage of Work Completed (PWC): This involves evaluating the actual progress of the project. This can be assessed using various project management tools and methods e.g. regular site visits, progress reports, and performance metrics

Here is an example to show the Value of Work Done calculation:

The total contract value of a project is $1,000,000, and it has been determined that 40% of the work has been completed.

VOWD=0.40×$1,000,000= $400,000

So, the Value of Work Done is $400,000.

The maths details can vary based on your specific needs and the type of project or contracts involved.

VOWD is important for managing cash flow, scheduling, and tracking projects. Project managers using VOWD should make sure to:

• Make an accurate assessment of the percentage of work completed to avoid discrepancies.
• Regularly update VOWD calculations to reflect current progress and financial status.

How to Manage The Value of Work Done Effectively

By using VOWD, project managers can effectively monitor project performance, manage budgets, and ensure that billing and payments align with the actual work completed. Here’s a streamlined approach for effective VOWD management:

• Set the Baseline: Define project scope, deliverables, and milestones to set a baseline for progress measurement.
• Implement Robust Tracking Systems: Set up reliable cost and revenue tracking systems to accurately capture project expenses and income.
• Track Actual Costs and Revenues: Monitor and record actual project costs and revenues using financial documents and transactions.
• Calculate VOWD: Compare actual costs and revenues against planned budgets to determine the value of work done.
• Monitor Project Profitability: Analyze VOWD data to assess project profitability and efficiency in cost and revenue management.
• Report Results and Communicate: Regularly report VOWD results to stakeholders, providing insights for decision-making.
• Take Corrective Actions: Address any financial variances or issues identified through VOWD monitoring by adjusting project plans and resource allocations.

For instance, if a project finishes early, the hourly rate of VOWD doubles, while if it takes longer than estimated, the hourly rate decreases. This highlights the importance of accurate time estimates for project profitability.

Conclusion

VOWD plays a pivotal role in driving project success in the oil and gas and renewables industry. By effectively managing VOWD, project engineers working for Operators such as EnQuest can ensure better financial performance, resource optimization, and decision-making, ultimately leading to project success.

About Proteus

Proteus is an end-to-end project management solution developed for the energy and engineering consulting industries. 

Proteus is industry-proven and enables consultancies to meet project demands across the full lifecycle, from proposal development to project delivery. Proteus helps its customers win more business, increase efficiencies, manage expenditures, and improve project controls.

Critical workflows, automation, and controls are integrated into Proteus. These include opportunity evaluation, proposal building, resource planning, budget tracking and forecasting, real-time multi-level restricted dashboards, and project performance analytics.

Third-party integrations and customised solutions allow Proteus’ users, which include C-suite, project leads, and engineers, to get the exact software solution needed for their business.

We offer a free onboarding consultation service to ensure your company account is set up to your company’s needs.

How to get Proteus

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