Earned Value Management System. a system to

Transcription

1 Earned Value Management System a system to

2 MANAGE and help resolve control problems in running projects where there is difficult to have an overall visibility of risks a lack of understanding of all the interdependencies of the various (resources) and the end?me and cost (goal) end to end management of not just tasks, but of internal and external resources and the links and interdependencies between them It is mostly applicable in big projects The industry standard for project control systems described in American Na8onal Standards Ins8tute (ANSI) EIA- 748, states that Earned Value Management Systems must be implemented on all projects with a total project cost (TPC) greater than $20M for control of project performance during the project execu8on phase.

3 Control Tradi?onal methods focus on planned accomplishment and actual costs Earned Value goes one step further and examines actual accomplishment Earned Value is mainly a methodology where values are earned as ac?vi?es are completed There is a direct rela?onship between Earned Value and percent complete

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5 unless you look at the planned cost of the completed work, you don t really know if this is good news or not!

6 The planned values provide a Performance Management Baseline (PMB) PMB is the sum of all work packages Planned Value for each?me period, calculated for the total program dura?on. The PMB forms the?me- phased budget plan against which project performance is measured When plolng the planned values of?me and cost against actual values, 2 gaps can then be iden?fied the variance between planned and actual cost, and the variance between planned and actual %me

7 So to use EVM we need to develop a tool: performance measurement baseline (PMB). This is a?me- phased budget that logically integrates and records work to provide scope, schedule and cost. Joining these three concepts in a unique document (calcula?on) will allow us to beser understand the progress of our project. That means we will beser apply the EVM analysis and take complete advantage of the informa?on it will bring to us. The proper process to establish the PMB would be: 1. Create or use your project Work Breakdown Structure a sound base for planning and budge?ng 2. Create the schedules 3. Authorize the budgets (budget at complete or BAC) 4. Time- phase the budget 5. Define measure of performance 6. Establish the PMB The PMB will help us build one of the most important elements in EVM

8 The three main elements of Earned Value Analysis Planned Value (PV) = Budgeted Cost of Work Scheduled (BCWS) Planned Work - the sum of budgets for all work packages scheduled to be accomplished within a given?me period Actual Cost (AC) = Actual Cost of Work Performed (ACWP) Actual Work - the actual cost incurred in accomplishing the work performed within a given?me period. For equitable comparison, ACWP is only recorded for the work performed to date against tasks for which a BCWP is also reported Earned Value (EV) = Budgeted Cost of Work Performed (BCWP) Cost as planned of actual work - the sum of budgets for completed work packages and completed por?ons of open work packages

9 The dis?nc?on between the PV (BCWS) and the EV (BCWP) is that the former represents the budget value of the ac?vi?es that were planed to be completed and the laser represents the budget value of the aceviees that actually were completed. EV is the cost (as planned) of the actual work performed!! planned cost of the completed work as we already said

10 Earned Value methodology works with 3 major components: planned work; actual work; cost (as planned) of the actual work performed (EV) IMPLEMENTING an EVM system An Earned Value System does cost money to put into opera?on Requires effort and exper?se on the part of the project team Earned Value is a methodology that consists of a uniform unit of measure remember percent?

11 Suppose that you are the project manager of a socware development project. You re part through the execu?on of your project and you wonder how things are going. First, you want to know what per cent complete the project is At a summary level, let s say that the project includes 6 phases conceptual design, program specifica8on, coding, documenta8on, user manual produc?on, and debugging Further, let s say that conceptual design and program specifica8on are complete, coding and documenta?on are in process, manual produc?on and debugging haven t started yet So, how complete is the project? We completed two out of six parts and are in process with two more. Does that mean we are 50% complete? Maybe, but, we don t know. What is each part worth? Does wri?ng one line of program specifica?on can we equate the various parts?

12 ?me unit as uniform measure Now suppose we determine that conceptual design is expected to take 200 work hours, program specifica?on wri?ng 300 hours, coding 600 hours, documenta?on 100 hours, user manual 400 hours and debugging 500 hours (total 2100) These working budgets in hours can easily be used as a weigh?ng factor in establishing the worth of the different parts. That is exactly what Earned Value does Since conceptual design and specs wri?ng are done, we have earned 500 hours of value. For the in- process ac?vi?es, we need to decide how we will earn the value. More on earning rules later. For now let s just say we are one quarter done with the coding and 10% with the documenta?on. We could then claim 150 hours for the coding and 10 hours or the documenta?on. The total earnings are then 660 hours. So, how complete is the project? Using Earned Value methodology, we would determine that the project is 31.4% complete (660 earned hours divided by 2100 hours of total project budget). Earned Value has allowed us to combine the progress of vastly different work efforts

13 How to set up the Earned Value system: 1. Use the Work Breakdown Structure (WBS) to divide the project into manageable por?ons 2. Iden?fy the ac?vi?es to be scheduled that represent the en?re project 3. Allocate the costs to be expended on each ac?vity 4. Schedule the ac?vi?es over?me 5. Tabulate, plot and analyze the data to confirm that the plan is acceptable How to use the informa?on generated by the Earned Value calcula?ons: 6. Update the schedule by repor?ng ac?vity progress 7. Enter the actual costs of the ac?vi?es 8. Execute the Earned Value calcula?ons, print and plot the reports and charts 9. Analyze the data and write the performance narra?ve 10. Decide with these elements

14 the three basic elements Planned Value (PV) = Budgeted Cost of Work Scheduled (BCWS) Planned work Actual Cost (AC) = Actual Cost of Work Performed (ACWP) Actual work Earned Value (EV) = Budgeted Cost of Work Performed (BCWP) Cost as planned of actual work PV AC EV

15 Variance Analyses and Performance indexes Cost Variance (CV) = Earned Value (EV) Actual Cost (AC) Schedule Variance (SV) = Earned Value (EV) Planned Value (PV) Cost Performance Index (CPI) = EV/AC Schedule Performance Index (SPI) = EV/PV Note that all values are in dollars

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17 In the tradi?onal approach we have an actual cost posi?ve variance of 8% which looks quite good

18 We now have a clearer picture of the actual status of the work. We currently have a schedule variance of - $20. We were scheduled to complete $100 of work, and have only completed $80. In addi?on, the work that was completed ($80) had a higher cost than we had planned ($92), crea?ng a cost variance of - $12. The actual cost variance is not a posi?ve 8% as calculated by the tradi?onal approach but it is nega?ve 15% (12/80) which is more accurate as it also considers the work accomplished. We thought we were ok, and in fact we are in trouble!! - 20 in 100 is - 20% - 12 in 80 is - 15%

19 Conclusions Earned Value integrates cost, schedule and scope. EV can be used to forecast future performance (?me and cost) and project comple?on dates It works as an early warning program/project management tool that enables managers to iden?fy and control problems before they become insurmountable It allows projects to be beser managed in the making, on?me and on budget

20 House Building Project Exercising with Earned Value Concepts

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23 Cost Varience percentage

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25 Schedule Varience Note that the schedule varience is in dólares a unique reference measure

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28 Cost Performance Index

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30 Cost Performance Index

31 Cost Performance Index

32 Schedule Performance Index

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37 The slides presented where taken from the following sources: Tammo T. Wilkens, 1999, Earned Value, Clear and Simple, Los Angeles County Metropolitan Transporta?on Authority Nagrecha, Suketu, 2002, An introduc?on to Earned Value Analysis Booz- Allen- Hamilton, Earned Value Management Tutorial