1 © 2001 david galley earned value management ‘project management with the lights on’...

1© 2001 David Galley

Earned Value Management

‘project management with the lights on’

Presentation to BCS

David Galley

15-Jan-2002


Agenda

Project Management in the dark

Illumination • Earned Value (EV) & Variance• Performance indices• Forecasting

Earned Value Management (EVM)• 32 criteria• Organisation [WBS, OBS, RAM, CA]• Budgeting

EVM in the UK

Where to go for more information


Project Management in the dark…

Project• planned duration: 12 mos• total budget: £100K• .

Status• time elapsed: 6 mos• spend so far: £64K• .

How far along are you?• 50%? 64%?

How are you doing?


• It tells you how much you’ve spent and compares it to the budget.

• Does it give an accurate picture of where you are on the project? NO! It doesn’t tell you if...– you’re ahead or behind

schedule– you’re over or underspent– you’ve spent money on the

right thing– you’re getting value for money– your problems are over or only

just begun• What’s missing?

£

time

actual

budget

Project Mgt in the dark


• Accomplishment is (planned) work that has been carried out successfully.

• The budgeted cost of that work quantifies the accomplishment.

• This is called ‘earned value’

£

time

actual

budget

accomplis

hment

or Earned Value (E

V)

What’s missing? - knowing how much has been accomplished


A bit more light…

Project• planned duration: 12 mos• total budget: £100K• produce 20 units

Status• time elapsed: 6 mos• spend so far: £64K• units produced: 8 complete, 2 partial

How far along are you?• 50%? 64%? >40%?

How are you doing?


Basic definitions – answer three basic Q’s

How much work should be done?

How much work is done?

How much did it cost?

Budgeted Cost for Work Scheduled (BCWS)• plan• schedule• budget

Budgeted Cost for Work Performed (BCWP)• accomplishment• Earned Value (EV)

Actual Cost of Work Performed (ACWP)• actuals


Where are we? – a more likely scenario


WIP - Earned Value measurement methods

Interim Milestone EV = budgeted cost (milestones completed)

Meas’d Milestone EV = budgeted cost (est. milestone pct complete)

Percent Complete EV = estimated percent complete typically used where there are tangible products

Apportioned Effort EV = dependent on another Work Package eg. QC EV assumed to be % of production EV

50/50, 0/100 EV = % budgeted cost once started / % on completion

Scheduled Effort EV = budgeted cost (est. elapsed time pct)

Actual Effort EV = actual effort

Level of Effort (LoE) EV = budgeted cost (status date) used for Work Packages (WP’s) with no end product eg. Management


£

time

actu

al

sche

dule

earn

ed

CVSV

• CV (Cost Variance)– BCWP - ACWP– earned value - actual

cost• SV (Schedule Variance)

– BCWP - BCWS– earned value - planned

value– 0 once all work

completed

Variance


• Months ahead or behind SV

= aver. monthly BCWS

• or graphically• draw horizontal

through current BCWP until it intersects BCWS

• length approximates lead/lag

Translating schedule variance into lead/lag

earned (BCWP)

schedule (BCWS)

SV

months behind


zero

positivevariance

negativevariance

cost variance

schedule variance

• Plot cost variance and schedule variance over time.

• Watch which way the lines go...– positive is good– negative is bad

Variance Trend Curves


+10%

-10%

-20%

+0%

+10%

-10%

-20%

+0%

CV%

SV%

• CV%– (BCWP - ACWP)/BCWP– CV/earned value

• SV%– (BCWP - BCWS)/BCWS– SV/planned value

• VAC% = VAC/BAC

Percent Variance Trend Charts


• CPI (Cost Performance Index)– BCWP/ACWP– earned/actual– the one to use…

• SPI (Schedule Performance Index)– BCWP/BCWS– earned/planned– of diminishing value

as project progresses… tends to 1

1.1

0.9

0.8

1.0

1.1

0.9

0.8

1.0

CPI

SPI

Performance Indices


More definitions – answering Q’s about the total

job What was the total job

supposed to cost?

What do we now expect will be needed to finish the job?

What do we now expect the total job to cost?

How much do we now expect to eventually underspend/overspend?

Budget At Completion (BAC)

Estimate To Completion (ETC)

Estimate At Completion (EAC)• EAC = ACWP + ETC• often referred to as Latest Revised Estimate (LRE)

VAC (Variance At Completion)• VAC = BAC - EAC


Forecasting – variations on the basic EAC EAC = ACWP + ETC = ACWP + (BAC BCWP)

iEAC = ACWP + FF (BAC - BCWP)

Selection of FF is based upon:• cause of the variance• technical risk• schedule deviations• trends• judgement

Sample Independent EACs based on:• FF = 1 / CPI• FF = 1 / (0.8 CPI + 0.2 SPI)• FF = 1 / CPI * SPI• FF = 3 / CPIt + CPIt-1 + CPIt-2


Forecast sanity checks – an example

Example project• Total budget (BAC) = £5000part way through project• Work scheduled (BCWS) = £2000• Work accomplished (BCWP)= £1800• Actual cost (ACWP) = £2400• Supplier’s LRE = £5600(Latest Revised Estimate)

Will supplier come in on budget?

Is the supplier’s LRE reasonable?

To-Complete Performance Index (TCPI)


Will the supplier come in on budget?

EV BCWP £1800CPI = = = = 0.75

Actuals ACWP £2400

TCPI(BAC) = cost efficiency to complete on budget

Work Remaining BAC-BCWP= = Budget Remaining BAC-ACWP

£5000-£1800 £3200= = = 1.23 £5000-£2400 £2600


Is the supplier’s LRE reasonable?

EV BCWP £1800CPI = = = = 0.75

Actuals ACWP £2400

TCPI(LRE) = cost efficiency to complete at LRE

Work Remaining BAC-BCWP= = Estimate Remaining LRE-ACWP

£5000-£1800 £3200= = = 1.0 £5600-£2400 £3200


Where youreally are!

Where it’sgoing right

and where it’sgoing wrong

How muchit’s really

going to cost

When to askthe toughquestions

EVM

Know where you are in terms of

accomplishment as well as how much you’ve

spent

Drill down through the data to where the problem is

Informeddecision making

Know the final cost and delivery date

with confidence

Earned Value Management tells you...


EVMS 32 criteria

Organisation

Planning, Scheduling &

BudgetingAccounting consideration

Analysis & Mgt Reports

Revisions & Data

Maintenance


Organisation criteria

1. Establish Work Breakdown Structure (WBS)

2. Establish Organisation Breakdown Structure (OBS)

3. Integrate planning, scheduling, budgeting, work authorisation and cost accum. with WBS & OBS

4. ID company organisation responsible for controlling overheads

5. Cost & schedule performance measurement by WBS/OBS


Organisational Breakdown Structure (OBS)

ABC project DirectorK.Niche

Bus.Develop.

C.Spalding

Consult.ServicesE.Ness

IT Dev.Group

M.Conger

E-CommsLimited

P.Dawson

TransformaLimitedT.Wolfe

SupportGroup

T.Caulter

DesignTeam

D.LaPort

TestTeam

N.Elliott

ProgrammingTeam

A.Murphy

QATeam

S.Humphrey


WBS – execution orientated example

SystemDesign

Changeplanning

Developpilot

AssessPilot

Pilotchange

CommsInstall.

W/SInstall.

Bus.Reqt.

ChangeReqt.

Project Defn.phase

Designphase

Pilotphase

Roll-outphase

ABCproject


WBS – product orientated example

Promotionmaterial

Trainingcourseware

Server LANComms

boxShopLANs

Shopterminals

Reqt.Spec.

Bus.Case

ProjectCharter

Transitiondocumentation

Centralfacility

Shopsystems

ABCproject


Responsibility Allocation Matrix (RAM)

Work Breakdown Structure (WBS)O

rgan

izat

ion

Bre

akdo

wn

Str

uctu

re (

OB

S) 1 2 3 4 5 6 7 8A

BC

DE

F

Control Account (CA)


Control Accounts

Intersection of WBS and OBS • WBS element• Control Account Mgr (CAM)

Key control point• Schedule, time-phased budget (BCWS)• Actual cost accumulation (ACWP)• Earned value determination (BCWP)• Variance analysis (cost& schedule)• Corrective action• Estimate At Completion (EAC)


Planning, Scheduling+Budgeting criteria

6. Schedule (sequence, interdependencies)

7. ID products, milestones, tech. perf. goals to measure progress

8. Time-phased budget at Control Account (CA) level

9. Budget IDs significant cost elements

10. Budgets in terms of money, hours or other units

11. CA budget = Sum WP budgets+planning budgets

12. ID & control LoE activity by time-phased budget

13. Overhead budgets.. Overhead pools

14. ID Mgt Reserve (MR) and Undistributed Budget (UB)

15. Reconcile program tgt cost with internal budgets+MR


Budget Breakdown

DiscreteWP’s

AEWP’s

LoEWP’s

PP’s

CA BudgetsSummary

PP’s

Distributed Budget (DB) UB

Performance Measurement Baseline (PMB) MR

Contract Budget Base (CBB)

Contract Price

Profit

Mgt Reserve

Undistributed Budget

Planning Packages


Accounting considerations criteria

16. Record direct costs

17. Each CA child of a single WB

18. Each CA child of a single OBS

19. Record all indirect costs

20. ID unit costs, equiv. unit costs or lot costs

21. Accounting system


Analysis & Mgt Reporting criteria

23. ID signif. differences in schedule/cost performance, provide reasons

24. ID budgeted and actual costs, reasons for signif. differences

25. Summarise data & variances through the WBS/OBS…

26. Implement managerial action resulting from EV info.

27. Develop revised EAC… compare with PMB… funding…


Revisions & Data Maintenance criteria

28. Incorp. authorised changes… record effects in budget & schedule

29. Reconcile current budgets to prior budgets

30. Control retroactive changes…

31. Prevent unauthorised changes to program budget

32. Document changes to performance measurement baseline (PMB)


Potential Benefits of EVM

Improved project performance

Management by exception

Good predictive capability

Database of completed projects, useful for comparative analysis

Enabler for a new culture of openness, trust and honesty• improved contractor/customer relations• “the main problem with EVM is that it works”


EVM in the UK

Defence• MoD - 30 IPT’s intend to or are using EVM• BAe Systems, Rolls-Royce, Stracham & Henshaw, GKN Westlands, Thales, BAe Systems (Nimrod, Hawk, Eurofighter, FOAS, JSF, Type 45, Astute, CVF)

Construction• Laing, Millenium Dome, BAA Terminal 5

Software• IBM• Unisys• EDS


Where to go next?

Websiteswww.acq.osd.mil/pmwww.cpm-pmi.orgwww.evm.nasa.govwww.apm.org.uk/apm/evsig.htm

‘Earned Value Project Management’• Quentin Fleming & Joel Koppelman• ISBN: 1-880410-27-3 $35

APM EV SIG• Quango: NAO, OGC, MoD, EDS, IBM, Unisys, PMI, BAA T5, Laing, Rolls-Royce, BAe Systems

• UK standard• Implementation Guidelines (AIM)


Who to go to next? – Steve Wake

Head of APM EV SIG

[email protected]

7th ‘EVA in the UK conference’• Church House, Westminster • 20-June-2002• Sir John Bourn Auditor General – keynote speaker

• Royal Shakespeare Company


‘EVA in the UK’Church House, Westminster

www.churchhouseconf.co.uk/facilities/assembly-pan.htm


Integrated Baseline Review

IBR - a formal and continual process conducted to assess the content and integrity of the Performance Measurement Baseline (PMB)

Purpose – is to achieve and maintain a joint project/customer understanding of the risks inherent within the baseline and the management control processes that will operate• highlight expectations and assumptions early• clear understanding of the plan and risks• sound basis for

—measuring & reporting project performance—proactive project management

1 © 2001 david galley earned value management ‘project management with the lights on’...

Documents