EARNED VALUE Earned Value Management Systems Earned Value

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EARNED VALUE ØEarned Value Management Systems ØEarned Value Analysis

EARNED VALUE ØEarned Value Management Systems ØEarned Value Analysis

EARNED VALUE MANAGEMENT SYSTEM IS NOT: A software product, or Something you can buy.

EARNED VALUE MANAGEMENT SYSTEM IS NOT: A software product, or Something you can buy. IS: A collection of management practices. A structured method to: ØEstablish a Performance Measurement Baseline ØMeasure and analyze performance Scalable to all sizes of projects.

EARNED VALUE MANAGEMENT SYSTEM Project Management Practices Addressing 32 Criteria: ØOrganization (of the project)

EARNED VALUE MANAGEMENT SYSTEM Project Management Practices Addressing 32 Criteria: ØOrganization (of the project) 5 criteria ØPlanning, Scheduling, & Budgeting 10 criteria ØAccounting Considerations 6 criteria ØAnalysis and Management Reports 6 criteria ØRevisions and Data Maintenance 5 criteria

EARNED VALUE MANAGEMENT SYSTEM ØOrganization (of the project) ü Define the authorized work elements.

EARNED VALUE MANAGEMENT SYSTEM ØOrganization (of the project) ü Define the authorized work elements. ü Provide for integration of organization’s PPBES structure ü Provide for integration of WBS and organizational structure. Note: The information listed here is only a sampling of the criteria listed in ANSI-EIA 748 A. For a complete listing of the criteria, refer to the standard itself

EARNED VALUE MANAGEMENT SYSTEM ØPlanning, Scheduling, and Budgeting ü Identify sequencing and interdependencies of

EARNED VALUE MANAGEMENT SYSTEM ØPlanning, Scheduling, and Budgeting ü Identify sequencing and interdependencies of tasks. ü Describe work in discrete work packages (WBS). v. Budget v. Schedule v. Deliverables ü Ensure work packages flow up to over-all budget Note: The information listed here is only a sampling of the criteria listed in ANSI-EIA 748 A. For a complete listing of the criteria, refer to the standard itself

EARNED VALUE MANAGEMENT SYSTEM ØAccounting Considerations ü Cost performance measurement at a suitable time

EARNED VALUE MANAGEMENT SYSTEM ØAccounting Considerations ü Cost performance measurement at a suitable time ü Recognized, acceptable costing techniques ? Obligation ? Accrual ? Invoice ü Rational identification and accountability of all costs Note: The information listed here is only a sampling of the criteria listed in ANSI-EIA 748 A. For a complete listing of the criteria, refer to the standard itself

EARNED VALUE MANAGEMENT SYSTEM ØAnalysis & Management Reports ü Generate reports at least monthly

EARNED VALUE MANAGEMENT SYSTEM ØAnalysis & Management Reports ü Generate reports at least monthly v Schedule Variance v Cost Variance ü Implement managerial actions as appropriate ü Develop revised estimates Note: The information listed here is only a sampling of the criteria listed in ANSI-EIA 748 A. For a complete listing of the criteria, refer to the standard itself

EARNED VALUE MANAGEMENT SYSTEM ØRevisions and Data Maintenance ü Reconcile budget changes to authorized

EARNED VALUE MANAGEMENT SYSTEM ØRevisions and Data Maintenance ü Reconcile budget changes to authorized scope changes ü Incorporate authorized changes in a timely fashion ü Control retroactive changes Note: The information listed here is only a sampling of the criteria listed in ANSI-EIA 748 A. For a complete listing of the criteria, refer to the standard itself

Amount of Detail Required in an EVMS Can be tailored to the project risk

Amount of Detail Required in an EVMS Can be tailored to the project risk and significance (cost, visibility, etc). 10 10 10 9 9 9 8 8 8 7 7 7 6 6 6 5 5 5 4 4 4 3 3 3 2 2 2 1 1 1 Project Significance EVMS Detail Project Risk

EARNED VALUE ANALYSIS L Provides an integrated performance report. L Relates Directly to the

EARNED VALUE ANALYSIS L Provides an integrated performance report. L Relates Directly to the WBS ØPlanned WBS $ = Planned Value ØNo WBS = No planning = No Planned Value ØApplicable to projects of any size. L Relies on three key data points: ØPlanned Value ØActual Cost ØEarned Value

PLANNED VALUE ØHow much do you expect to have done at completion ? Budget

PLANNED VALUE ØHow much do you expect to have done at completion ? Budget at Completion (BAC) ØHow much should you have done at point X ? (PV) or Budgeted Cost of Work Scheduled (BCWS)

PLANNED VALUE Planned Value $575 K

PLANNED VALUE Planned Value $575 K

ACTUAL COST ØThe dollar amount actually spent to date. (AC) or Actual Cost of

ACTUAL COST ØThe dollar amount actually spent to date. (AC) or Actual Cost of Work Performed (ACWP) ØHas no relationship to work accomplished.

ACTUAL COST $665 K Actual Cost $665 K Planned Value $575 K Planned Value

ACTUAL COST $665 K Actual Cost $665 K Planned Value $575 K Planned Value

EARNED VALUE ØHow much have you actually gotten done as of Today ? (EV)

EARNED VALUE ØHow much have you actually gotten done as of Today ? (EV) or Budgeted Cost of Work Performed (BCWP) ØWork accomplished, not money spent. ØEV is the basis for Variances and Performance Indices ü Cost Variance & CPI ü Schedule Variance & SPI ØEverything starts with EV (or BCWP)

EARNED VALUE $575 K Planned Value $575 K Earned Value $475 K Earned Value

EARNED VALUE $575 K Planned Value $575 K Earned Value $475 K Earned Value

EARNED VALUE ØSeveral ways to “Earn” value: ü ü % Complete 50/50 Rule 20/80

EARNED VALUE ØSeveral ways to “Earn” value: ü ü % Complete 50/50 Rule 20/80 Rule 0/100 Rule

CALCULATING VARIANCES Cost Variance (EV-AC) $475 K - $665 K = -$190 K CPI

CALCULATING VARIANCES Cost Variance (EV-AC) $475 K - $665 K = -$190 K CPI (EV/AC) = 0. 714 AC = $665 K PV = $575 K EV = $475 K Actual Cost $665 K Planned Value $575 K Earned Value $475 K Schedule Variance (EV-PV) $475 K - $575 K = -$100 K SPI (EV/PV) = 0. 826

CALCULATIONS Cost Variance: Cost Performance Index: Schedule Variance: Schedule Performance Index: Estimate to Complete:

CALCULATIONS Cost Variance: Cost Performance Index: Schedule Variance: Schedule Performance Index: Estimate to Complete: CV = EV - AC CPI = EV / AC SV = EV - PV SPI = EV / PV ETC = BAC - EV Estimate at Completion: EAC = AC + BAC - EV CPI