Earned Value Analysis
What Is It ?
Why Do I Need It ?
How Do I Do It?
Todays Situation
Need for accurate and consistent status information Numerous complex (and interrelated) projects/tasks
Projects with many WBS activities Interrelated Links
Theres Room For Improvement
70% of projects are:
Over budget Behind schedule
52% of all projects finish at 189% of their initial budget
And some, after huge investments of time and money, are simply never complete
Source:The Standish Group
How to answer the question: Have we
done what we said wed do?
% complete estimating % of Budget spent % of work done % of time elapsed
subjective, incomplete draws false conclusions
Enter Earned Value Analysis
Earned Value Analysis is: an industry standard way to: measure a projects progress, forecast its completion date and final cost, and provide schedule and budget variances along the way.
By integrating three measurements, it provides consistent, numerical indicators with which you can evaluate and compare projects.
Whats more Important?
Knowing where you are on schedule? Knowing where you are on budget? Knowing where you are on work accomplished?
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EVA Integrates All Three
It compares the PLANNED amount of work with what has actually been COMPLETED, to determine if COST , SCHEDULE, and WORK ACCOMPLISHED are progressing as planned.
Work is Earned or credited as it is completed.
Earned Value needed because...
Different measures of progress for different types of tasks Need to roll up progress of many tasks into an overall project status
Need for a uniform unit of measure (s or work-hours).
Earned Value needed because...
Provides an Early Warning signal for prompt corrective action.
Bad news does not age well. Still time to recover Timely request for additional funds
OK, So What Is This Stuff?
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First! - We gotta get organized
EVA works best when work is compartmentalized. Compartmentalization is best achieved with a wellplanned Work Breakdown Structure. So, how do I create a WBS for a really complex project?
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Proper WBS Design
One WBS per program
Deliverable-oriented Work not in the WBS is out-of-scope Each descending level represents more detail
Full (and accurate) definition is key
Defined deliverable(s) Timeframe for delivery of product Total cost (direct and indirect) to deliver product
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WBS Units are Work Packages
Lowest level WBS elements Have an accompanying narrative Have three measurable components Scope of work to be accomplished Total (direct and indirect) cost Timeframe for completion
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Control Account Plans
A CAP is essentially a Work Package with some added features: Assignment of responsibility
Organization Individual
Division (if necessary) into lower-level Work Packages. Metrics for measuring EV performance
Milestones % complete Other
The sum of the CAPs constitutes the Performance
Measurement Baseline
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Some New Terms
BCWS - Budgeted Cost of Work Scheduled
ACWP - Actual Cost of Work Performed
BCWP - Budgeted Cost of Work Performed
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Earned Value Definitions
BCWS: Budgeted Cost of Work Scheduled
Planned cost of the total amount of work scheduled to be performed by the milestone date.
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BCWS - Budgeted Cost of Work Scheduled
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Earned Value Definitions
(cont.)
ACWP: Actual Cost of Work Performed
Cost incurred to accomplish the work that has been done to date.
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ACWP - Actual Cost of Work Performed
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Earned Value Definitions (cont.)
BCWP: Budgeted Cost of Work Performed
The planned (not actual) cost to complete the work that has been done.
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BCWP - Budgeted Cost of Work Performed
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The Whole Story
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Some Derived Metrics
SV: Schedule Variance (BCWP-BCWS)
A comparison of amount of work performed during a given period of time to what was scheduled to be performed. A negative variance means the project is behind schedule
CV: Cost Variance (BCWP-ACWP)
A comparison of the budgeted cost of work performed with actual cost. A negative variance means the project is over budget.
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Schedule Variance & Cost Variance
Schedule Variance = BCWP-BCWS 49,000 - 55,000 SV = - 6,000 Cost Variance = BCWP-ACWP 49,000 56,000 CV = - 7,000
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Some More Derived Metrics
SPI: Schedule Performance Index
SPI=BCWP/BCWS SPI<1 means project is behind schedule
CPI: Cost Performance Index
CPI= BCWP/ACWP CPI<1 means project is over budget
CSI: Cost Schedule Index (CSI=CPI x SPI)
The further CSI is from 1.0, the less likely project recovery becomes.
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Performance Metrics
SPI: BCWP/BCWS
49,000/55,000 = 0.891
CPI: BCWP/ACWP
49,000/56000 = 0.875 CSI: SPI x CPI .891 x .875 = 0.780
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Making Projections
Once a project is 10% complete, the overrun at completion will not be less than the current overrun. Once a project is 20% complete, the CPI does not vary from its current value by more than 10%.
The CPI and SPI are statistically accurate indicators of final cost results.
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Making Projections
Today
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Estimate to Complete
Today
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A New Criteria
Activities earn value as they are completed. The value earned is the WBS budgeted cost of the activity completed to date.
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Value of Earned Value
Schedule Status Reporting Cost Status Reporting Forecasting
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Requirements of Earned Value
Proper WBS Design Baseline Budget Control Accounts Baseline Schedule Work measurement by Control Account
work-hours, cost, units, etc.
Good Project Management Practices
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Shortcomings of Earned Value
Quantifying/measuring work progress can be difficult. Time required for data measurement, input, and manipulation can be considerable.
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Summary
EVA & EVMS will help reduce guesswork in:
Measuring performance forecasting
Need to get beyond misleading measures of progress. Reasons to use EVA and EVMS:
Good project management practice
Incorporate into contracts
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Earned Value Analysis
Questions/Discussion
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