Post on 17-Dec-2015
1© 2001 David Galley
Earned Value Management
‘project management with the lights on’
Presentation to BCS
David Galley
15-Jan-2002
2© 2001 David Galley
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
3© 2001 David Galley
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?
4© 2001 David Galley
• 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
5© 2001 David Galley
• 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
6© 2001 David Galley
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?
7© 2001 David Galley
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
8© 2001 David Galley
Where are we? – a more likely scenario
9© 2001 David Galley
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
10© 2001 David Galley
£
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
11© 2001 David Galley
• 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
12© 2001 David Galley
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
13© 2001 David Galley
+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
14© 2001 David Galley
• 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
15© 2001 David Galley
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
16© 2001 David Galley
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
17© 2001 David Galley
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)
18© 2001 David Galley
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
19© 2001 David Galley
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
20© 2001 David Galley
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...
21© 2001 David Galley
EVMS 32 criteria
Organisation
Planning, Scheduling &
BudgetingAccounting consideration
Analysis & Mgt Reports
Revisions & Data
Maintenance
22© 2001 David Galley
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
23© 2001 David Galley
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
24© 2001 David Galley
WBS – execution orientated example
SystemDesign
Changeplanning
Developpilot
AssessPilot
Pilotchange
CommsInstall.
W/SInstall.
Bus.Reqt.
ChangeReqt.
Project Defn.phase
Designphase
Pilotphase
Roll-outphase
ABCproject
25© 2001 David Galley
WBS – product orientated example
Promotionmaterial
Trainingcourseware
Server LANComms
boxShopLANs
Shopterminals
Reqt.Spec.
Bus.Case
ProjectCharter
Transitiondocumentation
Centralfacility
Shopsystems
ABCproject
26© 2001 David Galley
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)
27© 2001 David Galley
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)
28© 2001 David Galley
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
29© 2001 David Galley
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
30© 2001 David Galley
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
31© 2001 David Galley
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…
32© 2001 David Galley
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)
33© 2001 David Galley
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”
34© 2001 David Galley
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
35© 2001 David Galley
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)
36© 2001 David Galley
Who to go to next? – Steve Wake
Head of APM EV SIG
swprojects@cableinet.co.uk
7th ‘EVA in the UK conference’• Church House, Westminster • 20-June-2002• Sir John Bourn Auditor General – keynote speaker
• Royal Shakespeare Company
37© 2001 David Galley
‘EVA in the UK’Church House, Westminster
www.churchhouseconf.co.uk/facilities/assembly-pan.htm
38© 2001 David Galley
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