Earned Value Management

Transcription

1 Earned Value Management Reading the Roadmap to Project Success (or, Are We There Yet?) Steve Margolis, PMP, CISSP September 5, 2018

2 Overview EVM Background EVM Basics and Standards Variables & Metrics Integrating Cost, Schedule, Scope EVM Links Sample Questions 2

3 EVM Background 1960s PERT/Cost :- Earned value-based on Department of Defense (DoD) Cost/Schedule Control Systems Criteria (C/SCSC) 1996 DoD adopts 32 Industry Earned Value criteria 1998 ANSI/EIA 748 Issued 3

4 EVM Basics Industry definition: Use of an integrated management system that coordinates work scope, schedule, and cost objectives and employs earned value methods for program planning and control EVM is not an accounting method or financial management practice 4

5 EVM Basics Triple Constraint EVM is a tool for the Project Manager Earned Value may point to cost or schedule issues, but does not substitute for good project management. Don t Manage the Earned Value Critical Path Analysis Technical, scope control SCOPE SCHEDULE COST 5

6 EVM Standards Industry standard ANSI/EIA EVM system guidelines address nine management processes DoD contracts >$20M require EVM DoD contracts >$100M surveillance, certified EVM System (EVMS) * Not used on FFP, LoE, or T&M Contracts * 6

7 EVM Variables - PMB Performance Management Baseline (PMB); timephased budget plan. Earned Value measures progress vs. the PMB. MR for unknown unknowns Should not mask poor cost performance Planning Packages for rolling wave WBS development EVM is managed at the CA level: Roll-up for Reporting NCC AUW Undistributed Budget CBB OVERRUN Work Packages Contract Price TAB PMB OTB Control Accounts Profit / Fees Planning Packages DAU Gold Card Management Reserve Summary Level Planning Packages 7

8 Responsibility Assignment Matrix (RAM) CONTRACT WORK BREAKDOWN STRUCTURE ORGANIZATIONAL STRUCTURE LEVEL 1 LEVEL 2 LEVEL 3 FIRE CONTROL RADAR TRAINING RECEIVER SYSTEM ANTENNA C O M P A N Y T E S T E N G M F G D E S I G N LEVEL 4 MECHANICAL DESIGN Electrical DESIGN DRAFTING/ CHECKING CONTROL ACCOUNT CONTROL ACCOUNT RECEIVER CONTROL ACCOUNT CONTROL ACCOUNT PHASE SHIFTER RECEIVER CASE POWER SUPPLY APPLICATION S/W Work Packages 8

9 EV Independent Variables PV or Planned Value, BCWS Budgeted Cost of Work Scheduled EV or Earned Value, BCWP Budgeted Cost of Work Performed AC or Actual Cost, ACWP Actual Cost of Work Performed BAC Budget at Completion EAC Estimate at Completion Also Latest Revised Estimate (LRE) 9

10 Some Earned Value Techniques (Short-Term, 2-3 Periods) (Within One Period) Incremental Milestone (Long-Term) Equivalent Unit (e.g.: Road Building) Percent Complete Agile: use %Complete from agile tool and apply to high level schedule Supervisor s Estimate (Subjective) 10

11 Earned Value Metrics CV = EV AC = BCWP ACWP Cost Variance SV = EV PV = BCWP BCWS Schedule Variance (Accomplishment) in $ VAC = BAC EAC Variance at Completion Forecast Overrun or Underrun 11

12 Earned Value Metrics Cost Efficiency Cost Performance Index (CPI) = EV/AC CV% = (CV/EV)*100 Schedule Efficiency Schedule Performance Index (SPI) = EV/PV SV% = (SV/PV)*100 To Complete Performance Index (TCPI) Work Remaining / Cost Remaining (BAC EV) / (EAC AC) 12

13 Earned Value Metrics EAC Forecast Final Cost (EAC) by Projecting Future Performance based on Past Performance Estimate At Completion (EAC) oactuals to Date + [Remaining Work / Efficiency Factor] oac + [(BAC EV) / CPI] = BAC/CPI Estimate to Complete (ETC) oetc = EAC AC = BAC/CPI AC 13

14 EVM Graphical View Graphical view of baseline (PMB) showing end date and total Budget at Completion (BAC). EAC Using the past performance, CPI, as a prediction of future performance, the AC can be projected to forecast an Estimate at Completion (EAC). PV is the PMB up to the Status Date $ Management Reserve (MR) Schedule Variance AC PMB Cost Variance TAB BAC CV compares the actual cost to the budgeted cost of actual Work Performed. PV EV SV compares the Budgeted Cost of actual Work Performed with Work Scheduled up to the Status Date (Time Now). time Time Now Completion Date 14

15 Evaluating Schedule Variance SV does not tell the whole story Good News May Not Be Good 10 Day s work Scheduled by status date 10 Days work completed: Zero Schedule Variance Critical Path shows Project will be 2 days late! 3 Days 2 Days 2 Days 3 Days Critical Path Start 10 Days 2 Days 3 Days 2 Days 2 Days Time Now Days Completed Task 15

16 Evaluating Schedule Variance SV does not tell the whole story Bad News May Not Be Bad 15 Day s work Scheduled by status date Only 12 Days work completed: Negative SV Critical Path shows Project is on schedule Slipped Task has Slack Critical Path 5 Days 5 Days 5 Days 4 Days Start 10 Days 2 Days 3 Days 3 Days 2 Days Time Now Completed Task 16

17 Integrated Baseline Review Jointly Assess Planning Cost, Schedule, Technical Ensure Complete Coverage of SOW Exclude Work not in Scope Logical Scheduling Critical Path Adequate Resourcing Identify Risk 17

18 Integrating Cost, Schedule, Scope DAU 12-Step Analysis Model Highlights: Sort for CV and SV $ and %, ID WBS elements w/ most unfavorable variances Correlate w/ Technical Drivers / Key Performance Parameters (KPPs) Correlate w/ Critical Path Correlate CV & SV drivers w/ each other 18

19 Integrating Cost, Schedule, Scope Generate an EAC Based on Key Drivers Select Performance Factor (PF) for Key WBS Elements CPI for Cost Drivers SPI for Schedule Drivers CPI*SPI for both Technical Risk Factor 19

20 Validate Independent EAC Low Range EAC: CPI(cum) High Range EAC: CPI(cum)*SPI(cum) Likely EAC from Analysis Independent TCPI within 5% of CPI(cum)? Future performance is not likely to increase more than 5% over past performance based on OSD history 20

21 CPI and To-Complete 21

22 Summary EVM is one tool available to the PM Use with Critical Path analysis Integrates Cost & Schedule performance Correlate with key technical drivers Report Card on the baseline Increased focus by Federal agencies More interest by commercial sector MS Project EV table Agile: Storycard tool & sprint summary 22

23 EVM Links AT&L EVM site: DAU EVM community: DAU EVM Training: %20Center.aspx DAU Gold Card General-Reference-(Gold-Card) NDIA Guides and Resources, including EVM Intent Guide (32 Criteria) 23

24 Q&A 24

25 $ BCWS Cum EARNED VALUE MANAGEMENT GOLD CARD Total Allocated Budget Management Reserve Schedule Variance ACWP Cum Time BCWP Cum Time Now VARIANCES Positive is Favorable, Negative is Unfavorable Cost Variance CV = BCWP ACWP CV % = (CV / BCWP) * 100 Schedule Variance SV = BCWP BCWS SV % = (SV / BCWS) * 100 Variance at Completion VAC = BAC EAC VAC % = (VAC / BAC) * 100 PMB Cost Variance Projected Slip? Completion Date EFFICIENCIES Cost Efficiency CPI = BCWP / ACWP Favorable is > 1.0, Unfavorable is < 1.0 Schedule Efficiency SPI = BCWP / BCWS Favorable is > 1.0, Unfavorable is < 1.0 EAC BAC COMPLETION = ACTUALS TO DATE + [ (REMAINING WORK) / (PERFORMANCE FACTOR) ] EAC CPI = ACWP CUM + [ (BAC BCWP CUM ) / CPI CUM ] EAC Composite = ACWP CUM + [ (BAC BCWP CUM ) / (CPI CUM * SPI CUM ) ] TO COMPLETE PERFORMANCE INDEX (TCPI) # TCPI Target = Work Remaining / Cost Remaining = (BAC BCWP CUM ) / (Target ACWP CUM ) To Determine the TCPI for BAC, LRE, or EAC Substitute TARGET with BAC, LRE, or EAC # To Determine the Contract Level TCPI for EAC, You May Replace BAC with TAB OVERALL STATUS % Schedule = (BCWS CUM / BAC) * 100 % Complete = (BCWP CUM / BAC) * 100 % Spent = (ACWP CUM / BAC) * 100 BASELINE EXECUTION INDEX (BEI) & Hit Task % BEI = Total Tasks Completed / (Total Tasks with Baseline Finish On or Prior to Current Report Period) Hit Task % = 100 * (Tasks Completed ON or PRIOR to Baseline Finish / Tasks Baselined to Finish within Current Report Period) NCC AUW TAB CBB OVERRUN Undistributed Control Budget (UB) Accounts (CA) Work Packages (WP) Contract Price PMB OTB Profit / Fees Summary Level Planning Packages (SLPP) Planning Packages (PP) Management Reserve (MR) ACRONYMS ACWP Actual Cost of Work Performed Cost actually incurred in accomplishing work performed = ACTUAL COST AUW Authorized Unpriced Work Work contractually approved, but not yet negotiated / definitized BAC Budget At Completion Total budget for total contract thru any given level BCWP Budgeted Cost for Work Performed Value of completed work in terms of the work s assigned budget = EARNED VALUE BCWS Budgeted Cost for Work Scheduled Time-phased Budget Plan for work currently scheduled = PLANNED VALUE CA Control Account Lowest CWBS element assigned to a single focal point to plan & control scope / schedule / budget CBB Contract Budget Base Sum of NCC & AUW EAC Estimate At Completion Estimate of total Cost for total contract thru any given level generated by Ktr, PMO, DCMA, etc. = EAC Ktr / PMO / DCMA LRE Latest Revised Estimate Ktr s EAC or EAC Ktr MR Management Reserve Budget withheld by Ktr PM for unknowns / risk management NCC Negotiated Contract Cost Contract Price Minus profit or fee(s) OTB Over Target Baseline Sum of CBB + additional budget approved for remaining work PAC Price At Completion EAC Plus Adjusted Profit or Fee(s) PMB Performance Measurement Baseline Contract time-phased budget plan PP Planning Package Far-term CA activities not yet defined into WPs SLPP Summary Level Planning Package Far-term contract activities not yet defined into CAs TAB Total Allocated Budget Sum of all budgets for work on contract = NCC, CBB, or OTB TCPI To Complete Performance Index Efficiency needed from time now to achieve a Cost Target = BAC, LRE, or EAC UB Undistributed Budget Broadly defined activities not yet distributed to CAs or SLPPs WP Work Package Near-term, detail-planned activities within a CA EVM POLICY: Interim DoDI , Enclosure 1. Table 8. EVMS in accordance with ANSI/EIA-748 is required for cost or incentive contracts, subcontracts, intra-government work agreements, & other agreements valued > $20M (TY $). Contracts > $50M (TY $) require that the EVMS be formally validated by the cognizant contracting officer. EVM is discouraged on Firm-Fixed Price, Time & Material Contracts, & LOE activities regardless of cost. Refer to the IPMR Implementation Guide for IPMR Tailoring Guidance. DoD s EVM CONTRACTING REQUIREMENTS: DFARS CLAUSES NOTICE OF EVMS FOR SOLICITATIONS EVMS FOR SOLICITATIONS & CONTRACTS CONTRACTOR BUSINESS SYSTEMS FOR SOLICITATIONS & CONTRACTS CONTRACT PERFORMANCE REPORT DI-MGMT-81466A 5 FORMATS = WBS, ORGANIZATION, BASELINE, STAFFING, EXPLANATIONS & PROB ANALYSES INTEGRATED MASTER SCHEDULE DI-MGMT MANDATORY FOR DOD EVMS CONTRACTS Integrated Program Mngt Report DI-MGMT * 7 FORMATS = WBS, OBS / IPT, BASELINE, STAFFING, EXPLANATIONS & PROB ANALYSES, IMS, HISTORY / FORECAST COST INTEGRATED BASELINE REVIEW MANDATORY FOR ALL EVMS CONTRACTS WBS For Defense Materiel Items MIL-STD-881-C * Combines & Supersedes DI-MGMT-81466A & 81650; Effective July 1, 2012 EVM CoP: Address: EVM.dau@dau.mil Revised January 2014

26 Sample PMP Earned Value Questions You are the project manager of a project to build fancy birdhouses. - You are to build two birdhouses a month for 12 months. - Each birdhouse is planned to cost $ Your project is scheduled to last for 12 months. - It is the beginning of month You have built 20 birdhouses and your CPI is How is the project performing? A. Over budget and ahead of schedule B. Under budget and ahead of schedule C. Over budget and behind schedule D. Under budget and behind schedule. 1. A Over budget & ahead of schedule. The problem tells you that your CPI is.9091, and we know that CPI = EV/AC. Applying that, a CPI less than 1 means that we aren t getting enough value for each dollar that we put into our project, so it is over budget. However, the project is ahead of schedule because we have built 20 birdhouses and after 9 months, we had expected to build only 2 birdhouses per month * 9 months = 18 birdhouses. Questions posted by Rich Rinaldi,

27 Sample PMP Earned Value Questions You are the project manager of a project to build fancy birdhouses. - You are to build two birdhouses a month for 12 months. - Each birdhouse is planned to cost $ Your project is scheduled to last for 12 months. - It is the beginning of month You have built 20 birdhouses and your CPI is What is the actual cost of the project right now? A. $1800 B. $2000 C. $2200 D. $2400 C $2200. In this problem, we need to determine the AC. In the body of the problem, you are given the CPI and can determine the EV, so you can use the CPI formula to back out the AC. EV = 20 birdhouse & $100 per birdhouse = $2000. CPI = EV/AC.9091 = $2000/AC, so multiply both sides by AC AC(.9091) = $2000, so divide both side by.9091 AC = $2200. Questions posted by Rich Rinaldi,

28 Sample PMP Earned Value Questions You are the project manager of a project to build fancy birdhouses. - You are to build two birdhouses a month for 12 months. - Each birdhouse is planned to cost $ Your project is scheduled to last for 12 months. - It is the beginning of month You have built 20 birdhouses and your CPI is Assuming that the COST variance experienced so far in the project will continue, how much more money will it take to complete the project? A. $400 B. $440 C. $2800 D. $2840 B $440. First, use the context of the problem to determine that you need the ETC when a variance exists and it is continuing. Based on that information, we know to use ETC = BAC/CPI AC. We already know the CPI from the problem and AC from the solution to #2, so let s find BAC. BAC = 2 birdhouses per month * 12 months * $100 per birdhouse BAC = $2400 ETC = EAC AC = BAC/CPI AC ETC = $2400/.9091 $2200 ETC = $440 Questions posted by Rich Rinaldi,

29 Sample PMP Earned Value Questions You are the project manager of a project to build fancy birdhouses. - You are to build two birdhouses a month for 12 months. - Each birdhouse is planned to cost $ Your project is scheduled to last for 12 months. - It is the beginning of month You have built 20 birdhouses and your CPI is If the cost variance experienced so far were to stop, what is the project s estimate at completion? A. $2400 B. $2440 C. $2600 D. $2800 C $2600. This question is asking you for the EAC if a variance that was encountered on a project is expected to stop, so use EAC = AC + BAC EV ( or AC + Budgeted Cost of Work Remaining). EAC = $ $2400 $2000 EAC = $2600 The real PMP exam doesn t have answers that build upon each other, so your steps to solving this problem on its own would be less straightforward. Instead you would first determine which equation to use, then calculate AC using the CPI (as in question #2), then BAC as in question #3, then EV as in question #2. Questions posted by Rich Rinaldi,

30 Sample PMP Earned Value Questions You are the project manager of a project to build fancy birdhouses. - You are to build two birdhouses a month for 12 months. - Each birdhouse is planned to cost $ Your project is scheduled to last for 12 months. - It is the beginning of month You have built 20 birdhouses and your CPI is What is the project s TCPI using the project s Budget At Completion? A..5 B. 1 C. 1.5 D. 2 D 2. Fortunately, PMI has to tell you which TCPI formula to use. This one says use BAC, so TCPI = (Work Remaining)/(Budget Remaining) = (BAC EV)/(BAC AC) = ( ) / ( ) = 400/200 = 2. Or, 4 birdhouses left to build and $200 of budget remaining, so we would have to complete the last four at $50 each, or double the cost efficiency of the original plan. Questions posted by Rich Rinaldi,

31 You are the project manager of a project to build fancy birdhouses. - You are to build two birdhouses a month for 12 months. - Each birdhouse is planned to cost $ Your project is scheduled to last for 12 months. - It is the beginning of month You have built 20 birdhouses and your CPI is Senior management wants to know the percentage of the project that is complete. What should you report? A. 75% B. 83% C. 92% D. 95% B 83%. Percent Complete = (EV/BAC)*100% = ($2000/$2400)*100 = 83% Sample PMP Earned Value Questions Note: 92% of the Budget has been spent but does not represent the amount of completed work. Questions posted by Rich Rinaldi,