Earned Value Management Earned Value Management Pranay Srivastava Pranay Srivastava

Mar 2008Mar 2008

Agenda

� Earned Value Management � EVM Introduction

� Base Data

� Summary Data

� Forecast Data

� EVM in Practice.

Agenda

� Earned Value Management � EVM Introduction

� Base Data

� Summary Data

� Forecast Data

� EVM in Practice.

EVM History� 1967 DoD Instruction Cost/Schedule

control system criteria

� 1987 PMI recommends EVM

� 1997 DoD Regulation 5000.2R on EVM

� 1998 ANSI/EIA 748 adopts EVM.

What is EVM� Best practices focusing on process, people & tools for project tracking and control

� Integrates� Technical performance (status of work)

� Schedule performance

� Cost performance

� When used to its full extent, it allows � Measuring performance

� Analyzing variance

� Developing forecasts.

Advantages of EVM

� Easy to understand

� Low overhead

� Integrates cost and schedule

� Based on results

� Simplifies status reporting

� Reliable prediction

� Well proven.

Disadvantages of EVM

� Doesn’t address critical path

� Deterministic

� Can drive wrong behavior

� Doesn’t account quality

� Can’t handle management reserves

� Doesn’t reveal the cause.

Type Of Data

� Base Data� Data ONLY for the current period

� Summary Data� Derived data based on the base data

� Rolled-up data till date

� Indicates the current health of the project

� Forecast Data� Project forecast/estimate based on summary data.

Agenda

� Earned Value Management � EVM Introduction

� Base Data

� Summary Data

� Forecast Data

� EVM in Practice.

Base Data

� Total Budget (BAC)� Total planned value for the project

� Planned value (PV)� Estimated effort/cost for all tasks planned to be completed in the period

� Earned value (EV)� Planned effort/cost for all tasks completed during the period.

Base Data

� Actual Cost (AC)� Actual effort/cost incurred on all tasks completed during the period

� Total Spent (TS)� Actual effort/cost incurred on all tasks to date, regardless of whether the task has been completed or not.

Base Data

� Assume today is 22nd Feb; Task A, B, C, D are complete, E is in-progress, and F not yet started

Total

1025-feb-2008F

3*520-Feb-2008E

131015-Feb-2008D

7510-Feb-2008C

14105-Feb-2008B

551-Feb-2008A

TSACEVPVSchedule DateTask

Agenda

� Earned Value Management � EVM Introduction

� Base Data

� Summary Data

� Forecast Data

� EVM in Practice.

Summary Data

� Cost Variance (CV)� Difference between Earned Value and Actual Cost i.e. EV – AC

� Cost Performance Index (CPI)� Ratio of Earned Value and Actual Cost (EV/AC)

� <1.0 indicates project will be over budget

� >1.0 indicates project will be under budget

� = 1 indicates project will finish on-budget.

Summary Data

� Schedule Variance (SV)� Difference between Earned Value and Planned Value i.e. EV – PV

� Schedule Performance Index (SPI)� Ratio of Earned Value and Planned Value (EV/PV)

� <1.0 indicates project will be delayed

� >1.0 indicates project will finish before time

� = 1 indicates project will finish on-time.

Summary Data - Emerging Trend

� Why required� SV/SPI are measure of work scope not time

� At end of project, SV = 0 & SPI = 1

� Time Based Schedule Variance� Difference between Planned Time and Actual Time

� SV(t) = Planned Time – Actual Time

� Time Based Schedule Performance Index� Ratio of Planned Time and actual Time

� SPI(t) = Planned Time / Actual Time

Summary Data

� Assume today is 22nd Feb; Task A, B, C, D are complete; E is in-progress, F not yet started

Total

10F

3*5E

1310D

75C

1410B

55A

SPISVCPICVTSACEVPVTask

Agenda

� Earned Value Management � EVM Introduction

� Base Data

� Summary Data

� Forecast Data

� EVM in Practice.

Forecast Data

� Estimate To Complete (ETC)� Estimated effort/cost to complete all pending scheduled tasks

� Project ETC� Team's estimate of effort/cost required to complete all scheduled tasks (valid when earlier estimations are no longer valid)

� Statistical ETC� ETC = (BAC – EV) assuming similar variance will not occur in future

� ETC = (BAC-EV)/CPI assuming similar variance will occur in future.

Forecast Data

� Estimate At Completion (EAC)� Estimated effort/cost incurred to complete all scheduled tasks

� Project EAC� Team's estimate of total effort/cost to complete all scheduled tasks

� Project EAC = Total Spent + Project ETC

� Statistical EAC� EAC = Actual Cost + (BAC-EV)

� EAC = Actual Cost + (BAC-EV)/CPI.

Forecast Data - Emerging Trend

� Future cost performance is assumed to be same as past 3 periods cost performance

� EAC = AC + ( BAC - EV)/ ((EVi+EVj+EVk)/ACi+ACj+ACk)

� Future cost performance is assumed to be also influenced by schedule performance

� EAC = AC + ( BAC - EV)/ (CPI*SPI)

� Future cost performance is assumed to be influenced by both cost & schedule performance in some ratio (x,y)

� EAC = AC + ( BAC - EV)/ (x CPI + y SPI)

Forecast Data - Emerging Trend

� Time Estimate At Completion (EACT)� Approx time incurred to complete all scheduled tasks

� An emerging trend in EVM that uses time-based measure of schedule as an alternative or supplement to traditional work-based measure

� Statistical EACT� EACT = BAC/SPIat current trend.

Forecast Data

� Variance At Completion (VAC)� Forecasted variance between Total Budget and Estimate At Completion

� Project VAC� Team's forecasts of difference between budgeted and actual cost for all tasks

� Project VAC = Total Budget - Project EAC

� Statistical VAC� Statistical VAC = Total Budget - Statistical EAC.

Forecast Data

� To Complete Performance Index (TCPI)� Forecasts how efficient the project team needs to be to complete the project on budget

� TCPI = (Total Budget – Earned Value)

_________________________

(Total Budget – Actual Cost)

Forecast Data

� Assume today is 22nd Feb; Task A, B, C, D are complete; E is in-progress, F not yet started

Total

10F

3*5E

1310D

75C

1410B

55A

TCPI

VACEACETCSPICPIACPVTask

Agenda

� Earned Value Management � EVM Introduction

� Base Data

� Summary Data

� Forecast Data

� EVM in Practice.

Steps in using EVM

Develop

task level

Budget

Record task

level usage

Analyze &

Forecast

performance

Measure

physical

progress

Take

corrective

action

Report

performance

� Are we ahead/behind schedule?� Schedule Variance

� How efficiently are we using time?� Schedule Performance Index

� When are we likely to finish work?� Time Estimate at Completion.

How EVM helps in Time management?

� Are we under/over budget?� Cost Variance

� How efficiently are we using resource?� Cost Performance Index

� What is the project likely to cost?� Estimate At Completion

� What will the remaining work cost?� Estimate To Complete

� How much under/over budget will we be at end of project?� Variance At Completion.

How EVM helps in Cost management?