EVMS

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Basics of Earned Value Management

Part I

Eleanor HauptEarned Value Associates LLC ehaupt@earnedvalue.biz937-572-2586

EVMS

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What is EVM?

EVM is the primary project management tool...

that integrates the technical, schedule, and costparameters of the contract.

All work is planned, scheduled, and budgeted in time-phased ''planned value'' increments. As work is

performed, it is measured and controlled against the baseline.

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EVM Defined

• EVM is:

– performance measurement• how am I doing against my baseline plan?

– performance management• what do I need to do to bring the project in on cost

and schedule?

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Where can EVM be Applied?

• EVM suitable for projects that have:– Clear definition of work scope– Project schedule range from a few months to many years– Small to very large cost

• EVM not suitable for:– Projects without a clear work definition or deliverable

products• Example: research projects

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EVM Guidelines

• EVM has a recognized set of guidelines– A company’s business planning system should meet these

guidelines = Earned Value Management System• Most are existing project management practices• Relatively few practices unique to EVMS

– Guidelines do not specify a particular process or business system, but only set an expectation

• Some countries have national standards– U.S., Australia, Canada, U.K.– Guidelines may be mandatory in some cases

• Can be tailored or scaled for smaller projects

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Primary Steps in Performance Management

• Plan all project work– Create an integrated performance management baseline

• Objectively assess work progress at the level of performance– Compare to the plan and to actual costs

• Analyze significant deviations from the plan• Forecast impacts to cost and schedule• Take corrective actions as needed • Summarize data for progressively higher levels of

management• Maintain performance management baseline

– Update for contract changes (work scope)– Maintain realistic baseline for remaining work

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Why use EVM?

Life without EVM• Given:

– total budget of $100,000– 12 month effort– produce 20 units

• Status:– spent to date: $64,000– time elapsed: 6 months– units produced: 8 complete, 2 partial

• How are you doing, and how do you know how you are doing?

• How far along are you?– 64% spent (cost)– 50% spent (time)

EVM is Project Management with the Lights On

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Why use EVM?

Life with EVM• Given:

– total budget of $100,000– 12 month effort– produce 20 units

• Status:– spent to date: $64,000– time elapsed: 6 months– units produced: 8 complete, 2 partial

• Real Status:– You should have completed 50% of the work

• You’ve completed 42% of the work – A major vendor was late in delivering certain parts

• You’ve spent 64% of your budget– You’ve isolated the main cost variance to aluminum prices

• You’re forecasting additional cost overruns for the remaining work– You now know what the drivers are– You can now take the appropriate actions

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Earned Value Gives Insight

“Earned Value”

TIME

TIME NOW

Expenditures

Planned Expenditures

$

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Benefits of EVM

• Requires development of integrated baseline – Results in better project definition and planning

• Early identification of trends and problems• Accurate picture of project status

– Cost, schedule, and technical– Segregation of schedule and cost variances

• Projection of final costs• Project control by the team

– Enables project manager to make informed decisions based on facts

• Results in successful projects – On time, on cost

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How does EVM differ from Project Management?

Project Management

EVM

WBS

Team organization

Work authorization

Integrated Schedule

Budget

Integrated Baseline

Earned Value measurement

Variance analysis

Trend projection

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Basic EVMS Terms

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EVMS measures progress

Progress = Movement Forward

to measure progress,there must be a standardagainst which the forwardmovement may be compared

EVMS establishes a baselineto measure progress

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Five Basic Elements

BCWS Budgeted Cost for Work Scheduled“Planned Value”

BCWP Budgeted Cost for Work Performed “Earned Value”

ACWP Actual Cost of Work Performed “Actual Cost”

BAC Budget at Completion

EAC Estimate at Completion

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Total Performance Budget

hmm...5 miles of track, 5 months to do it all....$5000 budget....Thisis going to be tough!

It’s my pleasure to award you this contract for a new railroadtrack

What is the total job supposed to cost?

What is the value of the contract at cost?

= Performance Budget

What is the total job supposed to cost?

What is the value of the contract at cost?

= Performance Budget

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1. DEFINE THE WORK AND ORGANIZE TEAMS

Planning is a 3 Step ProcessPlanning is a 3 Step Process

100

4060

1525

3030

2. SCHEDULE THE WORK

3. ALLOCATE BUDGETS

$

CONTRACT BUDGET BASE

TIME

PM BASELIN

E

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The Integrated Baseline

• Preliminary planning during proposal phase• Finalized as soon as possible after award

– PM approves the baseline• Integrated baseline

– Work scope– Integrated master schedule– Time phased budget

• Tenets for managing the baseline– Control– Maintain realism– Reviews

Budgeted Cost for Work Scheduled (BCWS)

I’ve broken my work plan into 5 sections of track.I plan to lay 1 section of track each month.I estimated the cost of each section at $1,000.I’m establishing the BCWS for each section at $1,000.BCWS = performance budget

Month 1BCWS = $1,000

Month 2BCWS = $1,000

Month 3BCWS = $1,000

Month 4BCWS = $1,000

Month 5BCWS = $1,000

each dollar of BCWS represents a specific dollar of work scopeeach dollar of BCWS represents a specific dollar of work scope

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Budgeted Cost for Work Scheduled(BCWS)

Month 1 Month 2 Month 3 Month 4 Month 5

BCWS 1,000$ 1,000$ 1,000$ 1,000$ 1,000$

cumulativeBCWS 1,000$ 2,000$ 3,000$ 4,0004$ 5,000$

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Budget at Completion (BAC)

time

BAC

sum of all BCWS =

$

$

$$

$

$

$

$5,000$5,000

The baseline iscomposed

of many lower levelelements. These

sum up to the total value of the contract.

$

• when all work has been phased, cumulative BCWS = BACe.g., $5,000 = $5,000

• when all work has been phased, cumulative BCWS = BACe.g., $5,000 = $5,000

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Budgeted Cost for Work Performed(BCWP)

the EARNED VALUE concept

We’re at the end of the second month, but only 1 section of track is complete. Earned value of work completed = $1,000

• Assess progress on recurring basis• There are different methods of earning value (described in 300B)• You earn value the same way as it was budgeted in baseline

• Assess progress on recurring basis• There are different methods of earning value (described in 300B)• You earn value the same way as it was budgeted in baseline

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Measuring Performance BCWP

• General Principles– Establish valid metrics as you establish the time phased baseline

• Metrics should be objective and quantifiable• Relate true work status

– Should be a quantitative and discrete way to measure the work– May tie in with success criteria or technical measure

• e.g., successful completion of a specific test

• Must be consistent in following established metric as work progresses

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Budgeted Cost for Work Performed(BCWP)

Month 1 Month 2 Month 3 Month 4 Month 5cumulative data

BCWSPlanned

Va

BCWP Earned Val

lue 1,000$ 2,000$ 3,000$ 4,000$ 5,000$

ue 1,000$

time now

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Schedule Variance

BC WSBC WP

of the work I scheduled to have done,how much did I budget for it to cost?

of the work I actually performed,how much did I budget for it to cost?

SCHEDULE VARIANCE is the difference between work scheduled and work performed (expressed in terms of budget dollars)

formula: SV $ = BCWP - BCWS

example: SV = BCWP - BCWS = $1,000 - $2,000 SV= -$1,000 (negative = behind schedule)

SCHEDULE VARIANCE is the difference between work scheduled and work performed (expressed in terms of budget dollars)

formula: SV $ = BCWP - BCWS

example: SV = BCWP - BCWS = $1,000 - $2,000 SV= -$1,000 (negative = behind schedule)

BU

DG

ET B

ASE

D

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Schedule Variance

Month 1 Month 2 Month 3 Month 4 Month 5cumulative data

BCWSPlanned

Value 1,000$ 2,000$ 3,000$ 4,000$ 5,000$

BCWP Earned Value 0 1,000$

SV (cum)Schedule Variance -$1,000 -$1,000

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Actual Cost of Work Performed(ACWP)

Labor came to $1,300,and materials cost$1,100. We’ve spent$2,400 to date.

Value of ACWP comes from actual accounting records

Value of ACWP comes from actual accounting records

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Cost Variance

BC WPAC WP

of the work I actually performed,how much did I budget for it to cost?

of the work I actually performed,how much did it actually cost?

COST VARIANCE is the difference between budgeted costand actual cost

formula: CV $ = BCWP - ACWP

example: CV = BCWP - ACWP = $1,000 - $2,400 CV= -$1,400 (negative = cost overrun)

COST VARIANCE is the difference between budgeted costand actual cost

formula: CV $ = BCWP - ACWP

example: CV = BCWP - ACWP = $1,000 - $2,400 CV= -$1,400 (negative = cost overrun)

PER

FOR

MA

NC

E B

ASE

D

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Cost Variance

Month 1 Month 2 Month 3 Month 4 Month 5cumulative data

BCWSPlanned

Value 1,000$ 2,000$ 3,000$ 4,000$ 5,000$

BCWPEarned Value 0 1,000$

SV (cum)Schedule Variance -$1,000 -$1,000

ACWP Actual Costs 800$ 2,400$

CV (cum)Cost

Variance -$800 -$1,400

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BCWP Allows Isolation ofSchedule and Cost Variances

$

5 months

BCWP

TIME

5,000

CV

TIME NOW

SV

schedule variance = BCWP - BCWS = negative numbercost variance = BCWP - ACWP = negative number

behind schedule,over cost

behind schedule,over cost

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Estimate at Completion(EAC)

Just a few little glitches…. We should be able to do the complete job….ack…

let’s see, for about $7,500

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Variance at Completion (VAC)

B AC what the total job was budgeted for

E AC what the total job is projected to cost

VARIANCE AT COMPLETION is the difference between what the total job is supposed to cost and what the total job is now expected to cost.

FORMULA: VAC = BAC - EAC

Example: VAC = $5,000 - $7,500VAC = - $2,500 (negative = overrun)

VARIANCE AT COMPLETION is the difference between what the total job is supposed to cost and what the total job is now expected to cost.

FORMULA: VAC = BAC - EAC

Example: VAC = $5,000 - $7,500VAC = - $2,500 (negative = overrun)

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Variance at Completion (VAC)

$

5 months

BAC

TIME

5,000

EAC VAC

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EVM Variances

Positive Negative

SV Ahead of Schedule Behind Schedule

CV Under running costs Over running costs

VAC Projected underrun Projected overrun

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Planning

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The Organizing Process

• Process– Step 1: define the authorized work using a work breakdown

structure (WBS)• break the work down into manageable pieces• provides a framework for

– program and technical planning– cost estimating and resource allocation– performance measurements and status reporting

– Step 2: define the organizational structure• Organizational Breakdown Structure (OBS)

– Step 3: assign a single element of work to a single manager• control account manager (CAM)

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Assigning Work

control account

WBS

ORGANIZATION

Assignment of a single work element

to a single team allows you to roll up the costs

up either direction

control account

control account

control account

control account

control account

control account

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The Control Account

• Fundamental building block for EVM• Established at lowest WBS level• Properties

– Assigned to Control Account Manager– “Mini Project”

work

schedulebudget

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What is in a Control Account?

BUDGETLabor 1,000 hrsLabor $ 75,000Material $ 25,000

SCHEDULETIER 1

TIER 2

SOW

1.3.4.1 Build ejection seat

CONTROL ACCOUNT PLANCAM name: ______ WBS: _______ Total Budget: _________

Work

Work

Work

$$

$ $

$

$

$

$$

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Work Package

• Development of Control Account Plans– MAY break down the control account budget into

smaller work packages• Work Packages

– subset of control account– reasonably short in duration– single element of cost (e.g., labor)– single technique for earning value– consistent with detail schedules– has same characteristics as control account

• scope of work• milestone completion criteria• single performing organization• start and end dates

– A group of activities on the schedule

CONTROL ACCOUNT PLAN

Work Pkg #1

Work Pkg #2

Work Pkg #3

$$

$ $

$

$

$

$$

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A Fun Example…

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Contract Award

• You are the program manager, I. M. Taz• You just won a contract to eliminate varmints within the state of Arizona

– birds (tweetie and road runner types)– small animals

• You have an organization of highly trained specialists– L. M. Fudd– Sil Vester the cat– Wile E. Coyote– Daffie Duck (your deputy and the CAM for management)

• You have allocated the following budgets from your $50,000 contract award

– wascally rabbits ($5,000)– squirrels ($5,000) – tweetie birds ($20,000)– road runners ($10,000)– program management ($10,000)

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Organize the work

• Build a simple work breakdown structure

Varmint Control

1.2.1tweetie

1.2Birds

1.3Program Mgt

1.1 Small Animals

1.2.2road runner

1.1.1wascallywabbits

1.1.1wascallywabbits

1.1.2 squirrels

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Organize the workers

• Build a simple organization breakdown structure

I.M. TazProgram Manager

Sil Vestertweetie birds

Wile E. Coyoteroad runners

Daffie DuckProgram Mgt

L. M. Fudd,small animals

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Build a RAM and allocate workSilVester

L. M.Fudd

Wile E.Coyote

DaffieDuck

1.1.1wascallywabbits1.1.2squirrels

1.2.1tweetie birds

1.2.2road runner

1.3programmanagement

RAM is a listing of the controlaccounts, the responsible manager (control account

managers), and assigned budget

RAM is a listing of the controlaccounts, the responsible manager (control account

managers), and assigned budget

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Build a RAM and allocate workSilVester

L. M.Fudd

Wile E.Coyote

DaffieDuck

1.1.1wascallywabbits

$5,000

1.1.2squirrels $5,000

1.2.1tweetie birds $20,000

1.2.2road runner $10,000

1.3programmanagement

$10,000

control account

EV Techniques 0/100, 50/50, Units Complete,% Complete, Milestones

CONTROL ACCT. TITLE: Roadrunner CONTROL ACCOUNT MANAGER: Wile E. Coyote

BUDGET: $10,000

TIER I MILESTONE AWARD END

WP# WORK DESCRIPTION EV METHOD MONTH 1 MONTH 2 MONTH 3 MONTH 4 MONTH 5 MONTH 6 TOTAL BACBCWS 1,500 1,500

1 Anvil 0/100BCWPBCWS 500 500 1,000

2 Paint Fake Tunnel 50/50BCWPBCWS 600 600 600 600 600 3,000

3 Build Road units completeBCWPBCWS 1,000 1,000 1,000 3,000

4Build Anvil Support Mechanism milestone

BCWPBCWS 500 500 500 1,500

5Install Anvil Support Mechanism % complete

BCWP

TOTAL CONTROL ACCOUNT PLAN BCWS 600 1,600 2,100 2,600 2,600 500 10,000

BCWP

Schedule Variance month

cumulative

Actual Costs

Cost Variance month

cumulative

v

v v

v v v v v

v v

v v v

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Summary

• Should now understand– Basic EVM terms– Basic concepts of an integrated baseline

• Work, phased over time, with time phased budget

– Basics of planning– Control account concepts and example

Please stay tuned for Part 2!!