Earn Value Management PDF

Earn Value Management Time is not as time, but cost Time is money? Image credit: depositphotos 2018 BrainBOK What does EVM tell us? Project Health Check Schedule Performance Cost Performance Forecast Project Issues Estim...

Earn Value Management Time is not as time, but cost Time is money? Image credit: depositphotos 2018 BrainBOK What does EVM tell us? Project Health Check Schedule Performance Cost Performance Forecast Project Issues Estimation Problems Scope Creep Inefficiency Communication Corrective Actions 2018 BrainBOK Pre-requisites for EVM ✓ Well defined Scope ✓ Detailed WBS ✓ Project Management Schedule ✓ Management Support 2018 BrainBOK Steps involved in applying EVM 1. Define work 2. Assign dollar value to work 3. Apply earning values ❑ 0/100 ❑ 20/80 ❑ 25/75 ❑ 50/50 4. Execute project and measure progress 2018 BrainBOK EVM Terms ❖ Planned Value (PV) or Budgeted Cost of Work Scheduled (BCWS) ❖ Earned Value (EV) or Budgeted Cost of Work Performed (BCWP) ❖ Actual Cost (AC) or Actual Cost of Work Performed (ACWP) ❖ Schedule Variance (SV) ❖ Cost Variance (CV) ❖ Schedule Performance Index (SPI) ❖ Cost Performance Index (CPI) ❖ Budget At Completion (BAC) ❖ Estimate To Complete (ETC) ❖ Estimate At Completion (EAC) ❖ To-Complete Performance Index (TCPI) 2018 BrainBOK Definitions Planned Value (PV) The estimated (monetary) value of the work planned to be accomplished at a given point in time Earned Value (EV) The estimated (monetary) value of the work accomplished Actual Cost (AC) The “actual” cost incurred for the work accomplished 2018 BrainBOK Definitions Schedule Variance (SV) a measure of schedule performance on a project. It is the difference between the earned value (EV) and the planned value (PV) Cost Variance (CV) a measure of cost performance on a project. It is the difference between earned value (EV) and actual cost (AC) Schedule Performance Index (SPI) a measure of schedule efficiency on a project. It is the ratio of earned value (EV) to planned value (PV) Cost Performance Index (CPI) a measure of cost efficiency on a project. It is the ratio of earned value (EV) to actual costs (AC) 2018 BrainBOK Definitions Budget At Completion (BAC) the budget for all the work on the project. It is also the total planned value for the project Estimate To Complete (ETC) the estimated cost to complete all the “remaining work” on a project, an activity, or a WBS component Estimate At Completion (EAC) the estimated total cost of a project, an activity, or a WBS component, when all the work is completed To-Complete Performance Index (TCPI) the cost performance that must be achieved on the remaining work to meet a BAC (or EAC) target. It is the ration of “remaining work” to the “funds remaining” 2018 BrainBOK Mission Critical Project Project Details: Scope: Construct a boundary wall on a 10x10m square land Schedule Estimate: 4 weeks Resources: 4 Cost Estimate: $4000 2018 BrainBOK Planned Schedule and Cost 2018 BrainBOK Status after Week 1 8m of 10m (80%) of side 1 complete overall project 20% complete $1200 spent 2018 BrainBOK Earned Value Calculations @week1 Planned Value (PV) – Dollar value of work “scheduled” to be completed PV = Complete Side 1 = $1000 Actual Cost (AC) – Money “actually” spent AC = $1200 Earned Value (EV) – Dollar value of work “accomplished” EV = 80% of side 1 = 80% of $1000 = $800 OR EV = 20% of the project = 20% of $4000 = $800 Budget At Completion (BAC) – Total Planned Value for the project 𝒑=𝒏 BAC = σ𝒑=𝟏 𝑷𝑽 = $4000 2018 BrainBOK Schedule Performance Schedule Variance (SV) = EV – PV SV = $800 - $1000 = -$200 Schedule Performance Indicator (SPI) = EV / PV SPI = $800 / $1000 = 0.8 2018 BrainBOK Cost Performance Cost Variance (CV) = EV – AC CV = $800 - $1200 = -$400 Cost Performance Indicator (CPI) = EV / AC CPI = $800 / $1200 = 0.66 2018 BrainBOK EV Plot 2018 BrainBOK Forecasts Estimate To Complete (ETC): How much do we expect the remaining work to cost? Estimate At Completion (EAC): How much do we expect the final project cost to be? 2018 BrainBOK EAC (Re-estimate) 2018 BrainBOK EAC (atypical) 2018 BrainBOK EAC (typical) 2018 BrainBOK ETC (considering CPI and SPI) 2018 BrainBOK Estimate At Completion (EAC) Formulas 2018 BrainBOK To-Complete Performance Index (TCPI) 2018 BrainBOK Limitations of EVM Mental block: Time, not as time, but cost At the end of the project, SV is always 0 and SPI is always 1 even if the project finishes behind schedule Earned Schedule (ES) comes to rescue Refer to www.earnedschedule.com for more info No indication of Project Quality, or Customer Satisfaction Requires well-defined Scope, WBS, and Schedule Difficult to implement for dynamic work (like R&D projects) Benefits are proportional to the size / complexity of the project 2018 BrainBOK EXERCISES 2018 BrainBOK Question 1 A project manager is compiling the Work Performance Information for their project. The project team had planned to accomplish $25,000 worth of work till date. They have actually spent $20,000 till date, and has accomplished $18,000 worth of work. What is the CPI of the project? A. 0.8 B. 0.9 C. 1.11 D. 1.25 2018 BrainBOK Question 2 A highway construction project has been underway for more than 6 months. At the last monthly review meeting, the project SPI was reported as 1.03 and CPI as 0.81. The sponsor has expressed concern over the progress. Why is the sponsor concerned? A. The project is over budget B. The project is behind schedule C. The project is behind schedule and over budget D. The project has underestimated the work 2018 BrainBOK Question 3 Task - Develop and install ten printer drivers. Budget - $100,000 ($10K per printer driver) Time - 10 weeks (1 printer driver per week) At week 5: 4 printer drivers developerd and installed $47,500 spent to date 2018 BrainBOK