RELATIONSHIP-OBJECTIVE ANALYSIS

1
RELATIONSHIP-OBJECTIVE ANALYSIS

• Getting Full Value From Earned Value With a
  Value-Added Way of Looking at Performance
  Measurement

Presented By Will Gran Windmill International,
Inc. Nashua, New Hampshire 03060-5830 (603)
888-5502
Presented at the 14th Annual International
Integrated Program Management Conference Tysons
Corner Sheraton Premiere Hotel November 19, 2002
2
Value-Added From Earned Value

• Review some basics
• Traditional analyses
• Line graph presentation
• EAC formula
• Relationship-Objective Analysis
• Variances
• Efficiencies
• Resource use rates
• Estimates at completion
• Some closing thoughts . . .

3
When I Say . . . I Mean . . .

• Planned Value BCWS
• Completed Value BCWP
• Resources Used ACWP
• Remaining Planned Value BCWR
• Baseline Total Value BAC
• Resource Value Variance CV
• Time Value Variance SV
• Resource Use Efficiency Index CPI
• Time Value Efficiency Index SPI
• Contract At Cost TC
• Contract At Price TP
• Contract Liability CP

4
EVMS 32 Criteria

• Industry Standard EIA 748, paragraph 2.4.f
• Develop revised estimates of cost at completion
  based on performance to date, commitment values
  for material, and estimates of future conditions.
  Compare this information with the performance
  measurement baseline to identify variances at
  completion important to company management and
  any applicable customer reporting requirements
  including statements of funding requirements.

5
Performance Analysis Process

• Objective analysis from the data
• Status performance to time now
• Look for performance trends
• Compare tends with a baseline plan
• Project performance trends into the future
• Relate projected trends to some meaningful
  objective
• Subjective analysis from information
• Investigate root causes of variances
• Identify future influencing factors and risk
• Adjust projected trends
• Assess resource requirements
• Compare with contract parameters

6
Traditional Performance Analysis

• The Line Graph
• X-Axis Passage of time
• Years, quarters, months, weeks, days, etc.
• Y-Axis Measure of Resources
• Dollars, items, lengths, volumes, etc.

7
The Line Graph
8
Line Graph Charts

• The presentation is limiting . . .
• Depicts absolute values versus a time scale
• That focus on performance history
• Difficult to identify trends
• Difficult to compare trends to a baseline plan
• Difficult to develop credible cost projections to
  completion

9
Estimate At Completion Formula

• EAC Actuals PF X Remaining Planned Value
• Assumes Performance Factor will be a constant
• And 1 unit of Planned Value will convert to 1/-
  unit of Actual
• The Estimate At Completion Formula
• Provides a point estimate
• Is a limited predictive metric
• That inherently underestimates overruns
• And inherently underestimates underruns

10
The Traditional Analyses

• Line Graph Charts
• and the
• Estimate At Completion Formula
• Provide partial value from Earned Value

11
Why The Difference In EACs?
12
A Different Look At Performance

• Relationship-Objective Analysis
• X-Axis Value of work completed
• Y-Axis Progress toward an (Objective)

13
Relationship-Objective Graph
An X - Y Scatter Diagram
14
An (Objective) May Be

• Baseline Total Value
• Estimate At Completion
• Contract At Cost
• Contract At Price
• Contract Liability
• Or any general (Objective) that is a specific
  resource value

15
Variance As Percent
Line Graph
16
Variances As Of Baseline Plan

• Deviation from baseline time plan
• Deviation from baseline resource plan
• Reduces volatility of variance trends in early
  periods of the project.

17
Variances As Of Baseline Plan
An X - Y Scatter Diagram
18
Performance Efficiency Since Start

• Value of work completed with resources used
• History of past performance efficiency
• Efficient gt 100
• Inefficient lt 100

19
Resource Use Efficiency Since Start
An X - Y Scatter Diagram
20
Performance Efficiency To Finish

• Ability to accomplish work within (Objective)
• Future performance required

21
Resource Use Efficiency To Finish
22
Rate Of Using Resources

• History of a resource burn rate

23
Rate Of Using Resources
24
Estimate At Completion (EAC)

• EAC Actuals PF X Remaining Planned Value
• Assumes Performance Factor will be a constant
• And 1 unit of Planned Value will convert to 1/-
  unit of Actual
• The Estimate At Completion Formula
• Provides a point estimate
• Is a limited predictive metric
• That inherently underestimates overruns
• And inherently underestimates underruns

25
Performance Factors

• Should be related to performance

Cumulative Resource Use Efficiency Index
Running Average Resource Use Efficiency Index
(Period of Time)
Product Resource Use Efficiency Index X Time
Value Efficiency Index
Weighted 0.8 Resource Use Efficiency Index
0.2 Time Value Efficiency Index
Time Value Kicker Resource Use Efficiency Index
0.2 Time Value Efficiency Index
26
Estimate At Completion
27
Trend Line Projection Analysis

• Identify performance trend
• Select set of data to project trend
• Determine best fit line
• Y-Axis intercept
• Slope of best fit line
• Extrapolate to 100 complete

Projects performance trend to end of effort
28
Resource Use Trend Projection
29
EAC Trend Projection
30
Best Case - Worse Case - Most Likely
31
Thoughts While Showering . . .

• Focus on the BIG picture first, then dig deeper
• Volatility indicates poor baseline plan, poor
  discipline, or both
• Watch for front loading due to optimistic
  planning
• Significant change in scope creates a new
  baseline
• Dont be fooled by the early resource variance
  hump
• Time variances are associated with
  Work-In-Progress
• Time variances disappear when work is completed
• Resource variances accumulate when work is
  completed
• Time variances lead resource variances
• Look for long term trends and assess impacts

32
Thoughts While Shaving . . .

• An Index produces a ratio
• EAC formula produces a point estimate
• EAC as percent of an (Objective) produces a rate
  of change
• Trends usually appear before 20 Complete
• Relationship-Objective Analysis extrapolates rate
  of change trend to completion . . .
• . . . And gives you Full Value from Earned Value

33
Thoughts While Sitting . . .

• The Performance Factor is not constant as the
  Estimate At Completion formula assumes
• The trend of the Performance factor is the key
  determining parameter for the most realistic
  Estimate At Completion
• Understand which Performance factor should be the
  best predictor and why

34
Agathe Christie Says . . .

• Getting Full Value from Earned Value with
  Relationship-Objective Analysis is like a good
  detective story.
• The main characters are introduced, the plot is
  established, and the clues to Who Dunit emerge in
  the first 20 of the story.