Ev m Presentation 200509

8/12/2019 Ev m Presentation 200509

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21 September 2005 Earned Value Management 1

Earned Value ManagementManaging Scope, Cost, and Schedule to

Improve Project Performance

Scott S. Lynde, PMP

21 September 2005


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Agenda

Earned value management (EVM) backgroundBackground The Basics A Process MS Project Conclusion

Basic EVM terms and formulas A practical approach and process

Using Microsoft Project for EVM Conclusion


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A Quick Quiz

The project budget is $200k

The project duration is 4 months The work is evenly distributed

After 2 months, $90k is spent

Is the Project Over, On, or Under Budget?

Plan

Actual$ 50100

150

200

Time1 2 3 4


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The Answer: It Depends!

The project budget is $200k The project duration is 4 months The work is evenly distributed After 2 months, $90k is spent After 2 months, the planned work is $100k What if the project is:

50% complete?

45% complete?

40% complete?

70 80 90 100

Plan (Cost/Work) = $100k

Actual Costs = $90k

Work = $80kWork Accomplished = $90kWork Accomplished = $100k

EVM Integrates Scope, Cost, and Schedule to Improve Performance Management


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EVM Background

Background The Basics ConclusionA Process MS Project

Late 1800s - 1962American Factories

1962 - 1967PERT/Cost

1967 - 1996C/SCSC

1996 - PresentEVM: ANSI/EIA 748

1962Introduction ofPERT/Cost 1965

USAF formsC/SPCS group

1967DoD issuesC/SCSC 1996

32 EVMS criteriadefined; terms

simplified

1998ANSI/EIA 748guide published

Simplificat

ion

Adop

tion

1958US Navy

introduces PERT


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EVM Background


EVM Has Been Gaining Momentum

Published Papers on Earned Value

0

5

10

15

20

25

30

1995 1996 1997 1998 1999 2000 2001 2002


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The Project Lifecycle



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A Framework for EVM



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3+1 Core Data Elements


Planned Value (PV)

How much work is supposed to be done at a given point in time

Prepared during planning as a (cumulative) time-phased budget Referred to as the performance measurement baseline AKA the budgeted cost of work scheduled (BCWS)Actual Costs (AC)

The level of resources (typically $) expended to date Typically obtained from an organizations accounting system AKA the actual cost of work performed (ACWP)Earned Value (EV)

How much work has actually been accomplished Obtained by tracking and measuring progress on project work AKA the budgeted cost of work performed (BCWP)Budget at Completion (BAC)

The total planned value for the project


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A Framework for EVM



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A Framework for EVM


Planned Value

Actual Costs

Earned Value


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Variances


Cost Variance

CV = EV AC Determines how much the project is over or under budgetSchedule Variance

Cost: SV = EV PV Determines how much work is ahead or behind schedule

Ignores the critical path Converges to zero

Negative Variances are Unfavorable; Positive Variances are Favorable


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A Framework for EVM



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A Framework for EVM



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Forecasts


(Independent) Estimate at Completion

(I)EAC = BAC / CPI (cost performance index) EAC = AC + ETC (estimate to complete) EAC = project manager outlook Assumes the team will continue to operate

at the same efficiency level Projects the final cost of the project Forecasts the final project costVariance at Completion

VAC = BAC EAC Determines how much the project will beover or under budget when done

Studies of Hundreds or Large Defense Projects Have Shown that

EAC Is Accurate Within a Statistical Range by the 15-20% Mark


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A Framework for EVM



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A Framework for EVM



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Performance Indices


Cost Performance Index (CPI)

CPI = EV / AC Indicates the cumulative cost efficiency of a project howefficiently the team uses its resources ($)

Schedule Performance Index (SPI)

SPI = EV / PV Indicates how efficiently the team is using its timeTo-Complete Performance Index (SPI)

TCPI = (BAC EV) / (BAC AC) Indicates the efficiency required on remaining work in order toachieve a target (BAC or EAC)

For SPI and CPI, Values Greater than 1.0 Are Favorable; Less than 1.0 Are Unfavorable


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A Framework for EVM



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A Framework for EVM


Official ANSI standard for EVMS has 32 criteria; only 10 are necessary

Define authorized work elements Identify project organizational

structure and assign responsibility

Integrate planning, scheduling,budgeting, work authorization,and cost accumulation processes

Schedule the authorized work in asequential manner that identifies

the significant task dependencies Select EV measurement

techniques

Establish and maintain a time-phased baseline

Record direct costs consistently ina formal manner

Periodically generate projectmetrics to assess performance

Periodically develop revisedestimate at completion forecasts

Incorporate authorized changes ina timely manner

I.e., Practice Good Project Management


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A Practical Process: Planning


CostAccountant

ProjectManager

ProjectTeam

Decompose work

scope to amanageable

level

Assignunambiguousresponsibility

Develop a

performancemeasurement

baseline

Determine EV

measurementtechnique for all

tasks

Determinereportingfrequency

Provide time-phased budget tocost accountant

Basic

PMEV

PV BAC

1

2

3

5

4

6

#MS Project Demo


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Earned Value Recognition


Fixed formulas

Used on short-duration tasks

Used when product is well-understood

E.g., 50/50 or 25/75, or 0/100Weighted milestone

Used on long-duration tasks Used when there are observable

intermediate milestones Value is assigned to milestonesPercent complete Simple and easy Subjective Used when no objective

indicators exist

Apportioned effort

Used when a task has a direct,supportive relationship to anothertask (e.g., quality assurance (QA))

Typically calculated as apercentage of main task EV

Level of effort

Used for activities that do notproduce tangible outcomes e.g.,

project management PV is automatically credited asEV at end of each period


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Earned Value Recognition


Duration of Work Effort

Product of Work 1-2 Measurement Periods >2 Measurement Periods

TangibleFixed Formula

Weighted Milestone

Percent Complete

Intangible Apportioned Effort

Level of Effort

Recognition Methods for Project Activities Should Be Determined During Planning


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Our Project: Painting



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Our Schedule


WBS Task Nam e

0 Painting the Room1 Design

1.1 Browse catalogs for ideas1.2 Obtain swatches

1.3 Evaluate swatches and choose paints

John Doe,Jane DoeJohn Doe,Jane Doe

8 AM 12 PM 4 PM 8 PM 12 AM 4 AM 8 AM 12 PM 4 PM 8 PM 12 AM 4 AM 8 AM 12 PM 4 PMTue Oct 25 Wed Oct 26

WBS Task Name

2 Procurement

2.1 Procure paint and supplies

3 Preparation

3.1 Take down pictures

3.2 Remove electrical outlets

3.3 Tape walls

3.4 Room ready for painting

4 Painting

4.1 Paint wall 1

4.2 Paint wall 2

4.3 Paint wall 3

4.4 Paint wall 4

4.5 Room painted

4.6 Paint dried

5 Cleanup

5.1 Remove tape

5.2 Touch up mistakes

5.3 Install electrical outlets

5.4 Hang pictures

6 Painting complete

John Doe,Paint and s upplies[1]

Jane Doe

Jane Doe

John Doe

10/27

John Doe

Jane Doe

John Doe

Jane Doe

10/28

10/28

John Doe,Jane Doe

John Doe

Jane Doe

Jane Doe,John D

10/29

8 AM 12 PM 4 PM 8 PM 12 AM 4 AM 8 AM 12 PM 4 PM 8 PM 12 AM 4 AM 8 AM 12 PM 4 PMFri Oct 28 Sat Oct 29


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Producing a Time Phased Budget5


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Producing a Time Phased Budget(cont.)5


Option 2: Analysis Toolbar

9 k d


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9 Track and Report ProgressBackground The Basics ConclusionA Process MS Project

First, save a baseline

Set the status date Track progress

View the % complete

or earned value

Retrieve Actual Costs;10


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Retrieve Actual Costs;Analyze Data10

Plug AC and EV into spreadsheet model If necessary, calculate EV from % complete:

EV = BAC * % complete


P t ti F t


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Presentation Formats


Project

S-curves Dashboard speedometers

Bulls-eye chartPortfolio

Bulls-eye chart

SPI/CPI trending

P t ti F t P j t


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Presentation Formats: Project


30.1 99.0

P t ti F t P tf li


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Presentation Formats: Portfolio


C l i


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Conclusion

EVM is NOT HARD! (But the acronyms are!)

EVM can be applied to any project with a definedscope, schedule, and budget

EVM provides a closed-loopfeedback system

EVM is predictive

EVM will impress your friends EVM is gaining momentum


EVM Is Coming to a Project Near You


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Earned Value ManagementManaging Scope, Cost, and Schedule to

Improve Project Performance

Scott S. Lynde, PMP

21 September 2005

Reference


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Reference

Fleming, Quentin W. and Koppelman, Joel M.Earned Value Project Management, 2nd Ed.

Project Management Institute, June 2000.

Practice Standard For Earned Value ManagementProject Management Institute, October 2004.

Christensen, David S. and Heise, Scott."Cost Performance Index StabilityNational Contract Management Journal 25, Spring1993, pp. 7-15.

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Ev m Presentation 200509