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Brief Introduction toEarned Value Management (EVM)
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Outline
Introduction to the basic rationale and elements of EVM
Issues of actually implementing an EVM tracking scheme
Background materials
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The Problem
A successful program manager says: We completed the projectwe promised to deliver in the time we promised and with the
budget we asked for. The standard source of information about the status of the
project is the status of the budget, which only tells you howquickly and how completely you are spending the money youhave.
What you really want to track is how quickly and howcompletely you are accomplishing the work you promised to do.
The coupling of money spent to work done
or schedule consumed is loose and nonlinear. Also, the expenditure track is a
one-dimensional projection of a
two-dimensional problem.
ScheduleVariance
BudgetVariance
(under)
(over)
(ahead)(behind)
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Why You Need to Know Both
Cost and Schedule Variances
Project A is in good shape, under budget and ahead of schedule.
Project B is over budget, but if we realize
it is ahead of schedule, we can
slow the effort to save money.
Project Ds cost variance looks
better than As, but if we
realize it is behind schedule,
we can spend more to catch up.
Project C looks just like B if we
only look at the cost variance, butwe cant slow down to save money.
And it looks just like D if we only look at
schedule, but we cant spend more to catch up. Its time to rescope!
ScheduleVariance
Budget
Variance(under)
(over)
(ahead)(behind)
A
BC
D
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1. DEFINE THE WORK AND ORGANIZE TEAMS
100
40
60
15
25
30
30
2. SCHEDULE THE WORK
3. ALLOCATE BUDGETS
$
CONTRACT BUDGET BASE
TIME
BASELINE
So What Do We Have to Work With?
MANAGEMENT RESERVE (MR)
Each chunk of workcorresponds to a
chunk of budget anda chunk of schedule.
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For each chunk of work, define its value as the budgetassigned to it.
When you complete that chunk of work, you have earned itsvalue.
The total earned value to date gives you a point on the ($,time)graph the Budgeted Cost of Work Performed (BCWP).
You could compare this to the actual amount of work that youwere supposed to have completed by this point in the schedule,as measured by its budgeted cost the Budgeted Cost of WorkScheduled (BCWS), another point on the ($,time) graph.
You could also compare it to the actual amount spent to
complete the chunks of work done to date theActual Cost ofWork Performed (ACWP), a third point on the ($,time) graph.
Look at what information these comparisons give about thestatus of the project.
The Basic Idea
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Budgeted Cost of Work Scheduled
(BCWS)
Total Budget = $5,000to be spent over 5 months
We plan to deploy 1 standeach month at an estimatedcost of $1,000.BCWS each month = $1,000Month 1
BCWS = $1,000
Month 4BCWS = $1,000
Month 3BCWS = $1,000
Month 5BCWS = $1,000
Month 2BCWS = $1,000
Each dollar of BCWS represents a specific dollar of workscope. BCWS is aggregated and summed as the performancemeasurement baseline.
Each dollar of BCWS represents a specif ic dollar of workscope. BCWS is aggregated and summed as the performancemeasurement baseline.
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Budgeted Cost of Work Performed
(BCWP)
Were at the end of thesecond month, but only1 stand is complete.Value of work performed= $1,000
You earn value the same wayas it was budgeted in the baseline.
You earn value the same wayas it was budgeted in the baseline.
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Schedule Variance
(SV)
BC WSBC WP
Of the work we scheduled to have done,
how much did we budget for it to cost?
Of the work we actually performed,how much did we budget for it to cost?
SCHEDULE VARIANCE is the difference between work scheduledand 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 scheduledand 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)
BUDGETBASED
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Schedule Variance
(SV)
$
5 months
BCWSthe baseline
BCWPearned value
TIME
5,000
sv
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Actual Cost of Work Performed
(ACWP)
Labor came to $1,300,and materials cost$1,100. That first standcost $2,400!
actual expenditures vs. budgetactual expenditures vs. budget
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Cost Variance
(CV)
BC WPAC WP
Of the work we actually performed,
how much did we budget for it to cost?
Of the work we 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)
PERFORMANCE
BASED
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Cost Variance
(CV)
$
TIME 5 months
BCWPearned value
ACWPactual cost
5,000
cv
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Note That We Can Isolate
Schedule and Cost Variances
schedule variance = BCWP - BCWS = negative numbercost variance = BCWP - ACWP = negative number
behind schedule,over cost
behind schedule,over cost
5 months
BCWS
BCWP
ACWP
TIME
5,000
sv
cv$
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Where are the significant problems?
WBS DESCRIPTION Proj Ofcr %Comp %Spent CPI CV CV CV % VAC VAC
1 3600 PCC Zepka 28.99 34.09 0.850 -296.2 -17.62 -187.2
2 3200 COMMUNICATIONS Tideman 34.63 41.03 0.844 -130.8 -18.49 -87.0
3 G&A GEN & ADMIN 33.67 36.11 0.932 -45.2 -7.26 -36.8
4 2200 SYS ENGINEERING Price 85.04 94.35 0.901 -26.4 -10.95 0.0
5 3800 I & A Troop 35.40 37.08 0.955 -24.2 -4.75 -24.8
6 2100 PROJ MANAGEMENT Brown 45.70 48.51 0.942 -17.4 -6.16 -3.2
7 2300 FUNC INTEGRA Price 71.62 75.23 0.952 -17.4 -5.03 -30.8
8 5200 MANAGEMENT DATA Simmons 84.18 98.10 0.858 -13.2 -16.54 -16.0
9 3100 SENSORS Smith 20.87 21.49 0.971 -10.6 -2.94 -21.6
10 4000 SPARES Blair 17.87 18.90 0.945 -7.8 -5.78 -6.2
11 6200 SYSTEM TEST Hall 60.82 61.66 0.986 -5.6 -1.38 -2.0
12 5100 ENG DATA Novak 38.51 52.80 0.729 -4.6 -37.10 0.0
13 MR MGT RESERVE 0.00 0.00 0.0 439.2
14 UB UNDIST BUDGET 0.0 0.0
15 COM COST OF MONEY 0.0 0.0
16 3700 DATA DISPLAY Troop 41.13 41.13 1.000 0.0 0.00 0.017 OV OVERHEAD 0.0 0.0
18 6100 TEST FACILITIES Smart 100.00 98.02 1.020 2.0 1.98 0.0
19 3500 COMP PROGRAMS Pino 46.46 44.66 1.040 3.4 3.87 -1.4
20 6300 PCC TEST Bond 23.13 22.64 1.021 4.2 2.10 0.0
21 3400 ADPE Zepka 41.89 39.79 1.053 12.6 5.02 4.6
22 3300 AUX EQUIP Tideman 27.57 24.33 1.133 78.2 11.73 8.4
sorted by CV ($)By tracking and sorting on variances, wecan isolate the troublesome WBSelements.
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COST PERF INDEX (CPI) = BCWPACWP
SCHED PERF INDEX (SPI) = BCWPBCWS
COST PERF INDEX (CPI) = BCWPACWP
SCHED PERF INDEX (SPI) = BCWPBCWS
1.0
.9
1.1
G
OOD
BAD
1.2
.8
CPI
SPI
TIME
Performance Indices
We can also get a sense of the overall performanceof the project by tracking performance indices.
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Budget at Completion
(BAC)
$
time
BACsum of all BCWS =
$
$
$$
$
$
$
When all work has been phased, the cumulative BCWS = BACe.g., $5,000 = $5,000
When all work has been phased, the cumulative BCWS = BACe.g., $5,000 = $5,000
$5,000$5,000
The most important markers of the overallperformance of the project look atpredictions of the variances at the end.These require several quantities, the firstbeing the Budget at Completion.
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Estimate at Completion (EAC)
defined as actual cost to date + estimated cost of work remaining usually develop comprehensive EAC at least annually
reported by WBS in cost performance report
should examine on monthly basis
consider the following in EAC generation:
performance to date
impact of approved corrective action plans
known/anticipated downstream problems
best estimate of the cost to complete remaining work
also called latest revised estimate (LRE), indicated final cost, etc.
What will be the final cost?
ACWP + ETC = EAC
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Getting the Estimate at Completion
Just a few little glitches.
We should be able to dothe complete job.ack
lets see, for about $7,500
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Common EAC Formulae:
EAC = BAC/CPI
= ACWPcum + Budgeted Cost of Work Remaining
CPI3
= ACWPcum + Budgeted Cost of Work Remaining
.8(CPI) +.2(SPI)
= ACWPcum + Budgeted Cost of Work Remaining
CPI * SPI
Determining EAC via Statistics
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Other methods of EAC calculation
Grass Roots or formal EAC
detailed build-up from the lowest level detail
hours, rates, bill of material, etc.
Average of statistical formulae
Show range of EACs (optimistic, most probable,pessimistic)
Complete schedule risk analysis for remaining work,
estimate work remaining
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Variance at Completion(VAC)
VARIANCE AT COMPLETION is the difference between what the totaljob 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 totaljob 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)
B AC
E AC
what the totaljob is supposedto cost
what the totaljob is expectedto cost
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Variance at Completion
(VAC)
VAC = Budget at Completion - Estimate at Completion
= BAC - EAC
$
BAC
EACVAC
TIME
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Variance at Completion vs. Contractor Loss
Positive VAC: EAC < BAC underrun contractor gain
Negative VAC:
EAC > BAC share area contractor partial loss
EAC > ceiling overrun contractor loss (100%)
Government develops top level EAC for comparison
Government will limit progress payments if EAC is greater thanceiling
Government needs forecast of fund requirements
May still have time to change the final outcome
VAC is Particularly Importantfor Government Contracts
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A survey of over 800 military programs showed that no programever improved performance better than the following EACcalculation:
EAC = BAC/CPI,
at the 15%-complete point in the program.
Thus, there is strong empirical evidence that EVM translates earlyinformation into essential guidance for program re-baselining.
Probably the BiggestSelling Point for EVM
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EVM Analyses
PCUM
Term Formula
Percent Complete
Cost Performance Indexor Performance Factor
Checklist Actions
Ratio of work accomplished in terms of the total amount of work to do.
Symbol
% Done
CPI or PF
TCPI or VF
BCWPBAC
Average Per formanceBCWPcum
Duration (wks or mos)Since ACWP Began
BCWPcum
Duration (wks or mos)From Time Now toManager's StatedCompletion Date
SC or S/CSchedule Correlation
BCWPACWP
Ratio of work accomplis hed against money spent (an effici ency rating: WorkDone for Resources Expended)
To CompletePerformance Index
or Verification Factor
BAC - BCWPEAC - ACWP
Ratio of work remaining against money remaining (Efficiency which must beachieved to complete the remaining work with the expected remaining money)
Schedule Performance Index SPIRatio of work accomplished against what should have been done (Efficiency
Rating: Work done as compared to what should have been done)
BCWP
BCWS
SV
Ratio of Schedule Variance (SV) in terms o f average amount of workaccompli shed (in weeks or months). It indicates a correlation to prog ram trueschedule condition
IEACIndependent EstimateAt Completion
BACPF
Calculation of a projected Estimate At Completion to compare with the CAM'sEstimate At Completion:1) Ration of total work to be done against experienced cost effici ency2) Sunk costs added to a ratio of remaining work against weighted cost andschedule efficiencies
1)
2)BAC - BCWP.8CPI + .2SPI
ACWP +
Average ExpectedPerformance To Finish
Average rate at wh ich work has been accompli shed s ince work began
Average rate at wh ich work must be accompl ished in the fu ture to fi nish on thedate the CAM has forecasted for completion of the work.
PTO GO
PCUM
There are a wide variety of indicators to play with in EVM.
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EVM Analyses
Sort on significant variances
eliminate almost complete, just starting, etc. Graph and analyze trends
Look at comparative data
e.g. cumulative performance vs. projected performance
Examine written analysis by contractor
does it answer why?
adequacy of corrective action plans
Analysis of schedule trends, critical path Analysis of EAC realism
what are the drivers?what can we do about them?
what are the drivers?what can we do about them?
There are a wide variety of analytic techniques to play with in EVM.
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Graphical EVM Analyses
Dollar
sInMillions
Estimates at CompletionMEGA HERZ ELEC & VEN F04695-86-C-0050 RDPR FPI
Element: 3600 Name: PCC
BACLRECUM CPI
1992APR MAY JUN JUL AUG SEP OCT NOV DEC
1993JAN
5.0
6.0
7.0
8.0
5.1 5.4 5.1
5.1 5.4 5.7
5.1 5.4 5.9
5.1 5.4 6.0
5.1 5.5 6.3
5.1 5.5 5.8
5.1 5.5 6.5
5.5 5.7 7.6
5.5 5.7 6.8
5.8 6.0 6.8
MEGA HERZ ELEC & VEN Cost/Schedule VarianceF04695-86-C-0050 MOH-2 RDPR FPI POP: 01 MAR 1992 - 15 SEP 1993
PercentofDollars
COST VARIANCESCHEDULE VARIANCE
1992MAY JUN JUL AUG SEP OCT NOV DEC
1993JAN
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
Cost Drivers, Cause
Dollars In MillionsBCWSBCWPACWP
CVSV
0.3 0.2 0.2
0.0 -0.1
0.6 0.5 0.5
-0.0 -0.1
1.0 0.9 0.9
-0.0 -0.1
1.4 1.4 1.5
-0.1 -0.0
2.2 2.2 2.2
0.0 -0.0
2.5 2.7 3.0
-0.3 0.2
4.2 3.8 4.2
-0.5 -0.4
5.6 5.3 5.6
-0.3 -0.3
7.3 6.9 7.3
-0.5 -0.4
At CompletionKTR PO
20.8 20.8
20.8 20.8 20.8 23.0
0.0 -2.2
PMB: 20.4 % COMP: 32.9 MR: 0.4 KTR MR LRE: 0.0 PO MR LRE: 0.0
CURRENT FUNDING: 10.0PO EPC: 24.0
PROJ FUNDING: 23.0
AS OF: JAN 93OPR: MR B. TECH
PROGRAM: Mohawk Vehicle
0%
-11%-7%-6%
Overall cost and schedule trend
EAC realism
graphs show overall trend...are you getting better,
or worse?
graphs show overall trend...are you getting better,or worse?
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Will the contractor come in on budget?
COST PERFORMANCE INDEX:
CPI = cost efficiency for work performed to date(The value of work accomplished for each dollar spent)
$1000
= = = $2400 = .42
Compare the CPI to the TCPI-BAC:
TCPI(BAC) = Effic iency necessary to complete on budget
= = = $5000 - $1000$5000 - $2400
Example: Using Performance Efficiencies (1)
BCWP
ACWP
WORKACCOMPLISHED
ACTUALS
BAC-BCWPBAC-ACWP
WORKREMAINING
BUDGETREMAINING
= $4000$2600 = 1.54
HISTORY
FUTURE
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Example: Using Performance Efficiencies (2)
SCHEDULE PERFORMANCE INDEX:
SPI = schedule effic iency with which work has been accomplished(The rate at which work is being accomplished)
WORK= BCWP = ACCOMPLISHED = $1000 = .50
BCWS WORK $2000SCHEDULED
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IS THE CONTRACTOR'S EAC (LRE) REASONABLE?
Compare the CPI to the TCPI-LRE
TCPI(LRE) = Effic iency necessary to complete at the contractors estimate
WORKBAC-BCWP REMAINING $5000 - $1000 $4000 1.00
LRE-ACWP ESTIMATE $6400 - $2400 $4000REMAINING
Cumulative performance to date (CPI) = .42
Contractor has been performing at 42% efficiency, but expects tocomplete remaining work at 100% efficiency!
Example: Using Performance Efficiencies (3)
reasonable?
= == = =
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Outline
Introduction to the basic rationale and elements of EVM
Issues of actually implementing an EVM tracking scheme
Background materials
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ControlAccount
SoftwareEngineering
Getting at the Value
WorkPackages
PlanningPackages
OBS DATA SUMMARIZATION
SOFTWAREINTEGRATION
PROGRAM
ProductDevelopment
MasterPlanning
AdaProducts
SoftwareTools
Standards
CPCI #1MOS
CPCI #2MOLE
CPCI #3MAC
AdaStudy
AdaConversion
AdaAppr oach
AdaAppl icati ons
SecureSystems
LANAppl icati ons
Marketing
BCWSBCWPACWP
BACEAC
FUNCTIONAL
ORGANIZATION
CWBS
EXTENSION
SELECTED
REPORTING
ELEMENTS
SELECTED
PSWBS
ELEMENTS
HardwareEngineering
Engineering
Operations
WBS
DAT
A
SUM
MARIZ
ATION
VP/GM
Control
Account
ControlAccount
Control
Account
Control
Account
ControlAccount
Control Account
Responsibility Matrix
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Development of Control Account Plans
MAY break down the control account budget into smaller work
packages
Work Package
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
CONTROL ACCOUNT PLAN
Work Pkg #1
Work Pkg #2
Work Pkg #3
$$
$ $
$
$
$
$$
Work Packages
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Work packages are discrete and measurable.
Work packages yield products or accomplishments, such as
design drawing package
conduct design review
install stand
Often done in rolling wave
detailed plans made for near term work packages
planning packages are for future work and are not detailed
CAMs periodically plan another increment of work packages
Work Package Characteristics
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Should be a quantitative and discrete way to measure the work
Discrete
physical, tangible end product Apportioned
discrete, dependent on another discrete work package
example: quality assurance
planned as historical estimating factor (e.g., 7%)
Level of Effort
no tangible end product
basis of measurement: time
when clock starts ticking, you automatically accumulate earned value
no schedule variance example: management personnel
May tie in with success criteria or technical measure e.g., successful completion of a specific test, reliability growth curve
Ways of Earning Value
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Method How Value is Earned
0/100 no EV at opening, 100% EV at close of WP
50/50 50% EV at opening, 50% EV at close of WP
Units Completed same budget value for identical units
Equivalent Units planned unit standards, allows partial credit
Weighted Milestone each milestone weighted based on plannedresources
ideal to have a milestone each month
Percent Complete subjective (least desirable)
Methods for Assigning Earned Value
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Suggested for LWA
0/50/100 measurement
Typical work package length is 80 hours.
Work package status is reported at status meetings, held everytwo weeks. May just be that 50% of work packages are reported at weekly
status meetings.
EV is 0% (of budget for work package) if it has not yet been
started, or is only now starting. EV is 50% if work is underway.
EV is 100% if work is complete.
If work package is at 50% two status meetings in a row, it is
flagged as a potential issue. Avoids subjectivity of % done; compromises on granularity oftracking, frequency of reporting
Puts the onus on doing the WPs right, up front.
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Outline
Introduction to the basic rationale and elements of EVM
Issues of actually implementing an EVM tracking scheme
Background materials
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A Spectrum of Implementation
Where
When
Core EV PrinciplesANSI/EIA-748-1998
(32 criteria)Tailored Applications
SmallCompanies Larger Companies
MajorDefense
Contractors
as desired
Government
Organic
Reports
ForeignCountries
streamlined,no paper?
corporatepolicy,
enterprisewide
DoD Non-MajorContracts
(>12 months)
$6M
DoD MajorContracts
>$70M RDT&E
>$300M Prod
tailored toneeds
C/SSR CPR
*with judgment
FFPcontracts?
Commercial or Defense
Earned Value Management:
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Earned Value Management:History
1959 PERT and PERT/Cost Milestone Charts And Rate-of-Expenditure
Curves Dollars Spent Vs Estimates Of Percent
Complete (DD 1097)
1963 Earned Value Concept (MINUTEMAN)
1964 Cost Accomplishment Concept (TITAN III)
1966 AFCost/schedule Planning And ControlSpecification (C/SPCS)
1967 DODCost/Schedule Control SystemsCriteria (C/SCSC) (DODI 7000.2)
1972 DOD-Revised DODI 7000.2 and Issued theJoint Implementation Guide (JIG)
1972 NASA Marshall Space Flight CenterC/SPC
1975 DOEPerformance Measurement System(PMS)
1976 DODRevised the C/SCSC JIG
1980 DODRevised the C/SCSC JIG
1982 National Security AgencyEarned Value
1983 NASAGoddard Space Flight CenterPMS
1984 FAA & NASA Lewis Research CenterPMS
1985 NASA Johnson Space Flight CenterPMS
1987 DODRevised DOD C/SCSC JIG
1988 NASA Marshall SFCRevised PMS
(MMI 8020.7C, 44 Criteria) 1989 Australian DODDODI 7000.2
1990 Canadian DODPMS
1991 DODI 5000.2 replaces DODI 7000.2
1992 National Oceanic And AtmosphericAdministration (NOAA)PMS
1993 Swedish FMVC/SCSC
1994 Internal Revenue Service (IRS)C/SCSC
1994 Federal Bureau Of Investigation (FBI)C/SCSC
1996 DODR 5000.2-R replaces DODI 5000.2C/SCSC revised from 35 to 32 criteria
1996 Revised JIGRenamed Earned Value
Management Implementation Guide (EVMIG) 1997 EVMIG Revised
1998 MIL-STD 881B replaced by MIL HDBK 881
8/9/2019 EVM Basics
43/43
12/25/06 EVM Introduction 43
12/25/06 EVM Introduction 43
EVM Resources
Books
Earned ValueQuentin W. Fleming & Joel M. Koppleman
Cost/Schedule Control Systems Criteria
Quentin W. Fleming
Project Performance MeasurementRobert R. Kemps
Visualizing Project ManagementKevin Forsberg, Ph.D., Hal Mooz andHoward Cotterman
Software
Artemis ViewsArtemis Management SystemsContact: Patrick Perugini (303) 581-3102Web: http://www.artemispm.com
CobraWelcom SoftwareContact: Diana Melton (281) 558-0514Web: http://www.wst.com
Software [continued]
Dekker TRAKKERDekker Ltd.Contact: Ron Barry (909) 384-9000
Web: http://www.dtrakker.com
MicroFrame Project Manager (MPM)MicroFrame Technologies, Inc.Contact: Carl Amacker (415) 616-4000Web: http://www.microframe.com
Internet
Project Management Institutehttp://www.pmi.org
US DoD Earned Valuehttp://www.acq.osd.mil/pm
Earned Value Bibliographyhttp://www.uwf.edu/~dchriste/ev-bib.html