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# Earned value in five easy pieces

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A simple introduction to the principles of Earned Value Management

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### Earned value in five easy pieces

1. Earned Value in Five Easy PiecesNot that Earned Value can be made that easy, but this isthe start of getting our mind around the concepts of project performance measurement 1
2. 1. Using a credible schedule, define the planned value of the work2. Measure the Physical % Complete for each period of performance3. Calculate Earned Value = Planned Value x Physical % Complete4. Using the Earned Value variables ,calculate the performance indices5. With the performance indices take corrective actions 2
3. 1 Using a credibleschedule, define the plannedvalue of the work 3
4. 1 Create Work Packages for the activities that produce physical outcomesI 4
5. 1 Define the planned value (PV)(BCWS) spreads for each Work PackageI 5
6. Measure Physical Percent Complete of Work Package Outcomes2 6
7. Define 0/100 or 50/50 activities within each Work Package. You’re either done or not done. There is no “partial” done for a Work Package.2 7
8. 2 Define Apportioned Milestones that describe the incremental progress of the Work Package in units meaningful to the customerII 8
9. 2 Use evidentiary materials for each measurement. These are the only measures of progress. Not the passage of time or the consumption of resources. “Show Me the Outcomes”II 9
10. Calculate the Earned Value 3 10
11. EV = PV  Physical Percent Complete The Value that is Earned - the Earned Value - is the percent of the Planned Value that was delivered at the end of the period of performance. The percentage assessment is always measured by some physical assessment, some evidence that this percentage was actually achieved3 11
12. Using the Earned Value variables (BCWS, BCWP, ACWP), calculate Performance Indices4 12
13. The To Complete Performance Index (TCPI)  BAC  BCWP  TCPIEAC   EAC  ACWP 4 13
14. The Independent Estimate At Completion (IEAC)  Probably as GoodEAC1  BAC CPI as it GetsEAC2  ACWPcum   BAC  BCWPcum  SPIEAC3  ACWPcum   BAC  BCWPcum  SPI  CPI   Probably as Bad as it GetsEAC4  ACWPcum   BAC  BCWPcum  wt1  SPI  wt 2  CPI EAC5  ACWPcum   BAC  BCWPcum  CPI( period ) 4 14
15. 5 With the performance indices‘, take corrective action for remaining workV 15
16. Earned Value must measure work performance within a pre-defined period of time – the period of performance At the end of a project, the Earned Value always equals the Planned Value – since all the work has been done. What is different is how long it took and how much money is cost. Earned Value bounds the time period to the Planned periodIV 16
17. Failing to us discipline and rigor can put you on the beach. So remember… A ship on the beach is a lighthouse to the sea – Dutch Proverb Inattention to budgetary responsibilities  Progress not monitored in a regular and Work authorization not always followed consistent manner Budget and data reconciliation issues  Lack of vertical and horizontal traceability Lack of integrated management systems (critical path) Baseline fluctuations and frequent  Not capturing and using cost and schedule replanting data for corrective action Current period and retroactive changes  Lack of predictive variance analysis Improper use of management reserve  Lack of internal surveillance and controls Earned Value techniques not reflecting  Managerial actions not demonstrated actual accomplishments using Earned Value Untimely and unrealistic Latest Revised Estimates (LRE) 17
18. Are You Doing Earned Value?  Do we know the value of the planned work?  Have we bounded the period of performance for each work element?  Do we know how to measure Physical Percent Complete?www.jack-nicholson.info 18
19. Earned Value is fundamentally a planning tool. It will not “fix” problems with projects. But it will make the performance problems visible in analytical ways.www.jack-nicholson.info 19
20. Glen B. Alleman Niwot Ridge Consulting 4347 Pebble Beach Drive Niwot, Colorado 80503 303.241.9633 glen.alleman@niwotridge.com Performance Based Management(sm) Integrated Master Plan Integrated Master Schedule Earned Value Management Systems Risk Management Proposal Support ServicesGlen B. Alleman, Copyright © 2012 20/58