Embed Size (px)
DESCRIPTION
45% are familiar with EVM 23% have worked on a project with EVM 15% have personally used EVM 88% of projects public, 12% private/combo 86% as Owner/Rep, 14% for Contractor/other EVM measures performance of project - 43% EVM measures performance of project team – 7%, both project and project team - 50% 3
Citation preview
Earned Value Management
Presented by Niyi LadipoSeptember 14, 2009
Results of the Survey
What is Earned Value Management (EVM)?
EVM vs. Traditional Cost Management
EVM Performance Measurement
Benefits and need for EVM?
First steps to implementation
2
Outline of Presentation
45% are familiar with EVM 23% have worked on a project with EVM 15% have personally used EVM 88% of projects public, 12% private/combo 86% as Owner/Rep, 14% for Contractor/other EVM measures performance of project - 43% EVM measures performance of project team – 7%, both project
and project team - 50%
3
Results of the Survey
What is going on with my project?
4
Budget?
Scope?
Schedule?
What resources?
Measure and manage performance?
5
Beginning of the project:
How is my project doing: Budget vs. Actual?
How much accomplished to date?
Cost to date, Cost to complete?
How long to complete?
Over or under budget, by how much?
Corrective measures?
6
During the project:
What is Earned Value Management?
7
An objective method of quantifying the key parameters of a project: technical performance, cost and schedule
8
What is Earned Value Management?:
Project
Cost
Technical performance
Schedule
A project management technique that permits owner and contractor to perform in-depth examination of the technical scope, schedule and cost information to evaluate performance and assess the need for corrective action
9
What is Earned Value Management?:
A management technique that integrates a program’s technical scope, schedule and resources with program risk in a baseline plan. Progress is measured against this baseline plan to produce metrics that highlight variances and performance trends, thereby providing program managers and high level management, with objective visibility into progress and enabling more effective management
Source: National Defense Industrial Association (NDIA) Program Management Systems Committee Application Guide, March 2007 [Re-phrased slightly]
10
What is Earned Value Management?:
A technique that enhances the essentials of good project management practice, which consist of thorough: Planning
Executing
Controlling
11
What is Earned Value Management?:
A technique for performance measurement utilizing three elements: Planned Value or authorized work
PV or Budgeted Cost of Work Scheduled (BCWS)
Earned Value or authorized work which has been completed
EV or Budget Cost of Work Performed (BCWP)
Actual Cost or costs incurred
AC or Actual Cost of Work Performed (ACWP)
12
What is Earned Value Management?:
EVM vs. Traditional Cost Management
13
Traditional Cost Management Planned Value
Actual Cost
14
EVM vs. Traditional Cost Management?
Earned Value Management Planned Value
Earned Value
Actual Cost
15
EVM vs. Traditional Cost Management?
2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
32.0
52.0
61.067.0
78.0
25.0
38.0
46.0
58.0
65.0
73.077.0
82.0
Traditional Cost Management
BudgetActual
Mill
ion
Dol
lars
16
EVM vs. Traditional Cost Management?
2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
21.0
33.0
39.0
52.0
60.0
32.0
52.0
61.067.0
78.0
25.0
38.0
46.0
58.0
65.0
73.077.0
82.0
Earned Value Performance Measurement
BudgetActualEarned
Mill
ion
Dol
lars
EVM Performance Measurement
17
Variances: Schedule Variance (SV) = Earned – Budget SV ≥ 0 is favorable
Cost Variance (CV) = Earned – Actual Cost CV ≥ 0 is favorable
18
EVM Performance Measurement:
19
EVM Performance Measurement
2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
21.0
33.0
39.0
52.0
60.0
32.0
52.0
61.067.0
78.0
25.0
38.0
46.0
58.0
65.0
73.077.0
82.0
Earned Value Performance Measurement
BudgetActualEarned
Mill
ion
Dol
lars
SV = 60 – 65 = -$5M
CV = 60 – 78 = -$18M
Performance Indices: Schedule Performance Index(SPI)
= Earned / Budget SPI ≥ 1 is favorable
Cost Performance Index(CPI)
= Earned / Actual Cost CPI ≥ 1 is favorable
20
EVM Performance Measurement:
21
EVM Performance Measurement
2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
21.0
33.0
39.0
52.0
60.0
32.0
52.0
61.067.0
78.0
25.0
38.0
46.0
58.0
65.0
73.077.0
82.0
Earned Value Performance Measurement
BudgetActualEarned
Mill
ion
Dol
lars
SPI = 60/65 = 0.92
CPI = 60/78 = 0.77
Forecast of Final Estimate at Completion: Best Case of EAC:
= Budget at Completion (BAC) / CPI
Worst Case of EAC:
= BAC /(CPI x SPI)
22
EVM Performance Measurement:
23
EVM Performance Measurement
2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
21.0
33.0
39.0
52.0
60.0
32.0
52.0
61.067.0
78.0
25.0
38.0
46.0
58.0
65.0
73.077.0
82.0
Earned Value Performance Measurement
BudgetActualEarned
Mill
ion
Dol
lars
EAC (best) = 82/0.77= $106.5M
EAC (worst) = 82/(0.92x0.77) = $115.7M
What are the Benefits of EVM?
24
Allows for management’s use of EVM metrics to make better-informed decisions by: Frequent and continuous monitor of true cost
and schedule performance results
Forecast of range of final costs at completion
Forecast of remaining effort (TCPI) against original Budget at Completion (BAC) To Complete Performance Index = (BAC – EV)/Remaining Funds
25
Benefits of EVM
Provides data for the prediction of project performance and signals early warning of problems: Since mid 1970s the DOD has tracked, analyzed
and compiled records of its findings on more than 700 projects utilizing EVM
Results have consistently shown that as early as 15% into the completion of a project, the actual performance is a good indication of the forecast for final project cost at completion.
26
Benefits of EVM
To satisfy requirements by Defense Federal Acquisition Regulation Supplement (DFARS) and FAR
To satisfy mandates by DOD, Department of the Energy (DOE), Office of Management and Budget (OMB) and federal agency directives
27
Benefits of EVM
To ensure comprehensive project management with risk analysis at onset
It is a flexible and scalable technique No specific method of implementation
The guidelines in the ANSI/EIA-748 standard are scalable to accommodate project size or complexity
Allows for practice of “management by exception”
28
Benefits of EVM
“What am I doing right so that I can duplicate it. What am I doing wrong so that I can fix it before it gets worse”Source: Tony J. Barrett, PE, EVP, Value Technology Inc.
29
Benefits of EVM
Steps required to Implement EVM
30
Earned Value Management is implemented through the setting up of an Earned Value Management System (EVMS)
EVMS is a set of policies, processes, practices and procedures that meet an organization’s implementation of ANSI/EIA-748 standard
It is made up of three essential phases namely: Inputs
Methods
Outputs
31
EVM Implementation
EVMS Inputs include: Scope Definition – WBS, OBS
Planning and Scheduling the scope
Allocating the resources
Establishing the Earned Value Project Baseline or Performance Measurement Baseline (PMB)
32
EVM Inputs
33
Performance Measurement Baseline
Project or Contract Price Base
Profit Project Cost Base:
Negotiated Target Costs / Authorized but Un-negotiated
ChangesPerformance
Measurement Baseline (PMB)
Distributed Budgets
Control Account Plans (CAPs)
Work Packages
Planning Packages
Undistributed Budgets
Management
Reserve (MR)
Earned Value Methods consist of: Planned Value (PV)
Earned Value (EV)
Actual Cost (AC)
Metrics and Performance Measurements
Forecasting (EAC, TCPI, …)
Integrated Baseline Review (IBR)
34
EVM Methods
Earned Value Outputs include: Reporting Requirements
Proper Analysis of Reports
Corrective Action Taken
35
EVM Outputs
EVM is more commonly employed by the Public Sector because: Guidelines specify its use
It permits early risk assessment and determination of project performance and funding
It provides visibility and transparency
It provides accuracy, timeliness and completeness
Recent trends suggest that its requirement will increase as thresholds limits may be reduced for EVM compliance
36
Who uses EVM?
EVM is less commonly employed by the Private Sector because: There is limited knowledge and experience regarding its
use and benefits by both owners and contractors
Education of the sector is required
There is reluctance by the Contractor to provide data from its cost system for performance measurement, except where mandated by the Contract
37
Use of EVM by the Private Sector?
Fort Belvoir Community Hospital, Virginia, USACE (Ongoing) Fort Lee BRAC Program, Virginia, USACE (Ongoing) Aberdeen Proving Grounds C41SR BRAC Program,
Maryland, USACE (Ongoing) Levees Design and Build Project, New Orleans, USACE
(Ongoing) Chemical Weapons Destruction Facility Construction, Russia,
Partnership - Parsons/US/Russia Environmental Restoration Programs by Savannah River Site Rocky Flats Closure Project, near Denver, Colorado – DOE
38
Examples of Application in Construction
Fleming, Q. W., and Koppelman, J. M. Earned Value Project Management. Third Edition. Newton Square, Pennsylvania: Project Management Institute, Inc., 2005.
Humphreys, G. C. Project Management Using Earned Value. Orange, CA.: Humphreys & Associates, Inc. 2002
Project Management Institute, Inc. Practice Standard for Earned Value Management. Newton Square, Pennsylvania: Project Management Institute, Inc., 2005
Earned Value Management Systems ANSI/EIA-748-B-2007. Arlington, Virginia: Government Electronics and Information Technology Association, 2007
39
References for further information on EVM
40
QuestionsQuestions or Comments?
