GPE engineering project management. Project Management in an Engineering Context

Transcription

1 GPE engineering project management Project Management in an Engineering Context

2 Earned Value Management System Is a system to

3 MANAGE --- and help resolve control problems in running projects difficulties to have an overall visibility of risks; a lack of understanding of all the interdependencies of the various (resources) and time and cost (goal); With EVMwe can integrate end to end management of not just tasks, but of internal and external resources and the interdependencies between them. The industry standard for project control systems described in American National Standards Institute (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 execution phase. However, small projects with small resources and low infrastructures are not good candidates to EVM

4 Control Traditional 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 activities are completed There is a direct relationship between Earned Value and percent complete

5 Is this any good? Can we advance project s situation?

6 unless you look at the planned cost of the completed work, you can t really know if this is good news or not! Earned Value

7 The planned values provide a Performance Measurement Baseline (PMB) PMB is the sum of all work packages Planned Value for each time period, calculated for the total project duration. The PMB forms the time-phased budget plan against which project performance is measured When plotting the planned values of time and cost against actual values, 2 gaps can then be identified the variance between planned and actual cost, and the variance between planned and actual time Performance Measurement Baseline - An approved, integrated scope-schedulecost plan for the project work against which project execution is compared to measure and manage performance

8 So to use EVM we need primarily to develop a performance measurement baseline (PMB). This logically integrates and records work scope, schedule and cost. Joining these three concepts in a unique document will allow us to better understand the progress of our project, better apply the EVM analysis and take complete advantage of the information it will bring to us. To develop a PMB we need to: 1. Create and develop the Work BreakdownStructure (BoozAllen and Hamilton tutorial) (WBS a sound base for planning and budgeting) 2. Create the schedules 3. Authorize the budgets (budget at complete orbac) 4. Time-phase the budget 5. Define measures of performance 6. Construct the PMB The PMB is one of the most important elements in EVM

9 Budget at completion (BAC), represents the total amount of fund that will be spent in the project, as planned (equals the PV accrued at completion) how much is your budget for the entire project? Estimate at completion (EAC), estimates the final costs of the project if current performance continues. This means that, even though in the planning phase a final budget is calculated, as the project moves forward the budget amount may be increased due to possible delays or unexpected expenses, so an estimate is done to cover this likely variation Variance at completion (VAC) is the difference between them, VAC= EAC-BAC

10 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 time period Actual Cost (AC) = Actual Cost of Work Performed (ACWP) Actual Work - the actual cost incurred in accomplishing the work performed within a given time 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 (planned costs) for completed work packages and completed portions of open work packages

11 The distinction between the PV (BCWS) and the EV (BCWP) is that the former represents the budget value of the activities that were planed to be completed and the latter represents the budget value of the activities 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

12 Earned Value methodology works with 3 major components: tool 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 operation; Requires effort and expertise on the part of the project team Earned Value is a methodology/tool that consists of a uniform unit of measure remember percent?

13 Little case/example Suppose that you are the project manager of a software development project. You re part through the execution 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 conceptual design, program specification, coding, documentation, usermanual production, and debugging (sixparts) Further, let s say that conceptual design and program specification are complete, coding and documentation are in process, manual production and debugging haven t started yet So, how complete is the project? We ve 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 writing one line of program specification equals one line of code and this, in turn, equals one line in the documentation? How is one to equate the various parts?

14 time unit as uniform measure Little case/example Now suppose we determine that conceptual design is expected to take 200 wok hours, program specification writing 300 hours, coding 600 hours, documentation 100 hours, usermanual 400 hoursand debugging 500 hours (total2100) These labor budgets in hours can easily be used as a weighting factor in establishing the worth of the various parts. That is exactly what Earned Value does Since conceptual design and specs writing are done, we have earned 500 hours of value. For the in-process activities, 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 documentation. We could then claim 150 hours for the coding and 10 hours or the documentation. 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

15 How to set up an Earned Value system 1. Establish the Work Breakdown Structure (WBS) to divide the project into manageable portions 2. Identify the activities to be scheduled that represent the entire project 3. Allocate the costs to be expended on each activity 4. Schedule the activities over time 5. Tabulate, plot and analyze the data to confirm that the plan is acceptable How to use information generated by the Earned Value calculations 6. Update the schedule by reporting activity progress 7. Enter the actual costs on the activities 8. Execute the Earned Value calculations, print and plot the reports and charts 9. Analyze the data and write the performance narrative

16 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

17 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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19 In the traditional approach we have an actual cost positive variance of 8% which looks quite good

20 Applying EV we can see that things are not quite so good 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 ofwork, and have only completed $80. In addition, the work that was completed ($80) had a higher cost than we had planned ($92), creating a cost variance of -$12. The actual cost variance is not a positive 8% as calculated by the traditional approach but it is negative 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 BIG trouble!! -20 in 100 is - 20% -12 in 80 is - 15%

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

22 House Building Project Exercising with Earned Value Concepts (Booz Allen and Hamilton tutorial)

23 Cost Varience

24 Cost Varience

25 Cost Varience

26 Cost Varience percentage

27 Schedule Varience

28 Schedule Varience

29 Schedule Varience Note that the schedule variance is in dollars a unique reference measure

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31 Schedule Varience

32 Cost Performance Index

33 Cost Performance Index

34 Cost Performance Index

35 Cost Performance Index

36 Schedule Performance Index

37 Schedule Performance Index

38 Schedule Performance Index

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40 Schedule Performance Index

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

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