1860 Module 10 Reporting and Metrics.pdf

~ UNIVERSITY OF TORONTO ~ SC HOOL OF CON TI NU ING STUD IE! Course 1860 - Foundations of Project Management Module 10: Reporting and Metrics ~ UNIVERSITY OF TORONTO ~ SC HOOL OF CON TI N...

~ UNIVERSITY OF TORONTO ~ SC HOOL OF CON TI NU ING STUD IE! Course 1860 - Foundations of Project Management Module 10: Reporting and Metrics ~ UNIVERSITY OF TORONTO ~ SC HOOL OF CON TI NU ING STUD IE! Module 10 - Section 1 Earned Value Management  Traditional Waterfall Approach Traditionally we focus on variance analysis: o Scope, schedule, and cost actuals compared to baselines = variance If the cost actuals are less than the baseline, we think we are under budget (an incomplete picture that can lead us to wrong conclusions about the project status) In Project management, we used to earned value to determine the value of work actually performed o What have we accomplished? Earned Value (EV) o The budgeted cost of work performed {BCWP) o It is the value of the work actually performed 9 UN IVERSIT Y OF TO RONTO ~ SCHOO L 0 1 CONT INU ING STUOIE~ https://youtu.be/U313VMm2r7Q EV instructions This impacts whether we move from red/yellow/green status  Earned Value Management (EVM) EVM is a data analysis technique that integrates scope, cost and time data It is a data analysis technique used for performance measurement and aids project managers in: - Assessing project trends - Determining schedule trends (ahead/behind) - Monitoring budget status (over/under) It can also be used to monitor progress of work for: - External vendors, suppliers, consultants and contractors - Internal groups and staff 9 UN IVERSIT Y OF TO RONTO ~ SCHOO L 0 1 CONT INU ING STUOIE~ use data to measure performance  Earned Value Example ' ,.__.,.. You hire someone to paint ten similar rooms over ten days (one room per day) for $4,000. The cost is $400 per room. Day 1 Day2 Day3 Day4 Days Day6 Day7 Days Day9 Day 10 - RM 1 RM 2 RM 3 RM4 - - RM 5 RM 6 - ,- RM 7 - I- RMS - I- RM9 RM 10 - $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 At the end of day 5, the contractor has spent $2 ,000. When you compare the actual cost of $2,000 for five days to the budget, you th ink that you are on budget. Scenario 1: What If the contractor told you that he had painted 3 rooms Instead of 5? The picture looks bad: half of the budget has been spent on only 3 of the 10 rooms. Scenario 2: What if told you he had painted 6 rooms Instead of 5? The picture looks great: half of the budget has been spent, and 6 of the 10 rooms have been painted. Knowing that 50% of the budget has been spent does not guarantee that 50% of the work was performed. The work performed must be in sync with the actual cost. - UNIVERSITY OF TORONTO M:HOOl CO:-.'T 1:,,.:u1NG ~TUD IU 8 EV = PV(% work completed so far)  The Cost Baseline (5-Curve) - Virtual Conference: 1.1 Survey Remember Module 7 EVM requires a time- phased Cost Baseline: - Project Cost Baseline is the cumulative budget $6,000 ~ - - - - - - - - - 'l l -- - amounts at regular points $5,000 f - - - - - - ---=-.,-,,,=---- over the planned project $4,000 f - - - - ~~ ------ $3,000 > - - -- ~------- duration. $2,000..______ _ _ _ _ _ _ __ Budget At Completion $1,000 >------------ (BAC) is the total project $- Week 1 Week 2 Week 3 Week 4 budget (the cumulative Time budget amount at completion) - Cost Baseline 9 UN IVERSIT Y OF TO RONTO ~ SCHOO L 0 1 CONT INU ING ST UOIE~ Work Package and EVM For reporting project status, project managers review: - Scope (WBS deliverables) - Time (start and finish activities for each activity) - Cost information (for all activities) Since the project's WBS is divided and subdivided into logical, measurable work packages, these work packages provide the basis for comparing on a specific status date: - Work planned - Work completed (or earned), and - Actual funds spent 9 UN IVERSIT Y OF TO RONTO ~ SCHOO L 0 1 CONT INU ING STUOIE~  Key Values of EVM Planned Value (PV): What work value did we plan to have achieved by now? The budget associated with the work that should be completed to date For work packages that should be in progress : include a percentage of the package budget to represent the portion that should be in progress Total PV of whole project is also known as Budget at Completion (BAC) Earned Value (EV): What work value have we achieved so far? The budget associated with the work that has been completed to date - For work packages that are in progress : include a percentage of the package budget to represent the work value achieved so far Actual Cost (AC): What have we actually spent so far? The cost incurred for the work that has been completed to date Both direct and indirect costs incurred in accomplishing work For work packages that are in progress , include both known and ~ anticig ated charges and invoices for that completed work. ~ ~~~6~!, ~6iT~~1~g~~uo~g 5 https://youtu.be/Gy1P784tKG8  Earned Value Chart The following chart illustrates these three measures on an overly simple project - In this case , the S-curve is a straight line, in order to make it easier to demonstrate project cost forecasting Earned Value measures are calculated at regular intervals, such as on a monthly basis - In this case , the PV and EV values were provided by the project team members and the AC numbers were provided by the accounting department as of the project's status date 9UN IVERSIT Y OF TO RONTO ~ SCHOO L 0 1 CONT INU ING STUOIE~ Schedule variance (SV) is the difference in dollars are reporting period between the earned value and the planned value. in this case, the planned value is higher than the earned value, so the SB is negative. this means that less work has been done than planned, so the project is behind schedule. SPI or schedule performance index, EV/PV is less than 1  Earned Value Chart - Key Measures $1,800,000 I 1 Status Date $1,600,000 1 - - - - - - - - - - - ,. - - - - - - - -~ Budget at Completion BAC = 1,600,000 $1,400,000 $1,200,000 PV = $1,000,000 800,000 $800,000 $600,000 $400,000 : Expected Completion $200,000 AC= $- - Planned Value {PV) - Earned Value (EV) - Actual Cost (AC) 9 UN IVERSIT Y OF TO RONTO ~ SCHOO L 0 1 CONT INU ING STUOIE~ 10 Calculations on next slide Schedule variance (SV) is the difference in dollars are reporting period between the earned value (EV) and the planned value (PV). In this case, the planned value is higher than the earned value, so the SV is negative. this means that less work has been done than planned, so the project is behind schedule. SPI or schedule performance index, EV/PV is less than 1 Cost variance (CV) is the difference between earned value and actual costs expressed in dollars. In this case, EV is more than actual cost, so CV is a positive number. this means there has been less costs than expected for the work completed. this project is under budget. cost performance index (CPI), EV/AC is greater than 1. If we extrapolate the EV and the AC, we can see the trend on where these are likely to go if we stay the current course. In this case, the project will continue to complete deliverables late, but also continue to underspend  @ EVM Variances and Indices Differences between these three EVM measures allow us to calculate indicators: Variances: _j Whatdoes - Cost Variance: CV = EV - AC -=:::=. Al suggest? ' - Schedule Variance: SV = EV - PV Positive variances are good ; negative variances are bad EVM Indices: - Cost Performance Index: CPI = EV/ AC - Schedule Performance Index: SPI = EV/ PV Index values over 1.0 are good ; those below 1.0 are bad Useful for tracking trends on a project, or comparing projects The CPI value will be particularly useful 9 UN IVERSIT Y OF TO RONTO ~ SCHOO L 0 1 CONT INU ING STUOIE~ 11 EV is always first Variances are always EV minus X Indices are always EV multiplied X Costs are always EV _____ AC Schedules are always EV ______ PV  Earned Value Chart - Variance $1,800,000 1 Status Date $1,600,000 1 - - - - - - - - - -~ - - - - - - -~ Budget at Complet ion BAC = 1,600 ,000 $1,400,000 $1,200,000 $1,000,000 Schedule Variance : SV = EV - PV $800,000 1----:'"'4'~ ?"'-,::__~ sv = $600 ,000 - $800,000 = -$200,000 $600,000 f - - ----=====i~...::::::,,.-,:...__ _~ Cost Variance: CV= EV - AC CV = $600,000 - $400,000 = $200,000 $400,000 Expected Completion $200,000 $- - Planned Value {PV) - Earned Value (EV) - Actual Cost (AC) 9 UN IVERS IT Y OF TO RONTO ~ SCHOOL 01 CONT INUING STUOIE~ 12 This project is under budget and behind schedule  EVM Indicators - At Status Date Term Formula Amount Budget at Completion BAC $1 ,600 ,000 Earned Value EV $600 ,000 Planned Value PV $800 ,000 Actual Cost AC $400 ,000 CV= EV -AC Cost Variance $200 ,000 ($600 ,000 - $400,000) SV = EV - PV Schedule Variance -$200 ,000 ($600 ,000 - $800,000) CPI= EV/ AC Cost Performance Index 1.5 or 150% ($600 ,000 I $400,000) SPI =EV/ PV Schedule Performance Index 0.75 or 75% ($600 ,000 I $800,000) 9 UN IVERSIT Y OF TO RONTO ~ SC HOO L 0 1 CONT INU ING STU OIE~ 13 Calculations from example  Forecasting Cost using EVM Management wants to know what the total costs will be when the project is completed This forecast is known as the Estimate at Completion (EAC) Four formulas can be used to forecast the EAC: EAC =AC+ ETC Actual costs to date (AC) plus a new estimate for all remaining work (Bottom Up, ETC , estimate to complete). Original estimate was fundamentally flawed EAC = AC + (BAC - EV) Actual costs to date (AC) plus remaining budget (BAC-EV). Current variances are viewed as atypical of future variances EAC = BAC / CPI (very popular) If current trends are expected to continue, Budget at Completion (BAC) is modified by the cumulative Cost Performance Index (CPI) Easiest and most reasonable approach EAC =AC+ (BAC - EV)/ (CPI * SPI} Considers both CPI and SPI , when they are trending in different 6 directions - under budget while ahead of schedule.._ UN I VERS IT Y OF TO RONTO ~ SCHOOL 01 CONT INUING STUOIE~ 14  Earned Value Chart - EAC Forecast IC-1.2 $1,800,000 : Status Date BAC =1,600,000 ,, , , I $1,600,000 $1,400,000 ,, $1,200,000 PV= $1,000,000 800,000 $800,000.,,,,..,,,,..,,,,..,,,,. $600,000.,,,,. $400,000 Estimate at Completion 1\ = EAC BAC / CPI 1 Forecast Completion $200,000 AC= =$1,600,000 / 1.5 400 ,000 = $1 ,066,700 1 Date $- - Planned Value (PV) - Earned Value (EV) - Actual Cost (AC) - - Forecast EV - - Forecast AC 9 UN IVERSIT Y OF TORONTO ~ SCHOO L 0 1 CONT INU ING STUOIE~ 15.. Summary of Earned Value Formulas Term Earned Value - EV Formula Work package estimate x % Good Outcome... complete Planned Value PV From Cost Baseline Actual Cost AC From actual results Cost Variance CV EV-AC Positive Negative Schedule Variance SV EV-PV Positive Negative Cost Performance CPI EV/ AC >1 1