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Earned Value Analysis

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` Need for accurate and consistent status

information

` Numerous complex (and interrelated) projects Projects with many WBS activities

Virtual offices

Diverse technology platforms

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Theres Room For Improvement 

70% of projects are:Over budget Behind schedule

52% of all projects finish at 189% of t heir initial

budget 

And some, after huge investments of time and money,are simply never comple

Source:The Standish Group

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` % complete estimating

% of Budget spent

% of work done

% of time elapsed

subjective, incomplete

draws false conclusions

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Enter Earned Value Analysis

Earned Value Analysis is: an industry standard way to:

measure a projects progress, forecast its completion date and final cost, and

provide schedule and budget variances along t heway.

By integrating t hree measurements, it provides

consistent, numerical indicators wit h

which

you canevaluate and compare projects.

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` Knowing where you areon schedule?

` Knowing where you areon budget?

` Knowing where you areon work accomplished?

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` Provides an ³Early Warning´ signal for prompt

corrective action.

Bad news does not age well.

Still time to recover 

Timely request for additional funds

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But First! - We gotta get organized

EVA works best when work is compartmentalized.

Compartmentalization is best achieved wit h a well-planned Work Breakdown Structure.

So, how do I create a WBS for a really complexproject?

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Proper WBS Design

One WBS per program Deliverable-oriented

Work not in t he WBS is out-of-scope

Each descending level represents more detailFull (and accurate) definition is key Defined deliverable(s)

Timeframe for delivery of product 

Total cost (direct and indirect) to deliver product 

Lets Look at an example:

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A sample Work Breakdown Structure

Serve Pizzas to Customers

Provide t he Place Cook t he Food Serve Customers (Ot  hers)

Cook t he SauceMake t he Dough Build t he Pizza

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WBS Units are Work Packages

Lowest level WBS elements

Have an accompanying narrative

Have t hree measurable components

Scope of work to be accomplished

Total (direct and indirect) cost 

Timeframe for completion

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Some New Terms

BCWS - Budgeted Cost of Work Scheduled(PV Planned Value)

ACWP - Actual Cost of Work Performed(AC Actual Cost)

BCWP - Budgeted Cost of Work Performed(EV Earned Value)

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BCWS: Budgeted Cost of Work Scheduled

Planned cost of t he total amount of work sc

heduledto be performed by t he milestone date.

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BCWS - Budgeted Cost of Work Scheduled

0

20000

40000

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Jan-03

Feb-03

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BCWS

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Earned Value Definitions (cont.)

ACWP: Actual Cost of Work Performed

Cost incurred to accomplish the work that has beendone to date.

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ACWP - Actual Cost of Work Performed

49000

56000

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Jan-03

Feb-03

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No

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BCWP

ACWP

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`BCWP: Budgeted Cost of Work Performed

The planned (not actual) cost to complete the work 

that has been done.

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BCWP - Budgeted Cost of Work Performed

49000

55000

0

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Feb-03

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BCWP

BCWS

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55000

49000

56000

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Jan-03

Feb-03

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N

-03

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BCWS

BCWP

ACWP

The Whole Story

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`SV: Schedule Variance (BCWP-BCWS) A comparison of amount of work performed during a

given period of time to what was scheduled to beperformed.

A negative variance means the project is behindschedule

`CV: Cost Variance (BCWP-ACWP) A comparison of the budgeted cost of work

performed with actual cost.

A negative variance means the project is over budget.

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Schedule Variance & Cost Variance

Schedule Variance = BCWP-BCWS

$49,000- 55,000

SV = - $ 6,000

Cost Variance = BCWP-ACWP

$49,00056,000

CV = - $7,000

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`SPI: Schedule Performance Index

SPI=BCWP/BCWS

SPI<1 means project is behind schedule

`CPI: Cost Performance Index

CPI= BCWP/ACWP

CPI<1 means project is over budget

`CSI: Cost Schedule Index (CSI=CPI x SPI)The further CSI is from 1.0, the less likely project

recovery becomes.

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Performance Metrics

SPI: BCWP/BCWS

49,000/55,000 = 0.891

CPI: BCWP/ACWP

49,000/56000 = 0.875

CSI: SPI x CPI

.891 x .875 = 0.780

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Making Projections

Once a project is 10% complete, t heoverrun at completion will not be lesst han t he current overrun.

Once a project is 20% complete,t he CPI does not vary from its current value by moret han 10%.

The CPI and SPI are statistically accurate indicators of final cost results.

Source: Defense Acquisition University

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102000

90882

103865

0

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an03

eb03

Mar03

Apr03

Ma

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un03

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Aug03

Sep03

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t03

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B WS

B W

A W

i r j cti s

Tod y

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102000

116,571

0

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40000

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100000

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140000

Jan-03

ar-03

ay-03

Jul-03

ep-03

Nov-03

Jan-04

ar-04

W

W

W

Estimate to Complete

Today

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A New Criteria

Activities earn value as they are completed.

The value earned is the WBS budgeted cost of theactivity completed to date.

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` Schedule Status Reporting

` Cost Status Reporting

` Forecasting

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` Proper WBS Design

` Baseline Budget Control Accounts

` Baseline Schedule

` Work measurement by Control Account work-hours, dollars, units, etc.

` Good Project Management Practices

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` Quantifying/measuring work progress can be

difficult.

` Time required for data measurement, input,and manipulation can be considerable.

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