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evaeuropeGENEVA 2009
Geneva School of Business Administration Haute école de gestion de Genève
EVA EuropE 2009 wAs jointly orgAnisEd by pArtnErsgold sponsors
© 2009, CErn, HEg, AutHors - tHis mAtEriAl is proVidEd CourtEsy of EVA EuropE 2009, tHE EuropEAn orgAnisAtion for nuClEAr rEsEArCH(CErn), tHE gEnEVA sCHool of businEss AdministrAtion (HEg) And tHE AutHors. All rigHts rEsErVEd. tHE ContEnts mAy not bE rEproduCEd witHout pErmission of tHE AutHors And EVA EuropE.
Earned Value
Measurement
Earned Value ManagementFundamental PrinciplesOlivier Lazar, Msc., MBA, PMP
Earned Value Measurement (EVM)Definition
“…Technique...integrates project Scope, Cost and Schedule measures to help the project management team
assess project performance.”PMBOK® Guide, 2008
EVM History
EVM emerged as a financial analysis specialty in United States Government programs in the 1960s on DoD’s programs (Polaris missiles…)EVM was not limited to the DoD for long. It was quickly adopted by the National Aeronautics and Space Administrationalso received greater attention by publicly traded companies in response to the Sarbanes-Oxley Act of 2002
EVM Objectives and Benefits
Going beyond 2 dimensional project assessment (Cost vs Allocated Budget) by integrating Technical Achievement monitoringExactly measure “What did we get for the money we spent?”Anticipate rather than ReactProvide Vision over the project from Now to CompletionEasy to use, to report and to analyze
Earned Value Principles
EVM Measures:1. Planned effort (Planned Value – PV) – Baseline
Person-days estimated at current dateCumulative cash flow of project
2. Actual effort (Actual Cost – AC)Person-days expended at current dateIf measuring cost, use “committed” cost
3. Scope achievement (Earned Value – EV)Percent of work (scope/deliverables) accomplished
EVM Analyzes:Current status vs baseline (variance)Estimate to complete (Effort & Duration) (Baseline estimate x index – actual effort)Corrective actions (if needed)
Earned Value Illustrated (S-Curve)C
ost
Time
Budget At Completion (BAC)Performance Measurement Baseline
Data Date
Planned Value (PV)
Actual Cost (AC)
Earned Value (EV) = BAC x Physical %
Cost Variance = EV - AC
Schedule Variance = EV - PV
Actual Time Variance
Estimate to Complete (ETC = BAC – EV)
Estimate At Completion (EAC = AC + ETC)
Performance Indexes:- SPI (Schedule): EV / PV- CPI (Cost): EV / AC
Earned Value Calculations
1. Planned Value (PV) = [(BAC/Project Duration) x Elapsed time units]2. Actual Cost (AC)3. Earned Value (EV) = BAC x Physical % Complete4. Cost Variance (CV) = EV - AC5. Schedule Variance (SV) = EV - PV6. Cost Performance Index (CPI) = EV / AC7. Schedule Performance Index (SPI) = EV / PV8. Estimate at Completion (EAC) = AC+ETC9. Estimate to Compete (ETC) = BAC – EV10. To Complete Performance Index (TCPI) = (BAC-EV)/(EAC-AC)
Acronyms, see PMBOK® Guide
What does these PI’ tell us?
Of course, about the current status… But… It’s too late anyway!
Highlight the trendsPredict deviationsEvaluate resources
About the Quality of the Project PlanIs the initial estimate accurate?Deviation can highlight a problem with the accuracy of the initial plan
• About how realistic is an objective…• The TCPI will tell you… when used with CPI…
Microsoft Excel Worksheet
CV SV PROJECT STATUS
Over-achieving and underspending
No action needed (unless spending customers’ money is an issue!)
( + ) ( + )
Over-achieving, but overspent for the achievement
Money being wasted, e.g. unnecessary overtime?
( - ) ( + )
( + ) ( - )
Under-achieving on the project, but overachieving for the spend
Team performing well but under-resourced
( - ) ( - )
Under-achieving, and overspending for the achievement
Team under-resourced and under-performing
1
2
3
4
1 Cost
Time
Cost
Time
3
2 Cost
Time
4 Cost
Time
Interpretation and Analysis
PV: Budgeted CostAC: Actual CostEV: Earned Value
Difficulties and Limitations
Consolidation issues:
If a consolidated indicator is green, get a look at the details. Some difficulties can be masked by over well-performing activities of workpackages.
So called « Support Activities » (1FTE, 100% rate, long term)
AC = PV, SPI and CPI correlated
Data’s time consistency (costs and % at same Data Date)
Lack of Planning (“Failing to Plan is Planning to Fail” Ika, 2006)Difficult to obtain a stable and consistent Baseline
Cultural Issues
Earned Value Management is NOT addressing Quality
Progress Measurement
Progress measurement : difficulties to define a precise and accurate way of estimate the work performed
Existing ways of measurement:Physical % Complete (ex. 42.5% of task)Defined Steps (25/25/30/20)0/100Custom % Complete (n/y, ex. 20/80)Level of Effort (EV=PV) eg. Management tasks
ReferencesISO/WD 21500, International Organization for Standardization, to be published. Project Management – Guide to Project Management.ISO 10600, International Organization for Standardization, 1997. Quality Management – Guidelines to Quality in Project Management.American National Standard Institute, 1998. ANSI/EIA 748 EVMS Standard.AACE, Association for Advancement of Cost Engineering, 1956 – 2002. Project Management Using Earned Value, Gary C. HumphreysHumphreys & Associates, 2002.PMI® , Project Management Institute, 2005. Practice Standard for Earned Value Management.PMI®, Project Management Institute, 1996-2008. A Guide to the Project Management Body of Knowledge.Sarbanes-Oxley Act, 2002.Office of the Secretary of Defense & National Aeronautics And Space Administration, 1962. DOD & NASA Guide PERT COST.