1. MISUSE OF EARNED VALUE MANAGEMENT RESULTS IN ERRONEOUS CONCLUSIONS
Charles F. Lappenbusch, Jr. MBA, CCP, EVP, PSP Presentation to Seattle Section, AACE® International March 9, 2017

2. BIOGRAPHY Charles F. Lappenbusch, Jr., MBA, CCP, EVP, PSP
Over 30 years of financial and project management
Director of Development for a new town
Cost control processes, monitoring and integration with Critical Path Scheduling, Earned Value Management, and Risk Analysis.
What you don’t know about me.

3. This is Earned Value!

4. INTRODUCTION PURPOSE: EVM within CONTEXT OF PROJECT CONTROLS
COMPLETION DATE?
COMPLETION COST?
INFORMATION FROM THE NOISE

5. INTRODUCTION PURPOSE:
EVM IS INTEGRATION SCOPE, RESOURCE (COST), SCHEDULE & RISK
COMMON TERMS
EXTENSION OF PI
START THE CONVERSATION
CRITIQUE

6. INTRODUCTION ASSUMPTIONS: SCOPE BUDGET at COMPLETION (BAC)
CRITICAL PATH METHOD (CPM)
WORK BREAKDOWN STRUCTURE (WBS)

7. INTRODUCTION FOCUS: EVM KEY PERFORMANCE INDICATORS (KPI)
COST PERFORMANCE INDICATOR (CPI)
SCHEDULE PERFORMANCE INDICATOR (SPI)
TOTAL FLOAT (TF)

8. INTRODUCTION FOCUS: EVM a PROJECT CONTROL EVM to CALCULATE EAC
EARNED VALUE (EV) vs EARNED PAYMENT (EP)

9. INTRODUCTION TAKE A-WAY: WBS - INTEGRATOR EVM – PROJECT CONTROL
EVM NOT FINANCIAL CONTROL
EVM KPIs DEPEND UPON ALIGNMENT OF DD, PV, EV, AC, TF
EV vs EP

10. EVM BENEFITS
INTEGRATES:
SCOPE
RESOURCE(COST)
SCHEDULE
RISK

11. EVM BENEFITS COMPARE UNLIKE ACTIVITIES COMMON NUMBER LOOK AHEAD TOOL
ADDS DEPTH & INSIGHT
EAC IN LIEU OF DETAIL ESTIMATE
KPI TRENDING ANALYSIS

12. EVM BENEFITS SUMMARY MEASURES PROGRESS OBJECTIVE MEASUREMENT
COMPARES PROGRESS TO THE SCOPE, RESOURCE (COST), SCHEDULE & RISK PLANS

13. PLANNED VALUES (PV) Per DDs
EVM FOUNDATION
WBS
BAC
CPM
PMB
DATA DATES (DD)
PLANNED VALUES (PV) Per DDs

14. EVM EAC EAC = AC + (BAC –EV)/CPI EAC = AC + [(BAC – EV) / (EV/AC)]
EAC = AC + [(BAC – (%C*BAC)/
(%C*BAC)/AC)]

15. EVM EAC EAC = AC + (BAC –EV)/ (SPI*CPI)
EAC = AC + {(BAC – EV) / [(EV/PV) * (EV/AC)]}
EAC = AC + {[(BAC – (%C*BAC)/
{[(%C*BAC)/PV)]*
[(%C*BAC)/AC)]}}

16. ALIGNMENT DATA DATE (DD) PLANNED VALUE (PV) EARNED VALUE (EV)
ACTUAL COST (AC)
TOTAL FLOAT (TF)

17. WBS INTEGRATION KPI ROLLED UP OR DRILLED DOWN
BASIS FOR TRACEABILITY OF KPIs
THE USE OF ADDITIONAL FILTERS
Organization Breakdown Structure (OBS)
Resource/Cost Breakdown Structures (RBD/CBS)

18. DATA DATE (DD) RECURRING RECORDING DATE 1st DAY AFTER RECORDING PERIOD
SEPARATES ACTUAL (HISTORY) FROM SCHEDULED DATA
PV, EV, AC, TF MUST ALIGN WITH DD
THE BASIS OF KPI TRENDING

19. PLANNED VALUE (PV) PV PER BAC, CPM, PMB PV IS FIXED TO DD
PV IS IN SAME UNITS OF MEASUREMENT AS EV

20. EARNED VALUE (EV) EV IS NOT FIXED TO DD EV IS ACCOMPLISHMENT OF PV
EV IS IN SAME UNITS OF MEASUREMENT AS PV

21. ACTUAL COST (AC) AC IS ACTUAL RESOURCE (COST) AC SAME DD AS EV
INVOICE DELAY A DISTORTION OF AC
AC ACCRUAL
AC vs. EP

22. TOTAL FLOAT (TF) CRITICAL PATH (CP) SCHEDULE KPI
MEASURES THE CP ACTIVITIES
TF MUST BE ALIGNED WITH THE DD
TF & SPI ARE NEEDED TO ANALYZE BOTH THE FLOAT AND CP ACTIVES

23. COST PERFORMANCE INDEX (CPI)
EVM KPIs
COST PERFORMANCE INDEX (CPI)
CPI =EV/AC
CPI = <1 – OVER BUDGET
CPI = 1 – ON BUDGET
CPI = 1< - UNDER BUDGET

24. EVM KPIs SCHEDULE PERFORMANCE INDEX (CPI) SPI = EV/PV
SPI = <1 - BEHIND SCHEDULE
SPI = 1 – ON SCHEDULE
SPI = 1< AHEAD OF SCHEDULE
NOTE: WHEN EV = PV = SPI = 1
SCHEDULE VARIANCE = $0
REGARDLESS OF SCHEDULE

25. 27 EVM KPIs CPI, SPI, TF = 27 KPI MATRIX EXAMPLES:
OBSERVATIONS
5 – CPI=0.85, SPI=1.00, TF=+20
6 – CPI=0.85, SPI=0.85, TF=-20

26. EARNED PAYMENT (EP) EP DETERMINISTIC PER T& C OF THE CONTRACT
PV FLOATS WITH EP
DD FLOATS WITH EP
EV PROBABILISTIC
EAC AND KPIs
PV FIXED PER PMB
DD FIXED PER EV
AC IS FIXED TO EV

27. EV vs EP Earned Payment (EP) Earned Value (EV) EVM ELEMENT
EV & EP Functions
EV is a measurement of a Project's progress
EP is used to determine payment

28. EV vs EP EVM ELEMENT Earned Value (EV) Earned Payment (EP) Progress
EV measures actual progress of a project
EP measures progress of payment

29. EV vs EP EVM ELEMENT Earned Value (EV) Earned Payment (EP)
Data Date (DD)
EV is measured for all activities prior to the DD
EP of several activities will most likely have different DD

30. PV is fixed to a specific time period
EV vs EP
EVM ELEMENT
Earned Value (EV)
Earned Payment (EP)
Planned Value (PV)
PV is fixed to a specific time period
PV moves with the EP

31. EV vs EP EVM ELEMENT Earned Value (EV) Earned Payment (EP)
Actual Cost (AC)
The cost (not cash flow) to achieve the EV
EP is cash flow and not necessarily AC.

32. EV vs EP EVM ELEMENT Earned Value (EV) Earned Payment (EP) SUMMARY
EV measures project progress.
EP measures project payment.

33. SUMMARY ONLY AS GOOD AS FOUNDATION
SCOPE, RESOURCE (COST), SCHEDULE and RISK
EVM NEEDS WBS TO INTEGRATE
MUST ALIGN
DD, PV, EV, AC, TF
EP MEASURES PAYMENT
EV MEASURES PROGRESS

34. This is Earned Value!

35. QUESTIONS
&
CRITIQUE