Transcript Earned Value Analysis

Earned Value Analysis
An overview
Jonathan Fishwick
Rolls-Royce plc
©2003 Rolls-Royce plc
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Topics
 What is Earned Value?
 Why we use it?
 Earned Value parameters
 Some Earned Value calculations
 Summary
 Any questions?
Rolls-Royce data – strictly private
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What is Earned Value?
 Earned Value is a way of measuring how
much work you have done for the money
you have spent.
 It is a powerful Programme Management
technique that enables monitoring of not
just planned and actual costs, but also
the progress achieved.
 It provides an “early warning” of where
spend is exceeding physical achievement
 It can predict future performance
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Traditional Plan vs. Actual view
 Is there a performance problem? Is it a
good or bad position?
100
80
60
£k
40
Budget
Actual
20
0
J
F
M
A
M
J
J
A
S
O
N
D
 Could be a cash-flow problem, but what
if the task had finished in October?
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Why we use Earned Value?
 Rolls-Royce introduced an optimised
business process Integrated Programme
Management (IPM)
 Both IPM and EVA have their origins in
the Cost/Schedule Control System
Criteria (CS²): this was issued by the US
DoD in 1967 to standardise reporting
requirements and provide visibility of
accomplishment of contract work
Rolls-Royce data – strictly private
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Why we use Earned Value?
 Rolls-Royce’s Programme Management
and Earned Value processes are tailored
to meet the specific requirements of the
company
 Earned Value is best practice for
performance management in our
industry, and many customers expect us
to use it
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Relevant IPM principles?
 All work within the company must
belong to a programme
 All work undertaken must have clearly
defined deliverables, planned in terms of
cost and schedule
Performance to be managed using
Earned Value
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How IPM programmes are planned
Master
Schedule
WBS 1
WBS 1.1
WBS 1.1.1
WBS 1.2
WBS 1.1.2
WBS 1.2.1
Work
Breakdown
Structure
WBS 1.2.2
Control
Account
Plans
 Earned Value is planned and achieved at the task level
within the Control Account and summarised up through the
project structure
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Earned Value methods
 Each task has an Earned Value method
assigned - to phase the planned cost and to
calculate the achieved (Earned) Value
 Example methods:
 0-100
Claim 100% of activity value at completion
 20-80 Claim 20% for starting the activity and the
remainder on completion
 Milestones - x% for a completed milestone, x
being determined in advance by the CAM
 Level of Effort - Work is planned evenly over
activity duration so claim proportional value for
the passage of time
Rolls-Royce data – strictly private
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Earned Value parameters
Cost
Time Now
BCWS
ACWP
BCWP
Time
 BCWS - Budget Cost of Work Scheduled (Baseline)
What we planned to do - What we planned to spend
 ACWP - Actual Cost of Work Performed
What really happened - What we have spent
 BCWP - Budgeted Cost of Work Performed
Value of the work done - The Earned Value
Rolls-Royce data – strictly private
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Earned Value view ?
 Can you better judge whether good or
bad?
100
80
60
£k
40
BCWS
ACWP
BCWP
20
0
J
F
M
A
M
J
J
A
S
O
N
D
 Clear “indication” of being behind
schedule and over cost
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Earned Value indices
 Calculations using the EV parameters can
indicate current performance
 Cost
Performance Index (CPI = BCWP/ACWP)
 Values of CPI greater than 1.0 indicate the
project is under budget in terms of Earned
Value. Values less than 1.0 indicate the project
is overspent for the amount of work that has
been done.
 Schedule Performance Index
(SPI = BCWP/BCWS) Values of SPI greater than
1.0 indicate the project is ahead of schedule.
Values less than 1.0 indicate that it is behind
schedule
Rolls-Royce data – strictly private
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Earned Value indices
Calculations
using the EV indices can
predict likely end cost/funding
requirements
Estimate at Completion (EAC) =
BAC - BCWP
ACWP +
CPI x SPI
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Earned Value variances
 There are calculations using the EV
parameters that indicate current
variances
Schedule
Variance (SV = BCWP - BCWS)
is the difference between the value of
work performed by the status date and
the value of work scheduled to have been
performed by that date
Rolls-Royce data – strictly private
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Earned Value variances
Time Now
Cost
BCWS
CV
SV
ACWP
BCWP
Time
 Cost Variance (CV = BCWP - ACWP) is
the difference between the value of work
performed and the actual amount of
money spent
Rolls-Royce data – strictly private
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Reporting Earned Value
 Rolls-Royce’s management system
provides standard Earned Value
reports both numerical and graphical
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Summary
 This has been a simplistic overview of
Earned Value, there are more complex
applications
 Earned Value is an integral part of the IPM
process
 It is the “best practice” performance
management tool in the Aerospace
industry
 Many of Rolls-Royce’s customers expect
us to use it, mandatory on some
contracts
Rolls-Royce data – strictly private
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Summary
 Earned Value Analysis enables us to:
Review trends and effects on plans
Understand the likelihood that the work
will be achieved on time and to budget
Manage by exception
Take timely corrective action by providing
an “early warning” of deviations
Measure what we have achieved against
an agreed plan
However,to be effective, EVA requires a
credible well thought out, baselined plan
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Any questions?
Rolls-Royce data – strictly private