Earned Value Analysis
What Is It ? Why Do I Need It ? How Do I Do It?
Todays Situation
Need for accurate and consistent status information Numerous complex (and interrelated) projects
Projects with many WBS activities Virtual offices Diverse and integrated manufacturing processes
Theres 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 completed
Source:The Standish Group
How to answer the question:
Have we done what we said wed do?
% complete estimating % of Budget spent % of work done % of time elapsed
subjective, incomplete draws false conclusions
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Enter Earned Value Analysis
Earned Value Analysis is: an industry standard way to: measure a projects progress, forecast its completion date and final cost, 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.
Whats More Important?
Knowing where you are on schedule? Knowing where you are on budget? Knowing where you are on work accomplished?
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EVA Integrates All Three
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.
Earned Value is needed because...
Different measures of progress for different types of tasks Need to roll up progress of many tasks into an overall project status
Need for a uniform unit of measure (dollars or work-hours).
Earned 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
And One More Reason
Why You Need EVA
?
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Because It May Be Required!
These Set the Stage: GPRA; 1993
FASA, Title V; 1994
Clinger-Cohen Act; 1996 And Then Along Came OMB! (Circular A-11, Part 7)
"Agencies must use a performance based acquisition management system, based on ANSI/EIA Standard 748, to measure achievement of the cost, schedule, and performance goals."
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OK, So What Is This Stuff?
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So, Is This Stuff New ?
Its been around since the sixties. Cost/Schedule Control Systems Criteria (C/SCSC)
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Examples of Informal Earned Value Analysis
Its done informally without realizing it. 30% time used, 30% $$ spent So, if 30% of the work is done, I must be OK ?? Shop floor estimates Cost comparisons Budget vs. Actual
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Hows This Project Doing?
120000
100000
80000
60000
Projected Actual
40000
20000
0 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03
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Lets Take A Look Under The Hood
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But First! - We Must Get Organized
EVA works best when work is compartmentalized. Compartmentalization is best achieved with a wellplanned Work Breakdown Structure. So, how do I create a WBS for a really complex project?
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Proper WBS Design
One WBS per program
Deliverable-oriented Work not in the WBS is out-of-scope Each descending level represents more detail
Full (and accurate) definition is key
Defined deliverable(s) Timeframe for delivery of product Total cost (direct and indirect) to deliver product
Lets Look at an example:
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A Sample Work Breakdown Structure
Serve Pizzas to Customers
Provide the Place Make the Dough Cook the Food Cook the Sauce Serve Customers Build the Pizza
(Others)
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WBS Units are Work Packages
Lowest level WBS elements Have an accompanying narrative Have three measurable components Scope of work to be accomplished Total (direct and indirect) cost Timeframe for completion
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Control Account Plans
A CAP is essentially a Work Package with some added features: Assignment of responsibility
Organization Individual
Division (if necessary) into lower-level Work Packages. Metrics for measuring EV performance
Milestones % complete Other
The sum of the CAPs constitutes the Performance
Measurement Baseline
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Some New Terms
PV Planned Value
AC - Actual Cost
EV Earned Value
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Earned Value Definitions
PV: Planned Value
Planned cost of the total amount of work scheduled to be performed by the milestone date.
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PV Planned Value or Budgeted Cost of
Work Scheduled
120000 100000 80000 60000 40000 20000 0 BCWS
Feb-03
Aug-03
Sep-03
Nov-03
Jan-03
Jun-03
Jul-03
May-03
Dec-03
Mar-03
Apr-03
Oct-03
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Earned Value Definitions
(cont.)
AC: Actual Cost of Work Performed
Cost incurred to accomplish the work that has been done to date.
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ACWP - Actual Cost of Work Performed
120000 100000 80000 60000 40000 20000 0 56000 49000 BCWP ACWP
Feb-03
Nov-03
Jan-03
Jun-03
Jul-03
May-03
Dec-03
Aug-03
Sep-03
Mar-03
Apr-03
Oct-03
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Earned Value Definitions
Performed
(cont.)
EV: Earned value or Budgeted Cost of Work
The planned (not actual) cost to complete the work that has been done.
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EV- Earned Value or Budgeted Cost of Work
Performed
120000 100000 80000 60000 40000 20000 0 55000 49000 BCWP BCWS
Feb-03
Nov-03
Jan-03
Jun-03
Jul-03
May-03
Dec-03
Aug-03
Sep-03
Mar-03
Apr-03
Oct-03
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The Whole Story
120000 100000 80000 56000 60000 40000 20000 0 55000 49000 BCWS BCWP ACWP
Feb-03
Aug-03
Sep-03
Nov-03
Jan-03
Jun-03
Jul-03
May-03
Dec-03
Apr-03
Mar-03
Oct-03
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Some Derived Metrics
SV: Schedule Variance (EV-PV)
A comparison of amount of work performed during a given period of time to what was scheduled to be performed. A negative variance means the project is behind schedule
CV: Cost Variance (EV-AC)
A comparison of the budgeted cost of work performed with actual cost. A negative variance means the project is over budget.
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Schedule Variance & Cost Variance
Schedule Variance = EV-PV $49,000 - 55,000 SV = - $ 6,000 Cost Variance = EV-AC $49,000 56,000 CV = - $7,000
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Some More Derived Metrics
SPI: Schedule Performance Index
SPI=EV/PV
If SPI<1 means project is behind schedule
CPI: Cost Performance Index
CPI= EV/AC
If CPI<1 means project is over budget
CSI: Cost Schedule Index (CSI=CPI x SPI)
The further CSI is from 1.0, the less likely project recovery becomes.
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Performance Metrics
SPI: EV/PV
49,000/55,000 = 0.891
CPI: EV/AC
49,000/56000 = 0.875 CSI: SPI x CPI .891 x .875 = 0.780
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Making 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
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Making Projections
120000 100000 80000 60000 40000 20000 0 103865 102000 90882
Today
BCWS BCWP ACWP
Feb-03
Aug-03
Sep-03
Nov-03
Jan-03
Jun-03
Jul-03
May-03
Dec-03
Apr-03
Mar-03
Oct-03
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Estimate to Complete
140000 120000 100000 80000 60000 40000 20000 0
116,571 102000
Today
BCWS BCWP ACWP
Ja n03 M ar -0 3 M ay -0 3 Ju l-0 3 Se p03 No v03
Ja n04 M ar -0 4
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A New Criteria
Activities earn value as they are completed. The value earned is the WBS budgeted cost of the activity completed to date.
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Value of Earned Value
Schedule Status Reporting Cost Status Reporting Forecasting
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But How Do I Do All This Stuff ?
With an Earned Value Management System
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Requirements of Earned Value
Proper WBS Design Baseline Budget Control Accounts Baseline Schedule Work measurement by Control Account
work-hours, dollars, units, etc.
Good Project Management Practices
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Shortcomings of Earned Value
Quantifying/measuring work progress can be difficult. Time required for data measurement, input, and manipulation can be considerable.
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Summary
EVA & EVMS will help reduce guesswork in:
Measuring performance forecasting
Need to get beyond misleading measures of progress. Reasons to use EVA and EVMS:
Good project management practice OMB requirement
Incorporate into contracts
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Earned Value Resources
http://www.pmi.org/ http://www.acq.osd.mil/pm/ ANSI/EIA 748 is available from:
Global Engineering Documents
800-854-7179
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Earned Value Analysis
Questions/Discussion
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