Title: Using Earned Value Analysis by Alan Bye
1Using Earned Value Analysisby Alan Bye
2Earned Value
Why Do I Need It ? What Is It ? How Do I Do
It?
3Todays Situation
- Need for accurate and consistent status
information - Numerous complex (and interrelated) projects
- Projects with many WBS activities
-
- Virtual offices
- Diverse technology platforms
4Theres Room For Improvement
- 70 of projects are
- Over budget
- Behind schedule
- 52 of all projects finish at 189 of their
initial budget - And some, after huge investments of time and
money, are simply never complete - SourceThe Standish Group
5Earned Value Analysis (EVA)
- Earned Value Analysis is
- an industry standard way to
- measure a projects progress where direct
measures cannot be used - Predict future performance, and
- provide schedule and budget variances along the
way - By integrating three measurements, it provides
consistent, numerical indicators with which you
can evaluate and compare projects.
6EVA the three elements
- It compares the PLANNED amount of work with what
has actually been COMPLETED, to determine if Cost
, Schedule, and Work accomplished are progressing
as planned. -
- Work is Earned or credited as it is completed.
7Earned Value is needed because...
- Provides an Early Warning signal for prompt
corrective action. - Bad news does not age well.
- Still time to recover
- Timely request for additional funds
8Earned Value Management EVolution
- 1959 US DoD began looking at Milestone
Charts and Rate of Expenditure - Curves.
- 1963-64 Earned Value concept begins with the
Minuteman Titan III - rocket programmes.
- 1966 USAF - Cost/Schedule Planning
Control Specification (C/SPCS). - 1967 US DoD - Cost/Schedule Control
Systems Criteria (CSCS2). - 1972 US DoD - Issued the Joint
Implementation Guide (JIG). - (revisions were to follow
1976, 1980, 1987 and 1996). - 1972 NASA
- 1975 US Dept of Environment (DoE)
- 1982 US National Security Agency
- 1989 Australian DoD
- 1990 Canadian DoD
- 1992 National Oceanic Atmospheric
Administration (NOAA) - 1994 Federal Bureau of Investigation
(FBI), Inland Revenue Service (IRS) - 1996 JIG replaced by Earned Value
Management Implementation Guide (EVMIG) - (revised 1997)
- Present World wide implementations.USA,
Europe, Canada, Australia, Japan
9Traditional Plan vs. Actual view
- Is there a performance problem? Is it a good or
bad position?
10Terminology
- BCWS - Budgeted Cost of Work Scheduled
- ACWP - Actual Cost of Work Performed
- BCWP - Budgeted Cost of Work Performed
-
11Earned Value Definitions
- BCWS Budgeted Cost of Work Scheduled
- The planned earned value to be performed by the
milestone date.
12Earned Value Definitions (cont.)
- ACWP Actual Cost of Work Performed
- Actual Cost to date.
13Earned Value Definitions (cont.)
- BCWP Budgeted Cost of Work Performed
-
- The actual earned value i.e. the value of the
work performed based on its planned value
14How to construct the baseline (BCWS) (planned
earned value)
- Establish the activities (milestones)
- Calculate a budget for each activity (milestone).
What is the cost of completing the activity? - Ideally one activity (milestone) per reporting
period - In a table, record the cumulative budget for each
milestone and draw the graph
15How to construct the baseline (BCWS)
16How to score the Earned Value (BCWP) (actual
earned value)
- When an activity (milestone) is achieved, the
Earned Value (EV) is scored equal to its planned
value - It has nothing to do with how much you get paid
- The EV is scored in the period in which it was
completed
17How to score the EV (BCWP)
18How to record Actual Cost (ACWP)
- Actual cost of doing the work
- This may be recorded for each activity
(milestone). This is the ideal situation, but
you may only have information relating to actual
cost for the entire project. This is also
acceptable - You may be accumulating an actual cost in a
period prior to the activity is delivered.
19How to record Actual Cost (ACWP)
20Graphical representation of project progress
Budget At Completion (BAC)
Planned Costs (BCWS)
Actual Costs (ACWP)
Earned Value (BCWP)
Time
Today
21- Exercise
- Describe the status of each project using EV
terminology -
- 10 minutes
22As at today, the value of the work is less than
planned, therefore we are behind schedule. The
actual cost of work is greater than plan and also
greater than the BCWP. Therefore we have been
doing the work considerably more costly than
planned.
23As at today, the value of the work is greater
than planned value, therefore we are ahead of
schedule. The actual cost of work is greater
than plan but less than the BCWP. Therefore
despite having spent more money than plan, on the
work we have completed, we are doing it cheaper
than the plan.
As at today, the value of the work is greater
than planned value, therefore we are ahead of
schedule. The actual cost of work is greater
than plan and also greater than the the BCWP.
Therefore as well as spending more money than
planned, we are overspent on the work that we
have completed.
24As at today, the value of the work is less than
planned value, therefore we are behind schedule.
The actual cost of work is less than plan but is
greater than the BCWP. Therefore despite having
spent less than the plan, on the work that we
have done we are overspending
As at today, the value of the work is less than
planned value, therefore we are behind schedule.
The actual cost of work is less than plan and
also less than the BCWP. Therefore as well as
being under the planned expenditure, we are also
doing the work cheaper than the plan
25Some Derived Metrics
- SV Schedule Variance (BCWP - BCWS)
- A comparison of the amount of work performed to
what was planned to be performed. - A negative variance means the project is behind
schedule - CV Cost Variance (BCWP - ACWP)
- A comparison of the budgeted cost of work
performed with actual cost. - A negative variance means the project is over
budget.
26Some More Derived Metrics
- SPI Schedule Performance Index SPI BCWP /
BCWS - SPI lt 1 means project is behind schedule
- CPI Cost Performance Index CPI BCWP/ACWP
- CPI lt 1 means project is over budget
27- Cost indices and variances
- Cost Performance Index (CPI) BCWP
- ACWP
- Cost Variance (CV) BCWP - ACWP
- Cost Variance (CV) CV x 100
- BCWP
- Schedule indices and variances
- Schedule Variance (SV) BCWP - BCWS
- Schedule Performance Index (SPI) BCWP
- BCWS
- Schedule Variance (SV) SV x 100
28Graphical representation of project progress
Budget At Completion (BAC)
Planned Costs (BCWS)
Schedule slippage (time)
Cost Variance ()
Actual Costs (ACWP)
Schedule Variance ()
Earned Value (BCWP)
Time
Today
29Making Projections
Once a project is 10 complete, the overrun at
completion will not be less than the current
overrun. Once a project is 20 complete, the CPI
does not vary from its current value by more than
10. The CPI and SPI are statistically accurate
indicators of final cost results. Source
Defense Acquisition University
30Estimate At Completion (EAC)
- Formula 1 BAC
- CPI
- Considered to give a minimum EAC
- Formula 2 BAC
- CPI x SPI
- Provides an EAC that accounts for a schedule
change - Formula 3 ACWP BAC BCWP
- CPI
x SPI - Provides an EAC that accounts for a schedule
change, but also takes - into account the value of the work done
31Graphical representation of project progress
Estimate At Completion (EAC)
Variance at Completion
Budget At Completion (BAC)
Planned Costs (BCWS)
Schedule slippage (time)
Forecast schedule slippage
Cost Variance ()
Actual Costs (ACWP)
Schedule Variance ()
Earned Value (BCWP)
Time
Today
32Basic Analysis
33- Exercise
- 1. Read the worked example
- Do the Earned Value exercise
-
- 1 hour
34Now the real world!
- Activities do not always last for a reporting
period (week, month etc) - Some activities do not deliver anything, e.g.
management support, but it still a cost to the
project
35Activities do not always last for a reporting
period What can be done?
- Use an Earned Value Method of 50/50
- When constructing the BCWS (the plan), you put
50 of the activity (as a BCWS value) in the
period the activity is planned to start and the
remaining 50 in the period when the activity is
planned to finish. - The BCWP (Earned Value) is earnt in the same
proportions, i.e. 50 when the activity starts
and 50 when the activity finishes
36EV Methods Internal resource
37EV Methods Material/vendor
38Some activities do not deliver anything - What
can be done?
- Use an Earned Value Method called Level of Effort
- When constructing the BCWS (the plan), spread the
activity value evenly throughout the duration - The BCWP (Earned Value) is earnt in the same
proportion to the plan regardless of whether any
time has been spent on the activity or not - BCWP BCWS therefore SPI 1.0 and SV 0 It
shows that we are always on schedule for this
type of activity
39EVMS / EVM / EV / EVA
- Earned Value Management System
- The executive Cost and Schedule system employed
- Can be a single system or many that are working
together - Earned Value Management
- Active management of a programme using EV
processes EVA - Earned Value Methods
- Metric selected to provide best possible
reflection of Schedule performance - Typically 0-100, 20-80, 50-50, 40-60,
Estimates, Milestones, Apportioned, - Level of Effort
- Earned Value
- Budgeted Cost of Work PerformedBCWP
- Executed tasks within a baseline having been
completed in line with exit criteria - Earned Value Analysis
- Variance Analysis of - Current month, Cumulative
to Date, and VAC - EAC Analysis in terms of TCPI(EAC) / Independent
EACs if warranted
40Key EVMS Components
- Authorisation
- Planning Budgeting
- Baseline Change Control
- Analysis
- Reporting
41Authorisation
- Control Account Authorisation CAA
- Total Allocated Budget (TAB) flow-down to
reporting WBS - Details initial Baseline distribution of Budget
- Provides a narrative (and/or) points to
additional documentation detailing deliverables - Indicates open duration of Control Account
- Details specific schedule adherence
- Signed off by both Programme Manager and
Control Account Manager - Usually a one-time eventfuture budget
transactions being dealt with by PCRs
42Planning and Budgeting
- Total Planning or Rolling Wave Planning
- Vertical Horizontal Integration with
Milestones, especially if a Critical Path is
required - Resource allocation and management
- Management Reserve (in-scope arisings)
- Undistributed Budget (WBS earmarked budget)
- Earned Value Method (EVM) selection
- TAB (DB UB MR)
- Where (DBUBMR) gtTAB Over Target Baseline !
43Baseline Control
- Baseline Change Control is performed using
Programme Change Requests (PCRs) - Baseline distribution Contract Budget Base (CBB
Log) - Change Control (Rubber Baseline mitigation)
performed by the usage of PCRs - PCRs authorise both BAC/EAC and pure EAC
changes - An understanding of MR v EAC is required !
- PCRs are signed-off by Programme Managers
44Analysis
-
- Performance Current Month, CTD, and Variance at
Completion - History SV, SPI, CV, CPI
- Current Management Reserve level predicted
Burn-Down - Programme flexibility MR versus VAC delta
- Staffing..Equivalent Heads versus Forecast
- Milestones.future forecasted dates versus
requirements (Exec, MWP, Programmatic) - Variance Analysis Reports (VARs) and Corrective
Actions - Future TCPI(EAC) and Trending
History
45Variance Analysis Report (VAR)
- Thresholds
- Fixed at Baseline
- Current month SV CV
- Cumulative SV CV
- VAC
- CAM reports
- Cause of variance
- Impact to Cost Schedule
- Corrective Actions
- VARs
- Discussed at MPRs
- Agreed and signed by PM/PL
- Corrective Actions
- Reviewed at subsequent MPRs
46Reporting
47Shortcomings of Earned Value
- Quantifying / measuring work progress can be
difficult. -
- Time required for data input, data gathering and
calculation - It is not the only way to manage a project
48Summary
- Use indicators to manage your project and not to
be a goal in itself. They will drive a
behaviour. - EV data is historical. Use it to predict and
influence the future - Look at Indices and Variances together and
observe trends - Concentrate on the parts of the project that
trip the variances - Not all projects are the same, i.e. do not expect
the same sort of variances and indices on a
technically challenging/risky project compared
with more straight forward projects - For EVA to be effective, it requires a credible
baselined plan.
49Thank you and any questions?