Transcript Slide 1
Professional Development Learning Event – 27 March 2007
Using Earned Value Analysis
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Professional Development Learning Event – 27 March 2007
Earned Value Why Do I Need It ?
What Is It ?
How Do I Do It?
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Professional Development Learning Event – 27 March 2007
Today’s Situation
Need for accurate and consistent status information
Numerous complex (and interrelated) projects
Projects with many WBS activities
Virtual offices
Diverse technology platforms
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Professional Development Learning Event – 27 March 2007
There’s 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 complete Source:The Standish Group 4
Professional Development Learning Event – 27 March 2007
Earned Value Analysis (EVA)
• “Earned Value Analysis” is: • an industry standard way to: • measure a project’s progress where direct measures cannot be used • • Predict future performance, 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.
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EVA – the three elements
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.
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Professional Development Learning Event – 27 March 2007
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
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Professional Development Learning Event – 27 March 2007
Earned Value Management EVolution
1959 US DoD began looking at Milestone Charts and Rate of Expenditure
Curves.
1963 64 Earned Value concept begins with the ‘Minuteman’ & ‘Titan III’ rocket programmes.
1966 USAF - Cost/Schedule Planning & Control Specification (C/SPCS).
1967 US DoD - Cost/Schedule Control Systems Criteria ( CSCS 2 ).
1972 US DoD - Issued the Joint Implementation Guide ( JIG ).
1972
1975 (revisions were to follow 1976, 1980, 1987 and 1996).
NASA US Dept of Environment (DoE)
1982 1989 1990 1992 US National Security Agency Australian DoD Canadian DoD National Oceanic & Atmospheric Administration (NOAA)
1994 Federal Bureau of Investigation (FBI), Inland Revenue Service (IRS)
1996 JIG replaced by Earned Value Management Implementation Guide ( EVMIG )
(revised 1997) Present World wide implementations…….USA, Europe, Canada, Australia, Japan
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Traditional Plan vs. Actual view
• Is there a performance problem? Is it a good or bad position?
100 80 £k 60 40 20 0 J F M A M J J A S Budget Actual O N D
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Terminology
• BCWS - Budgeted Cost of Work Scheduled • ACWP - Actual Cost of Work Performed • BCWP - Budgeted Cost of Work Performed 10
Professional Development Learning Event – 27 March 2007
Earned Value Definitions
•
BCWS:
“Budgeted Cost of Work Scheduled” • The planned earned value to be performed by the milestone date.
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Earned Value Definitions
(cont.)
•
ACWP:
“Actual Cost of Work Performed” • Actual Cost to date.
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Earned Value Definitions
(cont.)
BCWP:
Budgeted Cost of Work Performed
The actual earned value i.e. the value of the work performed based on its planned value 13
Professional Development Learning Event – 27 March 2007
How to construct the baseline (BCWS) (planned earned value)
• Establish the activities (milestones) • Calculate a budget for each activity (milestone). What is the cost of completing the activity?
• Ideally one activity (milestone) per reporting period • In a table, record the cumulative budget for each milestone and draw the graph 14
Professional Development Learning Event – 27 March 2007
How to construct the baseline (BCWS)
1 Produce a book
Chapter 1 BCWS Chapter 2 BCWS Chapter 3 BCWS Chapter 4 BCWS Chapter 5 BCWS Chapter 6 BCWS Chapter 7 BCWS Chapter 8 BCWS Chapter 9 BCWS Chapter 10 BCWS 10
2 3 4 5 6 7 8 9 10
10 10 10 10 10 10 10 10 10
TOTAL BCWS 10 20 30 40 50 60 70 80 90 100
BCWS 120 100 80 60 40 20 0 BCWS 1 2 3 4 5 6 7 8 9 10 15
Professional Development Learning Event – 27 March 2007
How to score the Earned Value (BCWP) (actual earned value)
• When an activity (milestone) is achieved, the Earned Value (EV) is scored equal to its
planned value
• It has nothing to do with how much you get paid • The EV is scored in the period in which it was
completed
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Professional Development Learning Event – 27 March 2007
How to score the EV (BCWP)
Produce a book
Chapter 1 BCWS BCWP Chapter 2 Chapter 3 Chapter 4 Chapter 5 BCWS BCWP BCWS BCWP BCWS BCWP BCWS BCWP Chapter 6 Chapter 7 BCWS BCWP BCWS BCWP Chapter 8 Chapter 9 BCWS BCWP BCWS BCWP Chapter 10 BCWS BCWP TOTAL TOTAL
BCWS BCWP 1
10 10
10 10 2
10
3
10 10
4
10
5 6 7
10 10 10 10 10 10 10 10
8
10
9
10
10
10
20 10 30 20 40 20 50 30 60 70 70 80 90 100
120 100 80 60 40 20 BCWS BCWP 0 1 2 3 4 5 6 7 8 9 10 17
Professional Development Learning Event – 27 March 2007
How to record Actual Cost (ACWP)
• Actual cost of doing the work • This may be recorded for each activity (milestone). This is the ideal situation, but you may only have information relating to actual cost for the entire project. This is also acceptable • You may be accumulating an actual cost in a period prior to the activity is delivered.
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Professional Development Learning Event – 27 March 2007
How to record Actual Cost (ACWP)
Produce a book
Chapter 1 BCWS ACWP BCWP Chapter 2 Chapter 3 Chapter 4 Chapter 5 BCWS ACWP BCWP BCWS ACWP BCWP BCWS ACWP BCWP BCWS ACWP Chapter 6 Chapter 7 BCWP BCWS ACWP BCWP BCWS ACWP Chapter 8 Chapter 9 BCWP BCWS ACWP BCWP BCWS ACWP BCWP Chapter 10 BCWS ACWP BCWP TOTAL TOTAL TOTAL
BCWS ACWP BCWP 1
10 8 10
10 8 10 2
10 2
3 4
5 10 10 1 5 10 2
5
4 10 3 10 5
6 7
2 10 5 10 10 8 10 9 10 10
8
10
9
10
10
10
20 10 10 30 16 20 40 23 20 50 35 30 60 59 70 70 80 90 100
100 90 80 30 20 10 0 70 60 50 40 BCWS ACWP BCWP 1 2 3 4 5 6 7 8 9 10 19
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Graphical representation of project progress
£ Actual Costs (ACWP) Planned Costs (BCWS) Budget At Completion (BAC) Today Earned Value (BCWP) Time
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Exercise
Describe the status of each project using EV terminology 10 minutes
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Professional Development Learning Event – 27 March 2007
6 examples
1.
£
2.
£
BCWS BCWP ACWP BCWS ACWP
Time Today As at today, the value of the work that has been completed is greater than plan, therefore we are ahead of schedule. The actual cost of work is less than plan and also less than the BCWP. Therefore we have been doing the work very much cheaper than plan.
BCWP
Time Today As at today, the value of the work is less than planned, therefore we are behind schedule. The actual cost of work is greater than plan and also greater than the BCWP. Therefore we have been doing the work considerably more costly than planned.
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6 examples
3.
£
4.
£
BCWS BCWS BCWP ACWP ACWP BCWP
Time Today As at today, the value of the work is greater than planned value, therefore we are ahead of schedule. The actual cost of work is greater than plan but less than the BCWP. Therefore despite having spent more money than plan, on the work we have completed, we are doing it cheaper than the plan.
Time Today As at today, the value of the work is greater than planned value, therefore we are ahead of schedule. The actual cost of work is greater than plan and also greater than the the BCWP. Therefore as well as spending more money than planned, we are overspent on the work that we have completed. 23
Professional Development Learning Event – 27 March 2007 5.
6 examples
£
6.
£
BCWS BCWS BCWP ACWP
Time Today As at today, the value of the work is less than planned value, therefore we are behind schedule. The actual cost of work is less than plan and also less than the BCWP. Therefore as well as being under the planned expenditure, we are also doing the work cheaper than the plan
ACWP BCWP
Time Today As at today, the value of the work is less than planned value, therefore we are behind schedule. The actual cost of work is less than plan but is greater than the BCWP. Therefore despite having spent less than the plan, on the work that we have done we are overspending 24
Professional Development Learning Event – 27 March 2007
Some Derived Metrics
SV: Schedule Variance (BCWP - BCWS)
A comparison of the amount of work performed to what was planned to be performed.
A negative variance means the project is behind schedule
CV: Cost Variance (BCWP - ACWP)
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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Some More Derived Metrics
SPI: Schedule Performance Index
SPI = BCWP / BCWS SPI < 1 means project is behind schedule
CPI: Cost Performance Index
CPI = BCWP/ACWP CPI < 1 means project is over budget
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Professional Development Learning Event – 27 March 2007
Cost indices and variances
• Cost Performance Index (CPI) = BCWP ACWP • • Cost Variance (CV) Cost Variance % (CV%) = BCWP - ACWP = CV x 100 BCWP
Schedule indices and variances
• Schedule Variance (SV) = BCWP - BCWS • Schedule Performance Index (SPI) = BCWP BCWS • Schedule Variance % (SV%) = SV x 100 BCWS 27
Professional Development Learning Event – 27 March 2007
Graphical representation of project progress
£ Schedule slippage (time) Planned Costs (BCWS) Budget At Completion (BAC) Actual Costs (ACWP) Schedule Variance (£) Earned Value (BCWP) Today Cost Variance (£) Time
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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 29
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Estimate At Completion (EAC)
• Formula 1 = BAC CPI Considered to give a minimum EAC • Formula 2 = BAC CPI x SPI Provides an EAC that accounts for a schedule change • Formula 3
{
– BCWP CPI x SPI Provides an EAC that accounts for a schedule change, but also takes
}
into account the value of the work done 30
Professional Development Learning Event – 27 March 2007
Graphical representation of project progress
Estimate At Completion (EAC) Variance at Completion £ Budget At Completion (BAC) Schedule slippage (time) Planned Costs (BCWS) Forecast schedule slippage Cost Variance (£) Actual Costs (ACWP) Schedule Variance (£) Earned Value (BCWP) Time Today
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Basic Analysis
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Exercise
1. Read the worked example 2. Do the Earned Value exercise 1 hour
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Now the real world!
• Activities do not always last for a reporting period (week, month etc) • Some activities do not deliver anything, e.g. management support, but it still a cost to the project 34
Professional Development Learning Event – 27 March 2007
Activities do not always last for a reporting period – What can be done?
• Use an Earned Value Method of 50/50 • When constructing the BCWS (the plan), you put 50% of the activity (as a BCWS value) in the period the activity is planned to start and the remaining 50% in the period when the activity is planned to finish.
• The BCWP (Earned Value) is earnt in the same proportions, i.e. 50% when the activity starts and 50% when the activity finishes 35
Professional Development Learning Event – 27 March 2007
EV Methods – Internal resource
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EV Methods – Material/vendor
Material Planning, Earned Value, & Actual Cost Guidelines Should Occur in the Same Period TYPES OF ORDER (EVM) TYPICAL EXAMPLES PLAN AND BUDGET (BCWS) EARNED VALUE (BCWP) ACTUAL COSTS (ACWP) SINGLE PAYMENT
0/100
MILESTONE PAYMENTS
MS or Estimates
PROGRESS PAYMENTS
MS or Estimates
MULTIPLE UNITS
MS or Estimates
DROP SHIPMENT
0/100
SINGLE ITEM.
SINGLE SERVICE.
LINE ITEM ON PO.
(WITH NO PROGRESS / PARTIAL PAYMENTS) Budget is planned in A/P that item is scheduled for receipt / completion.
RECEIPT / COMPLETION
BCWP on Receipt. Use 0-100 method based on receipt of goods or completion of service.
RECEIPT / COMPLETION
Budget for each milestone payment is planned in A/P that payment milestone is scheduled for completion. Milestone or Estimates method, using payment milestone values and/or weightings as % of total Activity. Earned Value is claimed upon CAM verification of milestone completion.
MILESTONE COMPLETION PROGRESS REPORT
Actual costs are booked/posted when goods are received or services are invoiced.
INVOICE / RECEIVER
Actual costs are booked/posted when invoice is received.
INVOICE / RECEIVER SUBCONTRACTED ITEM.
PARTIAL SHIPMENTS.
(UNITS OR LOTS)
VENDOR-TO-VENDOR MATERIAL.
Budget for each progress payment is planned in A/P that progress is scheduled.
Milestone or Estimates method depending on vendor or subcontractor inputs. Value is claimed based on CAM verification of progress.
Actual costs are booked/posted when invoice is received.
PROGRESS
Budget for each unit or lot multiplied by the number of units or lots scheduled for shipment each A/P.
UNIT / LOT RECEIPT
Budget is planned in A/P that item is scheduled for receipt by vendor.
RECEIPT PROGRESS REPORT
Milestone or Estimates (more likely) method based upon number of units / lots or equivalent units received. Earned value is claimed based upon CAM verification of receipt.
UNIT / LOT RECEIPT
BCWP on Receipt. Use 0-100 method based on receipt of goods or completion of service.
FOREIGN RECEIVER / RECEIPT INVOICE / RECEIVER
Actual costs are booked/posted when goods are received.
RECEIVER
Actual costs are booked/posted based on verified receiver.
FOREIGN RECEIVER SUBCONTRACTED SERVICES.
LOW VALUES SERVICES OR MATERIALS.
LOE or Estimates
STORES MATERIAL.
MISCELANEOUS MATERIALS.
Budget is time-phased based upon planned receipt or usage.
Level of Effort, Estimates, or Apportioned Effort for low value material & services; Earned value depends on discrete EVM- Material received as % of total material--or passage of time (for LOE). When invoices are booked/posted for material or services, or as charges are booked for computer, travel, or other charges.
IN-HOUSE FABRICATIION / MANUFACTURE
MS or Estimates
MAJOR SUBCONTRACTOR OR LARGE PO.
MS or Estimates
DEVELOPMENT PARTS.
PRODUCTION PARTS.
STORES MATERIAL.
MAJOR SUBCONTRACTOR SERVICES HIGH VALUE MATERIAL RECEIPT / USEAGE
Budget is time-phased based as a Primary Cost Activity (including cost of in-house labour and material). Use Milestone weightings for each A/P's BCWS or use Estimates method with % of BCWS for each A/P.
RECEIPT / USEAGE DEPENDS ON EVM
Use Milestone Method for sequential milestones; More likely, use Estimates method. Claim based on % complete of each line item using cost of parts received/total parts costs or operation hours complete/total hours X labour costs (or composite of both)
EQUIVALENT PARTS COMPLETE INVOICE / RECEIVER
When invoices are booked/posted for material or services; May need to use Estimated Actuals for false, significant variances.
INVOICE
Budget is time-phased based upon Vendor or Subcontractor's detailed BCWS (usually summarised to one Activity). Use Milestone weightings for each A/P's BCWS or use Estimates method with % of BCWS for each A/P.
RECEIPT / USEAGE
Use Milestone Method for sequential milestones; More likely, use Estimates method. Claim based on C/SSR, CPR, or Progress Reports provided by Subcontractor/Supplier.
SUPPLIER EARNED VALUE
When invoices are booked/posted for material or services; May need to use Estimated Actuals for false, significant variances.
INVOICE
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Professional Development Learning Event – 27 March 2007
Some activities do not deliver anything
-
What can be done?
• Use an Earned Value Method called Level of Effort • When constructing the BCWS (the plan), spread the activity value evenly throughout the duration • The BCWP (Earned Value) is earnt in the same proportion to the plan regardless of whether any time has been spent on the activity or not • BCWP = BCWS therefore SPI = 1.0 and SV = 0 It shows that we are always on schedule for this type of activity 38
Professional Development Learning Event – 27 March 2007
EVMS / EVM / EV / EVA
E arned V alue M anagement S ystem
: • The executive Cost and Schedule system employed • Can be a single system or many that are working together •
E arned V alue M anagement
: Active management of a programme using EV processes & EVA
E arned V alue M ethods
: • Metric selected to provide best possible reflection of Schedule performance • Typically: 0-100, 20-80, 50-50, 40-60, Estimates, Milestones, Apportioned, & Level of Effort
E arned V alue
: • Budgeted Cost of Work Performed…BCWP • Executed tasks within a baseline having been completed in line with exit criteria
E arned V alue A nalysis
: • Variance Analysis of - Current month, Cumulative to Date, and VAC • EAC Analysis in terms of TCPI(EAC) / Independent EACs if warranted 39
Professional Development Learning Event – 27 March 2007
Key EVMS Components
•
Authorisation
•
Planning & Budgeting
•
Baseline Change Control
•
Analysis
•
Reporting
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Authorisation
Control Account Authorisation CAA
: • Total Allocated Budget (TAB) flow-down to reporting WBS • Details initial Baseline distribution of Budget • Provides a narrative (and/or) points to additional documentation detailing deliverables • Indicates ‘open duration’ of Control Account • Details specific schedule adherence • Signed off by both Programme Manager and Control Account Manager • Usually a one time event…future budget transactions being dealt with by PCR’s 41
Professional Development Learning Event – 27 March 2007
Planning and Budgeting
• • • • • Total Planning or Rolling Wave Planning • Vertical & Horizontal Integration with Milestones, especially if a Critical Path is required Resource allocation and management Management Reserve (in-scope arisings) Undistributed Budget (WBS earmarked budget) Earned Value Method (EVM) selection •
TAB = (DB + UB + MR)
•
Where (DB+UB+MR) >TAB = Over Target Baseline !
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Baseline Control
• Baseline Change Control is performed using Programme Change Requests (PCRs) • Baseline distribution = Contract Budget Base (CBB Log) • Change Control (‘Rubber Baseline’ mitigation) performed by the usage of PCR’s • PCR’s authorise both BAC/EAC and ‘pure’ EAC changes • An understanding of MR v EAC is required !
• PCR’s are signed-off by Programme Managers 43
Professional Development Learning Event – 27 March 2007
Analysis
• Performance = Current Month, CTD, and Variance at Completion • History = SV, SPI, CV, CPI • Current Management Reserve level & predicted ‘Burn-Down’ • Programme flexibility = MR versus VAC delta • Staffing…..Equivalent Heads versus Forecast • Milestones….future forecasted dates versus requirements (Exec, MWP, Programmatic) • Variance Analysis Reports (VAR’s) and Corrective Actions • Future = TCPI(EAC) and Trending 44
Professional Development Learning Event – 27 March 2007
Variance Analysis Report (VAR)
• • • •
Thresholds: Fixed at Baseline Current month SV & CV Cumulative SV & CV VAC
• • •
CAM reports: Cause of variance Impact to Cost & Schedule Corrective Actions
• •
VAR’s: Discussed at MPR’s Agreed and signed by PM/PL
•
Corrective Actions: Reviewed at subsequent MPR’s
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Reporting
Professional Development Learning Event – 27 March 2007
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Professional Development Learning Event – 27 March 2007
Shortcomings of Earned Value
Quantifying / measuring work progress can be difficult.
Time required for data input, data gathering and calculation
It is not the only way to manage a project
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• • • • • •
Summary
Use indicators to manage your project and not to be a goal in itself. They will drive a behaviour.
EV data is historical. Use it to predict and influence the future Look at Indices and Variances together and observe trends Concentrate on the parts of the project that ‘trip’ the variances Not all projects are the same, i.e. do not expect the same sort of variances and indices on a technically challenging/risky project compared with more straight forward projects
For EVA to be effective, it requires a credible baselined plan.
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Professional Development Learning Event – 27 March 2007
Thank you and any questions?
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