CSE Senior Design I Earned Value Management Instructor: Mike O’Dell
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Transcript CSE Senior Design I Earned Value Management Instructor: Mike O’Dell
CSE Senior Design I
Earned Value Management
Instructor: Mike O’Dell
Some slides in this presentation were originally developed by Mr. Tom
Rethard, and most have been further enhanced and modified by Mr. Mike
O’Dell for use in the CSE Senior Design class.
4 Earned Value - What is it?
Simply, it is a project monitoring and
measurement system that:
1. establishes a clear relationship between
planned accomplishments and actual
accomplishments
2. reinforces and rewards good planning
practices
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4 Earned Value - What is it?
Basic concepts of Earned Value
Management (EVM)
Each task in a project earns value as planned
work is completed
For example (perhaps), if you were paid on this
basis, you would earn $$ at key milestones based on
the value of what you have completed (earned value)
Earned value can be compared to actual cost
and budgeted cost to determine variance and
predict future performance
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4 Earned Value - What is it?
The budgeted cost (e.g., dollars, person-hours,
person-days, etc.) in terms of your baseline
plan/budget of the work performed up to a
specified point in time
Also known as Budgeted Cost of Work Performed
(BCWP)
Each task in the Work Breakdown Structure
(WBS) is assigned a BCWP based on its individual
cost.
Project BCWP is total of BCWP for all tasks required
to complete the project
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4 Earned Value Components
Planned Value (a.k.a. BCWS)
How much work (person-hours) you planned to have
accomplished at a given point in time (this is from the
WBS in your plan)
Actual Cost (a.k.a. ACWP)
How much work (person-hours) you have actually spent
at a given point in time
Earned Value (a.k.a. BCWP)
The value (person-hours) in terms of your base budget
of what you have accomplished at a given point in time
(or, % complete X Planned Value)
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4 Earned Value: Example
Today
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8
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On Day X:
PLANNED VALUE (Budgeted cost of the work scheduled, BCWS) =
18 + 10 + 16 + 6 = 50
EARNED VALUE (Budgeted cost of the work performed, BCWP) =
18 + 8 + 14 + 0 = 40
ACTUAL COST (of the work performed , ACWP) =
45 (from your project tracking - not evident in above chart)
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4 Earned Value: Example
Cost (Person-Hours)
Actual Cost: what you
have actually spent to
this point in time.
Today
Planned Value: what your
plan called for sending on
the tasks planned to be
completed by this date.
Earned Value: value (cost)
of what you have
accomplished to date, per
the base plan.
Time (Date)
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4 Earned Value: Example
Cost (Person-Hours)
Today
Over
Budget
Behind
Schedule
Time (Date)
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4 Variance
Any schedule or cost deviation from a
specific plan.
Used within an organization to verify the
budget and schedule for a project
Frequently used as a key component of
plan reviews and performance
measurement
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4 Variance
Must compare scheduling and budget
variance at the same time
Schedule variance: deviations from work
planned – not a measure of changes in cost
Cost variance: deviations from the
budget – not a measure of work scheduled vs.
work completed
Example: applying more $$/people to a task may
maintain the schedule, but it adds to cost…
schedule on track… over budget on expenses (cost)
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4 Performance Indices
Cost Performance Index
CPI = BCWP/ACWP
Schedule Performance Index
SPI = BCWP/BCWS
Analysis
CPI > 1.0 exceptional performance
CPI < 1.0 poor performance
Similar for SPI
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4 Quiz
The EV measurement of work you planned to
have accomplished at a given point in time :
a.
b.
c.
d.
BCWP
ACSP
BCWS
ACWS
True or False: At any point in time, the SPI
tells you exactly how far ahead or behind
schedule you are on your project.
a. TRUE
b. FALSE
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4 Quiz
If BCWP is 20 pm and ACWP is 15 pm, CPI:
a.
b.
c.
d.
.75
1.33
1.0
0
a.
b.
c.
d.
On schedule
Ahead of schedule
Behind schedule
None of the above
If BCWP is 27 pm BCWS is 25 pm, you are
probably:
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4 Earned Value & Variance: Example
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On Day X:
PLANNED VALUE (BCWS) = 18 + 10 + 16 + 6 = 50
EARNED VALUE (BCWP) = 18 + 8 + 14 + 0 = 40
ACTUAL COST (ACWP) = 45 (from your project tracking)
Therefore:
Schedule Variance = BCWP – BCWS = 40 - 50 = -10 (behind schedule)
Schedule Performance Index = 40 / 50 = 0.8, or 80% of plan (a B-, at best)
Cost Variance = BCWP - ACWP = 40 - 45 = -5
Cost Performance Index = 40/45 = .89, or you’re getting an 89¢ return on every
$1.00 (or, person-hour) spent on this project
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4 Primary Measurement Methods
Measurable efforts
Discrete increments of work with definable
schedule and tangible results (i.e., real tasks
with a deliverable)
Level of effort
Work that is not discernable in discrete,
measurable tasks (e.g., project management,
training)
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4 Determining % Complete – When?
Allocate based on time spent – but what if you
spend more time than allocated?
Allocate 50% at start of task, 50% at end
But only for small, discrete tasks
Allocate 100% at start of task
Allocate 100% at end of task
Best solution if you keep tasks very small
Our approach
Allocate value at Critical Milestones
Good solution when using with contract work
Others?
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4 Another Example Project
Plans to spend $100K in each of first 4 weeks
(baseline budget, per documented plan)
Actuals, at end of week 4 show: $325K spent
BCWS = $400K ($100K x 4)
ACWP = $325K
What conclusions can you draw?
Under budget?
Is project on schedule?
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4 Another Example Project
Suppose BCWP is $300K
How is this determined?
What conclusions now?
SV = BCWP – BCWS
SV = $300k - $400K = -$100K
Behind schedule, but what does the $100K in
variance really mean?
CV = BCWP – ACWP = $300K - $325K
Over budget by $25K
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4 Earned Value Management
How can you use this information?
Careful analysis of variance and trends
Resetting schedule or budget, when appropriate
Variance Analysis Questions
What is the problem causing the variance?
What is the impact on time, cost and performance?
What is the impact on other efforts, if any?
What corrective action is planned or under way?
What are the expected results of the corrective
action?
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4 Earned Value Management
Extraordinary variance or alarming trends may
be cause for reset or cancellation of a project,
but where do you draw the line?
How much variance to allow depends on a
number of factors:
Life-cycle phase
Length of life-cycle phase
Length of project
Type of estimate
Accuracy of estimate
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4 Variance Projection
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4 Performance Index Trends
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4 Ideal Performance Index
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Closing Thoughts: Management
Reserve
The padding always added to a project for
unexpected costs that are within project
scope
Not an allowance for changes to scope
Not part of the cost estimate
Added by upper management, not the
project manager.
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Closing Thoughts: Government
Requirements
U.S. government contract cost tracking often
must include:
BCWS
BCWP
ACWP
Estimated cost at completion
Budgeted cost at completion
Cost and schedule variances with explanations
Traceability
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4 Summary
Cost, in the form of Earned Value or
BCWP, can be used to analyze progress of
a project
Using Earned Value data to make critical
project decisions must be based on careful
analysis of data, variances and trends
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