EVM is a project management process that integrates scope, schedule, and cost to assess project performance and forecast outcomes. It allows objective measurement of progress against a performance measurement baseline (PMB) which includes a work breakdown structure, schedule, and time-phased budget. EVM helps identify variances so management can take corrective actions to mitigate risks and keep the project on track. NASA requires EVM for projects over $20 million to enhance the likelihood of success through active measurement and management.

1. EVMS
The Principles, Best Practices and Benefits
Gary C. Humphreys
Humphreys & Associates, Inc.
NASA PM Challenge 2010
Used with Permission

2. PART 1
Overview, Earned Value Management
NASA PM Challenge 2010 1

3. What is EVM?
• Earned Value Management (EVM) is an integrated project
management process for assessing, understanding and quantifying
what a contractor or in-house project is achieving with
program/project dollars
– Integrates technical, cost, and schedule with risk management
– Allows objective assessment and quantification of current project
performance
– Helps predict future performance based on trends
“Management 101” “EVM 101”
Plan Organize
Organize Plan & Budget
EVM is simply good project
management! Staff Account for Costs
Direct Analyze
Control Incorporate Changes
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4. So why use EVM?
EVM enhances the chances of program/project success
• To Succeed, you must Manage
• To Manage, you must Measure
• To Measure, you must Define
• To Define, you must Understand
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5. NASA EVM Policy & Requirements
• NASA EVM requirements are found in NPR 7120.5, NASA Program and Project
Management Processes and Requirements and NPR 7120.7, NASA Information
Technology and Institutional Infrastructure Program and Project Management
Requirements. Policy is contained in NASA FAR Supplement (NFS) 1834.201.
NASA EVM requirements are predicated on the principles and guidelines in
ANSI/EIA-748, Industry Guidelines for Earned Value Management Systems.
• NPR 7120.5 requires the project EVM approach to be in place by Key Decision Point
(KDP) C (the conclusion of Preliminary Design Review (PDR)) and implemented in
Phase C (Final Design and Fabrication) through KDP E [Flight Readiness Review
(FRR) or Launch Readiness Review (LRR)].
• Additionally, project performance reporting must begin within 60 days after the start
of Phase C. To meet this timeline, it is highly recommended that projects begin
implementation planning during Phase B (Preliminary Design and Technology
Completion).
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6. NPR 7120.5 Guidance
• NPR 7120.5 also requires that NASA programs and projects use EVM on projects
and contracts that meet the following criteria:
1. For projects with a total anticipated final value of $20 million or more, EVM principles should
be applied, as defined by ANSI/EIA-748, Earned Value Management Systems.
a. If the project's primary NASA Center has a validated EVMS, the project uses that system rather than
the EVM principles application approach.
2. For development contracts and subcontracts valued at or between $20M and $50M, the
contractor is expected to have an EVMS that complies with the 32 guidelines in the
ANSI/EIA-748 Standard.
3. For development contracts and subcontracts valued at $50M or more, the contractor is
required to have an EVMS that has been formally validated by the Government.
4. EVM is not required on contracts for non-developmental engineering support services,
steady state operations, basic and applied research, and routine services such as janitorial
services or grounds maintenance services. In these cases, application of EVM is at the
discretion of the Program/Project Manager (PM).
• NASA projects that do not have a validated EVMS will use the seven management
principles that are contained in ANSI/EIA-748 standard.
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7. Seven EVM Principles (ANSI/EIA-748-B-2007)
1. Plan all work scope for the project to completion.
2. Break down the project work scope into finite pieces that can be assigned to a
responsible person or organization for control of technical schedule and cost
objectives.
3. Integrate project work scope, schedule, and cost objectives into a performance
measurement baseline plan against which accomplishments may be measured.
Control changes to the baseline.
4. Use actual costs incurred and recorded in accomplishing the work performed.
5. Objectively assess accomplishments at the work performance level.
6. Analyze significant variances from the plan, forecast impacts, and prepare an
estimate at completion based on performance to date and all remaining work that
must be performed.
7. Incorporate Earned Value Management in the project decision-making and review
processes.
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8. 32 EVM Guidelines (ANSI/EIA-748-B-2007)
Guideline Categories
• Organization (5 guidelines)
– Define contractual effort and assign responsibilities for the work. Integrate planning,
scheduling, work authorization, and accounting systems.
• Planning, Scheduling and Budgeting (10 guidelines)
– Plan, schedule, budget and authorize the work. Establish and maintain a time-phased
budget baseline.
• Accounting Considerations (6 guidelines)
– Accumulate costs of work and material.
– Report on progress/accomplishments to date.
• Analysis & Management Reports (6 guidelines)
– Compare planned, earned and actual costs, analyze variances. Develop revised
estimates at complete. Identify managerial actions.
• Revisions and Data Maintenance (5 guidelines)
– Execute timely incorporation of contractual changes. Maintain traceability from original
budgets.
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9. Earned Value Management Process
Risk Monitoring Informed Management
Decisions
Scheduling & Resource
Allocation Systems
Progress
Earned Value Mgmt System
(Progress)
Accounting
System
Technical Performance
Measurement
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10. Features of a “Good” EVM system
• Thorough up-front planning based on a detailed product-oriented Work
Breakdown Structure (WBS), incorporating Risk Management
– Timely Performance Measurement Baseline (PMB) establishment and control
– Information broken down by product, as well as by organization or function
• Objective measurement of technical accomplishment against the plan at
levels where the work is being performed
• Reporting consistency and discipline – a structured process and
methodology
− Summarized data reporting to higher management (performance metrics) for use
in effective decision making
− Provides for analysis of significant variances and their impact on the project
− Facilitates proper management actions to mitigate risk and manage technical,
cost and schedule performance
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11. PART 2
EVMS Terms and the
Performance Measurement Baseline
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12. Basic EVM Terms
• Budgeted Cost for Work Scheduled (BCWS)
– The sum of the time-phased budgets established for all effort (including in-
process work) scheduled to be accomplished within a given time period
• Budgeted Cost for Work Performed (BCWP)
– The sum of the time-phased budgets for work actually completed during a
specified time period
– BCWP is the budgeted value for the work actually accomplished
– Earned value can only be determined after the performance (or scheduled
performance) of work
• Actual Cost of Work Performed (ACWP)
– The costs (taken from the Accounting System) actually incurred (or in some
cases estimated) and recorded, in accomplishing the work performed within a
given time period
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13. Basic EVM Terms (continued)
• Budget At Completion (BAC)
– The budgetary goal (excluding MR) for accomplishment of all authorized work
• Estimate At Completion (EAC)
– Actual direct and indirect costs allocable to the contract, plus the estimate of all
costs for authorized work remaining
– Estimated cost to complete the entire project scope of work
– Supported with a rationale
– Best case, worst case, most likely
NASA PM Challenge 2010 12

14. Basic EVM Terms (continued)
• Total Allocated Budget (TAB)
– Total Allocated Budget is the sum of all budgets allocated by the contractor
against which contract performance is to be measured and reported
• Contract Budget Base (CBB)
– Contract Budget Base is the negotiated contract cost plus the estimated cost of
authorized unpriced work
• Authorized Unpriced Work (AUW)
– Contract work authorized by the contracting officer, not yet negotiated, aka not
yet definitized work
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15. Contract/In-house Project –
PMB Relationship
Contract Price (Project Price)
Total of all authorized
work, both negotiated Total Allocated Budget (TAB) Contract Fee/Profit
and un-negotiated
Contract Budget Base
Authorized Unpriced Over Target
(CBB) or Project
Work (AUW) Baseline (OTB)
Budget Base (PBB)
MR – Held for known
The total is also
Performance Measurement unknowns but in-scope
called Budget at Management Reserve (MR) future effort. Not used to
Completion (BAC) Baseline (PMB)
cover cost overruns.
UB – Temporary holding place for
allocation to control accounts not to
Distributed Budget Undistributed Budget (UB) exceed two accounting periods
following negotiations.
Summary Level Planning
Control Account (CA)
Package (SLPP)
Work Package (WP) Planning Package (PP)
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16. The Performance Measurement Baseline (PMB) –
Is all the work planned?
What is the PMB?
• A time-phased budget plan against which contract performance is
measured
• Developed by the contractor and jointly reviewed with the
customer within six months of contract award
• Based on the anticipated flow of work and outcomes
• Incorporates dynamic, authorized project changes
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17. PMB Development
Establishing the PMB is a 3-step process:
1. DEFINE THE WORK
• Statement of Work (SOW)
CONTRACT BUDGET BASE
• Work Breakdown Structure (WBS)
• Organizational Breakdown
Structure (OBS) MR
• Responsibility Assignment Matrix
(RAM)
2. SCHEDULE THE WORK
Integrated Master Schedule (IMS)
• Master Schedule
• Intermediate Schedule
• Detailed Schedules $
3. ALLOCATE BUDGETS
100
40
60 • Work Authorization System
• Control Account Plan (CAP)
15 • Work Packages (WP) &
25 Planning Packages (PP)
30
30 TIME
PMB – Time-phased, budgeted plan where contract performance can be measured.
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18. Work Breakdown Structure (WBS)
• A product-oriented hierarchical division of the hardware, software,
services, and data required to produce the project’s end product(s)
• Should not be functional or organizational oriented
• Should reflect the total project scope of work
• Structured according to the way the work will be performed
• Reflects the way in which project costs, schedule, technical and risk data
are to be accumulated, summarized, and reported
• WBS is the most important data item in defining and controlling the
contracted technical scope
• Summary level WBS must be the sum of all lower level WBS hierarchical
in nature
• Supports historical cost collection necessary for future costing activities of
similar scoped products
“It’s the WHAT that is Going to
Be Done”
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19. Properly Structured WBS
Standard
Product
Level 2’s
Oriented
Clear
WBS
Titles
Center Breakout
at Appropriate
Level
NASA PM Challenge 2010 18

20. Responsibility Assignment Matrix (RAM)
The Responsibility Assignment Matrix (RAM) Integrates WBS with OBS. The
intersecting points are the Control Accounts.
Contract Work Breakdown Structure (WBS)
1.0
1.1 1.2 1.3 WBS Reporting Level
CWBS Extension
Organization Breakdown Structure (OBS)
Functional Org
1.1.1 1.1.2 1.1.3 1.1.4
Control Account
1.1.2.1 1.1.2.2 1.1.2.3 1.1.2.4 1.1.2.5 • Task Description
• Perform. Measure
• Work Authorization
• Cost Accumulation
SW
• Work Package, Schedules,
& Budget
RAM
Mech
ENG
CA
Elec
Work
Packages
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21. Control Account (CA)
• The CA forms the hub of the technical, cost and, schedule management
focus
• Virtually all elements of planning and control come together at the CA
level including work authorization, schedules, budgets, earned value, cost
collection (actuals), problem identification/variance analysis and estimate
to complete
• Consists of:
– Work Packages (WPs) – near term work that is well defined.
– Planning Packages (PPs) - more far term effort used for budgeting and
scheduling purposes. A vehicle for planning at a higher level when details may
not yet be well defined. Planning packages must also reflect horizontal
integration with assignment of predecessors and successors.
Control Account
BUDGET – 150
10
• SCOPE 10
• SCHEDULE 15 PLANNING
20 PACKAGES
• BUDGET
20
45
WORK
PACKAGES 30
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22. Schedule Development
• Using the WBS:
– Develop a logic network schedule for all contractual activities, including
technical performance parameters/outcomes
– Scheduling is a process of changing work scope into defined tasks:
• WBS oriented
• Defined time duration (phased over the total life of the program)
• Logically connected to all other related tasks
– Determine resources required to complete scheduled activities
• Labor
– Direct Labor
– Civil Service Labor (when applicable)
– Support Contractors
• Material
• Contracts/Subcontracts
• Other Direct Costs
• Indirect Costs
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23. Horizontal & Vertical Schedule Integration (VSI)
The Scheduling System: Consists of an integrated, multi-tiered hierarchy of
schedule levels. With a complete Logic Network Schedule, the time-phased
PMB will be accurate, allowing for the identification of the true critical path(s).
INTEGRATED MASTER SCHEDULE (IMS)
Master Schedule
(Contract Summary)
INTEGRATIO
VERTICAL
Intermediate Schedule
N
(Logic Network
Schedule) HORIZONTA
L
INTEGRATIO
N
Detailed Schedules
(Control Accounts)
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24. Schedule Considerations
• Is the schedule logic (activity sequence) established and valid?
• Are the schedule milestones compatible with the schedule logic?
• Is the critical path analysis valid?
• Are durations reasonable compared with other project’s history?
• Are resources used to their maximum?
• Are parallel activities reasonable or risky, i.e., flight hardware being
built before qualification is complete?
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25. Understanding the Baseline
• Is the plan fully defined?
• Is the plan realistic?
• What are the risky areas of the plan?
How can we understand and assess inherent risk in the plan?
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26. Determining Earned Value
• How is Earned Value determined?
– When planning work three basic classifications are used:
• Discrete Work – Definable end product
• Level of Effort (LOE) – End product not defined
• Apportioned Effort – Budgeted based on a percentage of another (base)
related task (e.g., Quality Assurance)
– Earned Value must be taken in the same manner in which the work
was planned
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27. Discrete Earned Value Techniques
0/100 Method Milestone
• 1 accounting period • Identifiable milestone
• No EV at start • Milestone weighting should correlate to the
resources required to accomplish the task –
• 100% EV at completion
1 milestone per month
• 3 or more accounting periods
50/50 Method Percent Complete
• No more than 2 accounting periods • Least desirable
• 50% EV at start • Somewhat subjective
• 50% EV at complete • If used, apply quantitative back-up data
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28. Earned Value Techniques
Apportioned Effort (AE)
• Work that is dependent on or related to the performance of other discrete
effort in direct proportion (i.e., Quality Control effort in production)
• Percentage and base task must be identified
• Take the percentage of the AE for the base task, and that is what is earned
Production Effort
Inspection Effort
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29. Earned Value Techniques
Level of Effort (LOE)
• Contract effort that does not produce any definable end product(s)
– General or supportive activities; i.e., management, administrative, etc.
• Used when no other EV method is applicable
• Over-use will distort project performance measurement
• Budget is spread over the scheduled period of performance
• Value of work is earned based on passage of time
• Planned Work Budget (BCWS) = Earned Value (BCWP)
– Never a Schedule Variance
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30. Characteristics of a “Good” Milestone
• Tied to a specific product or event
• Within the authority of the person who will perform the work
• Clear, objective criteria for measuring accomplishment
• Directly related to the control account statement of work
• Weighted in relationship to the time-phased budget
• Expressed in calendar dates and identified to control account and
summary schedules
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31. What are some potential causes of
deviations from a Project Plan?
• Poor beginning estimates
• Poor understanding of requirements
• Lack of risk assessment/planning
• Requirements creep
• Poor management
• Unforeseen technology difficulties
• Jumping to conclusions about causes
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32. Future Performance Predictors
• Estimate At Completion (EAC)
– Actual direct and indirect costs allocable to the contract + the estimate of all
costs for authorized work remaining, or Estimate to Complete (ETC).
– Estimated cost to complete the entire scope of work
– Supported with a rationale
– EAC trends usually do not reverse
– Best case, worst case, most likely required in the CPR
• Comprehensive Estimate at Completion
– Bottoms-up estimate reviewing all remaining work and a thorough estimate of
that work
– Required annually
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33. EVM - Key Data Elements
Estimate At Completion (EAC)
Budget at
Contract or Project Budget Base Completion (BAC) Over
Budget Variance at
Completion
Management Reserve (MR)
Estimate to Complete (ETC)
Actual Cost
Actual Cost of Work Performed (ACWP)
Cost
Variance
Planned Value
$ Budgeted Cost for Work
Schedule
Variance Performance Measurement
Scheduled (BCWS)
Baseline (PMB)
Earned Value (Accomplished)
Budgeted Cost for Work Performed For Projected
(BCWP) Slippage (check
schedule)
Start
Time Now Completion
Date
Date
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34. PART 3
Performance Reporting, Variance
Analysis and Data Usage
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35. Where are we headed?
• First we need to analyze current trends (current performance indicators)
– What are our problem areas?
– What are the causes of our problems?
• Forecast the future based on performance to date
– How can we stay on plan?
– What are the impacts to the project?
– Any technical, cost, or schedule surprises?
– When will we finish all the work?
– What is the estimated cost at completion?
– Is it achievable?
• Indicate areas for management action
– What should we do now to mitigate problems?
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36. Project Data Trace (Storyboard)
Contractor Example Time / Accounting EVM
System System
Actuals
(ACWP)
WBS
Dictionary CPR
IMS
(Resource Loaded)
Planned
(BCWS) &
Accomplished
WAD (BCWP)
WBS
XML
SOW CAPs
RAM
Page 2 Organizational Owner
Requirements
Development
Packaging
Technical
Manager
Support
Project
Design
Test
WBS #
1.2.7
1.2.8
x
x wInsight
OBS
1.2.9 x
1.3.1 x
1.3.2 x
1.3.3 x
1.3.4 x
1.3.5 x
1.4.1 x
1.4.2 x
1.4.3 x
1.4.4 x
Mgmt Reporting &
Data Analysis
NASA PM Challenge 2010 35

37. Variance Calculations
• Cost Variance (CV): The difference between BCWP and ACWP
– CV = (BCWP - ACWP)
– Favorable is positive (Cost underrun)
– Unfavorable is negative (Cost overrun)
• Cost Variance Percent (%): The CV divided by the Earned Value times 100
CV% = (BCWP - ACWP) X 100
BCWP
• Schedule Variance (SV): The difference between BCWP and BCWS
– SV=BCWP-BCWS
– Favorable is positive (Ahead of schedule)
– Unfavorable is negative (Behind schedule)
• Schedule Variance Percent (%): The SV divided by the BCWS times 100
SV% = (BCWP - BCWS)
X 100
BCWS
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38. Variance Calculations (conclusions)
• Variance at Completion (VAC): The difference between BAC and EAC
– VAC = BAC - EAC
– Compares what the work was budgeted (BAC) to what it is currently estimated
to cost (EAC)
– Favorable is positive (Forecasted under run)
– Unfavorable is negative (Forecasted over run)
• Variance at Completion Percent (%): The VAC divided by the BAC times 100
VAC % = VAC
BAC X 100
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39. Variance Analysis Objectives
─ A clear explanation of the cause
─ A comprehensive impact assessment
─ A corrective action plan
─ A revised Estimate at Completion (EAC)
• Cost
• Schedule
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40. “Root Causes” of Cost Variances
Rate Variance
(Earned Value-Actual Rate) x Actual Hours
Labor
Usage (Efficiency) Variance
(Earned Hours – Actual Hours) x Earned Rate
Price Variance
Material (Earned Price – Actual Price) x Actual Quantity
Cost
&
Variance Usage Variance
Equipment
(Earned Quantity – Actual Quantity) x Earned Price
Price Variance
Other (Earned Price – Actual Price) x Actual Quantity
Direct Cost
(ODC) Usage Variance
(Earned Quantity – Actual Quantity) x Earned Price
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41. Analysis Considerations
Favorable and unfavorable variances should be carefully evaluated. The project analyst
should examine and understand the reasons for underruns, as well as overruns because
they could be masking a serious problem.
• Establishing Thresholds for Reporting and Analysis
– Establish threshold reporting based on risk and tailored to WBS by specific dollar amount and/or variance
percentage
– Identification of threshold reporting should also consider program phase, risk and WBS criticality
• Good Variance Analysis Identifies
– The Problem
– Cause of the Problem
– Impact to the Program (Cost, Schedule and Technical)
– Corrective Action
– Get well date
• Areas to Address
– Poor initial planning or estimating
– Technical breakthroughs or problems
– Cost (or usage) of labor, material, or Other Direct Costs higher or lower than planned
– Inflation and new labor contracts
– Front-end loading
• Reconciliation Analysis
– Other budget/funding documentation
– Labor resource planning documentation
– Schedules
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42. EVM Reporting
Contract Performance Report (CPR) - Required EVM data report on contracts
where full EVMS compliance is required
Contains Five Reporting Formats:
• Format 1 – Work Breakdown Structure
• Format 2 – Organizational Categories
• Format 3 -- Baseline
• Format 4 – Staffing
• Format 5 – Explanations and Problem Analysis
– Total contract
– Cost & schedule variance analysis
– Other analyses (6 topics)
– OTB & OTS (as applicable)
NASA PM Challenge 2010 41

43. Performance Indicators
• Cost Performance Index (CPI): The average cost efficiency with which work has
been performed to date
– Formula: CPI = BCWP / ACWP
– If CPI > 1.0, Effort is under-running budget
– If CPI < 1.0, Effort is over-running budget
• Schedule Performance Index (SPI): The ratio of the budgeted value of work
performed to the budgeted value of work scheduled
– Formula: SPI = BCWP / BCWS
– If SPI > 1.0, Effort is ahead of schedule
– If SPI < 1.0, Effort is behind schedule
– Is only an indicator
– More important early in the project
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44. Current Status Indicators
• How much of the program SHOULD have been accomplished at this
point?
– Percent Scheduled = (BCWS / BAC) X 100
• How many of the forecasted funds have been SPENT at this point?
– Percent Spent = (ACWP / BAC) X 100
• How much of the program has been ACCOMPLISHED to this point?
– Percent Complete = (BCWP / BAC) X 100
• What is the budgeted value of the work remaining?
– Work Remaining = BAC - BCWP cum
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45. Performance Forecasting
• To-Complete Performance Index (TCPI):
– Cost (CPI) efficiency required to complete the remaining work
– TCPIEAC= (BAC-BCWP) / (EAC-ACWP)
• Performance Indicator Comparison
– CPI versus TCPI
– Cost efficiency to date compared to cost efficiency to complete the
work remaining
– Note spread point when more than 20% complete
– Thoroughly evaluate all point degradations, e.g. 1.42 versus .67
– Very helpful in reviewing EAC rationales
NASA PM Challenge 2010 44

46. Future Performance Predicators
Independent Estimate At Completion (IEAC)
• There are many ways to calculate an IEAC
• An example: Independent Estimate At Completion (IEAC)
– IEAC = Actuals + (Work Remaining/Performance Factor)
• EAC = ACWP + [(BAC-BCWP)/Performance Factor]
– SPI as an indicator of EAC is better in first 50% (early stages) of a project
– There is no substitute for GOOD program information
• Common Performance Factors
– Cost Performance Index (CPI)
– Schedule Performance Index (SPI)
– WEIGHTED (80/20 or some other ratio)
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47. Using EVM Data as a Predictor *
• When a contract is more than 15% complete & more than 10% over-run:
– The over-run at completion will be more than the over-run incurred to date
• The final cost variance (in dollars or as a percentage) will be worse than
the cost variance at the 20% completion point.
* Based on OSD database of more than 500 major DOD contracts since 1977
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48. PART 4
Summary
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49. EVM Process Overview
Define the Work Plan the Work Work the Plan Collect Results
PMB
Risk?
(Schedule/Budget)
Measure Work
in Process
Change Control
(Earned Value)
Changes
Analyze Variances
External Changes Internal Changes
Implement Corrective
Actions
An iterative process used
throughout the life of a contract.
NASA PM Challenge 2010 48

50. Benefits of using EVM
• Provides Project Management with objective, accurate and timely data for
effective decision making (much more than plan versus actuals)
• Early warning of issues
• Allows more efficient use of management resources, by identifying and
focusing on problem areas
– Detail planning at levels where work is performed allows management attention
to be directed to areas where significant problems are indicated
• Provides better capability to trace problems to their source
• Provides better historical performance data
• EVM is an “Industry Best Practice” for project management (ANSI/EIA-748
– Earned Value Management Systems)
NASA PM Challenge 2010 49

51. Conclusions about EVM
• An integrated management process for gaining valuable insight into project
performance.
• Only management process that effectively integrates technical, cost,
schedule and risk.
• Provides valuable quantifiable performance metrics for forecasting at-
completion cost and schedule.
• Promotes early visibility to cost and schedule variance sooner than any
other practice---reduces the ‘shock syndrome’
• Focuses on significant technical, cost and schedule problems---avoids
swatting mosquitoes while the elephants charge on by
• Establishes funding authority’s confidence in program management
NASA PM Challenge 2010 50

52. Questions?
NASA PM Challenge 2010 51