Mahmood porter

2012 NASA PM Challenge:

Low Cost Earned Value Management System (EVMS) Implementation

Presented by:Zakir Mahmood CGFM, PMPAndrew Porter PMP, SSGB

Presented on: February 22-23, 2012

Agenda

Introduction to Earned Value Management (EVM)• Concepts• Business caseCase Study: Earned Value Management System (EVMS) Implementation at a Federal Agency• Background• Alternative Analysis• Requirements• Approach• Recession Proof EVM Solution• ResultsEVM with AgileConclusionQuestions & Answer

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How well is this project performing?

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Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10

Plan $ Actual $

Introduction to EVMConcepts

Time

Cos

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What is Earned Value Management (EVM)?EVM is a project management tool, which effectively integrates the scope of work with the schedule and cost elements for optimum investment planning and control.

Why is EVM important right now? Investment capital is scarceGreater emphasis on project success and valueIncreased demand for improved efficiency and ROIIncreased demand for accountability and transparency

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Variance at Completion

Budget At CompletionEstimate At Completion

Planned Value (PV)

Projected Costs

Estimate To Complete

ProjectedSchedule Delayat Completion

Earned Value (EV)

Cost Variance (CV)

Actual Costs

Status Date

Schedule Variance (SV)

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Time

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Benefits DrawbacksIntegrates project’s scope, schedule, & cost

Time required for data measurement can be considerable

Improves organizational effectiveness

Schedule variances do not address the critical path

Allows for performance analysis Value earned without respect to quality

Provides early warning signals of schedule slippages & cost overruns Root cause of performance issues

are not revealed

Introduction to EVMBusiness Case

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Economic Correction of 2008 Businesses• Slashed budgets & projects• Abandoned or delayed applications

Fee-Funded Federal Agency• Revenues drop by 50% +• Discretionary budgets cut by similar rate

Office of Chief Information Officer (OCIO)• Virtually all projects reevaluated or halted • Delivering successful projects became top priority

Case Study: EVMS ImplementationBackground

Our task: Develop a mechanism, process, artifacts to convey state of IT Investments

Culture Reactive, low morale, high turnoverPolicies SDLC was not adheredProject Scheduling Approach variedProject Budgeting Processes not standardizedIntegration Little internal coordinationReporting Ad-hocAnalysis Rarely performed

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Case Study: EVMS ImplementationBackground

Start of 2008; significant issues within organization

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Criteria Recession-Proof EVM COTS

Duration of implementation process < 1 year > 1 year

Implementation cost 1-2 FTE 2-4% of project portfolio

Change management requirement Low Moderate

Personnel training requirement Low Moderate

PMO maturity requirement Low High

Forecasting accuracy Moderate High

Case Study: EVMS ImplementationAlternative Analysis

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Issue • Limited investment capital available• Little leverage from existing systems & artifacts

Requirements• Develop a project budget process• Improve project schedule process• Link schedule & budget processes• Develop project reporting & analysis processes

Approach• Recession-Proof EVM• Leverage existing systems and artifacts

Case Study: EVMS ImplementationApproach

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Analyze existing processes for EVM capabilities • Identify process to improve• Identify opportunities for automation

Design EVMS solution• Improve existing project scheduling process• Design new project budget process• Identify ways to link schedule & budget: “Four-way Match”

Implement EVMS • Build EVM tools to standardize and automate processes• Integrate schedule and budget processes• Standardize reporting & analysis procedures

Case Study: EVMS ImplementationRecession-Proof EVM Solution

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Planned Schedule Planned Costs

Actual Schedule

Actual Costs

“Four-Way Match”

Activity Resourcing

Activity Costing

Activity Sequencing

Activity Statusing

EVMS Elements

Case Study: EVMS ImplementationRecession-Proof EVM Solution

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EVMS Requirement Solution

Standardize project planning Use SDLC phases to proxy activities

Estimate duration at activity level Summarize planned start & end dates at SDLC phase level

Recession Proof EVM SolutionPlanned Schedule

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EVMS Requirement SolutionDevelop cost estimates at activity level

Require costs to be planned at SDLC phase level

Link resource rates to planned hours Upload blended government and contractor rates

Assign all procurement costs to an activity

Require PM to select a SDLC phase for all procurements

Provide time phased estimates by activity level

Require PM to select a SDLC phase for all procurements

Map control accounts to activities Links Budget Organizations with Project Codes

Recession-Proof EVM SolutionPlanned Costs

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Feature Previous Tool Implemented ToolCosts linked to phase Labor only Both labor & material

Time to cost project Two days Two hours

Excel lines 1,000 150

Rate table linkage Manual Macro-enabled

Time phased Yes; generic dates Yes; precise dates

Project Resource Estimation Worksheet (PREW):Excel based model - derives planned costs from planned schedule

Recession-Proof EVM SolutionPlanned Costs (cont.)

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EVMS Requirement SolutionProject activity start & end dates are routinely updated PM updates project schedule weekly

All project activity % physical complete amounts are updated PM updates physical percent complete

Recession-Proof EVM SolutionActual Schedule

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EVMS Requirement SolutionEnter internal labor time into T&A system by project activity

Leverage cost accounting system, provide training to ensure accuracy

Provide PM resource usage reporting Provide PM resource usage data for validation

Link internal labor costs to project activity level

Leverage Time & Attendance system, General Ledger

Link actual procurement cost to project activity level Leverage General Ledger

Recession-Proof EVM SolutionActual Costs

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Feature Previous Method

Implemented Tool

Leverage of Cost accounting Weak Substantial

Reporting level Project Activity

Data source for procurement costs Cuff records General ledger

Data source for internal labor Not used T&A system

Internal labor reporting Not Available Bi-weekly

Recession-Proof EVM SolutionActual Costs (cont.)

General Ledger, Time & Attendance System:Queries actual costs by project activity; links to project budget

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Feature Previous Method

Implemented Tool

Integrity of EVM Calculations Non-credible Highly credible

Reporting process Ad-hoc Mostly automatedCost & Schedule reporting level Project level Activity level

Variance reporting $ variance at project level

% and $ variance at activity level

Forecasting level Not Available Activity levelForecasting accuracy Not Available Moderately

dependable

Recession-Proof EVM SolutionIntegrate Schedule and Cost

EVM Model:Leverages “Four-Way Match” to calculate EVM scores; generate reports

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Evaluates EVMS elements• Planned costs vs. actual costs• Planned schedule vs. actual schedule

Examines key trends & variances of EVM scores

Values outside tolerances are flaggedLarge variances are researched for root cause• Programmatic• Accounting• Reporting

Recession-Proof EVM SolutionIntegrate Schedule and Cost

Analysis Tool:Provides analyst with overview of key metrics

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Planned CostsBudget Tool

Actual CostsGeneral Ledger,

Time & Attendance System

Actual ScheduleStatus Updates

Financial Analysis

Trend & Variance

Managerial AnalysisPerformance

Finance Division

EVM Reporting

Status Reports

Project Management Office

Recession-Proof EVM Solution Process Map

Planned Schedule

Project Plan

Integrated Process

Project Planning

Project Execution

Monitor & Control

Analyze

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Case Study: EVMS ImplementationResults

EVM reports generated for 30 reports (>$100+M)• Standard reporting performed• Forecast reliability increased• Executive reporting for strategic decision making

EVM analysis is routinely performed• EVM dashboards to draw focus to key EVM metrics• Client staff trained to analyze metrics

Accountability & transparency have increased• Project Manager• Project performance

Project success rate has improved

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ConclusionImplementing Recession-Proof EVM

Requires:• Smaller capital investment (~2 FTE for 1 year)• Lower personnel impact

Succeeds by leveraging existing:• Systems - General Ledger & Time and Attendance• Tools - Project formulation & execution• Policies & procedures – SDLC

Yields:• Majority of EVMS benefits• Foundation for transitioning to a COTS EVMS

EVM Schedule Information for Agile Investments

• Graphical comparison of scheduled Budget vs. Actual (using percentages over time)– Time phased line graph comparing:

• Linear burn rate of planned execution for investment• Planned Burn rate (if non-linear and known)

– Requires a tool that captures this data; update and refine throughout the project life

• Actual execution– Are we on ahead or behind schedule and why?

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EVM Cost Information for Agile Investments

• Compare percentages over time for the following:– Total Cost vs. Planned Cost– Labor Category Breakout Cost vs. Planned Cost

• Separate Labor, SW/HW, Indirect Costs, project contingency funds, etc.

– Labor only vs. Planned Labor Cost• More predictable than HW/SW purchases• Timing and amount of non-labor purchases

are known and under control

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• EVM is a management tool– Requires leadership sponsorship

• Update policies and procedures to drive success– Metrics should drive decision making

• Budget at Completion (BAC) is critical– Tied to every EVM metric except actual cost– Evaluate and improve budgeting tools

• EVM is only as good as the data used to report • Consider Materiality of Investments

– How significant are non-labor costs?– What is the probability that they will be different than the plan?

• Leverage best practices, but allow flexibility to make a tailored solution that works for your investment(s)

Lessons Learned

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Question & Answer

Thank You!

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Appendix

EVM Formulas• Foundation• Variance• Efficiency• Forecasting

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EVM MetricsFoundation

Metric Definition Analytical questionBudget At

Completion BAC Total baseline cost What is the budget for this project?

Planned Value PV Estimated cost of all work

scheduled to be completed

What is the estimated value of the work planned to be done?

Actual Cost AC Cost incurred to accomplish the work

What is the actual cost incurred for the work accomplished?

Earned Value EV Budgeted cost of actual

work completed

What is the estimated value of the work actually accomplished?

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EVM MetricsVariance

Metric Formula Analytical question

Schedule Variance SV SV=EV-PV How is the project progressing against

the planned schedule?

Cost Variance CV CV=EV-AC How is the project progressing against

the budget?

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EVM MetricsEfficiency


Schedule Performance Index SPI SPI=EV/PV

How are we progressing vs. the original plan?

Cost Performance Index CPI CPI=EV/AC What is the value earned per

dollar spent ratio?

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EVM MetricsForecasting


Estimate at Completion EAC EAC = BAC/CPI What is the new projected total

estimate based on CPI?

Estimate to Complete ETC ETC = EAC - AC How much more will the project

cost?