Transcript Earned Value Analysis - PMIWDC

Understanding Program Resource
Management through Earned
Value Analysis
“Reading the Abba Charts”
Wayne Abba
PMI WDC Tool Time, July 18, 2006
Abba Consulting
Agenda
Earned Value Management and Resource
Management
• Essential Data Elements and Graphics
• Earned Value Analysis
• EVA Scenarios
• EVA and Funding Status
• Baseline Management
• Summary
Resource Management
• Earned Value Management = Resource
Management
– Resources are labor, material and other direct
and indirect costs required to execute the
program
• FAA applies EVM at Program level to include prime
and subcontractors, government FTEs, support
contractors
• Managed in dollars, hours, or any measurable unit
• Cost and schedule data summarized directly from
contracts and programs for management and
reporting at all levels
EVM Terminology and Resource
Management
Budgeted Cost for Work Scheduled
- Approved baseline timephased plan for resources to
be consumed (e.g. 100 hours)
Budgeted Cost for Work Performed
- Work accomplished in
terms of planned resources
(e.g. 100 hours)
Actual Cost of Work Performed
- Actual cost of the resources
consumed
(e.g. 120 hours)
- Reconcilable to accounting
system
Assume basic understanding –
Earned Value Management Concept and Terminology
Agenda
• Earned Value Management and Resource
Management
Essential Data Elements and Graphics
• Earned Value Analysis
• EVA Scenarios
• EVA and Funding Status
• Baseline Management
• Summary
EVM Trend Analysis: Cumulative
Risk
Time Now
Prog
Budget
At
Complete
Variance
Management Reserve
Resources
ACWP
(Actual
Cost)
Schedule Slip
BCWS
(Planned
Value)
Cost
Variance
400
Schedule
Variance
BCWP
(Earned
Value)
300
200
100
Time
▲
J
F
M
A
Approx. Time Variance
M
J
J
A
$ Favorable
EVM Trend Analysis:
Cost/Schedule Variances
Management
Reserve
Consumption
Schedule
Variance at
Completion
$ Unfavorable
0
Cost Variance
at Completion
Time
Schedule Slip
Cost Variance --Schedule Variance
Management Reserve
Agenda
• Earned Value Management and Resource
Management
• Essential Data Elements and Graphics
Earned Value Analysis
• EVA Scenarios
• EVA and Funding Status
• Baseline Management
• Summary
DoD Experience
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A-10
A-12
B-1
B-2
C-17
DDG-51
F-18
F-22
C-130H & J
Chinook
Apache
Longbow
Blackhawk
Kiowa
Seahawk
Comanche
T-45
T-46
•
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CVN-68
SSN-21
SSN-688
SSN-774
T-AOE-6
LHD-1
Crusader
M1
M2/M3 FVS
MK-48 ADCAP
MK-50 ALWT
SSBN-726
CG-47
MH-53
V-22 Osprey
P-3 Orion
RCAS
LIF Hawk
•
•
•
•
•
•
•
•
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•
•
•
•
* OUSD(AT&L)ARA/AM, 1/16/01
B-1 Engines
F-414-GE-400 Engines
Chem. Demilitirization
D-5 TRIDENT II
Javelin
Pershing II
FAMECE/UET
Satellites
AN/BSY-2
THAAD
ABL
GBL
* Aggregate overrun 5.5% on
115 largest DoD contracts
($3.0B on $84.8B @ 60%
complete), adjusted for over
target baselines a/o 4/30/2000
Earned Value Analysis
• Earned Value Analysis = Understanding the
relationships among the EVM data elements
• EVM discipline provides confidence
– Contractor and PM management systems are
adequate
– Data are summarized from the Control Account level,
where technical/schedule/cost integration occurs
• Use the data for management and oversight
– Data quality becomes “self-policing”
– Ask questions – be an informed, critical consumer
Planned Resource Consumption
Program
Budget $M
40
Management Reserve
35
Resources
30
25
10
BCWS
(Planned Value)
Time-Phased Plan
for Consumption
of Resources
5
Typical “S” Curve
20
15
▲
J
F
M
A
M
J
Time
J
A
S
O
N
D
Integrated Baseline Review (IBR):
Does Planned Resource Consumption
Make Sense?
$ Resources
Program
Budget
Front Loaded
Normal
400
End Loaded
300
200
100
Time
J
F
M
A
M
J
J
A
Baseline Extremes: Front-Loaded
• Rapid start
– Most resources to be consumed early in plan
• Questions
– What is basis for plan?
– Are resources available?
• Do IBR and review supporting documentation
$ Resources
Program
Budget
Front Loaded
400
300
200
100
Time
J
F
M
A
M
J
J
A
Baseline Extremes: End-Loaded
• Slow start
– Most resources to be consumed late in plan
• Questions
– What is basis for plan?
– Is schedule realistic?
• Do IBR and review supporting documentation
$ Resources
Program
Budget
400
300
End Loaded
200
100
Time
J
F
M
A
M
J
J
A
Normal Baselines
• Normal “S” curve for planned value
• Questions
– Is scope fully and mutually understood (using WBS)?
– Does the baseline capture all work?
• Labor resources
– Are in-house resources available and adequate?
– Are contractor resources available and adequate?
• Material resources
– Are contracts awarded/planned?
– Is the schedule logical and complete?
– Risk management
• Is Management Reserve adequate given expected risk?
Normal Baselines cont’d
– Management System
•
•
•
•
Does management system meet ANSI EVMS guidelines?
Are managers trained?
Are EVM techniques objective?
Is “Level of Effort” scope properly categorized?
• The Bottom Line
– Does the program have an executable plan that
integrates scope, planned cost and schedule
resources and risk?
– If “no,” go slow… better to do it right than to fail
Time - Based Planning Horizons
Rolling Wave 2
Rolling Wave 1
Rolling Wave 3
$ Resources
Program
Budget
Initial detail
planning
(6 Months)
400
300
Future work in planning packages
• Detail planning based on calendar
• Arbitrary
200
100
Time
D
M
J
S
D
M
J
S
Event - Based Planning Horizons
Critical
Design Review
Preliminary
Design Review
$ Resources
Program
Budget
Initial detail
planning
• Future work in planning packages
• Detail planning based on
technical objectives
• Facilitates event-based reporting
incentives
• Better integration of technical,
schedule and cost performance
and risk management
400
300
200
100
Time
D
M
J
S
D
M
J
S
Agenda
• Earned Value Management and Resource
Management
• Essential Data Elements and Graphics
• Earned Value Analysis
EVA Scenarios
• EVA and Funding Status
• Baseline Management
• Summary
Earned Value Analysis Scenarios
The Ideal
Portfolio Management
Early Warning Indicators
Know How to Get Help
Schedule Slips
• Problem indicators
– Early, large and unfavorable schedule
variance
– Front-loaded baseline
– Zero variance
• “Too good to be true”
– Slow resource consumption
• “Can’t get there from here”
Unfavorable Schedule Performance
Time Now
Prog
Budget
$ Resources
BCWS
(Planned
Value)
400
Schedule Slip
Schedule
Variance
BCWP
(Earned
Value)
300
200
100
Time
▲
J
F
M
A
M
J
J
A
Unfavorable Schedule Performance
$ Favorable
Time Now
Schedule
Variance at
completion
is zero by
definitioneven if
program
completes
late
$ Unfavorable
0
Time
Schedule Variance
Schedule variance should supplement “real” schedule analysis
Cost Overruns
• Problem indicators
– Early, large, unfavorable schedule variance
• Time is money
– Unfavorable cost variance
– Front-loaded baseline
– Zero variance
• “Too good to be true”
– Excessive resource consumption
• “Can’t get there from here”
Unfavorable Cost Performance
At
Complete
Variance
Time Now
Prog
Budget
Management Reserve
$ Resources
ACWP
(Actual
Cost)
BCWS
(Planned
Value)
Cost
Variance
400
BCWP
(Earned
Value)
300
200
100
Time
▲
J
F
M
A
M
J
J
A
$ Favorable
Unfavorable Cost Performance
Time Now
$ Unfavorable
0
Time
Cost Variance --Management
Reserve
$ Favorable
Evaluating Future Performance
Time Now
0
$ Unfavorable
PM Variance
at Completion
Time
• When/how
will performance improve?
• Review at appropriate time
• Tie PM evaluation to predictability
Cost Variance --Management
Reserve
$ Favorable
Evaluating Future Performance
Time Now
0
$ Unfavorable
PM Variance
at Completion
Time
• When/how
will performance improve?
• Review at appropriate time
• Tie PM evaluation to predictability
Cost Variance --Management
Reserve
A-12 Contract – Front Loaded
• Large unfavorable variances
• “Connect the dots”
• Front-loaded Baseline
(or completion date is wrong)
• No work planned ’93 – ’96?
A-12 Contract – Actual Cost vs. EAC
• Contractor and PM EACs
both imply no cost accrual
for several years during key
manufacturing/test phases
• Realistic EAC “off the chart”
Excessive Optimism
• Problem indicators
– Future performance predicted to be significantly
better than historical performance
• Variance trend analysis
– Cost Performance Index compared to
To Complete Performance Index (CPI vs TCPI)
• Actual trend and implied future trend diverging
• One of most powerful EVA techniques
• Independent EV analysis balances PM bias
A-12 Contract – Optimistic EACs
• Contractor estimates program
will begin to underrun
• PM estimates all problems will
be resolved – and no new problems
will occur
• Realistic EAC variance “off the chart”
Super Hornet Cumulative Trends
• Cost-type contract
• Significant cost risk
• No variances
• Too good to be true?
• No scope change
• Effective planning
• IPTs used EVM effectively
• Excellent performance
Super Hornet Variance Trends
• Substantial
Management
Reserve
Past vs. Future Efficiency: CPI vs. TCPI
Time Now
TCPI
EAC Efficiency Index
CPI Cum
CPI Current
>1.0
Average Future Performance
must Equal TCPI
1.0
To Achieve Indicated
Efficiency in Estimate
at Completion
<1.0
Given Performance to Date
(cumulative CPI)
Time
Confidence in Estimate
Cumulative Efficiency / Required Efficiency
Percent Difference
Can program complete at PM’s current estimate?
(
15
CPICUM
TCPIEAC
1
) x 100
No Confidence
10
Questionable
5
Acceptable
0
-5
Questionable
-10
No Confidence
-15
Apr-05
May-05
Jun-05
Jul-05
Aug-05
Sep-05
Oct-05
Nov-05
Contract: FAA XXX Contractor: Air Systems Inc.
Adapted from USAF
Dec-05
Jan-06
as of January 2006
Zeroing in on the EAC
Contract Budget:
PM Estimate:
Independent High:
Independent Low:
$19
$20
Contract: FAA XXX
Adapted from USAF
$21
$20.8M
$20.8M
$23.3M
$22.0M
$22
Contractor: FAA Contractor
$23
as of April 2006
Agenda
• Earned Value Management and Resource
Management
• Essential Data Elements and Graphics
• Earned Value Analysis
• EVA Scenarios
EVA and Funding Status
• Baseline Management
• Summary
EVA and Funding Status
Time Now
Prog
Budget
Resources
BCWS
(Planned
Value)
400
ACWP
(Actual
Cost)
300
Approved/Planned Funding
200
BCWP
(Earned
Value)
100
Time
D
M
J
S
D
M
J
S
Profitability Analysis on Flexibly Priced
Contracts
Cost Variance
Time Now
$ Favorable
levels
related to:
Min/Max
Fee
$ Unfavorable
0
Cost Sharing
Contractor Loss
Time
Cost Variance --Schedule Variance
Management Reserve
$ Favorable
Profitability Analysis on Flexibly Priced
Contracts
Cost Variance
Time Now
levels
related to:
Min/Max
Fee
$ Unfavorable
0
Cost Sharing
Contractor Loss
Time
Cost Variance --Schedule Variance
Management Reserve
Agenda
• Earned Value Management and Resource
Management
• Essential Data Elements and Graphics
• Earned Value Analysis
• EVA Scenarios
• EVA and Funding Status
Baseline Management
• Summary
Baseline Discipline
• Effective performance management requires
disciplined baseline management
– Initial baseline reflects go-ahead decision
• Scope, schedule, resources, risk
– Approve baseline changes to
• Revise work scope (increase or decrease)
• Restore meaningful performance management
• Manage funding reductions (“salami slices” or prioritized
cuts?)
• Balance scope, schedule, cost, risk assumptions
– Do not approve baseline changes to
• “Get to Green”
• Eliminate cost and schedule variances
Baseline Discipline
Time Now
Program
Budget
BCWS
$ Resources
ACWP
• No Variances
• Lack of definition
and discipline
• Baseline & schedule
growth preclude
measurement
400
300
BCWP
200
100
Time
J
A
J
O
J
A
J
O
Rebaselining
• When the original baseline becomes
unrealistic as a basis for management and
measurement, it may be necessary to
establish a new baseline
– A question of degree – what is ‘unrealistic?’
– Challenge assumptions
• Issues:
– Visibility to original baseline
– Reporting to stakeholders
Establishing a New Baseline
Time Now
Program
Budget
$ Resources
Management
Reserve
ACWP
400
• Baseline no longer meaningful
to manage performance
BCWS
300
200
BCWP
100
D
A
J
S
D
M
▲
Time
Establishing a New Baseline
Time Now
Program
Budget
Revised
Budget
Original
Budget
$ Resources
Management
Reserve
New
Baseline
BCWS
ACWP
400
BCWS
300
200
BCWP
“Single Point Adjustment”
• Eliminates variances
• Establishes new baseline
including Reserve if needed
100
D
A
J
S
D
M
▲
Revised
Schedule
J
S
Establishing a New Baseline
$ Favorable
Time Now
$ Unfavorable
0
Time
Cost Variance ------Schedule Variance
Management Reserve
Establishing a New Baseline
$ Favorable
Time Now
$ Unfavorable
0
“Single Point Adjustment”
• Eliminates variances
• Establishes new baseline
including MR if needed
• History is lost
• Temptation to “get to Green”
Time
Cost Variance ------Schedule Variance
Management Reserve
Establishing a New Baseline
$ Favorable
Time Now
$ Unfavorable
0
Time
Cost Variance ------Schedule Variance
Management Reserve
Establishing a New Baseline
$ Favorable
Time Now
$ Unfavorable
0
Budget for
Variance
• Complete program picture
• Preserves historical visibility
• Identifies added baseline amount
including MR if needed
• Changes chart dynamic by
measuring future performance
against anticipated overrun
Budget for
Future Work
0
Time
Cost Variance ------Schedule Variance
Management Reserve
Agenda
• Earned Value Management and Resource
Management
• Essential Data Elements and Graphics
• Earned Value Analysis
• EVA Scenarios
• EVA and Funding Status
• Baseline Management
Summary
Summary
• Pulling it all together
– Understand EVM/A and Resource Management
– From a single database, use EVM to
•
•
•
•
Manage the program
Measure program performance
Take appropriate management actions
Report to senior management and to customers
– Fix the problem, not the blame
• Encourage timely problem identification and objective
reporting
• Don’t necessarily equate program performance with
manager’s performance
– Develop organizational history and “IQ”
Program Baseline, Funding and Program Performance
are Reported in the OMB-300 Tables
Program ABC
600
500
400
$ (M)
CUR MO
Budget
$
30
Earned Value
$
25
Actual
$
33
SV
$
(5)
SPI
0.83
CV
$
(8)
CPI
0.76
VAC
JRC Baseline
PM EAC
JRC Completion B/L
PM Completion
CUM
$ 255
$ 240
$ 270
$
(15)
0.94
$
(30)
0.89
$
35
$ 550
$ 515
Nov-05
Oct-05
I.H.4
Table
I.H.2
Table
Summary of
Spending
Table
EAC
$ (M)
Funding (CIP)
Budget
Earned Value
300
I.H.4
Table
(EVMS) for
Approved
Useful
Segments
200
JRC Cur B/L
JRC Org B/L
Actual
ETC
100
Critical Design
Review
Production
Decision
1st Site
Delivery
In-service
Decision
Last
Site GA
0
Aug
-03
Oct
-03
Dec
-03
Feb
-04
Apr
-04
Jun
-0 4
Aug
-04
= Milestone Complete
Oct
-04
Dec
-04
Feb
-05
= Milestone B/L Plan
Apr
-05
Jun
-0 5
Aug
-05
Oct
-05
FAA Major Program
Baseline Status ($millions)
Original APB
Prior Years
263.7
FY05
59.9
FY06
24.8
250.3
250.7
47.2
47.1
29.7
29.7
250.3
46.9
[Rebaselined 09/05]
Actual Funding
Prior year obligations,
1/06
FY06 Planned obligations
FY06 Actual obligations
APB Schedule Milestones
FY07
4.1
Beyond Total APB
152.7
505.2
63.9
63.6
158.7
159.0
549.8
550.1
Total Program Duration :
Segment
Milestone
APB Plan (9/05)
Total System Initial Inv Decision
Contract Award
24.6
TBD
Original Risk Res
Remaining
Aug-00
Oct-00
Inv Decision
Sep-01
Inv Decision
In Service Decision
Jun-02
Oct-03
First ORD
JRC Rebaseline
Oct-03
Sep-05
Last ORD
May-11
EVM Performance Data
Segment
CPI / SPI
EVM- last 6 months
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
CPI
SPI
Sep-05
Oct-05
Nov-05
Dec-05
Jan-06
Milestone
FY 06 Milestones
Planned
Actual
Deliver two (2) Systems
Sep 2006.
Achieve Operational
Readiness Date (ORD) at
three (3) sites
Jul 2006.
Feb 2006.
Feb-06
Month
BCWS
BCWP
ACWP
CPI
SPI
Sep-05
214.7
205.4
146.1
Sep-05
1.41
0.96
Oct-05
216.9
203.1
149.3
Oct-05
1.36
0.94
Nov-05
218.20
206.6
151.5
Nov-05
1.36
0.95
Dec-05
156.68
159.01
153.27
Dec-05
1.04
1.01
Jan-06
159.07
160.33
154.5
Jan-06
1.04
1.01
CPI >1.0 Good (cost efficiency - for every dollar spent more than $1.00 of value received)
Feb-06
161.23
163.81
156.77
Feb-06
1.04
1.02
Technical Requirements and Other Issues
* Program Requirements have not changed since the program was rebaselined in September
* If the ASDE-X Program does not receive the funds outlined in the September 2005 rebaseline
CIP funding profile, then the program will not be able to implement the rebaseline as planned.
* If ASDE-X Upgrade Sites’ (i.e. ASDE-3/AMASS sites) expectations exceed ASDE-X program
specifications and requirements, then the Program IOC/ORD goals are at risk of not being met