Presented by Niyi Ladipo September 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

 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

What is going on with my project? 4

 Budget?  Scope?  Schedule?  What resources?  Measure and manage performance? 5

 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

What is Earned Value Management? 7

 An objective method of quantifying the key parameters of a project: technical performance, cost and schedule 8 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

 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

 A technique that enhances the essentials of good project management practice, which consist of thorough:  Planning  Executing  Controlling 11

 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

EVM vs. Traditional Cost Management 13

Traditional Cost Management  Planned Value  Actual Cost 14 Earned Value Management  Planned Value  Earned Value  Actual Cost

15

16

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

19

Performance Indices:  Schedule Performance Index(SPI) = Earned / Budget  SPI ≥ 1 is favorable  Cost Performance Index(CPI) = Earned / Actual Cost  CPI ≥ 1 is favorable 20

21

Forecast of Final Estimate at Completion:  Best Case of EAC: = Budget at Completion (BAC) / CPI  Worst Case of EAC: = BAC /(CPI x SPI) 22

23

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

 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

 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

 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

 “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

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

 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

33 Project or Contract Price Base Profit Project Cost Base: Negotiated Target Costs / Authorized but Un-negotiated Changes Performance Measurement Baseline (PMB) Distributed Budgets Control Account Plans (CAPs) Work PackagesPlanning 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

 Earned Value Outputs include:  Reporting Requirements  Proper Analysis of Reports  Corrective Action Taken 35

 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

 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

 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

 Fleming, Q. W., and Koppelman, J. M. Earned Value Project Management. Third Edition. Newton Square, Pennsylvania: Project Management Institute, Inc.,  Humphreys, G. C. Project Management Using Earned Value. Orange, CA.: Humphreys & Associates, Inc  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 Arlington, Virginia: Government Electronics and Information Technology Association,

40 Questions or Comments?