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EVMS

Basics of Earned Value
Management
Part I
Eleanor Haupt
Earned Value Associates LLC
ehaupt@earnedvalue.biz
937-572-25...
EVMS

What is EVM?

EVM is the primary project
management tool...
that integrates the
technical, schedule, and cost
parame...
EVM Defined

EVMS

• EVM is:
– performance measurement
• how am I doing against my baseline plan?

– performance managemen...
EVMS

Where can EVM be Applied?

• EVM suitable for projects that have:
– Clear definition of work scope
– Project schedul...
EVMS

EVM Guidelines

• EVM has a recognized set of guidelines
– A company’s business planning system should meet these
gu...
EVMS

•

Primary Steps in Performance
Management

Plan all project work
– Create an integrated performance management base...
Why use EVM?

EVMS

Life without EVM
•

•

•
•

Given:
– total budget of $100,000
– 12 month effort
– produce 20 units
Sta...
EVM is Project Management with the Lights On
Why use EVM?

EVMS

Life with EVM
•

•

•

Given:
– total budget of $100,000
– 12 month effort
– produce 20 units
Status:
...
EVMS

Earned Value Gives Insight
TIME NOW

Planned Expenditures

Expenditures

$

“Earned Value”

TIME
10
EVMS

Benefits of EVM

• Requires development of integrated baseline
– Results in better project definition and planning

...
EVMS

How does EVM differ from Project
Management?
Project
Management

EVM

WBS
Team organization
Integrated Schedule
Budg...
EVMS

Basic EVMS Terms

13
EVMS

EVMS measures progress

Progress = Movement Forward

to measure progress,
there must be a standard
against which the...
EVMS

Five Basic Elements
BCWS

Budgeted Cost for Work Scheduled
“Planned Value”

BCWP

Budgeted Cost for Work Performed
“...
EVMS

It’s my pleasure
to award you
this contract for
a new railroad
track

Total Performance Budget

hmm...5 miles of
tra...
EVMS

Planning is a 3 Step Process
Planning is a 3 Step Process

1. DEFINE THE WORK AND ORGANIZE TEAMS

CONTRACT BUDGET BA...
EVMS

•
•
•

•

The Integrated Baseline
Preliminary planning during proposal phase
Finalized as soon as possible after awa...
Budgeted Cost for Work Scheduled (BCWS)
I’ve broken my work plan into 5 sections of track.
I plan to lay 1 section of trac...
EVMS

Budgeted Cost for Work Scheduled
(BCWS)

Month 1

BCWS

cumulative

Month 3

Month 4

Month 5

$ 1,000

BCWS

Month ...
EVMS

Budget at Completion (BAC)

$

m
su

S
CW
ll B
fa
o

BAC
$5,000
$5,000

The baseline is
composed
of many lower level...
EVMS

Budgeted Cost for Work Performed
(BCWP)
the EARNED

VALUE concept

We’re at the end of the second month, but
only 1 ...
EVMS

•

Measuring Performance
BCWP

General Principles
– Establish valid metrics as you establish the time phased baselin...
Budgeted Cost for Work Performed
(BCWP)

EVMS

Month 1

Month 2

Month 3

Month 4

Month 5

cumulative data

BCWS

Planned...
BUDGET BASED

EVMS

Schedule Variance

BC WS
BC WP

of the work I scheduled to have done,
how much did I budget for it to ...
EVMS

Schedule Variance

Month 1

Month 2

Month 3

Month 4

Month 5

cumulative data

BCWS

Planned
Value

BCWP

Earned V...
EVMS

Actual Cost of Work Performed
(ACWP)

Labor came to $1,300,
and materials cost
$1,100. We’ve spent
$2,400 to date.

...
EVMS

BC WP
AC WP

PERFORMANCE BASED

Cost Variance
of the work I actually performed,
how much did I budget for it to cost...
EVMS

Cost Variance
Month 1 Month 2 Month 3 Month 4 Month 5

cumulative data

BCWS

Planned
Value

$ 1,000

$ 2,000

BCWP
...
EVMS

BCWP Allows Isolation of
Schedule and Cost Variances
TIME NOW

5,000

$

CV

SV

BCWP

TIME
schedule variance = BCWP...
EVMS

Estimate at Completion
(EAC)

Just a few little glitches….
We should be able to do
the complete job….ack…
let’s see,...
EVMS

Variance at Completion (VAC)

B AC

what the total job was budgeted for

E AC

what the total job is projected to co...
EVMS

Variance at Completion (VAC)
EAC

VAC

5,000

BAC

$

TIME

5 months

33
EVMS

EVM Variances
Positive

Negative

SV

Ahead of Schedule

Behind Schedule

CV

Under running costs

Over running cost...
EVMS

Planning

35
EVMS

The Organizing Process

• Process
– Step 1: define the authorized work using a work breakdown
structure (WBS)
• brea...
EVMS

Assigning Work
WBS

Assignment of a
single work element
to a single team allows
you to roll up the costs
up either d...
EVMS

The Control Account

• Fundamental building block for EVM
• Established at lowest WBS level
• Properties
– Assigned ...
What is in a Control Account?

EVMS

SCHEDULE

SOW

BUDGET
Labor
1,000 hrs
Labor $
75,000
Material $ 25,000

TIER 1

1.3.4...
EVMS

•

Work Package

Development of Control Account Plans
– MAY break down the control account budget into
smaller work ...
EVMS

A Fun Example…

41
EVMS

•
•

Contract Award
You are the program manager, I. M. Taz
You just won a contract to eliminate varmints within the ...
Organize the work

EVMS

•

Build a simple work breakdown structure

Varmint Control

1.1
Small
Animals

1.3
Program Mgt

...
Organize the workers

EVMS

•

Build a simple organization breakdown structure

I.M. Taz
Program Manager

L. M. Fudd,
smal...
EVMS

Build a RAM and allocate work
Sil
Vester

L. M.
Fudd

Wile E.
Coyote

Daffie
Duck

1.1.1
wascally
wabbits
1.1.2
squi...
EVMS

Build a RAM and allocate work
Sil
Vester
1.1.1
wascally
wabbits
1.1.2
squirrels
1.2.1
tweetie birds
1.2.2
road runne...
EV Techniques

CONTROL ACCT. TITLE: Roadrunner

0/100, 50/50, Units Complete,
% Complete, Milestones

CONTROL ACCOUNT MANA...
EVMS

Summary

• Should now understand
– Basic EVM terms
– Basic concepts of an integrated baseline
• Work, phased over ti...
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Transcript of "EVM of Project Management..."

  1. 1. EVMS Basics of Earned Value Management Part I Eleanor Haupt Earned Value Associates LLC ehaupt@earnedvalue.biz 937-572-2586 1
  2. 2. EVMS What is EVM? EVM is the primary project management tool... that integrates the technical, schedule, and cost parameters of the contract. All work is planned, scheduled, and budgeted in timephased ''planned value'' increments. As work is performed, it is measured and controlled against the baseline. 2
  3. 3. EVM Defined EVMS • EVM is: – performance measurement • how am I doing against my baseline plan? – performance management • what do I need to do to bring the project in on cost and schedule? 3
  4. 4. EVMS Where can EVM be Applied? • EVM suitable for projects that have: – Clear definition of work scope – Project schedule range from a few months to many years – Small to very large cost • EVM not suitable for: – Projects without a clear work definition or deliverable products • Example: research projects 4
  5. 5. EVMS EVM Guidelines • EVM has a recognized set of guidelines – A company’s business planning system should meet these guidelines = Earned Value Management System • Most are existing project management practices • Relatively few practices unique to EVMS – Guidelines do not specify a particular process or business system, but only set an expectation • Some countries have national standards – U.S., Australia, Canada, U.K. – Guidelines may be mandatory in some cases • Can be tailored or scaled for smaller projects 5
  6. 6. EVMS • Primary Steps in Performance Management Plan all project work – Create an integrated performance management baseline • Objectively assess work progress at the level of performance – Compare to the plan and to actual costs • • • • • Analyze significant deviations from the plan Forecast impacts to cost and schedule Take corrective actions as needed Summarize data for progressively higher levels of management Maintain performance management baseline – Update for contract changes (work scope) – Maintain realistic baseline for remaining work 6
  7. 7. Why use EVM? EVMS Life without EVM • • • • Given: – total budget of $100,000 – 12 month effort – produce 20 units Status: – spent to date: $64,000 – time elapsed: 6 months – units produced: 8 complete, 2 partial How are you doing, and how do you know how you are doing? How far along are you? – 64% spent (cost) – 50% spent (time) 7
  8. 8. EVM is Project Management with the Lights On
  9. 9. Why use EVM? EVMS Life with EVM • • • Given: – total budget of $100,000 – 12 month effort – produce 20 units Status: – spent to date: $64,000 – time elapsed: 6 months – units produced: 8 complete, 2 partial Real Status: – You should have completed 50% of the work • You’ve completed 42% of the work – A major vendor was late in delivering certain parts • You’ve spent 64% of your budget – You’ve isolated the main cost variance to aluminum prices • You’re forecasting additional cost overruns for the remaining work – You now know what the drivers are – You can now take the appropriate actions 9
  10. 10. EVMS Earned Value Gives Insight TIME NOW Planned Expenditures Expenditures $ “Earned Value” TIME 10
  11. 11. EVMS Benefits of EVM • Requires development of integrated baseline – Results in better project definition and planning • Early identification of trends and problems • Accurate picture of project status – Cost, schedule, and technical – Segregation of schedule and cost variances • Projection of final costs • Project control by the team – Enables project manager to make informed decisions based on facts • Results in successful projects – On time, on cost 11
  12. 12. EVMS How does EVM differ from Project Management? Project Management EVM WBS Team organization Integrated Schedule Budget Integrated Baseline Earned Value measurement Work authorization Variance analysis Trend projection 12
  13. 13. EVMS Basic EVMS Terms 13
  14. 14. EVMS EVMS measures progress Progress = Movement Forward to measure progress, there must be a standard against which the forward movement may be compared EVMS establishes a baseline to measure progress 14
  15. 15. EVMS Five Basic Elements BCWS Budgeted Cost for Work Scheduled “Planned Value” BCWP Budgeted Cost for Work Performed “Earned Value” ACWP Actual Cost of Work Performed “Actual Cost” BAC Budget at Completion EAC Estimate at Completion 15
  16. 16. EVMS It’s my pleasure to award you this contract for a new railroad track Total Performance Budget hmm...5 miles of track, 5 months to do it all....$5000 budget....This is going to be tough! What is the total job What is the total job supposed to cost? supposed to cost? What is the value of the What is the value of the contract at cost? contract at cost? = Performance Budget = Performance Budget 16
  17. 17. EVMS Planning is a 3 Step Process Planning is a 3 Step Process 1. DEFINE THE WORK AND ORGANIZE TEAMS CONTRACT BUDGET BASE BA SE LI NE 2. SCHEDULE THE WORK PM $ 3. ALLOCATE BUDGETS 100 40 60 15 25 TIME 30 30 17
  18. 18. EVMS • • • • The Integrated Baseline Preliminary planning during proposal phase Finalized as soon as possible after award – PM approves the baseline Integrated baseline – Work scope – Integrated master schedule – Time phased budget Tenets for managing the baseline – Control – Maintain realism – Reviews 18
  19. 19. Budgeted Cost for Work Scheduled (BCWS) I’ve broken my work plan into 5 sections of track. I plan to lay 1 section of track each month. I estimated the cost of each section at $1,000. I’m establishing the BCWS for each section at $1,000. BCWS = performance budget Month 1 BCWS = $1,000 Month 2 BCWS = $1,000 Month 3 BCWS = $1,000 Month 4 BCWS = $1,000 Month 5 BCWS = $1,000 each dollar of BCWS represents a specific dollar of work scope each dollar of BCWS represents a specific dollar of work scope
  20. 20. EVMS Budgeted Cost for Work Scheduled (BCWS) Month 1 BCWS cumulative Month 3 Month 4 Month 5 $ 1,000 BCWS Month 2 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 2,000 $ 3,000 4 $ 4,000 $ 5,000 20
  21. 21. EVMS Budget at Completion (BAC) $ m su S CW ll B fa o BAC $5,000 $5,000 The baseline is composed of many lower level elements. These sum up to the total value of the contract. $ $ $ = $ $ $ $ time •• when all work has been phased, cumulative BCWS = BAC when all work has been phased, cumulative BCWS = BAC e.g., $5,000 = $5,000 e.g., $5,000 = $5,000 21
  22. 22. EVMS Budgeted Cost for Work Performed (BCWP) the EARNED VALUE concept We’re at the end of the second month, but only 1 section of track is complete. Earned value of work completed = $1,000 ••Assess progress on recurring basis Assess progress on recurring basis ••There are different methods of There are different methods of earning value (described in 300B) earning value (described in 300B) ••You earn value the same way as it You earn value the same way as it was budgeted in baseline was budgeted in baseline 22
  23. 23. EVMS • Measuring Performance BCWP General Principles – Establish valid metrics as you establish the time phased baseline • Metrics should be objective and quantifiable • Relate true work status – Should be a quantitative and discrete way to measure the work – May tie in with success criteria or technical measure • e.g., successful completion of a specific test • Must be consistent in following established metric as work progresses 23
  24. 24. Budgeted Cost for Work Performed (BCWP) EVMS Month 1 Month 2 Month 3 Month 4 Month 5 cumulative data BCWS Planned Value BCWP Earned Value $ 1,000 $ 2,000 $ $ 3,000 $ 4,000 $ 5,000 1,000 time now 24
  25. 25. BUDGET BASED EVMS Schedule Variance BC WS BC WP of the work I scheduled to have done, how much did I budget for it to cost? of the work I actually performed, how much did I budget for it to cost? SCHEDULE VARIANCE is the difference between work scheduled SCHEDULE VARIANCE is the difference between work scheduled and work performed (expressed in terms of budget dollars) and work performed (expressed in terms of budget dollars) formula: formula: SV $ = BCWP --BCWS SV $ = BCWP BCWS example: example: SV = BCWP --BCWS = $1,000 --$2,000 SV = BCWP BCWS = $1,000 $2,000 SV= -$1,000 (negative = behind schedule) SV= -$1,000 (negative = behind schedule) 25
  26. 26. EVMS Schedule Variance Month 1 Month 2 Month 3 Month 4 Month 5 cumulative data BCWS Planned Value BCWP Earned Value SV (cum) Schedule Variance $ 1,000 $ 2,000 0 $ 1,000 -$1,000 $ 3,000 $ 4,000 $ 5,000 -$1,000 26
  27. 27. EVMS Actual Cost of Work Performed (ACWP) Labor came to $1,300, and materials cost $1,100. We’ve spent $2,400 to date. Value of ACWP comes from Value of ACWP comes from actual accounting records actual accounting records 27
  28. 28. EVMS BC WP AC WP PERFORMANCE BASED Cost Variance of the work I actually performed, how much did I budget for it to cost? of the work I actually performed, how much did it actually cost? COST VARIANCE is the difference between budgeted cost COST VARIANCE is the difference between budgeted cost and actual cost and actual cost formula: formula: CV $ = BCWP --ACWP CV $ = BCWP ACWP example: example: CV = BCWP --ACWP = $1,000 --$2,400 CV = BCWP ACWP = $1,000 $2,400 CV= -$1,400 (negative = cost overrun) CV= -$1,400 (negative = cost overrun) 28
  29. 29. EVMS Cost Variance Month 1 Month 2 Month 3 Month 4 Month 5 cumulative data BCWS Planned Value $ 1,000 $ 2,000 BCWP Earned Value 0 $ 1,000 SV (cum) ACWP CV (cum) Schedule Variance Actual Costs Cost Variance -$1,000 $ 800 -$800 $ 3,000 $ 4,000 $ 5,000 -$1,000 $ 2,400 -$1,400 29
  30. 30. EVMS BCWP Allows Isolation of Schedule and Cost Variances TIME NOW 5,000 $ CV SV BCWP TIME schedule variance = BCWP - BCWS = negative number cost variance = BCWP - ACWP = negative number 5 months behind schedule, behind schedule, over cost over cost 30
  31. 31. EVMS Estimate at Completion (EAC) Just a few little glitches…. We should be able to do the complete job….ack… let’s see, for about $7,500 31
  32. 32. EVMS Variance at Completion (VAC) B AC what the total job was budgeted for E AC what the total job is projected to cost VARIANCE AT COMPLETION is the difference between what the total VARIANCE AT COMPLETION is the difference between what the total job is supposed to cost and what the total job is now expected to cost. job is supposed to cost and what the total job is now expected to cost. FORMULA: FORMULA: VAC = BAC --EAC VAC = BAC EAC Example: Example: VAC = $5,000 --$7,500 VAC = $5,000 $7,500 VAC = --$2,500 (negative = overrun) VAC = $2,500 (negative = overrun) 32
  33. 33. EVMS Variance at Completion (VAC) EAC VAC 5,000 BAC $ TIME 5 months 33
  34. 34. EVMS EVM Variances Positive Negative SV Ahead of Schedule Behind Schedule CV Under running costs Over running costs VAC Projected underrun Projected overrun 34
  35. 35. EVMS Planning 35
  36. 36. EVMS The Organizing Process • Process – Step 1: define the authorized work using a work breakdown structure (WBS) • break the work down into manageable pieces • provides a framework for – program and technical planning – cost estimating and resource allocation – performance measurements and status reporting – Step 2: define the organizational structure • Organizational Breakdown Structure (OBS) – Step 3: assign a single element of work to a single manager • control account manager (CAM) 36
  37. 37. EVMS Assigning Work WBS Assignment of a single work element to a single team allows you to roll up the costs up either direction ORGANIZATION control account control account control account control account control account control account control account 37
  38. 38. EVMS The Control Account • Fundamental building block for EVM • Established at lowest WBS level • Properties – Assigned to Control Account Manager – “Mini Project” work schedule budget 38
  39. 39. What is in a Control Account? EVMS SCHEDULE SOW BUDGET Labor 1,000 hrs Labor $ 75,000 Material $ 25,000 TIER 1 1.3.4.1 Build ejection seat TIER 2 CONTROL ACCOUNT PLAN CAM name: ______ Work Work WBS: _______ Total Budget: _________ $ $ $ $ $ $ $ $ $ Work 39
  40. 40. EVMS • Work Package Development of Control Account Plans – MAY break down the control account budget into smaller work packages • Work Packages – – – – – – subset of control account Work Pkg #1 reasonably short in duration Work Pkg #2 single element of cost (e.g., labor) Work Pkg #3 single technique for earning value consistent with detail schedules has same characteristics as control account • • • • CONTROL ACCOUNT PLAN $ $ $ $ $ $ $ $ $ scope of work milestone completion criteria single performing organization start and end dates – A group of activities on the schedule 40
  41. 41. EVMS A Fun Example… 41
  42. 42. EVMS • • Contract Award You are the program manager, I. M. Taz You just won a contract to eliminate varmints within the state of Arizona – birds (tweetie and road runner types) – small animals • You have an organization of highly trained specialists – – – – • L. M. Fudd Sil Vester the cat Wile E. Coyote Daffie Duck (your deputy and the CAM for management) You have allocated the following budgets from your $50,000 contract award – – – – – wascally rabbits ($5,000) squirrels ($5,000) tweetie birds ($20,000) road runners ($10,000) program management ($10,000) 42
  43. 43. Organize the work EVMS • Build a simple work breakdown structure Varmint Control 1.1 Small Animals 1.3 Program Mgt 1.2 Birds 1.1.1 wascally wabbits 1.2.1 tweetie 1.1.1 1.1.2 wascally squirrels wabbits 1.2.2 road runner 43
  44. 44. Organize the workers EVMS • Build a simple organization breakdown structure I.M. Taz Program Manager L. M. Fudd, small animals Sil Vester tweetie birds Wile E. Coyote road runners Daffie Duck Program Mgt 44
  45. 45. EVMS Build a RAM and allocate work Sil Vester L. M. Fudd Wile E. Coyote Daffie Duck 1.1.1 wascally wabbits 1.1.2 squirrels 1.2.1 tweetie birds 1.2.2 road runner RAM is a listing of the control RAM is a listing of the control accounts, the responsible accounts, the responsible manager (control account manager (control account managers), and assigned budget managers), and assigned budget 1.3 program management 45
  46. 46. EVMS Build a RAM and allocate work Sil Vester 1.1.1 wascally wabbits 1.1.2 squirrels 1.2.1 tweetie birds 1.2.2 road runner 1.3 program management L. M. Fudd Wile E. Coyote Daffie Duck $5,000 $5,000 $20,000 control account $10,000 $10,000 46
  47. 47. EV Techniques CONTROL ACCT. TITLE: Roadrunner 0/100, 50/50, Units Complete, % Complete, Milestones CONTROL ACCOUNT MANAGER: Wile E. Coyote BUDGET: $10,000 TIER I MILESTONE WP# WORK DESCRIPTION AWARD EV METHOD BCWS 1 Anvil END MONTH 1 MONTH 2 MONTH 3 MONTH 4 MONTH 5 MONTH 6 TOTAL BAC 1,500 1,500 0/100 v BCWP BCWS 2 Paint Fake Tunnel BCWP BCWS 3 Build Road units complete BCWP BCWS 4 Build Anvil Support Mechanism 500 50/50 500 v 600 v 1,000 v milestone v 600 v 600 600 5 600 3,000 v v v 1,000 1,000 v 3,000 v BCWP BCWS Install Anvil Support Mechanism 1,000 500 500 v 500 1,500 v % complete BCWP TOTAL CONTROL ACCOUNT PLAN BCWS BCWP Schedule Variance month cumulative Actual Costs Cost Variance month cumulative 600 1,600 2,100 2,600 2,600 500 10,000
  48. 48. EVMS Summary • Should now understand – Basic EVM terms – Basic concepts of an integrated baseline • Work, phased over time, with time phased budget – Basics of planning – Control account concepts and example Please stay tuned for Part 2!! 48
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