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  • 1. Project Management National Conference 2011 PMI India Best Practices of Managing Earned Value in Project Schedule Senthil Kumar Ramachandran PMP Director – Engineering Aricent Technologies2|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 2. Project Management National Conference 2011 PMI India Contents 1 Abstract..............................................................................................................................4 2 Structure of this paper........................................................................................................5 3 Introduction........................................................................................................................5 4 Leverage earned value measurement and analysis.............................................................6 5 Challenges in analysing earned value ...............................................................................9 6 How to use Microsoft Project to track earned value?......................................................10 1.1.1 Resource loading and associate billing cost............................................................12 1.1.2 Baseline plan in alignment with project schedule, efforts and costs.......................12 1.1.3 Update progress of tasks, actual start and actual finish dates.................................12 1.1.4 Revision of baselines...............................................................................................12 7 Conclusion........................................................................................................................15 8 References........................................................................................................................15 9 Author’s Profile................................................................................................................16 ............................................................................................................................................163|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 3. Project Management National Conference 2011 PMI India 1 Abstract In IT industry till recent times, the organization process guidelines encourage individual project managers to frequently perform measurement and analysis of efforts/schedule variance and defect rate against the total volume of the delivery. But the individual project cost against revenues is not consistently analysed even though the revenue verses cost performance analysis performed at the program level (for group of projects) by key stakeholders above project managers. But the well-proven earned value management technique should be practiced at projects level, if required, at sub-project or task level. Definitely it would enable the project manager to take adequate proactive steps for project success. Though the project managers appreciate the real value of earned value management theory, most of them think that performing earned value measurement and analysis is time consuming and hard. Our experience is that the effective use of available tools like Microsoft Project would help project managers to measure earned value parameters easily with least effort. This paper begins with the discussion of how the critical earned value parameters could be leveraged to take timely corrective action. Subsequently, illustrates the steps involved in preparing and maintaining the project schedule using Microsoft Project (MS Project) to track the earned value parameters. Key benefits of managing the earned value in project schedule are: • Near zero effort to manage the earned value results • Ability to measure earned value at the individual project work package or sub-project level • Integrated view of project cost performance based on earned value and efforts4|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 4. Project Management National Conference 2011 PMI India 2 Structure of this paper Table 1 brief how the paper has been structured for the benefit of the readers.Section Name Purpose of the sectionIntroduction Simple explanation of the earned value formulasLeverage earned value Throughout the life cycle of a project how earned value measurementsmeasurement and could be leveraged to analyse software life cycle metrics and assessmentanalysis the cost risk. Based on the triggers of earned value goals deviation, the recommended analysis and potential corrective actions on software life cycle metrics and cost risk assessment are discussed.Challenges in analysing How the project environment challenges the project team to analyseearned value earned value in the project execution phase?How to Use Microsoft The step-by-step procedures to track earned value parameters usingproject (MS project) to Microsoft project. In the live presentation session, the near life Microsofttrack earned value? project schedules will be shown for the benefit of the audience to understand the tracking earned value in MS project. Table 1 : Structure of this paper 3 Introduction The earned value parameters are critical for IT project manager to determine the past, present and future cost performance at any point in time of a project. Let us understand the earned value parameters from IT project management perspective. Budgeted Cost of Work Scheduled or Planned Value (BCWS or PV) BCWS (or PV) is the planned cost to accomplish work to complete the task or set of tasks to achieve the desired results. In Microsoft project (MS project) terms, BCWS are the latest baseline cost up to the project status reporting date. Actual Cost of Work Performed or Actual Cost (ACWP or AC) ACWP (or AC) is the actual cost incurred on accomplished work on the task or set of tasks to achieve the desired result. In MS project terms, ACWP are the actual cost up to the project status reporting date. Budgeted Cost of Work Performed or Earned Value (BCWP or EV)5|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 5. Project Management National Conference 2011 PMI India BCWP (or EV) is the cost originally planned on the accomplished work on the tasks or set of tasks at particular point in time. In MS project terms, BCWP are the earned value (cost budgeted) of the tasks or subprojects up to the project status reporting date. Based on the above three cost parameters, the following critical performance measures are derived Cost Performance Index (CPI) = BCWP/ACWP Schedule Performance Index (SPI) = BCWP/BCWS Estimate at completion = BAC/CPI Variance at Completion = BAC - VAC 4 Leverage earned value measurement and analysis The periodic project status reporting guides the management and key project stakeholder to obtain the past, present and future performance. At any reporting period the earned value indicators – CPI, EAC and VAC should be tracked to monitor the cost performance in the past, present and future. Remarkably the earned value indicator should act as a trigger to analyze software delivery metrics results as well as mitigation (or implementation of contingency) of cost risk. Earned value analysis triggers In a typical software project, no clear relationship is drawn between software delivery metrics and earned value measurements even though the project management practitioner monitors software life cycle metrics and updates risk management plan on a periodic basis. In fact, the corrective actions based on reported metrics and risk response planning are performed independent of earned value analysis. As a continuous process in a software project life cycle, the earned value analysis should trigger the software life cycle metrics analysis and assessment of cost risks. Subsequently, metrics results should leads to corrective actions whereas the assessment of project cost risks should determine the risk response planning.6|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 6. Project Management National Conference 2011 PMI India Figure 1 shows the pictorial representation of how measurement and analysis of earned value should play the integral part of software project life cycle. It represent EV measurement is a continuous process it triggers analysis of software life cycle metrics as well as reassessment of cost risks to identify new risks. The flow chart in the Figure 1 shows the cyclic activities triggered for earned value measurement and analysis. The earned value goals mentioned in the flow chart are examples. Figure 1 : Earned Value Analysis in a software project life cycle Analysis and necessary corrective actions on software life cycle metrics The IT organization guidelines might define the cost variance goals. However the characteristics of the project like working model (offshore or onsite), pricing agreement etc., determines the project specific earned value goals.7|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 7. Project Management National Conference 2011 PMI India Project Earned Value Goals CPI should not be lesser than 0.95 (CPI >= 0.95) EAC should not exceed 5% of the latest baseline cost or BAC (EAC <= BAC+(5% of Baseline cost) VAC should not be higher than 5% of the latest baseline cost or BAC (VAC <= 5% of baseline cost) Figure 2 : Project Earned value goals Typically earned value measurement and analysis at any project status reporting period should meet the goals as in Figure 2 : Project Earned value goals. The time-phased analysis and subsequent corrective actions should have to be put in place throughout the project life cycle. The recommended analysis and potential corrective actions during various stages (life cycle phases) of the project are highlighted in the Table 2 : Recommended analysis and potential corrective actions to bring the earned value back into control. Life Cycle Recommended analysis Potential Corrective Actions Phases (If analysis results are below defined goals or affecting earned value goals) Requirement Clarity of use cases and Assess requirement priorities against ambiguities Analysis (RA) unambiguous articulation Co-operation of customer Management or steering committee escalation on counter-parts and end users Idle efforts and locking of resources High level Evaluate review efficiency or Reduce fagan reviews cycle time whereas increase design effectiveness peer review cycle time Analyze requirement volatility • Reduction of review-to-correction lead time • Define implementation priorities • Assess cost risk Low level Measure open issues and • Define drop dead lines to address dependencies design dependencies • Access scope risk Coding and Measure CUT productivity • Resource shuffling Unit Testing • Increase unit testing tools usage Measure code review efficiency Increase review effectiveness and review correction lead time Integration Measure pre-delivery defect Shorten testing cycle by increasing test execution and System density cycle and reporting testing Analyse Defect removal • Re-plan on testing location – onsite/offshore efficiency • Assess schedule risk8|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 8. Project Management National Conference 2011 PMI India User Measure delivered defect Measure reproducible and non-producible defect Acceptance density ratios and re-plan for resource deployment proportion (onsite verses offshore) Measure defect rework efforts Re-plan for re-testing and assess rework cost Post Measure problem reporting and • Reproduce-able/non-reproduce-able defect ratios Acceptance turnaround time and re-plan for resource deployment proportion Support • Reduce Idle time on closure of defects Table 2 : Recommended analysis and potential corrective actions Assessment of project cost risk As discussed earlier, the earned value indicators should trigger re-assessment of risk. The Figure 3 shows the outcome of the root cause analysis performed to re-assess the risk as the deviation from earned value goals has occurred in one of our project during the coding and unit testing phase. Figure 3: Cost risk re-assessment The root causes highlighted in pink has emerged as potential risk. It helps the project manager to mitigate or implement contingency. 5 Challenges in analysing earned value During the project planning phase the following aspects are known9|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 9. Project Management National Conference 2011 PMI India 1. Effort estimates for the scope of work as per statement of work or approved contracts agreements 2. Original project cost based on effort estimates 3. Work breakdown structure 4. Defined milestones for software life cycle phases 5. Planned project duration and start/end date of the project Therefore, it will be easy to measure the earned value parameters during the planning phase and early stages of execution phase. But tracking will be difficult gradually as changes are inevitable in any project. The following factors in execution make earned value analysis exercises cumbersome and time consuming • Changes in team size • Revision in efforts and cost • Changes in cost recovery model due to relocation of teams • Resource cost changes due to change in job levels or revision of resource cost • Addition of missed or unknown tasks in later stage of the project • Deletion of redundant tasks in later stage of the project • Necessity of re-planning schedule due to cost overruns • Necessity of re-planning schedule due to change of resources 6 How to use Microsoft Project to track earned value? Above challenges will be addressed if the project manager and project lead could do a good job on preparation and tracking of MS project driven schedules, cost10|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 10. Project Management National Conference 2011 PMI India and resources deployment. In the Figure 4: Earned Value Tracking – BCWS, BCWP, ACWP, CPI and EAC the live schedule shows the earned value parameters – BCWS, BCWP, ACWP, CPI and EAC tracked on a periodic basis (say weekly). Figure 4: Earned Value Tracking – BCWS, BCWP, ACWP, CPI and EAC Note to the readers: In the live presentation session, the near live MS project schedules will be shown for the benefit of the audience to understand the tracking earned value in MS project with the help of the steps described below. Table 3 shows the steps involved in preparing and tracking the project schedule using MS project to measure earned value parameters effectively11|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 11. Project Management National Conference 2011 PMI India Step Description Frequency Project Phase 1 Sequence the work breakdowns against each life 1 Planning cycle phases 2 1.1.1 Resource loading and associate billing 1 Pre-execution cost 3 1.1.2 Baseline plan in alignment with project 1 Pre-execution schedule, efforts and costs 4 1.1.3 Update progress of tasks, actual start and Weekly On execution actual finish dates 5 1.1.4 Revision of baselines On need basis On execution Table 3: Steps to prepare and track earned value Step 1: Sequence the work breakdown against each life cycle phases The live MS project schedule in the Figure 5: Work Break Down and the constraints shows how the work breakdowns and its relationships are tracked at a granular level. Also note the constraints or dependencies are identified as milestones (highlighted in pink) in order to have better control on dependencies. Figure 5: Work Break Down and the constraints Step 2: Resource loading and associate billing cost12|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 12. Project Management National Conference 2011 PMI India As the earned value indicators are cost related, the billing cost of resources should be associated in the resource sheet. Refer the live MS project schedule in the Figure 6 : Resource Sheet shows the resource names and assigned billing cost. The navigation of View  Resource Sheet in MS project shows the resource details and the cost per hour. The standard rate as well as the overtime rates should be associated if any special rates are agreed with customers on expert resources or hours worked beyond normal working hours. Figure 6 : Resource Sheet Step 3: Baseline plan in alignment with project schedule, efforts and costs The schedule should be aligned with project efforts and cost as per the agreed contract or Statement of work and then it should be base lined. The live MS project schedule in the Figure 7 : Baseline of schedule, efforts and cost shows the baseline work (refers to the effort) whereas baseline cost refers to the project cost. The EV indicator – BCWS refers to the baseline cost.13|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 13. Project Management National Conference 2011 PMI India Figure 7 : Baseline of schedule, efforts and cost Step 4: Update progress of tasks, actual start and actual finish dates The periodic and accurate updates of tasks should be performed to effectively measure earned value parameter. The live MS project schedule shown in the Figure 8 : Progress updates, the % complete column shows the percentage of accomplished work and it proves that the earned value parameters – BCWP, ACWP, CPI and EAC are current and up-to-date. As a result, it will guide the project manager to take necessary course of actions based on the analysis of reported software life cycle metrics and assessment of cost risks. Figure 8 : Progress updates Step 5: Revision of baselines The revision of baselines possibly occurs in the following situations14|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 14. Project Management National Conference 2011 PMI India • Change of team members • Revision in efforts, cost and efforts due to internal or external change request • Resource cost changes according to job levels/experience • Organization initiated change in resource cost But the revision of baseline is allowed for maximum of 10 times in microsoft project in addition there are options to remove baselines. The live MS project schedule shown in the Figure 8 has the Baseline 1 Cost column. It implies the 1st time revision of the baseline has occurred. However the BCWS will reflect the latest baseline1 cost. 7 Conclusion The best practices discussed in this paper should encourage PM practitioners to perform the earned value measurement and analysis throughout the project as it is critical to have project cost in control. The schedule variance and SPI are excluded in the discussion as earned value is more accurate and appropriate for cost measurement and predication rather than schedule. 8 References [1] Project Management Body of Knowledge [2] Microsoft office project version 2003 [3] Senthil Kumar Ramachandran,”COTS implementation risk assessment for Communication Service Providers” presented in PML 2005, Bangalore15|P a g e Application of Select Tools of Psychology for Effective Project Management
  • 15. Project Management National Conference 2011 PMI India 9 Author’s Profile As a leader in execution, Senthil Kumar Ramachandran constantly look forward to delivering value to customers by engaging and developing global teams focused on IT solution delivery by leveraging the 19 years of experience spans across technology domains in software services industry. Currently, Senthil is a Director – Engineering in Aricent Technologies. He is leading project delivery teams comprise of 150+ direct and indirect reporting globally. Prior to joining Aricent, Senthil has 6 years stint with Hewlett Packard. He was part of Wipro Technologies and GEC Alsthom in India too. He has Bachelor of Computer Engineering degree (Distinction) from Madurai Kamaraj University. He has served as one of a Honorary Director to develop the profession of Project Management in the PMI Bangalore Chapter for two years since August 2007. Senthil’s key professional associations and contributions in recent years: • Paper titled COTS implementation risk assessment for Communication Service Providers has been selected for presentation in International Project Management Conference – PML 2005 held in Bangalore • Published a paper on Order Management Core Processes and Pain areas in Tele-management Forum, USA on August 2003 Previously lead HP India Center PM Forum – Project/Program management forum for learning and sharing • Delivered PM Practitioners case study presentation in PMI Chapters senthilkumar.ramachandran@aricent.com16|P a g e Application of Select Tools of Psychology for Effective Project Management

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