Roger D. H. Warburton, PhD, PMP

Associate Professor,Metropolitan College, Boston University

Figuring Out:Where Are You?

&

Does your Contractor Agree?

The “How ya doin?”

Problem

Contractor: We’re a little behind, but it’s not a problem. We’ll make it up.

What do you say?

Route 93 Re-Paving Problem

We Have a Plan

From 128/I93 to I90-I93 is 7.7 miles.

Plan: 0.77 miles each monthSchedule:10 months. Cost: $1,470,000.

What Actually Happened?

Month 1:

Contractor: We’re a little behind, but it’s not a problem. We’ll make it up.

What Actually Happened?

Month 2:

Contractor: We’re a little behind, but it’s not a problem. We’ll make it up.

What Actually Happened?

Month 3: We’re a little behind, but it’s not a problem. We’ll make it up.

Enough Already!

Here’s the bill!

Actual$1,869,000

Budget$1,470,000

Month 11

There is a better way!

How Do We Measure“Progress?”

Actual 0.66 miles

Planned 0.77 miles

You can always measure something!

Against the plan …..

What Was Accomplished? Miles of Roadway Lines of code designed, written,

tested Drawings completed Reports delivered Units delivered Square Meters of Paint Feet of Steel Erected Cubic Yards of Tunnel Dug Out

WBS:Deliverable

Oriented Hierarchy

You Already Have The Data

Monthly Reports:What was planned?What was accomplished?What did it cost?

You are the PM. The Mayor wants to know the status of the project.

End of Month 2

Planned 1.54 miles

2) Report Costs:

1) Measure Progress:

Actual 1.49 miles

Planned $294,000

Actual $329,000

The “Value” of a Mile

Planned Cost / Mile = $190,909

Plan: 7.7 milesCost: $1,470,000

Complete ½ mile:“Value” = $190,909 ÷ 2

= $95,455

The “Value” of a Mile

Planned Cost / Mile = $190,909

Plan: 7.7 milesCost: $1,470,000

Complete ½ mile:“Value” = $190,909 / 2

= $95,455EarnedValue

Glossary Planned Value, PV

The sum of the value of the work planned

Earned Value, EV The sum of the value of work performed

Actual Cost, AC The sum of the costs incurred

Budget At Completion,BAC Estimated At Completion, EAC Estimate To Complete, ETC

$

Time Now

Actual CostsTo Date

Budget, BAC EstimateTo Complete

ETC

EAC

Glossary

Glossary Cost Performance Index, CPI

Schedule Performance Index, SPI

CPI: Cost Efficiency Cost Performance Index

Cost Efficiency

𝑪𝑷𝑰=1.43𝑥 $190,909$342,000

=0.80

Planned 1.54 miles

Actual 1.43 milesCost / Mile = $190,909

SPI: Schedule Efficiency

Schedule Performance Index, SPI

𝑺𝑷𝑰=1.43 𝑥 $190,9091.54 𝑥 $190,909

=0.93

Planned 1.54 miles

Actual 1.43 miles

You are behind schedule

How Much Behind? Schedule Variance, SV

𝑺𝑽 (𝒕 )=$𝟐𝟕𝟑 ,𝟎𝟎𝟎−$𝟐𝟗𝟒 ,𝟎𝟎𝟎

Planned 1.54 miles

Actual 1.43 miles

You are $21,000 behind schedule!

𝑺𝑽=𝑬𝑽 (𝒕 )−𝑷𝑽 (𝒕)

𝑺𝑽 (𝒕 )=−$𝟐𝟏 ,𝟎𝟎𝟎

Route 93 Status: Month 4

(Miles Completed) Cost

Month Planned Completed Planned Actual

1 0.77 0.77 $147,000 $181,000

2 0.77 0.66 $147,000 $161,000

3 0.77 0.62 $147,000 $187,000

4 0.77 0.58 $147,000 $177,000

You are the PM. The Mayor wants to know the status of the project.

Plot Everything!

What actually happened?

Months

Add the Cost

Months

Cumulative Costs

Months

Efficiency

Months

Graphs vs. Tables

Months

CPI =

Month CPI1 0.81 2 0.80 3 0.74 4 0.71

Typical CPI & SPI

CPI falls & Levels off SPI falls & rises → 1.0

How Much Will It Cost?

BAC = $1,470,000

𝑬𝑨𝑪=𝑩𝑨𝑪

¿𝑪𝑷𝑰 >¿ ¿

CPI = 0.8 → EAC = $1,838,000

Estimate at Completion

Estimate at Completion #2

𝑬𝑨𝑪=𝑨𝑪 (𝒕 )+ 𝑩𝑨𝑪−𝑬𝑽 (𝒕 )𝑪𝑷𝑰 (𝒕 )

𝑬𝑨𝑪=𝑨𝑪 (𝒕 )+ 𝑹𝒆𝒎𝒂𝒊𝒏𝒈𝑾𝒐𝒓𝒌𝑬𝒇𝒇𝒊𝒄𝒊𝒆𝒏𝒄𝒚

𝑬𝑨𝑪=$𝟔𝟖𝟏 ,𝟎𝟎𝟎+$𝟏 ,𝟒𝟕𝟎 ,𝟎𝟎𝟎−$𝟓𝟒𝟔 ,𝟎𝟎𝟎

𝟎 .𝟖𝟎

𝑬𝑨𝑪=$𝟏 ,𝟖𝟑𝟔 ,𝟎𝟎𝟎#1: EAC = $1,838,000

Plot EAC (t)

𝑬𝑨𝑪=𝑨𝑪 (𝒕 )+ 𝑩𝑨𝑪−𝑬𝑽 (𝒕)𝑪𝑷𝑰 (𝒕)

𝑩𝑨𝑪

𝑨𝒄𝒕𝒖𝒂𝒍

Earned Value Management (EVM)

Christensen & Heise, 1992 DOD experience >400 programs since 1977 Without exception:

The cumulative CPI does not significantly improve during the period of 15% through 85% of the contract

Provides early warning of trouble EAC reliable ~ 20% into a project

In fact it tends to decline!

“I did not use EVM because …”

“Not needed on small projects” “Hard to apply” (Kim, 2000)

“The implementation requirements, terminology, and the countless rules and interpretations, are perceived as overly restrictive” (Fleming & Koppelman, 2005)

It is difficult to find a balance between the utility of the EV technique . . . versus the effort it takes to implement (Quentin & Koppelman, 2005)

ContractorExcuses

From Earned Value

toTCPI

The to-complete performance index (TCPI) is the calculated projection of cost performance that must be achieved on the remaining work to meet a specified management goal, such as the BAC or the EAC.

PMBOK 4th Edition

A simple formula to change the world!

“Once our customers start calculating TCPI, we will no

longer be able to fudge project cost!”

TCPI

What is TCPI?

TCPI: Month 4 Work Remaining:

BAC – EV(t) = $1,470,000 – $546,000 Funds Remaining:

BAC – AC(t) = $1,470,000 – $681,000

= 1.17

You:You need a 17% improvement.

Contractor:No problem!

Trust me, we’ll make it up.

Everything will be OK.

Really?!

Your current efficiency is 80%

Your TCPI is 117%

You need a 37% improvement!

It’s Getting Worse!

You need a 37% improvement!

37%

You Can’t Win!

TCPI → ∞!

You need to be here!

You are here!

Admit it,

You’re here

The “Modus” Project

Cumulative Doesn’t Help

Modus: CPI & SPI

We Know the Cost

Guidance EVM Works

2 Simple Formulae:

You already have the data! TCPI is a powerful addition to EVM

CPI is about the past TCPI is about the future

Graphs are powerful Weekly data is the key

SPI doesn’t really work

Conclusion

Earned Value is the Public Sector Manager’s

Friend

ThankYou

rwarb@bu.edu

If it becomes obvious that the BAC is no longer viable, the EAC supersedes the BAC

PMBOK to the Rescue!

TCPI with EAC

Required efficiency is just the CPI!

Admit it,

You’re here

Schedule Prediction

𝑻 𝒂=𝑻 𝒑  

√𝑺𝑷𝑰