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The Benefits of using Earned Value Management

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The Benefits of using Earned Value Management presentation, by Simon Tomlinson and Richard Allison, 2 July 2019, at Airbus in Bristol

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The Benefits of using Earned Value Management

  1. 1. The Benefits of using Earned Value Management at Airbus Context and the Theory of EVM in Airbus Simon Tomlinson and Richard Allison 02 July 2019
  2. 2. •Introduction and welcome •How EVM is deployed at Airbus •How EVM is used at Airbus •Questions 02 July, 2019 The Benefits of using Earned Value Management at Airbus2 Agenda
  3. 3. 134,000 Total workforce € 997 billion Order book €67 billion Annual revenue We make it fly. 02 July, 2019 The Benefits of using Earned Value Management at Airbus3
  4. 4. Global Company 02 July, 2019 The Benefits of using Earned Value Management at Airbus4 China 1,150 Spain 13,177 (10%) USA 2,707 (2%) UK 11,304 (9%) Germany 44,214 (34%) France 47,865 (37%) 133,700employees from 135 nationalities Located across 35 countries on more than 180 sites International Sales 31% Europe 69% Non-Europe Other countries 10,178 (8%)
  5. 5. 02 July, 2019 An Airbus takes off or lands every 1.4 seconds. 18,191 Aircraft sold 60 Produced monthly 25,000+ Daily flights 10,926 Delivered Our aircraft are a familiar sight around the world. Data to end December 2017The Benefits of using Earned Value Management at Airbus5
  6. 6. Airbus’ impact in the UK 14,000 Workforce The UK is one of Airbus's 4 home nations (along with France, Germany and Spain) Trained more than 4,000 apprentices in the last 10 years R&D spend is approximately £500mmillion annually More than 8,000 patents since 2000 More than 4,500 companies in our supply chain Indirectly support over 110,000 Jobs £7.8bnEstimated value added to the economy per year Working with 20 universities 02 July, 2019 Source: Oxford Economic ReportThe Benefits of using Earned Value Management at Airbus Page 6
  7. 7. Project Management Office at Airbus Processes, Methods and Tools Operational Support Learning Strategic Planning Central Project and Programme Management Function
  8. 8. Airbus Project Management Office The Project Management Business Partner (PMBP) • Navigates the Project Leader / Programme Manager • Receives delegation from the Project Leader / Programme Manager • Implements and ensures the daily application of the AIRBUS Project Management processes • Carries out Project Control activities CoC P&PM Home Function Project Members Project Leader/ Programme Manager Supported Manager PMBP Functional Manager 02 July, 2019 The Benefits of using Earned Value Management at Airbus8
  9. 9. How EVM is deployed at Airbus 02 July, 2019 The Benefits of using Earned Value Management at Airbus9 Simon Tomlinson 02 July 2019
  10. 10. Airbus Project Management Office EVM Deployment CoC P&PM Home Function Project Members Project Leader/ Programme Manager Supported Manager PMBP Functional Manager 02 July, 2019 The Benefits of using Earned Value Management at Airbus10
  11. 11. What is Earned Value Management? 02 July, 2019 The Benefits of using Earned Value Management at Airbus11 Earned Value Management (EVM) is a methodology for integrating scope, schedule and costs of a Project, in order to objectively take the right decisions. EVM integrates Schedule and Costs simultaneously to display the project performance • Differentiate financial impact of over-cost & delay (= avoid over-cost being covered by delay) • Challenge & secure yearly outlooks and Remain-to-do exercises • Enhance quality of schedule and cost references EVM Benefits • A financial tool, EVM is Project Management good practice • A reporting tool but a basis for business discussion based on trends • Standalone tool: it goes together with other project indicators (critical path monitoring, actuals analysis,…) EVM is not…
  12. 12. EVM process needs 3 main prerequisites 02 July, 2019 The Benefits of using Earned Value Management at Airbus12 EVM brings all 3 elements together into 1 Integrated KPI A robust Project Structure Statements of Work, Clear cost and deliverable responsibility Dedicated Cost Collection, Clear Reporting level Change Management etc… Robust Schedule Management Aligned with Scope Mature Clear Targets Realistic Planning Baseline Up to date Robust Cost Management Aligned with Scope Mature Baseline Agreed with all contributors Monitored and updated Cascaded
  13. 13. Airbus uses EVM throughout the WBS 02 July, 2019 The Benefits of using Earned Value Management at Airbus13
  14. 14. • CV: Cost Variance: − This shows the absolute delta between the value delivered and the value that was planned to be delivered − It is calculated as: Value Delivered – Actual Value • SV: Scheduled Variance: − This shows the absolute delta between the value delivered and the value that was planned to be delivered − It is calculated as: Value Delivered – Planned Value A Quick Recap on the EVM KPIs • CPi: Cost Performance Indicator − This shows the ratio between the value delivered against the cost of achieving what has been delivered − It is calculated as: 02 July, 2019 The Benefits of using Earned Value Management at Airbus14 Value Delivered Cost of Delivery • SPi: Schedule Performance Indicator − This shows the ratio between the value delivered against the value that was planned to be delivered − It is calculated as: Value Delivered Planned Value Airbus Golden Rules: • Only use deliverables we can calculate the value of for EVM • Ensure those deliverables have a similar value • Have the same granularity for spend and delivery • Don’t attempt to match spend to specific deliverables Key is to be able to accurately measure the value of what has been delivered
  15. 15. How Airbus Calculates Earned Value from the Planned Cost of the Deliverables Achieved 02 July, 2019 The Benefits of using Earned Value Management at Airbus15 This number of deliverables Generates this amount of earned value Milestone Selection is key: • Only use a selection of milestones that are appropriate • The spend and delivery profiles must be similar • All deliverables used for EVM must have a similar value • Must be deliverables from all work packages and contributors • A sufficient number of deliverables must be on the critical path • At least one deliverable to fall within each measured time period
  16. 16. 02 July, 2019 The Benefits of using Earned Value Management at Airbus16 Airbus Calculates Earned Value from Actual number of Deliverables Achieved
  17. 17. 02 July, 2019 The Benefits of using Earned Value Management at Airbus17 Airbus Calculates Earned Value from Actual number of Deliverables Achieved
  18. 18. 02 July, 2019 The Benefits of using Earned Value Management at Airbus18 Airbus matches Earned Value to Planned and Actual Cost to determine CPi & SPi
  19. 19. 02 July, 2019 The Benefits of using Earned Value Management at Airbus19 Airbus matches Earned Value to Planned and Actual Cost to determine CPi & SPi
  20. 20. 02 July, 2019 The Benefits of using Earned Value Management at Airbus20 Airbus matches Earned Value to Planned and Actual Cost to determine CPi & SPi Earned Value Planned Spend SPi = Earned Value Actual Spend CPi = By having quantitative performance trends Airbus is able to: • Measure the project performance & progress • Track over cost and delay • Support arbitration and decision-making • Challenge the re-forecasting budget • Set-up an action plan to meet the forecasts A set of Pre-Requisites is required and Golden Rules must be respected to do EVM robustly
  21. 21. Airbus also shows the simpler cost and schedule variance 02 July, 2019 The Benefits of using Earned Value Management at Airbus21 End of Year By showing deviations Airbus can: • Easily see bridge from achievement to baseline • Can show for both schedule and cost • Can show both current and EOY forecast To Date
  22. 22. Pitfalls to watch out for: EVM tends to under estimate the project performance 02 July, 2019 The Benefits of using Earned Value Management at Airbus22 To address this Airbus: • Only uses EVM on larger work packages • Only selects a subset of milestones for EVM • Uses a lot of activities with short durations, but not so many there is too much work to measure them • Splits activities to better align with the spend profile • E.g. Report Generation vs Report Authorisation Deliverables aren’t claimed until they are 100% complete even though spend is being measured continuously
  23. 23. Pitfalls to watch out for: Precision vs accuracy Month EV PV AC CPi SPi CV SV 2 253,187 250,000 226,9231.11574 1.01275 26,264 3,187 3 511,587 500,000 499,3251.02456 1.02317 12,262 11,587 4 700,425 750,000 741,6970.94435 0.93390 -41,272 -49,575 02 July, 2019 The Benefits of using Earned Value Management at Airbus23 Just because CPi and SPi can be calculated to many decimal places doesn’t mean they are that accurate to that level Month EV PV AC CPi SPi CV SV 2 253,187 250,000 226,9231.12 1.01 26,000 3,000 3 511,587 500,000 499,3251.02 1.02 12,000 12,000 4 700,425 750,000 741,6970.94 0.93 -41,000 -50,000 At Airbus we will: • Never quote CPi and CPi to more than 2 decimal places • Place the emphasis on trends rather than individual vales • Use EVM to ask, rather than answer, questions
  24. 24. Pitfalls to watch out for: EVM is not an exact science – It only provides a trend of Schedule & Cost performance 02 July, 2019 The Benefits of using Earned Value Management at Airbus24 CPi and SPi are only as good as the data used to calculate them At Airbus we: • Always check that the numbers align with our instincts • Minimise the backlog in claiming deliverables • Make sure that all costs are either logged or commitments are recorded • Have “Golden Rules” to ensure there is a robust foundation and consistency in application of EVM across all projects and programmes
  25. 25. An example of an Airbus Golden Rule Schedule Robustness Golden Rule: The schedule baseline shall consist principally of milestones of the following types • Business relevant • Deliverables described in project Statement of Work (SoW) • Coverage of all work packages and contributors • ~30% on the Project Critical path (if possible) Rationale: • Earned value is calculated based on physical progress measurement (0 or 100% rule). The schedule needs to describe the actual delivery/outputs of the team. Impact / effect of deviation: • Physical progress measured is not representative, e.g. too low if no deliverable or intermediate product has been delivered. Consequently EV is biased. • Avoid selecting EVM milestone with a baseline date at end of the month • If a milestone is nearly achieved i.e. @ 95%, it will still be considered as not achieved and pushed to the next month. This has a direct impact on EV. 02 July, 2019 The Benefits of using Earned Value Management at Airbus25
  26. 26. Airbus Project Management Office EVM Deployment CoC P&PM Home Function Project Members Project Leader/ Programme Manager Supported Manager PMBP Functional Manager 02 July, 2019 The Benefits of using Earned Value Management at Airbus26
  27. 27. Airbus Project Management Office EVM Application CoC P&PM Home Function Project Members Project Leader/ Programme Manager Supported Manager PMBP Functional Manager 02 July, 2019 The Benefits of using Earned Value Management at Airbus27
  28. 28. The Benefits of using Earned Value Management at Airbus Application of EVM in Airbus Richard Allison 02 July 2019
  29. 29. DD Month, YEAR Presentation title runs here (go to Header and Footer to edit this text)29
  30. 30. Work Breakdown Clear WBS needed Airbus industrial responsibilities January 2018 France Germany UK Spain
  31. 31. What do you need? – Planning, Resources & Cost DD Month, YEAR Presentation title runs here (go to Header and Footer to edit this text)31 • Integrating our KPI − Planning − Phasing − Spend
  32. 32. Golden Rules • General: − Used on development Projects- − Yearly window − Only contributors that have specific deliverables − Average value of milestones • Content of the work must be delivered by the contributor • Ideally would like milestones every month of spend • All contributors to use an approximate similar value. • The milestones should be phased in line with the budget spend. • Statement of work • Definition of the deliverable. 32
  33. 33. Schedule 33 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 # # # # # # # # # # # # 1 2 3 4 5 6 7 8 9 # # # # # # # # # # # # # # # BASELINE 4 # # # # # # # # # # # ACHIEVED 4 # # # # # # # # # # # FORECAST 4 # # # # # # # # # # # BASELINE % # # # # # # # # # # # # INITIAL BASELINE % # # # # # # # # # # # # ACHIEVED % # # # # # # # # # # # # FORECAST % # # # # # # # # # # # # FORECAST 4 # # # # # # # # # # # BASELINE 0 0 0 0 0 0 0 1 1 1 1 1 INITIAL BASELINE % (CONSO)# # # # # # # # # # # # INITIAL BASELINE % - - - - - - - - - - - - # # # # # # # # # # # # ACHIEVED 0 0 # # # # # # # # # # FORECAST 0 0 0 0 0 0 0 1 1 1 1 1 FORECAST 0 0 0 0 0 0 0 1 1 1 1 1 % Nb. % Nb. 54% 64% 76% 87% 270 309 357 64% 76% 229 270 309 357 ACHIEVED / FORECAST 1% 4% 11% 20% 28% 100% 4 14 39 72 99 133 172 195 229 37% 48% 39 72 99 133 172 195 28% 37% 48% 54% 2018 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC BASELINE 1% 4% 11% 20% 87% 100% 4 14 SCHEDULING DATA - CURRENT YEAR ACHIEVED MILESTONES100% TO DATEKPI - CURRENT YEAR BACKLOG ACHIEVED VS PREV. FORECAST 0% 200% SCHEDULING PERFORMANCE100% ADVANCE / DELAY IN MONTH 0,0 COST PERFORMANCE INDEX72% VS CURRENT BASELINE% ? ? 1% 4% 11% 20% 28% 37% 48% 54% 64% 76% 87% 100% 1% 4% 11% 20% 28% 37% 48% 54% 64% 76% 87% 100% 1% 4%0% 20% 40% 60% 80% 100% 120% MilestonesCount BASELINE FORECAST ACHIEVED Start of the year • Baseline established: − Planning − Cost phasing
  34. 34. Finance 34 COST BASELINE # # # # # # # # # # # # # # # # # # # # # # # # INVISIBLEEFFORT DRIVENMILESTONEBASESPREAD TOTAL INITIAL # # # # # # # # # # # # COST BASELINE 0,5 1,5 2,0 # # # # # # # # # # # # # ADVANCE 2,0 0,0 INITIAL COST BASELINE # # # # # # # # # # # # EV 0,5 1,5 2,0 OVERCOST 2,0 0,8 ACTUALS 0,3 2,5 2,8 COST BASELINE 3,3 39,0 42,3 # ADVANCE 42,3 0,0 EV 3,3 39,0 42,3 UNDERCOST 42,3 0,0 1 2 3 4 5 6 7 8 9 # # # OP. REF. 3,3 39,0 42,3 # # # # # # # # # # # # COST BASELINE # # # # # # # # # # # # INITIAL COST BASELINE # # # # # # # # # # # # # # # # # # # # # # # # EARN VALUE(FORECAST)# # # # # # # # # # # # EARN VALUE(ACTUAL) # # # # # # # # # # # # EARN VALUEVS INTIAL BASELINE(ACTUAL)# # # # # # # # # # # # ACTUALS # # # # # # # # # # # # COST PROGRESS FORECAST# # # # # # # # # # # # % M€ % M€ % M€ - 1 3 - - - - - - - - - - - - - - - - ACTUALS 3% 7% - - - 19 23 28 EARNED VALUE 2% 5% 11% 19% 27% 37% 100% 33 37 42 33 37 421 2 5 8 12 16 23 28 37% 46% 55% 67% 77% 87% 46% 54% 67% 77% 87% BASELINE 2% 5% 12% 19% 28% MAR APR MAY 1 2 5 8 12 YTD EOY 2018 JAN FEB SEP OCT NOV DECJUN JUL AUG 100% 16 20 ACTIVITY BASED BUDGET (EARNED VALUE) - CURRENT YEAR YEAR TO DATE & CURRENT YEAR END SITUATION? ? MILESTONE BASED EFFORT DRIVEN 3,3 3,3 3,3 39,0 39,0 39,0 0,0 0,042,3 42,3 42,3 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 45,0 COSTBASELINE ADVANCE EV UNDERCOST OP.REF. EOY 0,5 0,5 0,3 1,5 1,5 2,5 0,0 0,8 2,0 2,0 2,8 0,0 0,5 1,0 1,5 2,0 2,5 3,0 COSTBASELINE ADVANCE EV OVERCOST ACTUALS YTD 0,7 2,0 4,9 8,2 11,7 15,6 19,5 23,4 28,1 32,6 36,9 42,3 0,7 2,0 4,8 8,1 11,6 15,6 19,4 22,8 28,1 32,6 36,9 42,3 0,7 2,01,2 2,8 0 5 10 15 20 25 30 35 40 45 €uromillions COST BASELINE EARN VALUE (FORECAST) EARN VALUE (ACTUAL) ACTUALS
  35. 35. PDT – iD2020 EVM – physical progress BKDA Actuals Nov 18 Schedule: 93% achieved milestones : -24 EVM : - 28 late / +4 in advance -1 xxxx: New XXX - closed mid dec -11/+1 yyy: -1000 TL.: all closed mid dec except 5 shift in 2019 -12/+3 ZZZ: Mat A delay snowball effect on Mat B activities Strong recovery up to Dec – 9 achieved mid dec -4 cccc Int: Mat A shift and Cap N- all closed mid dec EoY forecast: -11EVM shift for next year with NO cost impact. • XXXX: Shift of 7 EVM linked to loads • YYY: Shift 3 EVM linked to loads and IP validation • A/C int: Shift of 1 EVM ESI. 346 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 # # # # # # # # # # # # 1 2 3 4 5 6 7 8 9 # # # # # # # # # # # # # # # BASELINE 4 # # # # # # # # # # # ACHIEVED 4 # # # # # # # # # # # FORECAST 4 # # # # # # # # # # # BASELINE % # # # # # # # # # # # # INITIAL BASELINE % # # # # # # # # # # # # ACHIEVED % # # # # # # # # # # # # FORECAST % # # # # # # # # # # # # FORECAST 4 # # # # # # # # # # # BASELINE 0 0 0 0 0 0 0 0 1 1 1 1 INITIAL BASELINE % (CONSO)# # # # # # # # # # # # INITIAL BASELINE % - - - - - - - - - - - - # # # # # # # # # # # # ACHIEVED 0 0 0 0 0 0 0 0 1 1 1 # FORECAST 0 0 0 0 0 0 0 0 1 1 1 1 FORECAST 0 0 0 0 0 0 0 0 1 1 1 1 % Nb. % Nb. 2018 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC BASELINE 1% 4% 9% 18% 88% 100% 4 14 33 63 96 126 153 178 27% 35% 43% 50% 61% 76% 220 270 315 357 ACHIEVED / FORECAST 1% 4% 9% 17% 24% 96% 4 14 32 59 84 115 134 156 197 32% 37% 43% 55% 66% 81% 237 291 344 SCHEDULING DATA - CURRENT YEAR ACHIEVED MILESTONES93% TO DATEKPI - CURRENT YEAR BACKLOG ACHIEVED VS PREV. FORECAST 1% 75% SCHEDULING PERFORMANCE96% ADVANCE / DELAY IN MONTH 0,5 COST PERFORMANCE INDEX100% VS CURRENT BASELINE% ? ? 1% 4% 9% 18% 27% 35% 43% 50% 61% 76% 88% 100% 1% 4% 9% 17% 24% 32% 37% 43% 55% 66% 81% 96% 1% 4% 9% 17% 24% 32% 37% 43% 55% 66% 81% 0% 20% 40% 60% 80% 100% 120% MilestonesCount BASELINE FORECAST ACHIEVED
  36. 36. BKDA Actuals Nov 18 EVM – cost progress End of Nov Overcost: 0,2M€ XXXX: +0,1M€ actuals in line with activities EoY: confirmed at Op ref +0,5M€ mainly due to YYYY agreed post FC3 EoY: Confirmed at Op ref but due to new assumptions Ex Loss value 0,5k€ EVM shift and overconsumption Dx Loss value 0,3k€ EVM shift and overconsumption YYYY: -0,8M€ Underspend due to EC commitment (S/C activities) XXX: +0,3 M€ EoY -0,4M€ confirmed End of year forecast: 40,1M€ COST BASELINE # # # # # # # # # # # # # # # # # # # # # # # # INVISIBLEEFFORT DRIVENMILESTONEBASESPREAD TOTAL INITIAL # # # # # # # # # # # # COST BASELINE 4,4 32,1 36,5 # # # # # # # # # # # # # DELAY 35,0 1,5 INITIAL COST BASELINE # # # # # # # # # # # # EV 4,4 30,6 35,0 OVERCOST 35,0 0,2 ACTUALS 3,5 31,7 35,2 COST BASELINE 5,1 36,5 41,6 # DELAY 40,2 1,4 EV 5,1 35,1 40,2 OVERCOST 40,2 0,3 1 2 3 4 5 6 7 8 9 # # # OP. REF. 4,6 35,9 40,5 # # # # # # # # # # # # COST BASELINE # # # # # # # # # # # # INITIAL COST BASELINE # # # # # # # # # # # # # # # # # # # # # # # # EARN VALUE(FORECAST)# # # # # # # # # # # # EARN VALUE(ACTUAL) # # # # # # # # # # # # EARN VALUEVS INTIAL BASELINE(ACTUAL)# # # # # # # # # # # # ACTUALS # # # # # # # # # # # # COST PROGRESS FORECAST# # # # # # # # # # # # % M€ % M€ % M€ YTD EOY 2018 JAN FEB SEP OCT NOV DECJUN JUL AUG 100% 15 19 BASELINE 2% 5% 12% 20% 28% MAR APR MAY 1 2 5 8 12 37% 45% 55% 67% 78% 88% 39% 47% 60% 72% 84% 97% 32 36 42 30 35 401 2 5 8 10 14 23 28 ACTUALS 3% 7% 12% 19% 25% 16 19 25 EARNED VALUE 2% 5% 11% 19% 25% 33% - 1 3 5 8 11 15 18 21 25 36% 43% 50% 59% 71% 85% 30 35 - ACTIVITY BASED BUDGET (EARNED VALUE) - CURRENT YEAR YEAR TO DATE & CURRENT YEAR END SITUATION? ? MILESTONE BASED EFFORT DRIVEN 5,1 5,1 4,6 36,5 35,1 35,9 1,4 0,3 41,6 40,2 40,5 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 45,0 COSTBASELINE DELAY EV OVERCOST OP.REF. EOY 4,4 4,4 3,5 32,1 30,6 31,7 1,5 0,2 36,5 35,0 35,2 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 COSTBASELINE DELAY EV OVERCOST ACTUALS YTD 0,7 2,0 4,9 8,2 11,7 15,3 18,9 22,7 27,7 32,3 36,5 41,6 0,7 2,0 4,7 7,8 10,3 13,6 16,4 19,5 25,2 29,9 35,0 40,2 0,7 2,0 4,7 7,8 10,3 13,6 16,4 19,5 25,2 29,9 35,0 1,2 2,8 5,1 8,0 10,6 14,9 17,9 20,9 24,7 29,6 35,2 0 5 10 15 20 25 30 35 40 45 €uromillions COST BASELINE EARN VALUE (FORECAST) EARN VALUE (ACTUAL) ACTUALS
  37. 37. Planning • What works 37 • What doesn't work − Strong governance − Engaged stakeholders − Good analysis − Only the right sort of contributors being tracked by the tool − Not understanding what it means! − Cheating
  38. 38. Thank you

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