IBM Software Group RPM Earned Value Management Rational

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IBM Software Group RPM Earned Value Management Rational Portfolio Manager Farshad Shadpey Steven Milstein

IBM Software Group RPM Earned Value Management Rational Portfolio Manager Farshad Shadpey Steven Milstein © 2008 IBM Corporation

IBM Software Group | Rational Software Overview § Introduction § Why Earned Value Management

IBM Software Group | Rational Software Overview § Introduction § Why Earned Value Management § EV Prerequisites § EV Measuring Methods § EV in RPM § Gap Analysis § References 2 © 2008 IBM Corporation

IBM Software Group | Rational Software Introduction RPM supports Earned Value Management (EVM). However,

IBM Software Group | Rational Software Introduction RPM supports Earned Value Management (EVM). However, the RPM EV feature does not fully comply with all industry standards. The following slides: – Summarize the essential prerequisites and methods for EV calculation, based on the PMI and ANSI standards – Describe the fundamental parts in the RPM EV feature – Identify the gaps between those standards and RPM 3 © 2008 IBM Corporation

IBM Software Group | Rational Software Why Earned Value Management? § EVM is valuable

IBM Software Group | Rational Software Why Earned Value Management? § EVM is valuable to project managers because it allows them to compare where they are on a project with where they ought to be by: – Evaluating project performance in terms of cost (or effort or other relevant metric) and time by analyzing the Cost and Schedule Variances – Forecasting required cost (or effort or other relevant metric) and time to complete the project 4 © 2008 IBM Corporation

IBM Software Group | Rational Software An Example of EV Analysis (RPM EV Pivot)

IBM Software Group | Rational Software An Example of EV Analysis (RPM EV Pivot) 5 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Prerequisites Certain data must be collected in

IBM Software Group | Rational Software EV Prerequisites Certain data must be collected in order to calculate Earned Value – generally, this means: § Planned Values - Earned Value requires a detailed bottom-up baseline plan. This information captures the approved project cost (or effort or other relevant metric) at any point during the project. § Actual Costs - This information shows actual cost (or effort or other relevant metric) for the work completed at any point during the project. 6 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Prerequisites (Cont. ) And more specifically, Earned

IBM Software Group | Rational Software EV Prerequisites (Cont. ) And more specifically, Earned Value calculations require the following data, at any point in the project: [1] § The work scheduled to be completed § The approved budget for the work scheduled § The work actually completed § The approved budget corresponding to the completed work § The actual costs These prerequisites are used later in this presentation in the gap analysis 7 © 2008 IBM Corporation

IBM Software Group | Rational Software A challenging question – what is completed work?

IBM Software Group | Rational Software A challenging question – what is completed work? § Identifying completed work is easy § Identifying the level of completeness of work in progress is difficult 8 © 2008 IBM Corporation

IBM Software Group | Rational Software Measuring Completeness with EV Measuring Methods § The

IBM Software Group | Rational Software Measuring Completeness with EV Measuring Methods § The following EV measuring methods are based upon widely accepted PMI & ANSI standards: – Milestones With Weighted Values – Fixed (Start/Finish) Formula by Task – Percent Complete Estimates – A Combination of Weighted Milestones with Percent Complete Estimates – Equivalent Completed Units – Earned Standards – Complementary methods: • Apportioned Relationships to Other Discrete Work Packages • Level of Effort § For more information on these methods, please see the backup slides 9 © 2008 IBM Corporation

IBM Software Group | Rational Software Earned Value in RPM § RPM EV calculation

IBM Software Group | Rational Software Earned Value in RPM § RPM EV calculation is only based on the WBS labor cost (effort cost) rolled up from the task level. § The planned value (approved budget of the scheduled work) is defined by the Baseline WBS labor cost. § Completeness of tasks is measured by the actual hours and the earned value is calculated based on percent work (%W) where %W = Actual / (Actual + Remaining) and the planned values of assignments 1. 1 - %W as defined above complies with percent complete definition in IBM’s World Wide Project Management Method for the work units tracked by effort, refer to the page 18 of TC, Tracking a control document. Using %W is also similar to Standard Hours method defined in the ANSI/EIA-748 -A 1998 standard for Earned Value Management Systems, refer to the page 24 of the standard [3]. 10 © 2008 IBM Corporation

IBM Software Group | Rational Software Gaps Analysis EV Prerequisites Work scheduled to be

IBM Software Group | Rational Software Gaps Analysis EV Prerequisites Work scheduled to be completed Fully supports Approved budget for the scheduled work § Only considers task labor costs § Distributes the non-labor costs Gaps ------ § RPM does not allow the arbitrary distribution of non-labour costs evenly across the task duration § RPM does not consider costs specific Work completed Percent Work (%W) § RPM only supports actual work Approved budget for completed work § Only considers labor costs § RPM does not allow the arbitrary § Distributes the non-labor costs evenly across the task duration § RPM does not consider costs specific Actual costs 11 RPM Implementation Only considers task labour costs to project or summary tasks – it only considers costs at the assignment level completed at the assignment level but it would be more valuable if it were editable higher up in the WBS structure distribution of non-labour costs to project or summary tasks – it only considers costs at the assignment level § RPM does not consider costs specific to project or summary tasks – it only considers costs at the assignment level © 2008 IBM Corporation

IBM Software Group Backup Rational Portfolio Manager © 2008 IBM Corporation

IBM Software Group Backup Rational Portfolio Manager © 2008 IBM Corporation

IBM Software Group | Rational Software EV Measuring Methods § Milestones With Weighted Values

IBM Software Group | Rational Software EV Measuring Methods § Milestones With Weighted Values 1: – In this method, each work package has a specific budget value associated with specific milestones. This budget is determined based on the total budget of the work package and the weights of the milestones. After reaching a milestone, the budget value is considered as earned if the defined goals of the work package for that milestone are achieved. Otherwise, no earned value is considered for the work package [1, 2]. 1 - ANSI/EIA-748 -A-1998 standard for Earned Value Management Systems describes a method as “Valued Milestones” [3], which is the same as the “Milestones with Weighted Values” method. 13 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Measuring Methods (Example of EV calculation in

IBM Software Group | Rational Software EV Measuring Methods (Example of EV calculation in Milestones M 1 and M 2, Using Milestones With Weighted Method) 14 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Measuring Methods (Milestones With Weighted Values, Example

IBM Software Group | Rational Software EV Measuring Methods (Milestones With Weighted Values, Example of Performance Graph) 15 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Fixed (Start/Finish)

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Fixed (Start/Finish) Formula by Task: 25/75; 50/50; 75/25: – The first number multiplied by the budget of the activity divided by 100 is the assumed earned value after the activity starts. The remaining of the budget of the activity is considered as earned, when the activity is finished [1, 2]. 16 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Percent Complete

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Percent Complete Estimates: – In this method, the completeness of each activity is assessed for measuring periods. This method is the easiest, but could be the most subjective method [2, 3]. 17 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § A Combination

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § A Combination of Weighted Milestones with Percent Complete Estimates: – In this method, the percentage complete should be smaller or equal to the milestone percent [2]. 18 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Equivalent Completed

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Equivalent Completed Units: – In this method, the work for producing each unit of the product is broken down to various activities/work packages that are associated to some percent of the full unit. The earned value is calculated based on the budget of units and the percent of completed activities [1]. 19 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Earned Standards:

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Earned Standards: – In this method the standards, developed for recurring work and are used to define the budget and measure the performance [1]. 20 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Apportioned Relationships

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Apportioned Relationships to Other Discrete Work Packages (used as a complement of other measuring methods): – Activities like inspection are dependent on other activities/work packages, which have specific earned value. In this method, the planned value and subsequently the earned value of an apportioned activity is considered as a portion of the planned and earned values of the main activity/work package [1]. 21 © 2008 IBM Corporation

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Level of

IBM Software Group | Rational Software EV Measuring Methods (Cont. ) § Level of Effort (used as a complement of other measuring methods): – The performance of activities like project management or variant types of administrative jobs cannot be assessed independently. These activities are known as Level of Effort (LOE). The corresponding budget of an LOE activity in each measurement period is considered as its earned value [2]. 22 © 2008 IBM Corporation

IBM Software Group | Rational Software References [1] Quentin W Fleming and Joel M.

IBM Software Group | Rational Software References [1] Quentin W Fleming and Joel M. Koppelman. “Earned Value Project Management - An Introduction" (3 rd edition). Project Management Institute, Inc, 2005. [2] Project Management Institute. “Practice Standards for Earned Value Management”. Project Management Institute, Inc, Newtown Square, Pennsylvania, 2004. [3] GEIA Standard. “ANSI/EIA-748 -A-1998, Earned Value Management Systems”. Reaffirmed: August 28, 2002. 23 © 2008 IBM Corporation