Earned Value Performance Management (EVPM) Then, Now and the Future

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1 Presented By; Raf Dua Ceo and Owner Micro Planning International Australia Project Chat Adelaide 17 th November

2 How it all Began 2

3 The original name for EVPM was Cost/Schedule Control Systems Criteria Which became better known as CS² 3

4 Historical Outline(1) Concepts Developed in the US / Canada in the late 1960 s Australian DoD Linked Closely with US / Canadian Developers Joint Parliamentary Committee on Public Accounts Reported to Parliament JCPA Report 243 on the Desirability of Introducing CS² Concept JCPA Report Recommendations Adopted by Defence in

5 Cost/Schedule Control Systems Criteria is a A set of standards or criteria for measuring the adequacy of management control systems through application of earned value concepts. There was originally 35 criteria Def(AUST) 5655, Performance Measurement for selected projects 5

6 Historical Outline(2) Defence Created Special Cell To Administer CS²- Directorate of Project Management Systems (DPMS) CS² Policy and Procedures Published in Defence Procurement Manual First Project to Include CS² Requirements - The New Submarine Project

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8 Defence Objectives for CS² Data Indicate Work in Progress Properly Relate Cost Schedule and Technical Accomplishment Valid, Timely able to be Audited Supply Departmental Managers with Information at a Practical Level of Summarisation 8

9 Defence Policy for the Application of CS² Criteria Policy Requires CS ² Criteria and Clauses for Contracts as Follows For Production Contracts > $100M For Contracts With a Significant Development Content > $40M For Production Sub-Contracts > $100M For Sub-Contracts With a Significant Development Content > $40M 9

10 Typical Defence Work Breakdown Structure Title: Micro Planner X-Pert Time Now: 14-Jun-97:00:00 SHIPNO1 SHIP No.1 SHIP4C2 Propulsion Plant SHIP4CH1 Shell Plating SHIPNO2 SHIP No.2 SHIPNO3 SHIP No.3 SHIP4C3 Electric Plant SHIP4C4 Communications and Control SHIP4CH2 Longitudinal and Traverse Framing SHIP4CH3 Platforms and Decks SHP4CH61 Bulkhead No. 1 SHP4CH62 Bulkhead No. 2 SP4CH641 Bulkhead Frames SP4CH642 Bulkhead Plateing S4CH6431 Watertight Door No. D1S2 S4CH6432 SHIP4C + Construct Ship SHIP4C5 Auxiliary Systems SHIP4C6 Outfit and Furnishings SHIP4CH4 Superstructure SHIP4CH5 Foundations SHP4CH63 Bulkhead No. 3 SHP4CH64 + Watertight Door No. D1S1 S4CH6433 Watertight Door No. D2S3 SHIP4C7 Armament SHIP4C8 Integration/Engineeri ng SHIP4CH6 + Structural Bulkheads SHIP4CH7 Enclosures and Sponsors Bulkhead No. 4 SHP4CH65 Bulkhead No. 5 SHP4CH66 Bulkhead No. 6 S4CH643 + Watertight Doors SP4CH644 Glands & Seals S4CH6434 Watertight Door No. D2S2 S4CH6435 Watertight Door No. D1P34 SHIP4CH + Hull Structure SHIP4C9 Ship Assembly SHIP4CH8 Castings SHIP4CH9 Forgings and Weldings SHP4CH67 Bulkhead No. 7 SHP4CH68 Bulkhead No. 8 SP4CH645 Bulkhead Fabrication & Assembly S4CH6436 Watertight Door No. D3P21 S4CH6437 Watertight Door No. SHIP4P + Peculiar Support Equipment SHIP4P1 Intermediate SHIP4P2 Depot SHIP4CHA Fixed Ballast SHIP4CHB Doors and Closures D4C2 S4CH6438 Watertight Door No. D4S7 SHIP4T1 Equipment SHIP4CHC Kingposts SHIP4T + Training SHIP4T2 Services SHIP4CHD Masts SHIP4T3 Facilities SHIP4CHE Service Platforms SHIP4E1 Development Test and Evaluation SHIP4CHF Sonar Domes SHIP4E2 Operational Test and Evaluation SHIP4CHG Compartment Testing FFGSHIPS + Follow On Destroyer Project SHIPNO4 + SHIP No.4 SHIP4E + Systems Test and Evaluation SHIP4E3 Mockups SHIP4E4 Test and Evaluation Support Contractor Defined WBS Items SHIP4E5 Test Facilities SHIP4M1 SHIP4M + Systems Engineering System/Project Management SHIP4M2 Project Management SHIP4D1 Technical Publications <- DEF(AUST) 5664 Standard WBS Items Adapted to this particular project SHIP4D2 Engineering Data SHIP4D + Data SHIP4D3 Management Data SHIP4D4 Support Data SHIP4D5 Data Repository SHIP4V + Ship Conversion SHIP4V1 To Be Specified SHIP4Q1 SHIP4Q + Intermediate Common Support Equipment SHIP4Q2 Depot SHIP101 SHIP10 + Initial Spares and Initial Repair Spares (Specify by Allowance List, Grouping, or Hardware Element SHIP4I1 SHSUP + Shore Support Facilities SHIP4I + Industrial Facilities Construction/ Conversion/ Expansion Figure 1 DEF(AUST) 5664 Typical Ship System SHIP4I2 Equipment Acquistion or Modernization NOTES 1) Only a small section of the full WBS is shown. SHIP413 Maintenance 2) WBS Numbers used are not standardised. Level 1 Level 2 Level 3 Level 4 10

11 Defence Experience With CS² Contracts - Major Lessons Learned Rescheduling/Rebaselining Managements Use of CS² Data Management of Work Packages Technical Reviews and Audits 11

12 How it is done 12

13 Title: Micro Planner X-Pert Time Now: 14-Jun-97:00:00 SHIPNO1 SHIP No.1 SHIPNO2 SHIP No.2 SHIPNO3 SHIP No.3 SHIP4C + Construct Ship SHIP4C2 Propulsion Plant SHIP4C3 Electric Plant SHIP4C4 Communications and Control SHIP4C5 Auxiliary Systems SHIP4C6 Outfit and Furnishings SHIP4CH1 Shell Plating SHIP4CH2 Longitudinal and Traverse Framing SHIP4CH3 Platforms and Decks SHIP4CH4 Superstructure SHIP4CH5 Foundations SHP4CH61 Bulkhead No. 1 SHP4CH62 Bulkhead No. 2 SHP4CH63 Bulkhead No. 3 SHP4CH64 + SP4CH641 Bulkhead Frames SP4CH642 Bulkhead Plateing S4CH6431 Watertight Door No. D1S2 S4CH6432 Watertight Door No. D1S1 S4CH6433 Watertight Door No. D2S3 Earned Value Performance Management SHIP4C7 Armament SHIP4C8 Integration/Engineeri ng SHIP4CH6 + Structural Bulkheads SHIP4CH7 Enclosures and Sponsors Bulkhead No. 4 SHP4CH65 Bulkhead No. 5 SHP4CH66 Bulkhead No. 6 S4CH643 + Watertight Doors SP4CH644 Glands & Seals S4CH6434 Watertight Door No. D2S2 S4CH6435 Watertight Door No. D1P34 FFGSHIPS + Follow On Destroyer Project SHIPNO4 + SHIP No.4 SHIP4P + Peculiar Support Equipment SHIP4T + Training SHIP4E + Systems Test and Evaluation SHIP4CH + Hull Structure SHIP4C9 Ship Assembly SHIP4P1 Intermediate SHIP4P2 Depot SHIP4T1 Equipment SHIP4T2 Services SHIP4T3 Facilities SHIP4E1 Development Test and Evaluation SHIP4E2 Operational Test and Evaluation SHIP4E3 Mockups SHIP4E4 SHIP4CH8 Castings SHP4CH67 SP4CH645 Bulkhead No. 7 Bulkhead Fabrication & Assembly SHIP4CH9 Forgings and SHP4CH68 Weldings Bulkhead No. 8 SHIP4CHA Fixed Ballast SHIP4CHB Doors and Closures SHIP4CHC Kingposts SHIP4CHD Masts SHIP4CHE Service Platforms SHIP4CHF Sonar Domes SHIP4CHG Compartment Testing Contractor Defined WBS Items S4CH6436 Watertight Door No. D3P21 S4CH6437 Watertight Door No. D4C2 S4CH6438 Watertight Door No. D4S7 Develop the Work Breakdown Structure To Appropriate Number of Levels Test and Evaluation Support SHIP4E5 Test Facilities SHIP4M1 SHIP4M + Systems Engineering System/Project Management SHIP4M2 Project Management <- DEF(AUST) 5664 Standard WBS Items SHIP4D1 Adapted to this particular project Technical Publications SHIP4D2 Engineering Data SHIP4D + Data SHIP4D3 Management Data SHIP4D4 Support Data SHIP4D5 Data Repository SHIP4V + Ship Conversion SHIP4V1 To Be Specified SHIP4Q1 SHIP4Q + Intermediate Common Support Equipment SHIP4Q2 Depot SHIP101 SHIP10 + Initial Spares and Initial Repair Spares (Specify by Allowance List, Grouping, or Hardware Element Figure 1 SHIP4I1 DEF(AUST) 5664 Typical Ship System Construction/ Conversion/ Expansion SHSUP + Shore Support Facilities SHIP4I + Industrial Facilities SHIP4I2 Equipment Acquistion or Modernization NOTES 1) Only a small section of the full WBS is shown. SHIP413 2) WBS Numbers used are not standardised. Maintenance Level 1 Level 2 Level 3 Level 4 13

14 Figure 2 Typical Cost Account Chart, showing Contract Work Breakdown Structure (WBS) CONTRACT WBS & OBS elements. ENGINE TRAINING Functional Organisation (OBS) FAN ASSY. FAN COMPRESR TURBINE FULL SCALE FAN RIG MINOR FAN RIG DUAL SPOOL COMP. RIG COMPANY Manufacturg Engineering Test Design Mechanical Design Analytical Design Drafting & Checking Case Assy. Rotor Assy. Stator Assy. COST ACCOUNT COST ACCOUNT COST ACCOUNT COST ACCOUNT COST ACCOUNT COST ACCOUNT COST ACCOUNT COST ACCOUNT <- Work Packages Planning Packages -> 14

15 Typical Tiered Planning Structure Planning Structure WBS Structure Master Schedule Tier 1 1 Element Schedule Tier Tier Detail Schedules Detail Schedules Tier Figure 4 15

16 Proposed Project Schedule Structure Standard WBS & Cost Reports Extracted from within the Network Traditional Master Schedule Extracted as a Report from within the Network Elements Summary Hammock Master Schedule & Element Schedule as an Integrated Network with a Full WBS Built In. Element Hammock Detail Tasks Detailed Cost Account Schedules Summarised into Elements Figure 4 16

17 Proposed Data Structure Cost & WBS Reports WBS & Cost Data Element Hammock Summary Master Programme Consolidated Time Data Element Schedule & Master Programme Network Consolidated Data For Each Element Including Time, Cost and EV. (Either direct from CA Schedule or via Dept. Schedule) Detail Tasks Individual CA Programmes included in Dept. Schedules as SubProjects Department Level Resource Allocation Schedule Available Resources Resource Constrained Data Progress Data and Resource Requirements Individual CA or Work Package Schedules Detail Tasks Element Hammock Figure 5 17

18 The Management Cycle Figure 7 18

19 What is Earned Value Performance Management? EVPM is a Planning tool EVPM measures performance against plan producing variances and variance trends EVPM is an earned value system EVPM is an integrated cost and schedule control system EVPM is not an accounting or record keeping system 19

20 What is Earned Value Performance Management? EVPM is not a method for technical performance measurement but is a means for measuring technical progress against schedule through the achievement of technical milestones 20

21 What do all the Acronyms Stand For? BCWS - Budgeted Cost for Work Scheduled BCWP - Budgeted Cost for Work Performed ACWP - Actual Cost of Work Performed BAC - Budget at Completion EAC - Estimate at Completion 21

22 BCWP (Actually Accomplished) Cost Variance (Underrun to date) ACWP (Actual Costs to Date) 22

23 BCWP (Actually Accomplished) Scheduled Variance (Comparison of Planned and Actual) Scheduled Work (Actual Costs to Date) 23

24 BAC V A C EAC Estimated Costs of Remaining Work Costs to Date 24

25 Performance Management Baseline S- Curve Title : Time Now Budget Ceiling $ Original Budget CashFlow Cost Estimate Budget Cost Actual Cost Earned Value Recoverable Value Chargeable Value Results: $ Actual Cost (ACWP) 0.00 Estimate to Complete (ETC) Estimate at Completion (EAC) Nov-94 1-Feb-95 1-May-95 1-Aug-95 25

26 Performance Management Baseline S- Curve Showing Current Schedule Status Report Title : Orig Baseline v Curr Schedule (14/08) Cost Estimate Time Now Budget Cost Budget Ceiling Actual Cost $ Earned Value Recoverable Value Chargeable Value Results: $ Budget at Completion (BAC) Recoverable Budget Ceiling Budget To Date (BCWS) Earned Value (BCWP) Recoverable Value Actual Cost (ACWP) Estimate to Complete (ETC) Estimate at Completion (EAC) Earned / Cost Variance (CV) Recoverable / Cost Variance Schedule Variance (SV) Variance At Completion (VAC) Total Recoverable Variance Total Budget Adjustment Chargeable Costs Cost Performance Index (CPI) % Nov-94 1-Feb-95 1-May-95 1-Aug-95 1-Nov-95 26

27 What Do All The Indices Mean? 27

28 BCWS BCWP The sum of the budgets for all work effort planned to be accomplished (ie The Plan) The sum of the budgets for all work effort actually accomplished (ie The Earned Value) ACWP The actual costs incurred to date 28

29 Variances Defined CV = BCWP - ACWP SV = BCWP - BCWS VAC = BAC - EAC 29

30 Variances Continued Cost Variance Percentage(CVP) = CV * 100% BCWP = BCWP - ACWP * 100% BCWP Schedule Variance Percentage (SVP) = SV * 100% BCWP = BCWP - BCWS * 100% BCWP 30

31 Performance Indices Cost Performance Index(CPI) = BCWP/ACWP If CPI is < 1, then Project Over Budget Schedule Performance Index(SPI) =BCWP/BCWS If SPI is < 1, Project is Behind Schedule 31

32 Performance Indices (Cont) Cost - Schedule Index (CSI) = CPI * SPI = BCWP * BCWP ACWP * BCWS If CSI is < 1 it indicates a problem 32

33 As previously stated if the CPI is < 1 it means that the project is over budget. This is because CPI measures the Budgeted Cost with the Actual Cost.. The SPI compares the work performed with what was scheduled. Thus if the SPI is < 1 it means that the project is behind schedule. 33

34 In the situation where the CPI > 1 and the SPI <1, it means that the project is within budget, but it is also behind schedule. This has occurred probably because budget not been expended due to not having completed sufficient work. 34

35 Forecasting The amount of Funds required to complete the project is the Total Budget less the Earned Value, which is modified by the Cost Performance Index 35

36 Forecasting The Estimate to Complete ETC = BAC - BCWP CPI Where BAC is the Budgeted cost At Completion 36

37 Forecasting The Estimate To Complete allows the Project Manager to compare the amount of budget funds remaining with the amount required to complete the project. If there is a significant difference then the PM has to take the appropriate corrective actions 37

38 Forecasting The amount of budget required to complete the entire project is calculated by accumulating the actual costs incurred up to Time Now and add it to the Estimate To Complete. EAC = ETC + ACWP 38

39 Forecasting With the known Budget at Completion and now the Estimate At Completion it is a simple matter to calculate the Variance At Completion (VAC) (also known as Projected Cost Overrun(PCO)) when the value is negative. VAC = EAC - BAC or PCO = EAC - BAC 39

40 Forecasting In order to ascertain the severity of the situation the Variance At Completion or Project Cost Overrun can be determined as a percentage of the original budget. This is known as the Project Cost Overrun Percentage (PCOP). PCOP = PCO * 100 BAC 40