1. October 11, 2010 www.mbpce.com EARNED VALUE AND PERFORMANCE MANAGEMENT

2.  Niyi Ladipo  Jill Hubbard  Felicia Nicolaescu  Terrance Wakefield  Fred Marsh TODAY’S PRESENTERS 2

3.  EVM team and mission  Goal of EVM  EVM 101  EVM team accomplishments to date  Without EVM  EVM – Internal  Example projects  EVM challenges  What next?  Questions and discussions AGENDA 3

4. EVM Exploratory Team members  Niyi Ladipo  Fred Marsh  Jill Hubbard  Junghan Kwak  Terrance Wakefield  Jason Pettengill  Kay Bakhtar  Ned Wright  Dave Pierce  Tom Boyer  Felicia Nicolaescu  Neil Bhatt EVM EXPLORATORY TEAM 4

5.  Promote EVM as part of MBP project management services to existing clients  Develop EVM expertise internally  Promote EVM to new markets and clients EVM ET MISSION 5

6.  When will project be completed?  Estimate at completion (time)  Based on performance to date  What will project cost at completion?  Estimate at completion (dollars, hours)  Based on performance to date If EAC varies significantly from plan decide on corrective actions ULTIMATE GOAL OF EVM EAC 6 Goal!!!

7.  Provides data for the prediction of project performance and signals early warning of problems:  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 status at completion (DOD’s analysis of more than 700 projects utilizing EVM) 7 ULTIMATE GOAL AND RESULTS

8.  What is Earned Value Management (EVM)  An objective project management technique:  Integrates scope, schedule, and cost  Measures performance INTRODUCTION TO EVM Project Cost Scope Schedule EVM 8

9.  What is Earned Value Management (EVM)  A project management technique that permits owner and contractor to:  Perform in-depth examination of the scope, schedule, and cost information periodically  Evaluate performance  Assess the need for corrective action INTRODUCTION TO EVM 9

10.  What is EVM?  A management technique that integrates program’s technical scope, schedule, and resources with program risk in a baseline plan.  Program’s progress is measured against the baseline plan to produce metrics  Metrics highlight variances and performance trends  Program managers and high level management have objective visibility into progress, enabling effective decision making Source: National Defense Industrial Association (NDIA) Program Management Systems Committee Application Guide, March 2007 [Re-phrased for ease of understanding] INTRODUCTION TO EVM 10

11.  Provides project team with periodic objective assessment of project performance  Offers more realistic forecast of status at completion that complements the analysis from other project management techniques BENEFITS OF EVM 11

12.  Helps prevent scope creep through continuous measurement of earned and actual against authorized and planned scope  Allows for practice of “management by exception”  Allows compliance with requirements by Defense Federal Acquisition Regulation Supplement (DFARS) and FAR BENEFITS OF EVM 12

13.  Planned Value or authorized work  PV or Budgeted Cost of Work Scheduled (BCWS)  Earned Value or authorized work completed  EV or Budget Cost of Work Performed (BCWP)  Actual Cost or costs incurred  AC or Actual Cost of Work Performed (ACWP) THREE COMPONENTS OF EVM 13

14. PLANNED BUDGET CURVE 14 BAC = $ 2.3 million Budgeted Costs Month

15. Variances:  Schedule Variance (SV) = Earned Value – Planned Value  SV ≥ 0 is favorable  Cost Variance (CV) = Earned Value – Actual Cost  CV ≥ 0 is favorable EVM METRICS 15

16. SV AND CV METRICS 16

17. Performance Indices:  Schedule Performance Index(SPI) = Earned Value / Planned Value  SPI ≥ 1 is favorable  Cost Performance Index(CPI) = Earned Value / Actual Cost  CPI ≥ 1 is favorable EVM METRICS 17

18. 18 SPI AND CPI METRICS

19.  Before construction starts:  How will I measure my project performance in relation to:  My planned scope  My planned budget or cost  My planned duration  After construction starts:  How is my project doing?  When will my project complete?  How much will it cost at completion?  How is my project doing right now compared to what was planned? PROJECT TEAM ESSENTIALS 19

20. ESTIMATE AT COMPLETION 20

21. PLANNED VERSUS EARNED CURVES 21

22.  When actual cost is not known:  EAC = PD/SPI t PD = Planned project duration from baseline  SPI t = ES/AT ES = Earned Schedule = Time when EV should have been accomplished AT = Time from start of project ESTIMATE AT COMPLETION 22

23. 23 EXAMPLE CHART

24.  When actual cost is not known:  EAC = PD/SPI t = 47/0.76 = 62 months PD = Planned project duration from baseline  SPI t = ES/AT = 31.5/41.7= 0.76 ESTIMATE AT COMPLETION 24

25. Traditional Cost Management  Planned Value  Actual Cost EVM  Planned Value  Earned Value  Actual Cost TRADITIONAL COST MANAGEMENT / EVM 25

26.  EVM service sheet  EVM service trifold  EVM business plan (draft)  2 EVPs  Seminars, meetings, and conference  Internal training  Pilot and internal projects 26 TEAM ACCOMPLISHMENTS TO DATE

27.  Risk Management  Planning and Scheduling 27 WITHOUT EVM

28.  Organization  Planning, scheduling, and budgeting  Accounting  Analysis and management reporting  Revisions and data maintenance 28 EVM – INTERNAL TO MBP

29.  Record direct and indirect costs  Provide summary and detail visibility of costs  Establish process for reporting:  Material  Other direct costs  Subcontractor costs  Report formats:  Cost Performance Reports (CPR)  Cost/Schedule Status Reports (C/SSR) 29 ACCOUNTING

30. 30 COST POINT BUDGET

31. 31 COST POINT EARNED VALUE

32. 32 COST POINT REPORTING

33.  Three essential components:  Inputs  Methods  Outputs 33 EVM IMPLEMENTATION

34.  Scope definition – WBS and OBS  Planning and scheduling scope  Allocation of resources/costs  Establishment of Performance Measurement Baseline 34 EVM INPUTS

35. 35 PERFORMANCE MEASUREMENT BASELINE 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) Planning PackagesWork Packages Undistributed Budgets Management Reserve (MR) EV is measured at the WP level

36.  Planned Value (PV)  Earned Value (EV)  Actual Cost (AC)  Metrics and performance measurements  Forecasting (EAC, TCPI…)  Integrated Baseline Review (IBR) 36 EVM METHODS

37.  Reporting requirements  Proper analysis of reports  Corrective action taken 37 EVM OUTPUTS

38.  EVM on Fairfax County Parkway  Internal to MBP and its sub-consultant  Have PV, EV, and AC  EAC based on schedule and cost performance EVM EXAMPLE 38

39. 39 EXAMPLE CHART

40. 40 EXAMPLE CHART

41.  EVM for Contractor  Internal to contractor on fixed price project  Not required by owner  Have PV, EV, and AC  EAC based on schedule and cost performance EVM EXAMPLE 41

42. 42 EXAMPLE CHART

43.  EVM for owner where actual cost is not available  On fixed price project  Intended as supplement to schedule review/analysis  Have PV and EV  EAC (time) based on schedule performance EVM EXAMPLE 43

44. 44 EXAMPLE CHART

45. EVM CHALLLENGES  Contract language  Understanding by all parties  Contractor by-in  Scale to suit project  Point of implementation  Beginning of project  Work breakdown structure  Integration: scope, schedule, and cost 45

46.  Promote EVM to existing clients  Promote EVM to new clients  Promote EVM to new markets  Use internally WHAT NEXT? 46

47. THANK YOU! Questions & Discussion