time centric earned value

Copyright Square Peg Consulting 1999-2010 1

Earned Value - The �ext

Generation - A Practical

Application for Commercial

ProjectsBy:

John Goodpasture

Jim SumaraPresentation to the 28th PMI Seminar & Symposium

Chicago, September 29, 1997

Square Peg Consulting, LLC


Introduction

�“Earned Value systems are one of the most meaningful and useful tools to status, report, and analyze project cost, schedule, and performance”


Introduction

�“The compelling reason to employ earned value is to stimulate project improvement”


Accomplishment & Prediction

�Earned value measures accomplishment and

predicts outcome

�Traditionally cost-centric, reflecting cost priority in cost-reimbursable contract environments


Earned Value Measurements

�Three main measurement elements:

�A plan for accomplishment

�A claim of performance against plan

�A cost of performance


Traditional Earned Value

�Measures “core” value of project� When money is the “core value”, cost is management focus

� Both cost and schedule expressed in $’s

� Historical [look back] and Predictive [look forward]

�May be hard to apply; requires:� Time card or time accounting system

� Time card compliance

� Overhead and direct cost allocation system

� Ledger for associating cost with project work

packages


Motivations for an alternative Earned Value

� For many commercial projects, cost has lower priority than time

or performance.

� Focus of earned value must be on the core value of the project

� Must be practical to apply

*(Shiba, Graham, Walden 1993, 10)


Time is valuable

�Time is the new dimension of Quality; it has become one of the most important elements in modern business practice.

�We present an earned value system for time-centric or time-constrained

projects


Earned Start-Finish Earned Value

� “Earn” the time elements of the project plan means:

� Answering two questions: [1] are tasks starting on time; [2] are they finishing on

time?

� Retain most important features of cost-centric approach

� Plan for performance;

� Measurement of performance against plan

� Predictive outlook on completion


Definitions are key to success

Rule Definition or Application

A Finish is: Valued as 1 or 0. Task hascompleted its scope; scheduledsuccessors can begin.

A Start is: Valued as 1 or 0. Predecessor tasksare completed, task is staffed,resources are in place, andmeaningful effort has begun


Credit is given for Earnings

Rule Definition

No Partial credit A task is either started or it is not;it is finished or it is not;

Un-weighted Credit All tasks are weighted equally, 1 or0, for start and finish

Weighted Credit There are multiple methods forapplying weight. For instance,weight heavily the tasks that areon the critical path, or “nearcritical”.


Process Steps

� Construct WBS of deliverables; write tasks for achieving deliverables

� Construct schedule network; evaluate schedule risk with Monte Carlo analysis; find “near critical”and critical paths

� Establish earning rules

� Evaluate credit claims; analyze for future performance


Example Project Plan

02468101214161820

1st

Qtr

2nd

Qtr

3rd

Qtr

4th

Qtr

Planned TaskStarts

Planned TaskFinishes


“Performance” results of example

Project Plan

0

5

10

15

20

25

30

35

1st

Qtr

2nd

Qtr

3rd

Qtr

4th

Qtr

Cum PlannedStarts

Cum AcutalStarts

Cum PlannedFinishes

Cum ActualFinishes

Pln Start

Start Performance

Pln Finish

Finish Performance


Process-2000 Plan+a real project

0

510

15

20

2530

35

40

3-O

ct-

96

31-O

ct-

96

12-

Dec-96

23-Jan-

97

14-M

ar-

97

Period Start Plan

Period Start Acutal


Somehow, tasks always “start”

0

100

200

300

3-

Oct-

96

14-

Nov-

96

23-

Jan-

97

Cum Start

Plan

Cum Start

Actual


“Start Performance Index” ratio’s

plan to actual

0.80

0.85

0.90

0.95

1.00

3-

Oct-

96

14-

Nov-

96

23-

Jan-

97

Cum Start

Performance

Index


Here’s the plan for “Finishes”

0

5

10

15

20

25

30

3-Oct-

96

31-

Oct-96

12-

Dec-96

23-

Jan-97

14-

Mar-97

Period Finish Plan

Period Finish Acutal


“Finish Performance Index” for

Process-2000

0.00

0.20

0.40

0.60

0.80

1.00

3-O

ct-

96

31-O

ct-

96

12-

Dec-96

23-Jan-

97

14-M

ar-

97

Cum Finish

Performance

Index


Lessons Learned

� Using a high degree of granularity in scheduling improves predictive results

� Predicting outcome is another form of analyzing project risk.

� Schedule problems imply cost and performance problems

� Focusing on Start/Finish stimulated improved project performance

� Understanding earned value achieved without cost collection systems

from Henry Wadsworth Longfellow: “Great is the art of beginning,

but greater the art of finishing”


Questions?

John C. Goodpasture

Jim Sumara

info@sqpegconsulting

time centric earned value

Business

project cost

alternative earned value

associating cost

time elements

project risk

performance problems

reflecting cost priority

important features of