Earned Value JOEL VIRAY

TOPICS What is Earned Value Management? –Why do I need it? –How do I do it? Earned Value Reporting Earned Value System

What is Earned Value? Earned Value is an objective measurement of how much work has been accomplished on a project and at what cost Provide early alerts to performance slippage Earned Value indicates how much of the budget should have been spent in view of the amount of work done so far A Manager’s Tool for Integrated Cost, Schedule and Technical Performance Management Technical Schedule Cost Earned Value CSSR CPR Other Information

Why use EVM? Accurate picture of project status –cost, schedule, AND technical Early and accurate identification of trends and problems Basis for corrective action Supports mutual goals of contractor and customer –bring project in on schedule and cost

How Does Earned Value Work? Successful EVM management requires several key practices: –Identify each project deliverable –Develop a schedule for the completion of each deliverable –Assign a value to each deliverable

Terminology ACWP = Actual Cost of Work Performed BCWP = Budgeted Cost of Work Performed BCWS = Budgeted Cost of Work Scheduled SPI = Schedule Performance Index –(EV/Planned Value) or (BCWP/BCWS) CPI = Cost Performance Index –(EV/Actual Cost) or (BCWP/ACWP) EAC = Estimate at Completion BAC = Budget at Completion

WHY DO I NEED IT? Your project: –total budget of $100,000 –12 month effort –produce 20 units How are you doing? Is everything going to plan? How far along are you? (64%, 50%, >40%) –Is this where you expected to be or do you need to take action? EVM - A Simple Example EVM - A Simple Example Status: –spent to date: $64,000 –time elapsed: 6 months –units produced: 8 complete or 40% Complete

Earned Value – the Math Your project: –total budget of $100,000 –12 month effort –produce 20 units The Basics BAC = Budget at Completion = $100,000 BCWS = Plan =$50,000 ACWP = Actuals = $64,000 BCWP = Performance = $5,000/unit = $40,000 Status: –spent to date: $64,000 –time elapsed: 6 months –units produced: 8 complete or 40% Complete EVM - A Simple Example

Your project: –total budget of $100,000 –12 month effort –produce 20 units Earned Value –BAC = $100,000 ACWP = $64,000 –BCWS = $50,000 BCWP = $40,000 The Variance Measures CV= Cost Variance =BCWP-ACWP= -$24,000 SV =Schedule variance = BCWP-BCWS= -$10,000 CV% = CV/BAC = -20% SV % = SV/BAC = -10% CPI = BCWP/ACWP = 40,000/100,000 = 0.4 SPI = BCWP/BCWS = 40,000/50,000 = 0.8 Status: –spent to date: $64,000 –time elapsed: 6 months –units produced: 8 complete or 40% Complete EVM - A Simple Example

0 10K 25K 50K 75K 100K 125K JFMAMJJASONDMJJASONDJF Earned Value Trend Graph TIME FRAME Cost TIME NOW BAC $100K EAC $120K Schedule Variance $10K Cost Variance $20K BCWS $50K ACWP $64K Earned Value (Work Completed) $40K

Sample Project: Second Story Deck Stands 10 feet off the ground Measures 12 x 12 feet Set of stairs will lead to the ground Will be supported with 4 posts resting on concrete footings Footings must extend below frost line (4 feet) Homeowner (and friends) will construct with standard materials

Planned Values for Deck Replacement Project

Measuring Performance End of Day 5 –Planned: 34 hours of work –Expended: 36 hours –Earned: 26 hours

Measuring Performance

CPI (EV/Actual Cost) 26/36 = 0.72 –We are realizing 7.2 hours of result for every 10 hours of actual effort expended SPI (EV/Planned Value) 26/34 = 0.76 –We are realizing 7.6 hours of result for every 10 hours of planned effort

Corrective Action Stakeholder PriorityGeneral ApproachPossible Approaches Maintain project scheduleSacrifice product Reduce scope of other part of project (hand railings) Stop digging and hope building inspector doesn’t notice Sacrifice cost Work overtime Have a friend help (more pizza and beer) Rent a back-hoe

Re-Baseline Plan

Why do we need Early Warning? Course corrections are easier when you have time to make adjustments It’s too late when you’re this close to the iceberg!

STATING THE OBVIOUS EVM will not solve your problems - only you can do that! A good tool is POINTLESS if you don’t TAKE ACTION based on the information it gives you!!!

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