Transcript Mayo Collaborative Services Technology Convergence Project

Earned Value Management
a tool for project Portfolio management
Jim Strong
DLMP PMO Director
1
Earned Value Management:
• Defined per PMI PMBOK: A management
methodology for integrating scope, schedule
and resources, and for objectively measuring
project performance and progress.
• Cost Performance is measured by
determining the budgeted cost of work
performed (i.e. earned value) and comparing
it to the actual cost of the work performed (i.e.
actual cost).
• Schedule Progress is measured by comparing
the earned value to the planned value.
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Why Use Earned Value Management?
“…to help better manage projects and
portfolios of projects within the
organization”
•Adds another capability to the “tool box”
for the organization and the Project /
Program / Portfolio Manager
•Allows Sponsor / Program / Portfolio
Managers to “normalize” project / program
data to enable an aggregate or portfolio
view of the total effort
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Why Use Earned Value Management?
•Facilitates the analysis of project /
program performance
•Facilitates the monitoring and
communication of the
project/program/portfolio performance
•Provides a means to forecast future
performance based on past performance
•Facilitates “lessons learned” through a
review of the project performance trend
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Why Use Earned Value Management?
•Compliments the use of:
• PERT analysis (estimating)
• Dependency or Constraint analysis
• Critical Chain analysis
• Issue and Risk analysis
• Resource analysis
• Critical Path analysis
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Earned Value Management:
• Measures (key terms):
• Planned Value (PV) = Budgeted Cost of Work Scheduled (BCWS)
• Actual Cost (AC) = Actual Cost of Work Performed (ACWP)
• Earned Value (EV) = Budgeted Cost of Work Performed (BCWP)
• BAC = Budget at Complete; Total budget, Expense and Capital
planned for the project / program
• ETC = Estimate to Complete: team’s updated estimate to
complete the work remaining
• EAC = Estimate at Complete; Total of Actuals and estimated cost
of work remaining to complete the scope of work for the project /
program
• Calculated EAC = Total of Actuals and estimated cost of work
remaining to complete the scope of work for the project /
program; factored by Cost performance to date
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Earned Value Measurement:
• Cost Variance
• CV = EV – AC
Positive numbers
are favorable
• Schedule Variance
• SV = EV – PV
• Performance Indices
• Cost Performance Index
= or > than 1.0
• CPI = EV / AC
is favorable
• Schedule Performance Index
• SPI = EV / PV
• To Complete Performance Index (work remaining / remaining budget)
• TCPI = (BAC – EV) / (EAC – AC)
• Measurement Guidelines:
• Green – favorable variance to negative 9% variance
• Yellow – negative 10% to negative 19% variance
• Red - >20% negative variance
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Establishing the project / portfolio
Earned Value Baseline
Each task in a project plan has a value…
formed by labor or material cost….
allocated over time
Value of each of the
Tasks from project Plan….
form the Planned Value
PV
BAC
BAC = cum PV
at end of project
$
Time
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Monitoring the Project performance –
capturing cost of work performed – Actual Cost (AC)
Hours …
Or material / vendor costs….
Are expended to complete each task
$
$
Cap $
Cumulative
$
Costs to complete the Tasks
from project Plan….
form the Actual cost
$
Unfavorable Cost Variance
AC
PV
BAC
EAC = AC + Estimate to Complete (ETC)
$
EV
Time Now
Time
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SPI / CPI (cum) “worm” Chart (example)
• 1.0 is optimal
• Cost and schedule performance; tracked over time to indicate trend
• SPI must close to 1.0 to complete the project; CPI can be at any level at completion
• TCPI can be used to predict future performance based on past performance
1.0
Favorable
CPI
SPI
Time
Measurement Guidelines:
Green – favorable variance to negative 9% variance
Yellow – negative 10% to negative 19% variance
Red - >20% negative variance
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Three EV “snake” charts to ponder (1 of 3)
$
“Green”, CV favorable
CV = +200
CPI = 1.1
PV
EV
AC
“Green”, SV < 10%
SV = -150
SPI = 0.95
Time
Possible Scenarios:
Unfavorable Schedule Variance:
• Resources not applied at the start of the project in a timely fashion
• Effort continues behind schedule; not making up project delays
• What tasks are creating the unfavorable schedule variance?
• Are there specific technical or other issues / risks driving the variance?
• Opportunity - Can we apply more resources to pull in the schedule?
Favorable Cost Variance:
• Tasks not taking as much time as estimated or planned
• Tasks completed by lower cost resource
• Opportunity - Can we apply more resources to pull in the schedule?
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Three EV “snake” charts to ponder (2 of 3)
“Green”, CV favorable
CV = +300
$
CPI = 1.2
Possible Scenarios:
EV
AC
PV
“Green”, SV favorable
SV = +200
SPI = 1.1
Time
Favorable Schedule Variance:
• Tasks not taking as much time as planned
• Slack time / schedule buffer built into project plan
• Not as many issues encountered
• Anticipated risks well and applied mitigation into plan or effort to date
• Planned effort “padded”?; what is the basis of estimate – higher rate of
probability applied to project (100% probability versus most likely 50/50?)
Favorable Cost Variance:
• Tasks not taking as much effort as estimated or planned
• Tasks completed by lower cost resource
• Check for any material / labor costs not realized
• Is the favorable CV long term? What is the EAC? Does TCPI support the EAC?
• Should we re-baseline the project and put funding back into the Management
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Reserve for the Program / Practice?
Three EV “snake” charts to ponder (3 of 3)
$
“RED”, CV > 20%
CV = -200
CPI = 0.79
AC
PV
EV
“Yellow”, SV >9%
SV = -100
SPI = 0.9
Possible Scenarios:
Unfavorable Schedule Variance:
• Effort continues behind schedule; team not making up project delays
• What tasks constitute the majority of the variance?
• Do issues continue to linger or are they being resolved?
• Is / are there technical issues / risks driving the negative variance trend?
Unfavorable Cost Variance:
• Tasks taking more effort than estimated
• What tasks constitute the majority of the variance? How much effort remains?
• Do we have the right skill level of resources versus plan?
• Are we managing the scope, do we have scope creep? (Change Request log?)
• What is the EAC? Should we cancel the project?
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Considerations for Implementing
• Time recording system, or equivalent manual
process, absolutely required to capture actual
labor costs
• Quality estimates for the project tasks
• Allow adequate time for creation of requirements
and task estimates
• Creation of project performance measurement
plan –
• Usually in the form of MS Project (project
schedule)
• Forms the basis for the “Planned Value” (PV)
• Large material costs need not be included in the
EV as they can represent major “step functions” in
the EV plans; possibly masking the labor effort of
the project
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Recommendations
•Gain Leadership support
•Train the PMs and core Project teams
•Start small, consider pilot
•Keep it simple: keep EV milestones and
associated cost accounting activity
points to a minimum (i.e. 600 line MS
project plan lines may consolidate to
20 EV milestones or less)
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Earned Value Management
‘Gold Card’
PMB
EAC
Control
Accounts
BAC
PMB
Schedule Variance
$
Work Packages
Planning Packages
Cost
Variance
TERMINOLOGY
AC
PV
EV
time
Time
Now
Completion
Date
VARIANCES Favorable is Positive, Unfavorable is Negative, Green if <10%, 10%<Yellow<20%, Red >20%
Cost Variance
CV = EV – AC
CV % = (CV / EV) *100
Schedule Variance
SV = EV – PV
SV % = (SV / PV) * 100
Variance at Completion VAC = BAC – EAC
OVERALL STATUS
% Schedule = (PVCUM / BAC) * 100
% Complete = (EVCUM / BAC) * 100
% Spent
= (ACCUM / BAC) * 100
BCWS = PV
BCWP = EV
ACWP = AC
BAC
PMB
CA
Budget At Completion
Performance Measurement Baseline
Control Account
WP
PP
PV
EV
AC
EAC
SLPP
TCPI
Work Package
Planning Package
PLANNED VALUE
EARNED VALUE
ACTUAL COST
Estimate At Completion
Summary Level Planning Package
To Complete Performance Index
Total budget for total contract thru any given level
time-phased budget plan
Lowest CWBS element assigned to a single focal point to plan & control
scope / schedule / budget
Near-term, detail-planned activities within a CA
Far-term CA activities not yet defined into WPs
Value of work planned to be accomplished
Value of work accomplished
Cost of work accomplished
Estimate of total cost
Far-term activities not yet defined into CAs
Efficiency needed from ‘time now’ to achieve an EAC
(DAU = Defense Acquisition University, US DoD training & policy support
for their acquisition workforce)
(tool downloaded from https://acc.dau.mil/CommunityBrowser.aspx?id=17810)
Modified for DLMP PMO use 02/06/2007
TRIPWIRE METRICS Favorable is > 1.0, Unfavorable is < 1.0, Okay>0.91, 0.90>concern>0.80, escalate<0.79
Cost Efficiency
CPI = EV / AC
Schedule Efficiency SPI = EV / PV
BASELINE EXECUTION INDEX (BEI) (Schedule Metric)
BEI = # of Baseline Tasks Actually Completed / # of Baseline Tasks Scheduled for Completion
CRITICAL PATH LENGTH INDEX (CPLI) (Schedule Metric)
CPLI = (Critical PathBaseline Duration + Float Duration) / Critical PathBaseline Duration
TO COMPLETE PERFORMANCE INDEX (TCPI)
TCPIEAC
= Work Remaining / Cost Remaining = (BAC – EVCUM) / (EAC – ACCUM)
ESTIMATE AT COMPLETION #
EAC
= Actuals to Date + [(Remaining Work) / (Efficiency Factor)]
EACCPI
=
ACCUM
+ [(BAC – EVCUM) / CPICUM ] =
BAC / CPICUM
EACComposite
=
ACCUM
+ [(BAC – EVCUM) / (CPICUM * SPICUM)]
EVM Home Page = https://acc.dau.mil/evm eMail Address:
[email protected]
DAU POC: (703) 805-5259 (DSN 655)
Revised December 2006
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