# Calculating the Value of Work Done (VOWD) Video

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• 0:03 What Is VOWD?
• 1:06 How Do You Calculate VOWD?
• 3:22 VOWD During a Project
• 4:28 Interpreting the Results
• 4:53 Lesson Summary
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Lesson Transcript
Instructor: Mike Miller
After this lesson, you'll be able to explain the value of work done technique, know how to calculate it, and understand why it is important to the project manager and the project management organization.

## What Is VOWD?

The value of work done (VOWD) technique is a method for measuring and estimating the cost of the project at a specific point in time. This can either be a given point of time, like the actual end of the project, or a forecasted point in time, like the projected end of the project. The main purpose of the value of work done technique is to determine an accurate and comprehensive estimate of the cost of the project at a specific time. Simply put, value of work done provides a financial measure of productivity.

Just about any industry or project can use the value of work done technique, but it's especially common in the petroleum industry. A close second would be any other industry or project that follows the engineer, procure, and construct model.

On the surface, the value of work done technique and the earned value method look similar because they both determine costs based on work. The main difference is that the value of work done technique measures against committed costs, not planned costs.

## How Do You Calculate VOWD?

Calculating value of work done is fairly straightforward in most situations but can require some complex thinking for others.

To calculate the value of work done, the project manager needs to know the hourly rate of labor (Rate) and the amount of hours worked (WH). The basic formula for value of work done is the amount of work multiplied by labor rate, or:

VOWD = Rate * WH

#### A Simple Example

Joe needs to calculate the value of work done for his network diagram project. Joe knows his labor rate is \$80.00/hour, and his team has worked a total of 300 hours. So Joe calculates the value of work done by using the formula:

300 * 80 = \$24,000.00

Simple, right?

#### A Slightly More Complex Example

Steve has a fixed price contract to design a company's Facebook page. The contract is fixed price valued at \$18,000.00 and took one month. The team of four worked tirelessly and had a total of 600 hours billed to the project. To find the value for the work completed, Steve must now rearrange the value of work done formula. He divides \$18,000.00 by 600 hours and realizes his labor cost is at \$30.00 per hour.

Steve realizes he had too much labor on this project, and the project is at a loss because the team's average salary is \$35.00/hour, which is less than the labor cost. Steve will be explaining to management why he had so much labor involved for a simple project.

#### An Even More Complex Example

In this example, Matt is the project manager for a crate project. Matt is monitoring the project and decides to calculate the value of work done, so he gathers the costs of the project. Currently Matt has 300 labor hours, with an average labor cost of \$50.00. Matt has reviewed items ordered, received, and paid and found that he has \$15,000.00 in material costs. To calculate the value of work done, Matt will perform the same calculation of multiplying the labor hours with labor costs, and then add the material costs. So Matt calculates the value of work done to be:

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