CSE Senior Design ICSE Senior Design I

Earned Value Earned Value ManagementManagement

Some slides in this presentation were originally developed by Mr. Tom Rethard, and most have been further enhanced and modified by

Mr. Mike O’Dell for use in the CSE Senior Design class.

Instructor: Mike O’DellInstructor: Mike O’Dell

4

2

Earned Value - What is it?Earned Value - What is it?

Simply, it is a project monitoring and measurement system that:1. establishes a clear relationship between

planned planned accomplishments and actualactual accomplishments

2.2. reinforcesreinforces and rewards good planning good planning practices

4

3

Earned Value - What is it?Earned Value - What is it?

Basic concepts of Earned Value Management (EVM) Each task in a project earns value as planned planned

workwork is completedFor example (perhaps), if you were paid on this

basis, you would earnearn $$ at key milestones based on the value of what you have completed (earned value)

Earned value can be compared to actual cost and budgeted cost to determine variance and predict future performance

4

4

Earned Value - What is it?Earned Value - What is it?The budgeted cost budgeted cost (e.g., dollars, person-

hours, person-days, etc.) in terms of your baseline plan/budgetbaseline plan/budget of the work performed up to a specified point in time Also known as Budgeted Cost of Work Performed

(BCWPBCWP)Each task in the Work Breakdown Structure

(WBS) is assigned a BCWP based on its individual cost. Project BCWP is total of BCWP for all tasks

required to complete the project

4

5

Earned Value ComponentsEarned Value ComponentsPlanned Value (a.k.a. BCWSBCWS)

How much work (person-hours) you planned to have accomplished at a given point in time (this is from the WBS in your plan)

Actual Cost (a.k.a. ACWPACWP) How much work (person-hours) you have actually

spent at a given point in time

Earned Value (a.k.a. BCWPBCWP) The value (person-hours) in terms of your base

budget of what you have accomplished at a given point in time (or, % complete X Planned Value)

4

6

Earned Value: ExampleEarned Value: Example

On Day X:

PLANNED VALUEPLANNED VALUE (Budgeted cost of the work scheduled, BCWS) =

18 + 10 + 16 + 6 = 50

EARNED VALUEEARNED VALUE (Budgeted cost of the work performed, BCWP) =

18 + 8 + 14 + 0 = 40

ACTUAL COSTACTUAL COST (of the work performed , ACWP) =

45 (from your project tracking - not evident in above chart)

18

8

14

Today

4

7

Earned Value: ExampleEarned Value: ExampleC

ost

(Per

son-

Hou

rs)

Time (Date)

Planned ValuePlanned Value: what your plan called for sending on the tasks planned to be completed by this date.

Today

Earned ValueEarned Value: value (cost) of what you have accomplished to date, per the base plan.

Actual CostActual Cost: what you have actually spent to this point in time.

Budgeted (Planned) S

pending

Budgeted (Planned) S

pending

Actual S

pending

Actual S

pending

Earned Value

Earned Value

4

8

Earned Value: ExampleEarned Value: ExampleC

ost

(Per

son-

Hou

rs)

Time (Date)

Today

Budgeted (Planned) S

pending

Budgeted (Planned) S

pending

Actual S

pending

Actual S

pending

Earned Value

Earned ValueBehind Behind

ScheduleSchedule

Over Over BudgetBudget

4

9

VarianceVariance

Any schedule or cost deviationschedule or cost deviation from a specific plan.

Used within an organization to verify the budget and schedule for a project

Frequently used as a key component of plan reviews and performance plan reviews and performance measurementmeasurement

4

10

VarianceVariance

Must compare scheduling and budget variance at the same time Schedule varianceSchedule variance: deviations from work

planned – not a measure of changes in cost Cost varianceCost variance: deviations from the

budget – not a measure of work scheduled vs. work completedExample: applying more $$/people to a task may

maintain the schedule, but it adds to cost… schedule on track… over budget on expenses (cost)

4

11

Performance IndicesPerformance Indices

Cost Performance Index CPICPI = BCWP/ACWP

Schedule Performance Index SPISPI = BCWP/BCWS

Analysis CPI > 1.0 exceptional performance CPI < 1.0 poor performance Similar for SPI

4

12

QuizQuizThe EV measurement of work you planned to

have accomplished at a given point in time :a. BCWPb. ACSPc. BCWSd. ACWS

True or False: At any point in time, the SPI tells you exactly how far ahead or behind schedule you are on your project.a. TRUEb. FALSE

4

13

QuizQuiz If BCWP is 20 pm and ACWP is 15 pm, CPI:

a. .75b. 1.33c. 1.0d. 0

If BCWP is 27 pm BCWS is 25 pm, you are probably:a. On scheduleb. Ahead of schedulec. Behind scheduled. None of the above

4

14

Earned Value & Variance: Earned Value & Variance: ExampleExample

On Day X: PLANNED VALUE (BCWS) = 18 + 10 + 16 + 6 = 50 EARNED VALUE (BCWP) = 18 + 8 + 14 + 0 = 40 ACTUAL COST (ACWP) = 45 (from your project tracking)

Therefore: Schedule VarianceSchedule Variance = BCWP – BCWS = 40 - 50 = -10 (behind schedule) Schedule Performance IndexSchedule Performance Index = 40 / 50 = 0.8, or 80% of plan (a B-, at best) Cost VarianceCost Variance = BCWP - ACWP = 40 - 45 = -5 Cost Performance IndexCost Performance Index = 40/45 = .89, or you’re getting an 89¢ return on

every $1.00 (or, person-hour) spent on this project

18

8

14

4

15

Primary Measurement Primary Measurement MethodsMethods

MeasurableMeasurable efforts Discrete increments of workDiscrete increments of work with definable

schedule and tangible results (i.e., real tasks with a deliverable)

Level of effortLevel of effort Work that is not not discernable in discretediscrete,

measurable tasks (e.g., project management, training)

4

16

Determining % Complete – Determining % Complete – When?When?

Allocate based on time spent – but what if you spend more time than allocated?

Allocate 50% at start of task, 50% at end But only for small, discrete taskssmall, discrete tasks

Allocate 100% at start of taskAllocate 100% at end of task

Best solution if you keep tasks very smallkeep tasks very smallAllocate value at Critical Milestones

Good solution when using with contract workOthers?

Our approach

4

17

Another Example ProjectAnother Example ProjectPlans to spend $100K in each of first 4 weeks

(baseline budget, per documented planper documented plan)Actuals, at end of week 4 show: $325K spent

BCWS = $400K ($100K x 4) ACWP = $325K

What conclusions can you draw?Under budget? Is project on schedule?

4

18

Another Example ProjectAnother Example Project

Suppose BCWP is $300K How is this determined?

What conclusions now? SV = BCWP – BCWS SV = $300k - $400K = --$100K

Behind scheduleBehind schedule, but what does the $100K in variance really mean?

CV = BCWP – ACWP = $300K - $325KOver budget Over budget by $25K

4

19

Earned Value ManagementEarned Value Management

How can you use this information? Careful analysis of variance and trends Resetting schedule or budget, when appropriate

Variance Analysis Questions What is the problem causing the variance? What is the impact on time, cost and performance? What is the impact on other efforts, if any? What corrective action is planned or under way? What are the expected results of the corrective

action?

4

20

Earned Value ManagementEarned Value ManagementExtraordinary variance or alarming trends

may be cause for reset or cancellation ofreset or cancellation of a project, but where do you draw the line?

How much variance to allow depends on a number of factors: Life-cycle phase Length of life-cycle phase Length of project Type of estimate Accuracy of estimate

4

21

Variance ProjectionVariance Projection

4

22

Performance Index TrendsPerformance Index Trends

4

23

Ideal Performance IndexIdeal Performance Index

4

24

Closing Thoughts: Management Closing Thoughts: Management ReserveReserve

The padding always added to a project for unexpected costs that are within project scope Not an allowance for changes to scope Not part of the cost estimate

Added by upper management, not the project manager.

4

25

Closing Thoughts: Government Closing Thoughts: Government RequirementsRequirements

U.S. government contract cost tracking often must include: BCWS BCWP ACWP Estimated cost at completion Budgeted cost at completion Cost and schedule variances with explanations Traceability

4

26

SummarySummary

Cost, in the form of Earned Value or BCWP, can be used to analyze progressanalyze progress of a project

Using Earned Value data to make critical project decisions must be based on careful analysiscareful analysis of data, variances and trends