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Earned Value AnalysisWhat Is It ?Why Do I Need It ?How Do I Do It?                         1
Today’s SituationNeed for accurate and consistent statusinformationNumerous complex (and interrelated) projects   Project...
There’s Room For Improvement70% of projects are:    •Over budget    •Behind schedule52% of all projects finish at189% of t...
How to answer the question:“Have we done what we said we’d do?” % complete estimating    % of Budget spent    % of work do...
Enter Earned Value Analysis “Earned Value Analysis” is:  • an industry standard way to:     • measure a project’s progress...
What’s more Important?           Knowing where you are           on schedule?           Knowing where you are           on...
EVA Integrates All ThreeIt compares the PLANNED amount of workwith what has actually been COMPLETED, todetermine if COST ,...
Earned Value needed because...Different measures of progress fordifferent types of tasksNeed to “roll up” progress of many...
Earned Value needed because...Provides an “Early Warning” signal for promptcorrective action.    Bad news does not age we...
And One More Reason Why You Need EVA        ?                    10
Because You Gotta !These Set the Stage:GPRA; 1993FASA, Title V; 1994Clinger-Cohen Act; 1996And Then Along Came OMB! (Circu...
OK, So What Is This Stuff?                         12
So, Is This Stuff New ?It’s been around since the sixties.“Cost/Schedule Control Systems Criteria”(C/SCSC)                ...
Examples of informal Earned Value               AnalysisIt’s done informally without realizing it.     •30% time used,    ...
How’s this project doing?120000100000 80000                                                                               ...
Let’s Take A Look Under TheHood                              16
But First! - We gotta get organized   EVA works best when work is ‘compartmentalized’.   Compartmentalization is best achi...
How am I gonna eat this elephant?Obviously in small bites.                                     18
Proper WBS DesignOne WBS per program• Deliverable-oriented• Work not in the WBS is out-of-scope• Each descending level rep...
A sample Work Breakdown Structure                    Serve Pizzas to CustomersProvide the Place   Cook the Food    Serve C...
WBS Units are “Work Packages”Lowest level WBS elementsHave an accompanying narrativeHave three measurable components • Sco...
Control Account Plans  A CAP is essentially a Work Package with some added  features:    Assignment of responsibility    ...
Enough With the WBS Stuff       Already !We came here to talk about Earned Value.                                         ...
Some New TermsBCWS - Budgeted Cost of WorkScheduledACWP - Actual Cost of Work PerformedBCWP - Budgeted Cost of WorkPerform...
Earned Value DefinitionsBCWS: “Budgeted Cost of Work Scheduled”Planned cost of the total amount of work scheduledto be per...
BCWS - Budgeted Cost of Work Scheduled1200001000008000060000                                                              ...
Earned Value Definitions (cont.)ACWP: “Actual Cost of Work Performed” Cost incurred to accomplish the work that has been d...
ACWP - Actual Cost of Work Performed12000010000080000                                                  56000              ...
Earned Value Definitions (cont.)BCWP: Budgeted Cost of Work Performed The planned (not actual) cost to complete the work  ...
BCWP - Budgeted Cost of Work Performed12000010000080000                                               55000               ...
The Whole Story12000010000080000                                             56000                                        ...
Some Derived MetricsSV: Schedule Variance (BCWP-BCWS) A comparison of amount of work performed during a  given period of ...
Schedule Variance & Cost VarianceSchedule Variance = BCWP-BCWS                   $49,000                  - 55,000        ...
Some More Derived MetricsSPI: Schedule Performance Index   SPI=BCWP/BCWS   SPI<1 means project is behind scheduleCPI: Cost...
Performance MetricsSPI: BCWP/BCWS      49,000/55,000 = 0.891CPI: BCWP/ACWP      49,000/56000 = 0.875CSI: SPI x CPI      .8...
Making ProjectionsOnce a project is 10% complete, theoverrun at completion will not be lessthan the current overrun.Once a...
Making Projections120000                                                                                                  ...
Estimate to Complete140000120000                       116,571100000                       102000           Today         ...
A New CriteriaActivities “earn value” as they are completed.      The value earned is the WBS budgeted cost of the      ac...
Value of Earned ValueSchedule Status ReportingCost Status ReportingForecasting                            40
But How Do I Do All This Stuff ?With an Earned Value Management System                                     41
A-11, Part 7 Requires an EVMS“ . . . based on ANSI/EIA Standard 748”And what does that mean?ANSI/EIA 748 provides a list ...
A-11, Part 7 Requires an EVMSSo where do I get one?Buy a prepackaged one. (Lot of ‘em around)Make your own.   •Microsoft...
Requirements of Earned ValueProper WBS DesignBaseline Budget Control AccountsBaseline ScheduleWork measurement by Control ...
Shortcomings of Earned ValueQuantifying/measuring work progresscan be difficult.Time required for data measurement,input, ...
SummaryEVA & EVMS will help reduce guesswork in:   Measuring performance   forecastingNeed to get beyond misleading meas...
Earned Value Resourceshttp://www.pmi.org/http://www.acq.osd.mil/pm/ANSI/EIA 748 is available from:  Global Engineering Doc...
Some “Compliant” SystemsWelcom “Cobra”    http://www.welcom.com/  Schedulemaker     http://www.schedulemaker.com/ Planiswa...
Earned Value AnalysisQuestions/Discussion                          49
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Earned value analisys

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Earned value analisys

  1. 1. Earned Value AnalysisWhat Is It ?Why Do I Need It ?How Do I Do It? 1
  2. 2. Today’s SituationNeed for accurate and consistent statusinformationNumerous complex (and interrelated) projects Projects with many WBS activities Virtual offices Diverse technology platforms 2
  3. 3. There’s Room For Improvement70% of projects are: •Over budget •Behind schedule52% of all projects finish at189% of their initial budgetAnd some, after huge investmentsof time and money, are simply nevercomple 3Source:The Standish Group
  4. 4. How to answer the question:“Have we done what we said we’d do?” % complete estimating % of Budget spent % of work done % of time elapsed  subjective, incomplete  draws false conclusions 4
  5. 5. Enter Earned Value Analysis “Earned Value Analysis” is: • an industry standard way to: • measure a project’s progress, • forecast its completion date and final cost, and • provide schedule and budget variances along the way. By integrating three measurements, it provides consistent, numerical indicators with which you can evaluate and compare projects. 5
  6. 6. What’s more Important? Knowing where you are on schedule? Knowing where you are on budget? Knowing where you are on work accomplished? 6
  7. 7. EVA Integrates All ThreeIt compares the PLANNED amount of workwith what has actually been COMPLETED, todetermine if COST , SCHEDULE, and WORKACCOMPLISHED are progressing asplanned.Work is “Earned” or credited as it iscompleted. 7
  8. 8. Earned Value needed because...Different measures of progress fordifferent types of tasksNeed to “roll up” progress of manytasks into an overall project statusNeed for a uniform unit of measure(dollars or work-hours). 8
  9. 9. Earned Value needed because...Provides an “Early Warning” signal for promptcorrective action.  Bad news does not age well.  Still time to recover  Timely request for additional funds 9
  10. 10. And One More Reason Why You Need EVA ? 10
  11. 11. Because You Gotta !These Set the Stage:GPRA; 1993FASA, Title V; 1994Clinger-Cohen Act; 1996And Then Along Came OMB! (Circular A-11, Part 7)"Agencies must use a performance based acquisitionmanagement system, based on ANSI/EIA Standard748, to measure achievement of the cost, schedule,and performance goals." 11
  12. 12. OK, So What Is This Stuff? 12
  13. 13. So, Is This Stuff New ?It’s been around since the sixties.“Cost/Schedule Control Systems Criteria”(C/SCSC) 13
  14. 14. Examples of informal Earned Value AnalysisIt’s done informally without realizing it. •30% time used, •30% $$ spent •So, if 30% of the work is done, I must be OK ??•Shop floor estimates•Cost comparisons Budget vs. Actual 14
  15. 15. How’s this project doing?120000100000 80000 Projected 60000 Actual 40000 20000 0 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 15
  16. 16. Let’s Take A Look Under TheHood 16
  17. 17. But First! - We gotta get organized EVA works best when work is ‘compartmentalized’. Compartmentalization is best achieved with a well- planned Work Breakdown Structure. So, how do I create a WBS for a really complex project? 17
  18. 18. How am I gonna eat this elephant?Obviously in small bites. 18
  19. 19. Proper WBS DesignOne WBS per program• Deliverable-oriented• Work not in the WBS is out-of-scope• Each descending level represents more detailFull (and accurate) definition is key• Defined deliverable(s)• Timeframe for delivery of product• Total cost (direct and indirect) to deliver productLet’s Look at an example: 19
  20. 20. A sample Work Breakdown Structure Serve Pizzas to CustomersProvide the Place Cook the Food Serve Customers (Others)Make the Dough Cook the Sauce Build the Pizza 20
  21. 21. WBS Units are “Work Packages”Lowest level WBS elementsHave an accompanying narrativeHave three measurable components • Scope of work to be accomplished • Total (direct and indirect) cost • Timeframe for completion 21
  22. 22. Control Account Plans A CAP is essentially a Work Package with some added features:  Assignment of responsibility • Organization • Individual  Division (if necessary) into lower-level Work Packages.  Metrics for measuring EV performance • Milestones • % complete • Other The sum of the CAPs constitutes the Performance Measurement Baseline 22
  23. 23. Enough With the WBS Stuff Already !We came here to talk about Earned Value. 23
  24. 24. Some New TermsBCWS - Budgeted Cost of WorkScheduledACWP - Actual Cost of Work PerformedBCWP - Budgeted Cost of WorkPerformed 24
  25. 25. Earned Value DefinitionsBCWS: “Budgeted Cost of Work Scheduled”Planned cost of the total amount of work scheduledto be performed by the milestone date. 25
  26. 26. BCWS - Budgeted Cost of Work Scheduled1200001000008000060000 BCWS4000020000 0 Nov-03 Jul-03 Jan-03 Jun-03 Dec-03 Mar-03 May-03 Aug-03 Sep-03 Oct-03 Feb-03 Apr-03 26
  27. 27. Earned Value Definitions (cont.)ACWP: “Actual Cost of Work Performed” Cost incurred to accomplish the work that has been done to date. 27
  28. 28. ACWP - Actual Cost of Work Performed12000010000080000 56000 BCWP60000 ACWP 490004000020000 0 Nov-03 Jan-03 Jun-03 Jul-03 Mar-03 May-03 Aug-03 Oct-03 Dec-03 Feb-03 Apr-03 Sep-03 28
  29. 29. Earned Value Definitions (cont.)BCWP: Budgeted Cost of Work Performed The planned (not actual) cost to complete the work 29
  30. 30. BCWP - Budgeted Cost of Work Performed12000010000080000 55000 BCWP60000 49000 BCWS4000020000 0 Nov-03 Jan-03 Jun-03 Jul-03 Apr-03 May-03 Aug-03 Sep-03 Oct-03 Dec-03 Feb-03 Mar-03 30
  31. 31. The Whole Story12000010000080000 56000 BCWS60000 BCWP 55000 49000 ACWP4000020000 0 Nov-03 Jan-03 Jun-03 Jul-03 Feb-03 Mar-03 May-03 Aug-03 Sep-03 Oct-03 Dec-03 Apr-03 31
  32. 32. Some Derived MetricsSV: Schedule Variance (BCWP-BCWS) A comparison of amount of work performed during a given period of time to what was scheduled to be performed. A negative variance means the project is behind scheduleCV: Cost Variance (BCWP-ACWP) A comparison of the budgeted cost of work performed with actual cost. A negative variance means the project is over budget. 32
  33. 33. Schedule Variance & Cost VarianceSchedule Variance = BCWP-BCWS $49,000 - 55,000 SV = - $ 6,000Cost Variance = BCWP-ACWP $49,000 56,000 CV = - $7,000 33
  34. 34. Some More Derived MetricsSPI: Schedule Performance Index SPI=BCWP/BCWS SPI<1 means project is behind scheduleCPI: Cost Performance Index CPI= BCWP/ACWP CPI<1 means project is over budgetCSI: Cost Schedule Index (CSI=CPI x SPI)The further CSI is from 1.0, the less likely projectrecovery becomes. 34
  35. 35. Performance MetricsSPI: BCWP/BCWS 49,000/55,000 = 0.891CPI: BCWP/ACWP 49,000/56000 = 0.875CSI: SPI x CPI .891 x .875 = 0.780 35
  36. 36. Making ProjectionsOnce a project is 10% complete, theoverrun at completion will not be lessthan the current overrun.Once a project is 20% complete,the CPI does not vary from its currentvalue by morethan 10%.The CPI and SPI are statistically accurate indicators of final cost results.Source: Defense Acquisition University 36
  37. 37. Making Projections120000 103865100000 102000 9088280000 Today BCWS60000 BCWP ACWP4000020000 0 Nov-03 Jan-03 Jun-03 Jul-03 Feb-03 May-03 Mar-03 Apr-03 Oct-03 Aug-03 Sep-03 Dec-03 37
  38. 38. Estimate to Complete140000120000 116,571100000 102000 Today BCWS80000 BCWP60000 ACWP4000020000 0 03 03 04 3 4 3 03 3 -0 -0 l-0 -0 v- n- n- p- ar ar ay Ju No Ja Ja Se M M M 38
  39. 39. A New CriteriaActivities “earn value” as they are completed. The value earned is the WBS budgeted cost of the activity completed to date. 39
  40. 40. Value of Earned ValueSchedule Status ReportingCost Status ReportingForecasting 40
  41. 41. But How Do I Do All This Stuff ?With an Earned Value Management System 41
  42. 42. A-11, Part 7 Requires an EVMS“ . . . based on ANSI/EIA Standard 748”And what does that mean?ANSI/EIA 748 provides a list of guidelines •Organization •Planning, Scheduling, and Budgeting •Accounting Considerations •Analysis and Management Reports •Revisions and Data MaintenanceBut, ANSI/EIA 748 doesn’t identify ‘approvedsystems’ 42
  43. 43. A-11, Part 7 Requires an EVMSSo where do I get one?Buy a prepackaged one. (Lot of ‘em around)Make your own. •Microsoft Project •Microsoft ExcelOr it could be as simple as this: 43
  44. 44. Requirements of Earned ValueProper WBS DesignBaseline Budget Control AccountsBaseline ScheduleWork measurement by Control Account work-hours, dollars, units, etc.Good Project Management Practices 44
  45. 45. Shortcomings of Earned ValueQuantifying/measuring work progresscan be difficult.Time required for data measurement,input, and manipulation can beconsiderable. 45
  46. 46. SummaryEVA & EVMS will help reduce guesswork in: Measuring performance forecastingNeed to get beyond misleading measures ofprogress.Reasons to use EVA and EVMS: Good project management practice OMB requirementIncorporate into contracts 46
  47. 47. Earned Value Resourceshttp://www.pmi.org/http://www.acq.osd.mil/pm/ANSI/EIA 748 is available from: Global Engineering Documents 800-854-7179 47
  48. 48. Some “Compliant” SystemsWelcom “Cobra” http://www.welcom.com/  Schedulemaker http://www.schedulemaker.com/ Planisware “OPX2” http://www.planisware.com/RiskTrak http://www.risktrak.com/index.htm Winsight http://www.cs-solutions.com Primavera Systems http://www.primavera.com 48
  49. 49. Earned Value AnalysisQuestions/Discussion 49

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