Earned Value Management System a system to
MANAGE - - - and help resolve control problems in running projects difficul7es to have an overall visibility of risks; a lack of understanding of all the interdependencies of the various (resources) and the end 7me and cost (goal); With EVM we 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 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.
Control Tradi7onal 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 ac7vi7es are completed There is a direct rela7onship between Earned Value and percent complete
unless you look at the planned cost of the completed work, you don t really know if this is good news or not!
The planned values provide a Performance Measurement Baseline (PMB) PMB is the sum of all work packages Planned Value for each 7me period, calculated for the total project dura7on. The PMB forms the 7me- phased budget plan against which project performance is measured When plolng the planned values of 7me and cost against actual values, 2 gaps can then be iden7fied the variance between planned and actual cost, and the variance between planned and actual 8me Performance Measurement Baseline - An approved, integrated scope-schedulecost plan for the project work against which project execution is compared to measure and manage performance
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 berer understand the progress of our project, berer apply the EVM analysis and take complete advantage of the informa7on it will bring to us. To develop a PMB we need to: 1. Deploy the Work Breakdown Structure 2. Sound base for planning and budge7ng 3. Create the schedules 4. Authorize the budgets (budget at complete or BAC) 5. Time- phase the budget 6. Define measures of performance 7. Construct the PMB The PMB is one of the most important elements in EVM
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 7me period Actual Cost (AC) = Actual Cost of Work Performed (ACWP) Actual Work - the actual cost incurred in accomplishing the work performed within a given 7me 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 por7ons of open work packages
The dis7nc7on between the PV (BCWS) and the EV (BCWP) is that the former represents the budget value of the ac7vi7es that were planed to be completed and the larer represents the budget value of the acdvides 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
Earned Value methodology works with 3 major components: planned work; actual work; cost (as planned) of the actual work performed (EV) IMPLEMENTING a system An Earned Value System does cost money to put into opera7on Besides, doing it right requires effort and exper7se on the part of the project team Earned Value is a methodology that consists of a uniform unit of measure remember percent?
Suppose that you are the project manager of a sofware development project. You re part through the execu7on 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 specifica7on, coding, documenta7on, user manual produc7on, and debugging (six parts) Further, let s say that conceptual design and program specifica7on are complete, coding and documenta7on are in process, manual produc7on 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 wri7ng one line of program specifica7on equals one line of code and this, in turn, equals one line in the documenta7on? How is one to equate the various parts?
8me unit as uniform measure Now suppose we determine that conceptual design is expected to take 200 wok hours, program specifica7on wri7ng 300 hours, coding 600 hours, documenta7on 100 hours, user manual 400 hours and debugging 500 hours (total 2100) These labor budgets in hours can easily be used as a weigh7ng factor in establishing the worth of the various parts. That is exactly what Earned Value does Since conceptual design and specs wri7ng are done, we have earned 500 hours of value. For the in- process ac7vi7es, 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 documenta7on. We could then claim 150 hours for the coding and 10 hours or the documenta7on. 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 allowes us to combine the progress of vastly different work efforts
How to set up the Earned Value system 1. Establish the Work Breakdown Structure (WBS) to divide the project into manageable por7ons 2. Iden7fy the ac7vi7es to be scheduled that represent the en7re project 3. Allocate the costs to be expended on each ac7vity 4. Schedule the ac7vi7es over 7me 5. Tabulate, plot and analyze the data to confirm that the plan is acceptable How to use informa7on generated by the Earned Value calcula7ons 6. Update the schedule by repor7ng ac7vity progress 7. Enter the actual costs on the ac7vi7es 8. Execute the Earned Value calcula7ons, print and plot the reports and charts 9. Analyze the data and write the performance narra7ve
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
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
In the tradi7onal approach we have an actual cost posi7ve variance of 8% which looks quite good
Applying EV we can see that things are not quite so good - 20 in 100 is - 20% - 12 in 80 is - 15% 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 addi7on, the work that was completed ($80) had a higher cost than we had planned ($92), crea7ng a cost variance of - $12. The actual cost variance is not a posi7ve 8% as calculated by the tradi7onal approach but it is nega7ve 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!!
Conclusions Earned Value integrates cost, schedule and scope. EV can be used to forecast future performance (7me and cost) and project comple7on dates It works as an early warning program/project management tool that enables managers to iden7fy and control problems before they become insurmountable It allows projects to be berer managed in the making, on 7me and on budget
House Building Project Exercising with Earned Value Concepts
Cost Varience
Cost Varience
Cost Varience
Cost Varience percentage
Schedule Varience
Schedule Varience
Schedule Varience Note that the schedule varience is in dólares a unique reference measure
Schedule Varience
Schedule Varience
Cost Performance Index
Cost Performance Index
Cost Performance Index
Cost Performance Index
Schedule Performance Index
Schedule Performance Index
Schedule Performance Index
Schedule Performance Index
Schedule Performance Index
The slides presented where taken from the following sources: Tammo T. Wilkens, 1999, Earned Value, Clear and Simple, Los Angeles County Metropolitan Transporta7on Authority Nagrecha, Suketu, 2002, An introduc7on to Earned Value Analysis Booz- Allen- Hamilton, Earned Value Management Tutorial