Project Management OPER 576 Resource Allocation Greg Magnan, Ph.D. May 6, 2004.
OPER 576 Project Management Earned Value Management & Reporting Greg Magnan, Ph.D. May 27, 2004.
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Transcript of OPER 576 Project Management Earned Value Management & Reporting Greg Magnan, Ph.D. May 27, 2004.
Project Life Cycle Stages
Definition Planning Execution/Impl./Control Closeout
Leve
l of E
ffort
Selection Charter Goals Specs Tasks Responsi
bilities
Estimates Schedules Sequencing Budgets Resources Risks Staffing
Status Reports Changes Quality Forecasts
Training Transfer
Documents Release
Resources Lessons
Learned
What is EVM?• EVM is an integrated management control system
for assessing, understanding and quantifying what a contractor or field activity is achieving with program dollars
• Integrates technical, cost, schedule, with risk management
• Allows objective assessment and quantification of current project performance
• Helps predict future performance based on trends• EVM provides project management with
objective, accurate and timely data for effective decision making
Source: http://evm.nasa.gov/brochure.pdf
EV History• “Instead of relating cost plans to cost actuals,
which had been the custom, PERT/Cost (DoD, 1967) related the value of physical work performed against the cost actuals to determine the utility and benefits from the funds spent. What was physically accomplished for what was spent was a simple but fundamentally important new concept in program management.”
• “The industry standard was called the Earned Value Management System (EVMS) and the number of criteria was reduced from 35 to 32. This major development was endorsed by the DoD in December 1996.”
Source: Fleming & Koppelman, 1998
Industrial Engineering Roots
PlannedStandards
ActualCosts
EarnedStandards
Physical FactoryOutput
Physical Work --Planned Output
Actual Costs
Convert to PM Situation
PlannedValue
ActualCosts
WorkAccomplished
[BCWS]Budgeted Cost ofWork Scheduled
[ACWS]Actual Cost of
Work Scheduled
[BCWP]Budgeted Cost ofWork Performed
Conversion Continued…
[BCWS]Budgeted Cost ofWork Scheduled
[ACWS]Actual Cost of
Work Scheduled
[BCWP]Budgeted Cost ofWork Performed
[BCWS]Budgeted Cost ofWork Scheduled
[ACWS]Actual Cost of
Work Scheduled
[BCWP]Budgeted Cost ofWork Performed
UsualPM
View
[BCWS]Budgeted Cost ofWork Scheduled
[ACWS]Actual Cost of
Work Scheduled
[BCWP]Budgeted Cost ofWork Performed
UsualPM
View
CV = BCWP - ACWS
SV = BCWP - BCWS
Setting up Earned Value
1. Establish the Work Breakdown Structure (WBS) to divide the project into manageable portions.
2. Identify the activities to be scheduled that represent the entire project.
3. Allocate the costs to be expended on each activity.
4. Schedule the activities over time.5. Tabulate, plot and analyze the data to confirm
that the plan is acceptable.
Steps in Using EV
6. Update the schedule by reporting activity progress
7. Enter the actual costs on the activities
8. Execute the Earned Value calculations, print and plot the reports and charts
9. Analyze the data and write the performance narrative.
Earned Value Terminology
Data Element
TermAcrony
mScheduled Work
Budgeted Cost for Work Scheduled
BCWS
Earned ValueBudgeted Cost for Work
PerformedBCWP
Actuals Actual Cost of Work Performed ACWP
Authorized Work Budget At Completion BAC
Forecasted Cost Estimate At Completion EAC
Work Variance Schedule Variance SV
Cost Variance Cost Variance CVCompletion
VarianceVariance At Completion VAC
Earned Value Benefits• When properly employed, it can give the project
manager an early warning signal that the project is heading for a cost overrun unless immediate steps are taken to change the spending plan
• “Today, it is likely that more than 99 percent of the projects in the world do not employ the earned-value cost management concept. Instead, to monitor costs status, they merely compare their spend plan to their actual costs, and that is unfortunate.”
• “Earned Value is a uniform unit of measure, a consistent methodology and a basis for cost performance analysis.”
Benefits of EVMS• Clear definition of work prior to beginning that
work– Helps the line manager credibly request appropriate
resources– Provides the basis for a realistic plan against which to
measure performance• Objective measurement of work accomplishment
– Helps the line manager develop plans that are rooted in reality
– If the task can be done within scope, schedule, budget; confidence in a successful outcome is increased
– If the task cannot be done within scope, schedule, budget; that problem can be defined and resolved at a time when the resolution will be reasonably inexpensive
Benefits of EVMS• Reduces propensity of customer/boss to add work
without adding budget– Ties budget directly to work
– Requires all work transfers to include associated budget
– Requires all budget transfers to include associated work
• Fosters management decisions within a framework of reality, rather than latent unease
• Provides true cost condition– Side-steps false cost variances
– Encourages realistic projections of final cost
– Enhances accuracy of funding forecasts
Status• What metrics are
important in managing projects?
• Who should know? Who needs to know?
• How often should they be updated?
• What form should the update take?
• What options are available?
Budgeting• The goals of any project include bringing the
project in on time and under or on budget. Accomplishing these sometimes conflicting goals requires: – a realistic initial project financial budget – a feasible project time frame – a budgetary plan linked to project activities – an understanding of the relationship between
completion time and project activities and their respective costs
– a methodology to track the variance between activity cost and budget
From Max Wideman’s Glossary• Budgeting & Cost Management
– The process of estimating the proper cost that should reasonably be expected to be incurred against a clear baseline, understanding how and why actual costs occur, and ensuring that the necessary response is taken promptly to ensure actual costs come under budget. Typical information needed for cost management includes:
• Budgets (including estimating), generally based on work breakdown structure or [cost] code of accounts
• Obtaining and recording commitments/accruals • Measurement of work accomplished and value
earned/valuation of work, including treatment of changes (change control) and claims
Creating an Initial Project Budget• Project budgets are typically constructed in
one of three ways: – Top-down budget building
• Predicable, accurate overall/at top• “Imposed” on managers
– Bottom-up budget building • Costing done closer to activities; participatory• Managers may overestimate; squeaky wheel
– Budget request process • Combination of top-down and bottom-up
• Statement of costs given scope of work
SUMMARY!!!
• Project Initiation (post-selection)– Kickoff; Charter; Deliverables
• Work Breakdown Structure– ID activities (brainstorm); time & cost estimates;
precedence relationships; RAM– Used throughout the project
• Network– ES/LS/EF/LF/Slack: Critical path– Milestones
• Resources– Conflicts; Resource Managers
EarlyStart
Duration
EarlyFinish
LateStart
SlackLate
Finish
Task Name
EarlyStart
Duration
EarlyFinish
LateStart
SlackLate
Finish
Task Name
EarlyStart
Duration
EarlyFinish
LateStart
SlackLate
Finish
Task Name
EarlyStart
Duration
EarlyFinish
LateStart
SlackLate
Finish
Task Name
EarlyStart
Duration
EarlyFinish
LateStart
SlackLate
Finish
Task Name
EarlyStart
Duration
EarlyFinish
LateStart
SlackLate
Finish
Task Name
EarlyStart
Duration
EarlyFinish
LateStart
SlackLate
Finish
Task Name
SUMMARY!!!
• Risk Management– Expected Loss (Le) = Pe x Pi x Lt
• Project Closure– Lessons learned archive / dissemination
• Teams & Communication– High-performance; vision; passion
• Reducing project duration / Crashing– More products faster…but, bang for buck
• Status– Gantt Charts, Stoplights, Earned Value
PROJECT MANAGEMENT
Project ManagementIntegration
Project PlanDevelopment
Project Plan Execution Integrated Change
Control
Project ScopeManagement
Initiation Scope Planning Scope Definition Scope Verification Scope Change Control
Project TimeManagement
Activity Definition Activity Sequencing Activity Duration
Estimating Schedule Dev’t Schedule Control
Project Cost Management
Resource Planning Cost Estimating Cost Budgeting Cost Control
Project QualityManagement
Quality Planning Quality Assurance Quality Control
Project HumanResource Management
OrganizationalPlanning
Staff Acquisition Team Development
Project CommunicationsManagement
CommunicationsPlanning
InformationDistribution
Perf. Reporting Admin. Closure
Project Risk Management
Risk Mgt. Planning Risk Identification Qual. Risk Analysis Risk Response
Planning Risk Monitoring and
Control
Project ProcurementManagement
Procurement Plg. Solicitation Plg. Solicitation Source Selection Contract
Administration Contract Closeout
Overview of Project Management Knowledge Areas & Project Management Processes (Source: PMI)