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project control using earned value analysis - Part 01


Published on

Project control using earned value analysis - Part 01

Mission of the projects control division
Why the earned value management?
Establishment of the Performance Measurement Baseline
EVM Analysis & Forecasting

Published in: Engineering

project control using earned value analysis - Part 01

  1. 1. PROJECTS CONTROL Guide Lines for projects control implementation using the earned value tools, and technique.
  2. 2. Missions… 2 Support Projects/Programs managers on projects control using EVM tools & Technique for integrate management of Projects Scope, Time, and Cost. Earned Value is needed because... o Preventing scope creep. o Improving communication and visibility with stakeholders. o Performance tracking, and forecasting o Enable measures for different types of tasks. o Roll up progress of many tasks into an overall project status. o Need for a uniform unit of measure (Cost or work- hours). EVM can answering management questions that are critical to the success of every project, such as: o Are we ahead of or behind schedule? o How efficiently are we using our time? o When is the project likely to be completed? o Are we under or over our budget? o How efficiently are we using our resources? o What is the remaining work likely to cost? o What is the entire project likely to cost? o How much will we be under or over budget? Successful projects are standard; there is a continuous improvement of planning on one hand, and budget and schedule control on the other. VISION:
  3. 3. Earned Value Management (EVM)… 3 EVM Develops and Monitors Within Planning & Execution Phases. Key practice of the project control process consist of two phases Establish a Performance Measurement Baseline (PMB) Budget Schedule Measure and analyze performance against the baseline Actual Cost Actual Progress PV EV ACTIME CONTROL COST CONTROL
  4. 4. Earned Value Management (EVM)… 4 It’s a project management technique that’s required the formation of an Integrated Baseline against which Performance can be measured for the duration of the project. EVM Develops and Monitors Three Key dimension for each work package.
  5. 5. Establishment of a Performance Measurement Baseline 5 First 01 Decompose work scope to a manageable level [WBS] Second 02 Develop the Baseline Schedule 03 Third Estimate the Project Budget 04 Four Develop the Performance Measurement Baseline WBS – Work Breakdown Structure • Define the Scope of Work • Decompose Deliverables into Work Package • Decompose to Manageable Level Activities Develop the Baseline Schedule • Define the Major Project Milestones • Logical Relations Between Activities, and WBS • Develop Baseline Schedule Estimate the Project Budget • Quantities Survey • Develop CBS • Estimated Material, Labors, and Non-Labors Cost • Develop Baseline Budget Develop the Performance Measurement Baseline • Assign Budget “Resources” to Baseline Schedule • Resources Leveling & Balancing • Establish a Performance Measurement Baseline
  6. 6. Establish a Performance Measurement Baseline (PMB)… 6 Does Planned Resource Consumption Make Sense? 1. DEFINE THE WORK 2. SCHEDULE THE WORK 3. ALLOCATE BUDGETS J F M A Time $Resources 400 300 200 100 M J J A Program Budget Front Loaded End Loaded Normal
  7. 7. EVM Performance Analysis and Forecasting 7 First 01 Calculate The EVM Three Key dimension Second 02 Calculate the Time & Cost Variances 03 Third Calculate the Project Key Performance Indicates 04 Four Forecast at Completion Project Status The EVM Three Key dimension • Record resource usage during project execution • Objectively measure the physical work progress • Calculate AC - Actual Cost, and EV earned value The Time & Cost Variances • Schedule Variance (SV) • Cost Variance (CV) • Variance at Complete (VAC) The Project Key Performance Indicates • Schedule Performance Index (SPI) • Cost Performance Index (CPI) • To-Complete Performance Index (TCPI) Forecast at Completion Project Status • Time Estimate at Completion (EACt) • Estimate at Completion (EAC) • Variance at Completion (VAC)
  8. 8. Earned Value Management Three Key dimension… 8 Performance measurement baseline .. Budget that is spread over . . . time, to accomplish the scope of work and against which progress can be measured when all work has been phased, cumulative BCWS = BAC Planned Value (PV): Describes how far along a project is supposed to be at any given point in the project schedule. The authorized Budget assigned to the Activities, or Work Breakdown structure The planned (Budget) cost to complete the work that has been done Earned Value = Assigned Budget for each work task * the physical work progress Earned Value (AC): Is the value of work performed expressed in terms of the approved budget assigned to that work for an Activity or Work Breakdown Structure The costs actually incurred and recorded in accomplishing the work performed (BCWP) within a given time period Labor Material (Subcontractor/vendor) Other, Equipment's, computer costs, etc. Indirect Costs Actual Cost (AC): Is an indication of the level of resources that have been expended to achieve the actual work performed to date or in a time period.
  9. 9. Earned Value Management Three Key dimension… 9
  10. 10. Schedule Analysis and Forecasting: How are we doing TIME wise? … EV Vs. PV 10 + Value ... Ahead – Value … Behind Example: If the project is 25 percent behind schedule, meaning that 25 percent of the planned work has not been accomplished. Schedule Variance (SV): Are we ahead or behind schedule? SV = EV – PV SV% = SV / PV SPI > 1 ... Ahead SPI < 1 … Behind This SPI indicates that work is being accomplished percent efficiency, usually used also for compare various projects performance together. Schedule Performance Index How efficiently are we using our time? SPI = EV / PV Using the SPI and the average Planned Value per unit of time, can generate a rough estimate of when the project will be completed, if current trends continue, compared to when it was originally supposed to be completed. Time Estimate at Completion When are we likely to finish the work? EACt = (BAC / SPI) / (BAC / MONTHS)
  11. 11. Cost Analysis and Forecasting: How are we doing COST wise? … EV Vs. AC 11 + Value ... Under-Budget [Save] – Value … Over-Budget [Non-Recoverable Loss] Cost Variance (CV) is a measure of cost performance on Budget. The EVM CV is particularly Critical because it indicate the relationship of Physical Performance to the Cost Spend. Cost Variance (CV): Are we under or over budget? CV = EV – AC CV% = CV / EV SPI > 1 ... Under-Budget [Save] SPI < 1 … Over-Budget [Non-Recoverable Loss] If we translate this into dollars, it would mean that Project has a cost efficiency of $0.xx worth of work for every dollar spent to date, usually used also for compare various projects performance together. Cost Performance Index: How efficiently are we using our resources? CPI = EV / AC The Estimate at Completion (EAC) tells a manager where the cost of a project is likely to end up if current performance trends continue. Variance at Completion: Will we finish under or over budget VAC = BAC – EAC Cost Estimate at Completion
  12. 12. Estimate at Complete (EAC)… 12 Estimate at Complete (EAC) technique that’s depend on various factors as contract type, and previous key performance indicates. Usually calculated within one of the following formulas. EAC EstimateAtComplete Forecast for ETC Work Performed at the Budget Rate EAC = AC + (BAC-EV) Forecast for ETC Work Performed at the Present CPI EAC=BAC/Cumulative CPI Forecast for ETC Work Considering Both SPI & CPI EAC=AC+[(BAC-EV)/(CPI*SPI)]
  13. 13. To-Complete Performance Index (TCPI)… 13 Which can tell a manager the efficiency that must be achieved for a project to meet a specified endpoint such as the Budget at Completion (BAC). This means that for Project EZ to achieve BAC, performance must improve from a CPI of 0.83 to a TCPI of 1.07 for the remaining work. To-Complete Performance Index: How efficiently must we use our remaining resources?
  14. 14. Final EVM Trend Analysis … 14 Does It Given You All Information You Need To Know? Risk At Complete Variance Cost Variance J F M A Time Resources 400 300 200 100 Time Now ACWP (Actual Cost) BCWS (Planned Value) BCWP (Earned Value) M J J A Schedule Slip Schedule Variance Management Reserve ▲ Approx. Time Variance
  15. 15. Final EVM Trend Analysis [REPORT]… 15 Does It Given You All Information You Need To Know? PV EV AV SV SPI CV CPI ETC EAC VAC TCPI Project Deliverables Work Package Activity 01 Activity 02 Activity 03 Activity 04 Activity 05 Activity 06 Activity 07 Activity 08 Activity 09 Activity 10 Activity 11 Forecast Status Month, year Main Elements ManpowerCode Work Breakdown Structure BAC Analysis
  16. 16. Example: 16 Problem: A project has a budget of £10M and schedule for 10 months. It is assumed that the total budget will be spent equally each month until the 10th month is reached. After 2 months the project manager finds that only 5% of the work is finished and a total of £1M spent. The best way to understand an EVM example is to solve it. PV = £2M EV = £10M * 0.05 = £0.5M AV = £1M CV = EV-AC = 0.5-1 = -0.5M CV% = 100 * (CV/EV) = 100*(-0.5/0.5) = -100% overrun SV = EV-PV = 0.5-2 = -1.5 months SV% = 100 * (SV/PV) = 100*(-1.5/2) = -75% behind CPI = EV/AC = 0.5/1 = 0.5 SPI = EV/PV = 0.5/2 = 0.25 EAC = BAC/CPI = 10/0.5 = £20M ETC = (BAC-EV) / CPI = (10-0.5)/0.5 = £19M Time to compete = (10-0.5)/0.25 = 38 Months This project will take TOTAL £20M (19+1) and 40 (38+2) Months to complete. Solution:
  18. 18. NOW … EVM Implementation Let’s Get Started…