Transcript Earned Value Management ‘project management with the lights on’ Presentation to BCS David Galley 15-Jan-2002 © 2001 David Galley.

Earned Value Management
‘project management with the lights on’
Presentation to BCS
David Galley
15-Jan-2002
© 2001 David Galley
1
Agenda
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Project Management in the dark
Illumination
• Earned Value (EV) & Variance
• Performance indices
• Forecasting
Earned Value Management (EVM)
• 32 criteria
• Organisation [WBS, OBS, RAM, CA]
• Budgeting
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EVM in the UK
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Where to go for more information
© 2001 David Galley
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Project Management in the dark…
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© 2001 David Galley
Project
• planned duration: 12 mos
• total budget: £100K
•.
Status
• time elapsed: 6 mos
• spend so far: £64K
•.
How far along are you?
• 50%? 64%?
How are you doing?
3
Project Mgt in the dark
•
•
£
time
•
© 2001 David Galley
It tells you how much you’ve spent
and compares it to the budget.
Does it give an accurate picture of
where you are on the project? NO!
It doesn’t tell you if...
– you’re ahead or behind schedule
– you’re over or underspent
– you’ve spent money on the right
thing
– you’re getting value for money
– your problems are over or only
just begun
What’s missing?
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What’s missing?
- knowing how much has been accomplished
£
•
•
•
Accomplishment is (planned)
work that has been carried
out successfully.
The budgeted cost of that
work quantifies the
accomplishment.
This is called ‘earned value’
time
© 2001 David Galley
5
A bit more light…
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© 2001 David Galley
Project
• planned duration: 12 mos
• total budget: £100K
• produce 20 units
Status
• time elapsed: 6 mos
• spend so far: £64K
• units produced: 8 complete, 2 partial
How far along are you?
• 50%? 64%? >40%?
How are you doing?
6
Basic definitions – answer three basic Q’s
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© 2001 David Galley
How much work should
be done?
How much work is
done?
How much did it cost?
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Budgeted Cost for Work
Scheduled (BCWS)
• plan
• schedule
• budget
Budgeted Cost for Work
Performed (BCWP)
• accomplishment
• Earned Value (EV)
Actual Cost of Work
Performed (ACWP)
• actuals
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Where are we? – a more likely scenario
© 2001 David Galley
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WIP - Earned Value measurement methods
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Interim Milestone EV = budgeted cost (milestones completed)
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Meas’d Milestone EV = budgeted cost (est. milestone pct complete)
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Percent Complete EV = estimated percent complete
typically used where there are tangible products
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Apportioned Effort EV = dependent on another Work Package
eg. QC EV assumed to be % of production EV
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50/50, 0/100 EV = % budgeted cost once started / % on completion
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Scheduled Effort EV = budgeted cost (est. elapsed time pct)
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Actual Effort EV = actual effort
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Level of Effort (LoE) EV = budgeted cost (status date)
used for Work Packages (WP’s) with no end product eg. Management
© 2001 David Galley
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Variance
£
SV
CV
• CV (Cost Variance)
– BCWP - ACWP
– earned value - actual cost
• SV (Schedule Variance)
– BCWP - BCWS
– earned value - planned
value
– 0 once all work completed
time
© 2001 David Galley
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Translating schedule variance into lead/lag
•
Months ahead or behind
SV
=
aver. monthly BCWS
•
or graphically
• draw horizontal
through current BCWP
until it intersects
BCWS
• length approximates
lead/lag
SV
months behind
© 2001 David Galley
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Variance Trend Curves
positive
variance
zero
• Plot cost variance and
schedule variance over
time.
• Watch which way the
lines go...
– positive is good
– negative is bad
schedule variance
negative
variance
© 2001 David Galley
cost variance
12
Percent Variance Trend Charts
+10%
• CV%
– (BCWP - ACWP)/BCWP
– CV/earned value
+0%
-10%
-20%
CV%
+10%
+0%
-10%
-20%
© 2001 David Galley
SV%
• SV%
– (BCWP - BCWS)/BCWS
– SV/planned value
• VAC% = VAC/BAC
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Performance Indices
•
CPI (Cost Performance
Index)
– BCWP/ACWP
– earned/actual
– the one to use…
•
SPI (Schedule
Performance Index)
– BCWP/BCWS
– earned/planned
– of diminishing value as
project progresses…
tends to 1
1.1
1.0
0.9
0.8
CPI
1.1
1.0
0.9
0.8
© 2001 David Galley
SPI
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More definitions
– answering Q’s about the total job
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What was the total job
supposed to cost?
What do we now expect
will be needed to finish
the job?
What do we now expect
the total job to cost?
How much do we now
expect to eventually
underspend/overspend?
© 2001 David Galley
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Budget At Completion (BAC)
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Estimate To Completion (ETC)
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Estimate At Completion (EAC)
• EAC = ACWP + ETC
• often referred to as Latest
Revised Estimate (LRE)
VAC (Variance At Completion)
• VAC = BAC - EAC
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Forecasting – variations on the basic EAC
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© 2001 David Galley
EAC
iEAC
= ACWP + ETC = ACWP + (BAC BCWP)
= ACWP + FF (BAC - BCWP)
Selection of FF is based upon:
• cause of the variance
• technical risk
• schedule deviations
• trends
• judgement
Sample Independent EACs based on:
• FF = 1 / CPI
• FF = 1 / (0.8 CPI + 0.2 SPI)
• FF = 1 / CPI * SPI
• FF = 3 / CPIt + CPIt-1 + CPIt-2
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Forecast sanity checks – an example
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Example project
• Total budget (BAC)
= £5000
part way through project
• Work scheduled (BCWS) = £2000
• Work accomplished (BCWP)= £1800
• Actual cost (ACWP)
= £2400
• Supplier’s LRE
= £5600
(Latest Revised Estimate)
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Will supplier come in on budget?
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Is the supplier’s LRE reasonable?
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To-Complete Performance Index (TCPI)
© 2001 David Galley
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Will the supplier come in on budget?
CPI
=
EV
Actuals
=
BCWP
ACWP
=
£1800
£2400
= 0.75
TCPI(BAC) = cost efficiency to complete on budget
=
=
© 2001 David Galley
Work Remaining
Budget Remaining
£5000-£1800
£5000-£2400
=
=
BAC-BCWP
BAC-ACWP
£3200
£2600
= 1.23
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Is the supplier’s LRE reasonable?
CPI
TCPI(LRE)
=
Actuals
=
BCWP
ACWP
=
£1800
£2400
= 0.75
= cost efficiency to complete at LRE
=
=
© 2001 David Galley
EV
Work Remaining
=
Estimate Remaining
£5000-£1800
£5600-£2400
=
BAC-BCWP
LRE-ACWP
£3200
£3200
= 1.0
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Earned Value Management tells you...
Know where you are
in terms of
accomplishment
as well as how much
you’ve spent
Where it’s
going right
and where it’s
going wrong
Where you
really are!
Drill down
through the
data to where
the problem is
EVM
How much
Know the final cost
it’s really
and delivery date
with confidence going to cost
© 2001 David Galley
When to ask
Informed
the tough decision making
questions
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EVMS 32 criteria
Revisions &
Data
Maintenance
Analysis & Mgt
Reports
Accounting
consideration
© 2001 David Galley
Organisation
Planning,
Scheduling &
Budgeting
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Organisation criteria
1. Establish Work Breakdown Structure (WBS)
2. Establish Organisation Breakdown Structure (OBS)
3. Integrate planning, scheduling, budgeting, work
authorisation and cost accum. with WBS & OBS
4. ID company organisation responsible for controlling
overheads
5. Cost & schedule performance measurement by
WBS/OBS
© 2001 David Galley
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Organisational Breakdown Structure (OBS)
ABC project
Director
K.Niche
Bus.
Develop.
C.Spalding
Design
Team
D.LaPort
© 2001 David Galley
Consult.
Services
E.Ness
Test
Team
N.Elliott
IT Dev.
Group
M.Conger
E-Comms
Limited
P.Dawson
Programming
Team
A.Murphy
Transforma
Limited
T.Wolfe
Support
Group
T.Caulter
QA
Team
S.Humphrey
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WBS – execution orientated example
ABC
project
Project Defn.
phase
Bus.
Reqt.
© 2001 David Galley
Change
Reqt.
Design
phase
System
Design
Change
planning
Pilot
phase
Develop
pilot
Assess
Pilot
Roll-out
phase
Pilot
change
Comms
Install.
W/S
Install.
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WBS – product orientated example
ABC
project
Project
Charter
Reqt.
Spec.
© 2001 David Galley
Bus.
Case
Transition
documentation
Promotion
material
Training
courseware
Central
facility
Server
LAN
Shop
systems
Comms
box
Shop
LANs
Shop
terminals
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Responsibility Allocation Matrix (RAM)
© 2001 David Galley
2
3
4
5
6
7
8
Control Account (CA)
B
C
D
E
F
1
A
Organization Breakdown Structure (OBS)
Work Breakdown Structure (WBS)
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Control Accounts
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© 2001 David Galley
Intersection of WBS and OBS
• WBS element
• Control Account Mgr (CAM)
Key control point
• Schedule, time-phased budget (BCWS)
• Actual cost accumulation (ACWP)
• Earned value determination (BCWP)
• Variance analysis (cost& schedule)
• Corrective action
• Estimate At Completion (EAC)
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Planning, Scheduling+Budgeting criteria
6. Schedule (sequence, interdependencies)
7. ID products, milestones, tech. perf. goals to measure progress
8. Time-phased budget at Control Account (CA) level
9. Budget IDs significant cost elements
10. Budgets in terms of money, hours or other units
11. CA budget = Sum WP budgets+planning budgets
12. ID & control LoE activity by time-phased budget
13. Overhead budgets.. Overhead pools
14. ID Mgt Reserve (MR) and Undistributed Budget (UB)
15. Reconcile program tgt cost with internal budgets+MR
© 2001 David Galley
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Budget Breakdown
Contract Price
Contract Budget Base (CBB)
Profit
Performance Measurement Baseline (PMB)
Distributed Budget (DB)
Discrete
WP’s
© 2001 David Galley
AE
WP’s
LoE
WP’s
PP’s
Mgt Reserve
UB
Summary
PP’s
CA Budgets
MR
Undistributed Budget
Planning Packages
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Accounting considerations criteria
16. Record direct costs
17. Each CA child of a single WB
18. Each CA child of a single OBS
19. Record all indirect costs
20. ID unit costs, equiv. unit costs or lot costs
21. Accounting system
© 2001 David Galley
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Analysis & Mgt Reporting criteria
23. ID signif. differences in schedule/cost performance,
provide reasons
24. ID budgeted and actual costs, reasons for signif.
differences
25. Summarise data & variances through the WBS/OBS…
26. Implement managerial action resulting from EV info.
27. Develop revised EAC… compare with PMB… funding…
© 2001 David Galley
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Revisions & Data Maintenance criteria
28. Incorp. authorised changes… record effects in
budget & schedule
29. Reconcile current budgets to prior budgets
30. Control retroactive changes…
31. Prevent unauthorised changes to program budget
32. Document changes to performance measurement
baseline (PMB)
© 2001 David Galley
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Potential Benefits of EVM
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Improved project performance
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Management by exception
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Good predictive capability
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© 2001 David Galley
Database of completed projects, useful for
comparative analysis
Enabler for a new culture of openness, trust and
honesty
• improved contractor/customer relations
• “the main problem with EVM is that it works”
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EVM in the UK
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© 2001 David Galley
Defence
• MoD - 30 IPT’s intend to or are using EVM
• BAe Systems, Rolls-Royce, Stracham & Henshaw,
GKN Westlands, Thales, BAe Systems (Nimrod, Hawk,
Eurofighter, FOAS, JSF, Type 45, Astute, CVF)
Construction
• Laing, Millenium Dome, BAA Terminal 5
Software
• IBM
• Unisys
• EDS
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Where to go next?
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© 2001 David Galley
Websites
www.acq.osd.mil/pm
www.cpm-pmi.org
www.evm.nasa.gov
www.apm.org.uk/apm/evsig.htm
‘Earned Value Project Management’
• Quentin Fleming & Joel Koppelman
• ISBN: 1-880410-27-3
$35
APM EV SIG
• Quango: NAO, OGC, MoD, EDS, IBM, Unisys,
PMI, BAA T5, Laing, Rolls-Royce, BAe Systems
• UK standard
• Implementation Guidelines (AIM)
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Who to go to next? – Steve Wake
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Head of APM EV SIG
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[email protected]
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© 2001 David Galley
7th ‘EVA in the UK conference’
• Church House, Westminster
• 20-June-2002
• Sir John Bourn Auditor General – keynote speaker
• Royal Shakespeare Company
36
‘EVA in the UK’
Church House, Westminster
www.churchhouseconf.co.uk/facilities/assembly-pan.htm
© 2001 David Galley
37
Integrated Baseline Review
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© 2001 David Galley
IBR - a formal and continual process conducted to
assess the content and integrity of the
Performance Measurement Baseline (PMB)
Purpose – is to achieve and maintain a joint
project/customer understanding of the risks
inherent within the baseline and the management
control processes that will operate
• highlight expectations and assumptions early
• clear understanding of the plan and risks
• sound basis for
— measuring & reporting project performance
— proactive project management
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