Earned Value Management a tool for project Portfolio management

1
Earned Value Managementa tool for project
Portfolio management

• Jim Strong
• DLMP PMO Director

2
Earned Value Management

• Defined per PMI PMBOK A management methodology
  for integrating scope, schedule and resources,
  and for objectively measuring project performance
  and progress.
• Cost Performance is measured by determining the
  budgeted cost of work performed (i.e. earned
  value) and comparing it to the actual cost of the
  work performed (i.e. actual cost).
• Schedule Progress is measured by comparing the
  earned value to the planned value.

3
Why Use Earned Value Management?

• to help better manage projects and portfolios
  of projects within the organization
• Adds another capability to the tool box for the
  organization and the Project / Program /
  Portfolio Manager
• Allows Sponsor / Program / Portfolio Managers to
  normalize project / program data to enable an
  aggregate or portfolio view of the total effort

4
Why Use Earned Value Management?

• Facilitates the analysis of project / program
  performance
• Facilitates the monitoring and communication of
  the project/program/portfolio performance
• Provides a means to forecast future performance
  based on past performance
• Facilitates lessons learned through a review of
  the project performance trend

5
Why Use Earned Value Management?

• Compliments the use of
• PERT analysis (estimating)
• Dependency or Constraint analysis
• Critical Chain analysis
• Issue and Risk analysis
• Resource analysis
• Critical Path analysis

6
Earned Value Management

• Measures (key terms)
• Planned Value (PV) Budgeted Cost of Work
  Scheduled (BCWS)
• Actual Cost (AC) Actual Cost of Work Performed
  (ACWP)
• Earned Value (EV) Budgeted Cost of Work
  Performed (BCWP)
• BAC Budget at Complete Total budget, Expense
  and Capital planned for the project / program
• ETC Estimate to Complete teams updated
  estimate to complete the work remaining
• EAC Estimate at Complete Total of Actuals and
  estimated cost of work remaining to complete the
  scope of work for the project / program
• Calculated EAC Total of Actuals and estimated
  cost of work remaining to complete the scope of
  work for the project / program factored by Cost
  performance to date

7
Earned Value Measurement
Positive numbers are favorable

• Cost Variance
• CV EV AC
• Schedule Variance
• SV EV PV
• Performance Indices
• Cost Performance Index
• CPI EV / AC
• Schedule Performance Index
• SPI EV / PV
• To Complete Performance Index (work remaining /
  remaining budget)
• TCPI (BAC EV) / (EAC AC)
• Measurement Guidelines
• Green favorable variance to negative 9
  variance
• Red - gt20 negative variance

or gt than 1.0 is favorable

• Yellow negative 10 to negative 19 variance

8
Establishing the project / portfolio Earned Value
Baseline
Each task in a project plan has a value formed
by labor or material cost. allocated over time
Value of each of the Tasks from project
Plan. form the Planned Value
PV
BAC
BAC cum PV at end of project

Time
9
Monitoring the Project performance capturing
cost of work performed Actual Cost (AC)
Hours Or material / vendor costs. Are expended
to complete each task


Cap
Cumulative Costs to complete the Tasks from
project Plan. form the Actual cost


10
SPI / CPI (cum) worm Chart (example)

• 1.0 is optimal
• Cost and schedule performance tracked over time
  to indicate trend
• SPI must close to 1.0 to complete the project
  CPI can be at any level at completion
• TCPI can be used to predict future performance
  based on past performance

Favorable
CPI
1.0
SPI
Time
Measurement Guidelines Green favorable
variance to negative 9 variance Red - gt20
negative variance
Yellow negative 10 to negative 19 variance
11
Three EV snake charts to ponder (1 of 3)
Green, CV favorable CV 200 CPI 1.1
PV
EV
Green, SV lt 10 SV -150 SPI 0.95

AC
Time

• Possible Scenarios
• Unfavorable Schedule Variance
• Resources not applied at the start of the project
  in a timely fashion
• Effort continues behind schedule not making up
  project delays
• What tasks are creating the unfavorable schedule
  variance?
• Are there specific technical or other issues /
  risks driving the variance?
• Opportunity - Can we apply more resources to pull
  in the schedule?
• Favorable Cost Variance
• Tasks not taking as much time as estimated or
  planned
• Tasks completed by lower cost resource
• Opportunity - Can we apply more resources to pull
  in the schedule?

12
Three EV snake charts to ponder (2 of 3)
Green, CV favorable CV 300 CPI 1.2
EV
PV
Green, SV favorable SV 200 SPI 1.1
AC

• Possible Scenarios
• Favorable Schedule Variance
• Tasks not taking as much time as planned
• Slack time / schedule buffer built into project
  plan
• Not as many issues encountered
• Anticipated risks well and applied mitigation
  into plan or effort to date
• Planned effort padded? what is the basis of
  estimate higher rate of probability applied to
  project (100 probability versus most likely
  50/50?)
• Favorable Cost Variance
• Tasks not taking as much effort as estimated or
  planned
• Tasks completed by lower cost resource
• Check for any material / labor costs not realized
• Is the favorable CV long term? What is the EAC?
  Does TCPI support the EAC?
• Should we re-baseline the project and put funding
  back into the Management Reserve for the Program
  / Practice?

Time
13
Three EV snake charts to ponder (3 of 3)
AC
RED, CV gt 20 CV -200 CPI 0.79
PV
Yellow, SV gt9 SV -100 SPI 0.9
EV

• Possible Scenarios
• Unfavorable Schedule Variance
• Effort continues behind schedule team not making
  up project delays
• What tasks constitute the majority of the
  variance?
• Do issues continue to linger or are they being
  resolved?
• Is / are there technical issues / risks driving
  the negative variance trend?
• Unfavorable Cost Variance
• Tasks taking more effort than estimated
• What tasks constitute the majority of the
  variance? How much effort remains?
• Do we have the right skill level of resources
  versus plan?
• Are we managing the scope, do we have scope
  creep? (Change Request log?)
• What is the EAC? Should we cancel the project?

14
Considerations for Implementing

• Time recording system, or equivalent manual
  process, absolutely required to capture actual
  labor costs
• Quality estimates for the project tasks
• Allow adequate time for creation of requirements
  and task estimates
• Creation of project performance measurement plan
  
• Usually in the form of MS Project (project
  schedule)
• Forms the basis for the Planned Value (PV)
• Large material costs need not be included in the
  EV as they can represent major step functions
  in the EV plans possibly masking the labor
  effort of the project

15
Recommendations

• Gain Leadership support
• Train the PMs and core Project teams
• Start small, consider pilot
• Keep it simple keep EV milestones and associated
  cost accounting activity points to a minimum
  (i.e. 600 line MS project plan lines may
  consolidate to 20 EV milestones or less)

16
Earned Value Management Gold Card
TERMINOLOGY BAC Budget At Completion Total
budget for total contract thru any given
level PMB Performance Measurement
Baseline time-phased budget plan CA Control
Account Lowest CWBS element assigned to a single
focal point to plan control scope /
schedule / budget WP Work Package Near-term,
detail-planned activities within a CA
PP Planning Package Far-term CA activities not
yet defined into WPs PV PLANNED VALUE Value of
work planned to be accomplished EV EARNED VALUE
Value of work accomplished AC ACTUAL COST
Cost of work accomplished EAC Estimate At
Completion Estimate of total cost SLPP Summary
Level Planning Package Far-term activities not
yet defined into CAs TCPI To Complete
Performance Index Efficiency needed from time
now to achieve an EAC (DAU Defense
Acquisition University, US DoD training policy
support
for their
acquisition workforce) (tool downloaded from
https//acc.dau.mil/CommunityBrowser.aspx?id17810
) Modified for DLMP PMO use 02/06/2007
VARIANCES Favorable is Positive, Unfavorable is
Negative, Green if lt10, 10ltYellowlt20, Red
gt20 Cost Variance CV EV AC CV
(CV / EV) 100 Schedule Variance SV EV
PV SV (SV / PV) 100 Variance at
Completion VAC BAC EAC
BCWS PV BCWP EV ACWP AC
OVERALL STATUS Schedule (PVCUM / BAC)
100 Complete (EVCUM / BAC) 100
Spent (ACCUM / BAC) 100
TRIPWIRE METRICS Favorable is gt 1.0, Unfavorable
is lt 1.0, Okaygt0.91, 0.90gtconcerngt0.80,
escalatelt0.79 Cost Efficiency CPI
EV / AC Schedule Efficiency SPI EV /
PV
TO COMPLETE PERFORMANCE INDEX (TCPI) TCPIEAC
Work Remaining / Cost Remaining (BAC EVCUM) /
(EAC ACCUM)
ESTIMATE AT COMPLETION EAC Actuals to
Date (Remaining Work) / (Efficiency
Factor) EACCPI ACCUM (BAC
EVCUM) / CPICUM BAC / CPICUM
EACComposite ACCUM (BAC EVCUM)
/ (CPICUM SPICUM)
EVM Home Page https//acc.dau.mil/evm eMail
Address EVM.dau_at_dau.mil DAU POC [phone]
(DSN 655) Revised December 2006