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Earned Value ProjectManagement

Colonel John KeeseeColonel John Keesee

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Objective

To introduce and discuss the fundamentalsTo introduce and discuss the fundamentalsof earned value project managementof earned value project management

Work Breakdown StructuresWork Breakdown Structures

Program plans and schedulesProgram plans and schedules

Earned value management systemsEarned value management systems

Cost and schedule variancesCost and schedule variances

Estimates at completionEstimates at completion

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Scenario

You have been tasked to be the projectYou have been tasked to be the projectmanager for an important projectmanager for an important project

You have been directed to use an earnedYou have been directed to use an earned

value management systemvalue management system

Time to market is critical for thisTime to market is critical for this

developmentdevelopment

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Work Breakdown Structure

Identifies 100 % of the work to beIdentifies 100 % of the work to beaccomplishedaccomplished

WBS dictionary breaks the scope intoWBS dictionary breaks the scope into

measurable tasksmeasurable tasks

Each with an estimated valueEach with an estimated value

Responsibility for each task assigned toResponsibility for each task assigned to

individuals or work teamsindividuals or work teams

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Work Breakdown Structure

Launch Vehicle

Payload Spacecraft Reentry vehicle Integration, Assembly,Test and Checkout

Space Vehicle Ground Command,

Control, Communications

and Mission Equipment

Space System

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Project Master Schedule

Detailed plan and scheduleDetailed plan and schedule Identified dependencies between tasksIdentified dependencies between tasks

18 months18 months Estimated resources for each taskEstimated resources for each task

10 units at $150K each10 units at $150K each

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Project Master ScheduleTask/Event Jan - Jun Jul - Dec Jan - Jun

Award ^Design ^

Buy specifications ^

Vendor quotes ^

Purchase orders ^Receive materials ^

Factory plans ^

Tool design ^

Tool fabrication ^

Parts fabrication ^

Assembly: sub and final ^

Test & checkout ^

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Project Performance Display

0

200000

400000

600000

800000

10000001200000

1400000

1600000

Jan April July

October

January April July

BCWS

BCWP

ACWP

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Plan Review Before Go-Ahead

CEO:CEO: Time to market is critical. You have 12Time to market is critical. You have 12

months.months.

This looks goldThis looks gold--plated at $1.5M. Youplated at $1.5M. You

have $1.0M.have $1.0M.

Go ahead, but come back to me withGo ahead, but come back to me with

your progress in three months.your progress in three months.

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The Three Month Review

Three units scheduled for completionThree units scheduled for completion Two units actually completedTwo units actually completed

$300,000 budgeted at this point$300,000 budgeted at this point $300,000 actually spent$300,000 actually spent

Optimist PM: A little behind schedule butOptimist PM: A little behind schedule but

right on the cost plan.right on the cost plan.

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Earned Value Measurements

1.1. Work scheduledWork scheduled

2.2. Budgeted cost of work scheduled (BCWS)Budgeted cost of work scheduled (BCWS)

3.3. Work performedWork performed

4.4. Budgeted cost of work performed (BCWP)Budgeted cost of work performed (BCWP)

5.5. Actual cost of work performed (ACWP)Actual cost of work performed (ACWP)

6.6. Schedule variance (SV) = BCWPSchedule variance (SV) = BCWP -- BCWSBCWS7.7. Cost Variance (CV) = BCWPCost Variance (CV) = BCWP -- ACWPACWP

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New Project Performance

Display

0

200000

400000

600000

800000

1000000

1200000

January

April

July

Octob

er

Dece

mbe

r

BCWS

BCWPACWP

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Management Reserve

Budgeted to provide the ability to adjust forBudgeted to provide the ability to adjust foruncertaintyuncertainty

Always accounted at the total project levelAlways accounted at the total project level

Normally retained and controlled at the totalNormally retained and controlled at the total

project levelproject level

Must not be eliminated by negotiationsMust not be eliminated by negotiations

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Summary

Earned value management system providesEarned value management system providesa key link between the cost, schedule, anda key link between the cost, schedule, and

technical aspects of a projecttechnical aspects of a project

Provides an early and reliable prediction ofProvides an early and reliable prediction of

future performancefuture performance

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References

Fleming, Quentin W. and Joel M.Fleming, Quentin W. and Joel M.KoppelmanKoppelman,, Earned Value ProjectEarned Value Project

Management,Management, PMI, Newtown Square, PAPMI, Newtown Square, PA

20002000

Lewis, James P.,Lewis, James P., Fundamentals of ProjectFundamentals of Project

ManagementManagement, AMACOM, NY 2002, AMACOM, NY 2002