Evm class 02 1to15 by upad

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Rauch & Hackenberg

Project Earned Value Management X 443.17 Class 2 The Basics of Earned Value

Copyright © 2012 Bill Hackenberg. All rights reserved.

Dilbert on progress reports…

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Class 1, Introduction Review Questions

Q. What is the difference between projects and operations:

a. Projects are ongoing activities b. Projects are performed by people, while operations are performed by machines

c. Projects are temporary and create a unique product or service

d. Projects and operations are the same

3 Copyright © 2012 Bill Hackenberg. All rights reserved.

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Q. The triple constraint is: a. Scope, Cost, Time b. Resources, Cost, Budget c. Schedule, Duration, Time d. Scope, Requirements, Quality


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Q. Which phase-to-phase relationship in a Project Life Cycle can have decision gates that the project must pass through before proceeding?

a. Sequential Relationship (Waterfall) b. Overlapping Relationship (Fast Tracking) c. Iterative Relationship (Iterative) d. Any of the above


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Q. The Project Charter is used to do all the following except:

a. Establish measurable project objectives and related success criteria for the project

b. Communicate Project purpose or justification to project stakeholders

c. Document high-level risks d. Provide a baseline for progress measurements and project control


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Q. How does the Project Management Maturity Model OPM3 define process maturity for organizations?

a. As soon as all processes have been formalized into documentation

b. When projects are completed quickly (cost overruns are ok)

c. When projects are complete cheaply (schedule overruns are ok)

d. When they adopt Program & Portfolio process


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Earned Value Primitives, or Primary Metrics •  Planned Value (PV)

–  Budgeted Cost of Work Scheduled –  How much work should be done? –  What is the budget for the work scheduled (according to the original

estimate)?

•  Earned Value (EV) –  Budgeted Cost of Work Performed –  How much work is done? –  What was the budget for work accomplished? –  Interpretation of EV: “Task A, which I was supposed to complete today, is

scheduled to cost $1,000. I am only 85 percent done on this task. Thus I have done $850 worth of work—which is my earned value (EV).”

–  EV = PV x % Complete

•  Actual Cost (AC) –  Actual Cost of Work Performed –  How much did the “is done” work cost? –  What are the actual costs for the Earned Value


has to be $$$ Ex: Task A 10 hrs, $10/ per hr PV=$100

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Schedule Variance (SV)

•  SV = EV – PV

•  Interpretation of SV: “As of today, I was supposed to have done $1,000 worth of work on Task A (PV). I have actually done $850 worth of work (EV). Thus, I am behind in my schedule by $150 worth of work (SV).”

•  Note: Schedule variance is valued in dollars!


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Cost Variance (CV)

•  CV = EV – AC

•  Interpretation of CV: “I have done $850 worth of work (EV), but it actually cost me $900 to do this (AC). It has cost me $50 more to do what I have done than I originally thought (CV).”


difference between Planned & spent

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Schedule Performance Index (SPI)

•  SPI = EV/PV

•  Interpretation: “I have done $1,500 worth of work (EV). The value of work scheduled is $1,000. Each dollar of scheduled work generated $1.50 worth of work (schedule performance index).”


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Cost Performance Index (CPI)

•  CPI = EV/AC

•  Interpretation: “I have done $850 worth of work (EV). It has cost me $900 to do so (AC). Each dollar I actually spent generated 94.4 cents worth of work (cost performance factor).”


Ratio of planned and spent

SV= - bad, + good (under budget)SPI= <1 bad, >1 good (ahead of schedule)

CV= $100000 (bad)CPI= .94 ok

1.5 times

CV= $100000CPI= .94 ok

CVCPI: 1.1SVSPI: 1.1under budget, ahead of schedule

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• The Project Baseline Plan

• 3 months • status

• Actual Costs = $300K

• Planned Costs = $300K

• Thousands (000)

• $1,000

• 500

• 750

• 250

• Authorized Budget $1,000,000

• 12 months duration

• Quentin W. Fleming 13

• Earned Value is three dimensional: • As we perform our projects, we need to determine:

• 1. What work has been scheduled? (from PMS)

• 2. What is the budget for the work scheduled?

• The Planned Value

• 3. What work has been accomplished? (from PMS)

• 4. What was the budget for work accomplished?

• The Earned Value

• 5. What are the actual costs for the Earned Value?

• The Actual Costs

• Quentin W. Fleming 14

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• Quentin W. Fleming

• EVM Measures 3 Dimensions

• Cost Actuals = $300K

• Thousands (000)

• Planned Value = $300

• $1,000

• 500

• 750

• 250

• Authorized Budget $1,000,000

• Earned Value = $200K

• 3 months • status

• 12 months duration

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• The Fundamental Difference:

• Earned Value Project Management

• Earned value = $200K

• Actual costs = $300K

• Planned value = $300K • Variance from the planned schedule = (-$100K)

• The "true" cost variance = (-$100K)

• Traditional Project Cost Management

• Actual costs = $300K

• Planned costs = $300K • Variance from the expenditure plan • (everything is 0K)

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PV= $300KAC= $300KEV= $200K% = 200K/1000K(BAC)= 20%

CV= EV - AC =200K-300K=-100KCPI= 200/300= .67SV= EV-PV= 200K-300K=-100KSPI= EV/PV = 200K/300K= .67

over-budget, behind schedule

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EVM Metrics, or Reporting and Comparison Metrics

•  Earned Value Formulas: – Schedule Variance:

SV = EV - PV – Schedule Performance Index:

SPI = EV / PV – Cost Variance:

CV = EV - AC – Cost Performance Index:

CPI = EV / AC


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•  The way to remember this is to write down the first part of the four earned value calculations:

•  CV=... •  CPI=... •  SPI=... •  SV=...



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•  In each case EV is the first variable:

•  CV=EV... •  CPI=EV... •  SPI=EV... •  SV=EV...



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•  Then add the operator: •  CV and SV (variance) use - •  CPI and SPI (Index) use /

•  CV=EV-... •  CPI=EV/... •  SPI=EV/... •  SV=EV-...



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•  Then add the second variable: •  C(ost)V and C(ost)PI use AC(ost) •  S(hedule)PI and S(hedule)V use P(lan)V

•  CV=EV-AC •  CPI=EV/AC •  SPI=EV/PV •  SV=EV-PV


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Forecasting Metrics •  Three Estimate to Complete (ETC) Forecasting

formulas mentioned in PMBOK

•  EAC forecast for ETC work performed at budgeted rate: EAC = AC + BAC – EV Where: EAC = Estimate at Completion (forecast)

BAC = Budget at Completion (original baseline)

•  EAC forecast for ETC work performed at the present CPI: EAC = BAC / cumulative CPI

•  EAC forecast for ETC work considering both SPI and CPI: AC + [(BAC – EV) / (cumulative CPI x cumulative SPI)]


PMBOK Pg. 184-185EAC Formula

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•  Cumulative CPI stabilizes at 20% point

•  At 20% point variances only +/- 12%



•  At 50%point variances only +/- 08% • Quentin W. Fleming 23

• Estimate at Completion

• AC • $300,000 = Actual Cost

• EV • $200,000 = Earned Value

• Cost Performance Index CPI = EV/AC = .67

• Schedule Performance Index SPI = EV/PV = .67

• PV • $300,000 = Planned Value


• Estimate At Completion =(AC+(BAC-EV)/CPI) = $1,500,000

• $1,000,000 = Budget • At Completion

• ($500K projected overrun)

• BAC

• EAC

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BAC = original planned valueEAC = PM project the project will cost

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Break

•  10 minute break


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Learning Team Project

•  Each learning team can pick their own project. •  The project should be a medium scale:

–  at least 50 tasks –  at least 5 resources

•  The project must come from a business situation. •  Learning team members will contribute background

details to define the project •  The team will work together to create a project

deliverables for its execution. •  Make sure projects are appropriately sized.


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Learning Team Project Objectives

•  Demonstrate a working knowledge of project earned value.

•  The team can split up the work anyway they choose

•  Final deliverable must be a single document for which the team will receive a single grade.

•  This will count 30% towards your individual grade.


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Learning Team Project Roadmap

•  Using earned value tools, learning teams will create and present a project charter, WBS, schedule, EVM metrics, and EVM implementation to demonstrate that the group members have command of the project earned value.

•  Draft deliverables will be required several times during the course, with a final presentation of the project due in the final week.

•  Interim deliverables will receive feedback from the instructor as the work proceeds and modifications may be made before turning in the final paper.


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Learning Team Class Exercise, Project Charter

•  Project Charter: – Project purpose or justification – Measurable project objectives and related

success criteria – High-level risks


Business

Evm class 02 1to15 by upad