Earned Value Management Prepared For: PMI-L.I. Chapter Prepared By: Jean Cronan Presentation on: 11 January 2017
Learning Objectives Earned Value • Background • Definitions • Establishing a Performance Baseline • Performance Management • Summary
Background Earned Value –Why Use - Benefits? • Early trending leads to proactive management resolution • Improves customer communications and relationship • Ensures scope planned and risks and budget managed • Creates an open culture within IPT
Background Earned Value – Current Standards • ANSI/EIA-478 • PMI Practice Standard for Earned Value • PMI EVM Community of Practice
Background How Does EVM Relate to PMBOK Process Groups and Knowledge Areas ? Initiate Plan Execute Monitor and Control Establish a Organize Project Direct and Measurement against PMB: Performance through the Manage Work Generate: Measurement Charter against PMB: Change Requests • Baseline (PMB): Conduct Variance Analysis • • Assign Scope • Procurements Control Risks • Responsibilities Management Acquire • through Time • Resources Stakeholder Management Management Cost • Management Risk • Management
Background ANSI/EIA-748 Source: DAU;EMIG
Background 2016 PMIAA – Program Management Improvement and Accountability Act Earned Value -Timeline 2011 PMI releases 2nd Edition EVM Standard,PMBOK Releases 2009 Weapons Systems Acquisition Reform Act, all US DoD contractors to have fully compliant ANSI/EIA-748B compliant 2005 PMI releases 1 st Edition EVM Standard 2002 Sarbanes Oxley Act 1999 Undersecretary of Defense adopts the ANSI/EIA-748 as agency standard on all US DoD acquisition contracts 1998 Initial issue of American National Standards Institute/Electronic Industries Alliance publishes Earned Value Management Systems (EVMS) called ANSI/EIA-A 1991 DoD issues DoD Instruction 5000.2 Defense Acquisition Management Policies; use of EVM on DoD-wide Programs 1972 C/S CSC Joint Implementation Guide launched for use by all military branches 1967 Department of Defense (DoD) creates Cost/Schedule Control System Criteria (C/S CSC) 1950’s Program Evaluation Review Techniques - PERT Increasing Oversight, Program Management Profession Acknowledged As Industry Experienced Delays and Overruns Source: EVMPEDIA, EVM History
Background Earned Value - Summary • Industry Standards Established • Continued Oversight • Increase use of EVM within DoD and Commercial Projects DoD, Commercial Industry, and PMI recognizes EVM as a critical Project Management Tool
Definition Earned Value • Based on: Technical, Schedule, Cost, Risk elements • Measures project performance by comparing work (hours/dollars) planned to work (hours/dollars) completed, formulae • Management Tool • Performance Measurement- what is going on • Performance Management – what can be done
Definition Earned Value – “Demand Diamond” Technical Schedule Cost Risk
Definition Earned Value Budget: $45 Actual: $55 How is this project performing ? Variance: ($10)
Definition Earned Value - Revisit AC= $55 PV=$45 EV=$60 SVAR= $15 SVAR= EV-PV 60-45 CVAR= $5 CVAR= EV-AC 60-55 How is this project performing adding EV ?
Definition Earned Value – Formulae -Variances Source: PMBOK, 5 th Edition
Definition Earned Value – Formulae -Variances Management Reserve Projected Slip
Definition Earned Value – Formulae -Variances Management Reserve Projected Slip March Cumulative March Cumulative PV: $45 CVAR: EV-AC ($60-$55) $5 AC: $55 SVAR: EV-PV($60-$45) $15 EV: $60 CPI: EV/AC ($60/$55) 1.09 BAC: $85 SPI: EV/PV($60/$45) 1.33 EAC: $110 VAC: BAC-EAC ($85-$110) ($25) MR: $55 Total Authorized Budget/ Contract Baseline: $140
Definition Earned Value – Formulae ETC/EAC Source: PMBOK, 5 th Edition
Definition Earned Value – Formulae – ETC/EAC 1 3 4 2 # EAC Description EAC Formula EAC Calculation EAC 1 Cost expected to remain constant EAC=BAC/CPI $140/1.09 $128 Future work will be accomplished at EAC=AC+(BAC-EV) $55+($85-$60) $80 planned rate (PV) 2 Bottom-Up: Initial plan, PV, no longer EAC=AC+Bottum-Up ETC $55+55 $110 3 valid 4 CPI and SPI influence remaining work EAC=AC+((BAC-EV)/(CPI*SPI)) $55+(($85-$60)/(1.09*1.33)) $80
Establishing a Performance Baseline Organize The Work Work Breakdown Structure Level 1 Organizational RADAR System Breakdown Structure Level 2 Antenna Receiver Transmitter Test IPT Transmit/Receive Level 3 Antenna Antenna Control Program Manager Modules Electronics Reporting Elect IPT Design Electrical Design Control Account Control Account Control Account Mech Design Control Account MFG IPT Drafting/Checking Control Account Organize The Work: Responsibility Assignment Matrix (RAM) Source: MIL STD 881-C
Establishing a Performance Baseline Plan The Work Work Breakdown Structure Level 1 Organizational RADAR System Breakdown Structure Level 2 Antenna Receiver Transmitter Test IPT Transmit/Receive Antenna Level 3 Antenna Control Program Manager Modules Electronics Reporting Elect IPT Design Electrical Design Control Account Control Account Level 4+ Mech Design Control Account Control Account Planning and Drafting/Checking MFG IPT Control Account Performing
Establishing a Performance Baseline Planning Techniques • Detail Planning • LOE • % Complete • Apportioned • Rolling Wave • Planning Packages Best Practice: No more than 10% of plan to consist of LOE
Establishing a Performance Baseline Scheduling Tier 0 – Customer/Contract Specified Milestones Horizontal/ Vertical -Accountability Tier 1 – Program Top Level Summary Schedule Customer, Executive Management, Program Office • -Integration Customer/Contract specified milestones • Program major milestones, phases • -Use of Rollingwave One page • Tier 2 – Integrated Master Schedule Further delineation of Tier 1 • Major tasks within each phase • Significant inter-phase events • Task links/Critical path(s) • Tier 3 – Detailed IPT Schedules Further delineation of Tier 2 • End item deliverables, Tests, Services • Functional commitment to IPT • Tier 4 – Control Accounts Work Packages • Earned Value Performance Measurement •
Establishing a Performance Baseline Budgeting Scope : WBS: Define the work Time Management : Schedule the work 20 20 60 Cost Management : 60 20 60 Distribute/allocate Budgets 60 20 Risk Management : Plan risk response s
Establishing a Performance Baseline Incorporating Risk Plans Risk #8 X Identify Risks • Plan Risk Response Approved Reserves • • Perform Qualitative Risk Analysis • Approved Change Request • Perform Quantitative Risk Analysis • Risk Mitigated • Risk Mitigation Leads to Proactive Project Management
Establishing a Performance Baseline Baselined • Ensure no more than 10% level of effort control accounts • Established management reserve, undistributed budget • Management Reserve Log established • Ready to start executing, monitoring/controlling, managing to baseline
Performance Management Managing with Data - What Can Be Done • 10% into project, trend forecasts future performance • Focus on indicators that reveal trends • Reporting includes root cause/corrective action plans • Rigorously review Risk Register, ensure mitigation steps incorporated into planning • Utilize data to drive projects to success Ensures Oxley Act of 2002 Is Being Satisfied
Summary • Early trending leads to proactive management resolution • Improves customer communications and relationship • Ensures scope planned and risks and budget managed • Creates an open culture within IPT Earned Value is a Management Tool , when used properly, can successfully measure and manage a project to increase internal and external customer satisfaction
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