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RELATIONSHIP-OBJECTIVE ANALYSIS

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

Performance Measurement

Presented at the 14th Annual International Integrated Program Management Conference

Tysons Corner Sheraton Premiere Hotel

November 19, 2002

Presented By Will Gran

Windmill International, Inc.

Nashua, New Hampshire 03060-5830

(603) 888-5502

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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 . . .

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When I Say . . . I Mean . . . Planned Value BCWSCompleted Value BCWPResources Used ACWPRemaining Planned Value BCWRBaseline Total Value BACResource Value Variance CVTime Value Variance SVResource Use Efficiency Index CPITime Value Efficiency Index SPIContract At Cost TCContract At Price TPContract Liability CP

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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.”

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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

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Traditional Performance Analysis

The Line GraphX-Axis: Passage of time

Years, quarters, months, weeks, days, etc.

Y-Axis: Measure of ResourcesDollars, items, lengths, volumes, etc.

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The Line Graph

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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

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Estimate At Completion FormulaEAC = 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

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The Traditional Analyses

Line Graph Charts

and the

Estimate At Completion Formula

Provide partial value from Earned Value

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Why The Difference In EACs?

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A Different Look At Performance

Relationship-Objective Analysis

X-Axis: Value of work completed

Y-Axis: Progress toward an (Objective)

Percent Complete = Work Completed Baseline Total Value X 100

Percent Of (Objective) = Resources Value Value Of (Objective) X 100

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Relationship-Objective GraphAn X - Y Scatter Diagram

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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

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Variance As Percent Line Graph

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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.

Time Variance = Completed Value - Planned Value Baseline Total Value X 100

Resource Variance = Completed Value - Resources Used Baseline Total Value X 100

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Variances As % Of Baseline PlanAn X - Y Scatter Diagram

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Performance Efficiency Since Start

• Value of work completed with resources used

• History of past performance efficiency

• Efficient > 100%• Inefficient < 100%

Resource Use Efficiency Index Since Start = Completed ValueResources Used X 100

Time Value Efficiency Index Since Start = Completed ValuePlanned Value X 100

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Resource Use Efficiency Since StartAn X - Y Scatter Diagram

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Performance Efficiency To Finish

• Ability to accomplish work within (Objective)

• Future performance required

Efficiency Index To Meet (Objective) = Remaining Planned Value(Objective) Resources Remaining X 100

Efficiency Index To Meet (Objective) = Baseline Total Value - Completed Value(Objective) - Resources Used X 100

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Resource Use Efficiency To Finish

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Rate Of Using Resources

• History of a “resource burn rate”

Resource Use as % Of (Objective) = Resources Used (Objective) X 100

Planned Value as % Of (Objective) = Planned Value (Objective) X 100

Completed Value as % Of (Objective) = Completed Value (Objective) X 100

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Rate Of Using Resources

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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

Estimate At Completion (EAC)

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Performance FactorsShould be related to performance

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

Cumulative ~ Resource Use Efficiency Index

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Estimate At Completion

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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

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Resource Use Trend Projection

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EAC Trend Projection

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Best Case - Worse Case - Most Likely

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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

• Don’t 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

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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

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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

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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.”