Transcript Program Review Task Force

OPER 576
Project Management
Earned Value Management
& Reporting
Greg Magnan, Ph.D.
May 27, 2004
Level of Effort
Project Life Cycle Stages
Definition Planning
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Selection
Charter
Goals
Specs
Tasks
Responsi
bilities
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Estimates
Schedules
Sequencing
Budgets
Resources
Risks
Staffing
Execution/Impl./Control
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Status Reports
Changes
Quality
Forecasts
Closeout
 Training
 Transfer
Documents
 Release
Resources
 Lessons
Learned
Is This Any Good?
What is EVM?
• EVM is an integrated management control system
for assessing, understanding and quantifying what
a contractor or field activity is achieving with
program dollars
• Integrates technical, cost, schedule, with risk
management
• Allows objective assessment and quantification of
current project performance
• Helps predict future performance based on trends
• EVM provides project management with
objective, accurate and timely data for effective
decision making
Source: http://evm.nasa.gov/brochure.pdf
EV History
• “Instead of relating cost plans to cost actuals,
which had been the custom, PERT/Cost (DoD,
1967) related the value of physical work
performed against the cost actuals to determine the
utility and benefits from the funds spent. What
was physically accomplished for what was spent
was a simple but fundamentally important new
concept in program management.”
• “The industry standard was called the Earned
Value Management System (EVMS) and the
number of criteria was reduced from 35 to 32.
This major development was endorsed by the DoD
in December 1996.”
Source: Fleming & Koppelman, 1998
Industrial Engineering Roots
Physical Work -Planned Output
Planned
Standards
Earned
Standards
Physical Factory
Output
Actual
Costs
Actual Costs
Industrial Engineering Roots
E
L
U
D
E ce
H
SC a r i a n
V
Planned
Standards
Earned
Standards
CO
ST
Actual
Costs
Eff
icie
ncy
PM Language
Scheduled Work
Planned
Value
Work
Accomplished
Planned Budget
Actual
Costs
PM
Variances
LE
U
D e
E
H anc
C
S a ri
V
Planned
Value
Planned Budget
Work
Accomplished
CO
ST
Scheduled Work
Actual
Costs
Va
ri a n
ce
Convert to
PM Situation
[BCWP]
Budgeted Cost of
Work Performed
[BCWS]
Budgeted Cost of
Work Scheduled
Planned
Value
Work
Accomplished
Actual
Costs
[ACWS]
Actual Cost of
Work Scheduled
Conversion Continued…
[BCWS]
Budgeted Cost of
Work Scheduled
[BCWP]
Budgeted Cost of
Work Performed
[ACWS]
Actual Cost of
Work Scheduled
E
L
U
D
E ce
H
SC a r i a n
V
[BCWS]
Budgeted Cost of
Work Scheduled
[BCWP]
Budgeted Cost of
Work Performed
CO
ST
Va
ri a n
[ACWS]
Actual Cost of
Work Scheduled
ce
Usual
PM
View
SV = BCWP - BCWS
E
L
U
D
E ce
H
SC arian
V
[BCWS]
Budgeted Cost of
Work Scheduled
[BCWP]
Budgeted Cost of
Work Performed
CO
ST
Va
ri a n
Usual
PM
View
[ACWS]
Actual Cost of
Work Scheduled
ce
CV = BCWP - ACWS
Earned Value Elements
Setting up Earned Value
1. Establish the Work Breakdown Structure (WBS)
to divide the project into manageable portions.
2. Identify the activities to be scheduled that
represent the entire project.
3. Allocate the costs to be expended on each
activity.
4. Schedule the activities over time.
5. Tabulate, plot and analyze the data to confirm
that the plan is acceptable.
Steps in Using EV
6. Update the schedule by reporting activity
progress
7. Enter the actual costs on the activities
8. Execute the Earned Value calculations,
print and plot the reports and charts
9. Analyze the data and write the
performance narrative.
EV at a “Cost Account”
Level
Earned Value Terminology
Data Element
Term
Acronym
Scheduled Work
Budgeted Cost for Work Scheduled
BCWS
Earned Value
Budgeted Cost for Work Performed
BCWP
Actuals
Actual Cost of Work Performed
ACWP
Authorized Work
Budget At Completion
BAC
Forecasted Cost
Estimate At Completion
EAC
Work Variance
Schedule Variance
SV
Cost Variance
Cost Variance
CV
Completion Variance
Variance At Completion
VAC
Earned Value Benefits
• When properly employed, it can give the project
manager an early warning signal that the project is
heading for a cost overrun unless immediate steps
are taken to change the spending plan
• “Today, it is likely that more than 99 percent of the
projects in the world do not employ the earnedvalue cost management concept. Instead, to
monitor costs status, they merely compare their
spend plan to their actual costs, and that is
unfortunate.”
• “Earned Value is a uniform unit of measure, a
consistent methodology and a basis for cost
performance analysis.”
Benefits of EVMS
• Clear definition of work prior to beginning that
work
– Helps the line manager credibly request appropriate
resources
– Provides the basis for a realistic plan against which to
measure performance
• Objective measurement of work accomplishment
– Helps the line manager develop plans that are rooted in
reality
– If the task can be done within scope, schedule, budget;
confidence in a successful outcome is increased
– If the task cannot be done within scope, schedule,
budget; that problem can be defined and resolved at a
time when the resolution will be reasonably inexpensive
Benefits of EVMS
• Reduces propensity of customer/boss to add work
without adding budget
– Ties budget directly to work
– Requires all work transfers to include associated budget
– Requires all budget transfers to include associated work
• Fosters management decisions within a framework of
reality, rather than latent unease
• Provides true cost condition
– Side-steps false cost variances
– Encourages realistic projections of final cost
– Enhances accuracy of funding forecasts
• What metrics are
important in managing
projects?
• Who should know?
Who needs to know?
• How often should they
be updated?
• What form should the
update take?
• What options are
available?
Status
Budgeting
• The goals of any project include bringing the
project in on time and under or on budget.
Accomplishing these sometimes conflicting goals
requires:
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–
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a realistic initial project financial budget
a feasible project time frame
a budgetary plan linked to project activities
an understanding of the relationship between
completion time and project activities and their
respective costs
– a methodology to track the variance between activity
cost and budget
From Max Wideman’s Glossary
• Budgeting & Cost Management
– The process of estimating the proper cost that should
reasonably be expected to be incurred against a clear
baseline, understanding how and why actual costs occur,
and ensuring that the necessary response is taken
promptly to ensure actual costs come under budget.
Typical information needed for cost management
includes:
• Budgets (including estimating), generally based on work
breakdown structure or [cost] code of accounts
• Obtaining and recording commitments/accruals
• Measurement of work accomplished and value earned/valuation
of work, including treatment of changes (change control) and
claims
Creating an Initial Project Budget
• Project budgets are typically constructed in
one of three ways:
– Top-down budget building
• Predicable, accurate overall/at top
• “Imposed” on managers
– Bottom-up budget building
• Costing done closer to activities; participatory
• Managers may overestimate; squeaky wheel
– Budget request process
• Combination of top-down and bottom-up
• Statement of costs given scope of work
SUMMARY!!!
• Project Initiation (post-selection)
– Kickoff; Charter; Deliverables
• Work Breakdown Structure
– ID activities (brainstorm); time & cost estimates;
precedence relationships; RAM
– Used throughout the project
• Network
– ES/LS/EF/LF/Slack: Critical path
– Milestones
Early Duratio Early
Start
n
Finish
Early Duratio Early
Start
n
Finish
Task Name
Early Duratio Early
Start
n
Finish
Late
Start
Slack
Task Name
Late
Finish
Late
Start
Slack
Early Duratio Early
Start
n
Finish
Late
Finish
Task Name
Task Name
• Resources
– Conflicts; Resource Managers
Late
Start
Slack
Late
Finish
Early Duratio Early
Start
n
Finish
Task Name
Early Duratio Early
Start
n
Finish
Late
Start
Task Name
Late
Start
Slack
Late
Finish
Early Duratio Early
Start
n
Finish
Task Name
Late
Start
Slack
Late
Finish
Slack
Late
Finish
Late
Start
Slack
Late
Finish
SUMMARY!!!
• Risk Management
– Expected Loss (Le) = Pe x Pi x Lt
• Project Closure
– Lessons learned archive / dissemination
• Teams & Communication
– High-performance; vision; passion
• Reducing project duration / Crashing
– More products faster…but, bang for buck
• Status
– Gantt Charts, Stoplights, Earned Value
PROJECT MANAGEMENT
Project Management
Integration
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Project Plan
Development
Project Plan Execution
Integrated Change
Control
Project Scope
Management
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Project Cost Management
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Resource Planning
Cost Estimating
Cost Budgeting
Cost Control
Project Communications
Management
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Communications
Planning
Information
Distribution
Perf. Reporting
Admin. Closure
Initiation
Scope Planning
Scope Definition
Scope Verification
Scope Change Control
Project Time
Management
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Project Quality
Management
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Quality Planning
Quality Assurance
Quality Control
Project Human
Resource Management
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Project Risk Management
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Risk Mgt. Planning
Risk Identification
Qual. Risk Analysis
Risk Response
Planning
Risk Monitoring and
Control
Activity Definition
Activity Sequencing
Activity Duration
Estimating
Schedule Dev’t
Schedule Control
Organizational
Planning
Staff Acquisition
Team Development
Project Procurement
Management
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Procurement Plg.
Solicitation Plg.
Solicitation
Source Selection
Contract
Administration
Contract Closeout
Overview of Project Management Knowledge Areas & Project Management Processes (Source: PMI)