1. ©2003 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc. This information is given in good faith based upon the latest information available to Rolls-Royce plc, no warranty or representation is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc or any of its subsidiary or associated companies. Earned Value Analysis An overview Jonathan Fishwick Rolls-Royce plc

2. Rolls-Royce data – strictly private Filename 2 Topics What is Earned Value? Why we use it? Earned Value parameters Some Earned Value calculations Summary Any questions?

3. Rolls-Royce data – strictly private Filename 3 What is Earned Value? Earned Value is a way of measuring how much work you have done for the money you have spent. It is a powerful Programme Management technique that enables monitoring of not just planned and actual costs, but also the progress achieved. It provides an “early warning” of where spend is exceeding physical achievement It can predict future performance

4. Rolls-Royce data – strictly private Filename 4 Traditional Plan vs. Actual view Is there a performance problem? Is it a good or bad position? Could be a cash-flow problem, but what if the task had finished in October?

5. Rolls-Royce data – strictly private Filename 5 Why we use Earned Value? Rolls-Royce introduced an optimised business process Integrated Programme Management (IPM) Both IPM and EVA have their origins in the Cost/Schedule Control System Criteria (CS²): this was issued by the US DoD in 1967 to standardise reporting requirements and provide visibility of accomplishment of contract work

6. Rolls-Royce data – strictly private Filename 6 Why we use Earned Value? Rolls-Royce’s Programme Management and Earned Value processes are tailored to meet the specific requirements of the company Earned Value is best practice for performance management in our industry, and many customers expect us to use it

7. Rolls-Royce data – strictly private Filename 7 Relevant IPM principles? All work within the company must belong to a programme All work undertaken must have clearly defined deliverables, planned in terms of cost and schedule Performance to be managed using Earned Value

8. Rolls-Royce data – strictly private Filename 8 How IPM programmes are planned WBS 1.1WBS 1.2 WBS 1.1.1 WBS 1.1.2WBS 1.2.1 WBS 1.2.2 WBS 1 Work Breakdown Structure Work Breakdown Structure Master Schedule Master Schedule  Earned Value is planned and achieved at the task level within the Control Account and summarised up through the project structure Control Account Plans Control Account Plans

9. Rolls-Royce data – strictly private Filename 9 Earned Value methods Each task has an Earned Value method assigned - to phase the planned cost and to calculate the achieved (Earned) Value Example methods: 0-100 Claim 100% of activity value at completion 20-80 Claim 20% for starting the activity and the remainder on completion Milestones - x% for a completed milestone, x being determined in advance by the CAM Level of Effort - Work is planned evenly over activity duration so claim proportional value for the passage of time

10. Rolls-Royce data – strictly private Filename 10 Earned Value parameters BCWS - Budget Cost of Work Scheduled (Baseline) What we planned to do - What we planned to spend ACWP - Actual Cost of Work Performed What really happened - What we have spent BCWP - Budgeted Cost of Work Performed Value of the work done - The Earned Value ACWP Cost BCWS BCWP Time Time Now

11. Rolls-Royce data – strictly private Filename 11 Earned Value view ? Clear “indication” of being behind schedule and over cost Can you better judge whether good or bad?

12. Rolls-Royce data – strictly private Filename 12 Earned Value indices Calculations using the EV parameters can indicate current performance Cost Performance Index (CPI = BCWP/ACWP) Values of CPI greater than 1.0 indicate the project is under budget in terms of Earned Value. Values less than 1.0 indicate the project is overspent for the amount of work that has been done. Schedule Performance Index (SPI = BCWP/BCWS) Values of SPI greater than 1.0 indicate the project is ahead of schedule. Values less than 1.0 indicate that it is behind schedule

13. Rolls-Royce data – strictly private Filename 13 Earned Value indices Calculations using the EV indices can predict likely end cost/funding requirements Estimate at Completion (EAC) = ACWP + BAC - BCWP CPI x SPI

14. Rolls-Royce data – strictly private Filename 14 Earned Value variances There are calculations using the EV parameters that indicate current variances Schedule Variance (SV = BCWP - BCWS) is the difference between the value of work performed by the status date and the value of work scheduled to have been performed by that date

15. Rolls-Royce data – strictly private Filename 15 Earned Value variances Cost Variance (CV = BCWP - ACWP) is the difference between the value of work performed and the actual amount of money spent ACWP Cost BCWS BCWP Time Time Now SV CV

16. Rolls-Royce data – strictly private Filename 16 Reporting Earned Value Rolls-Royce’s management system provides standard Earned Value reports both numerical and graphical

17. Rolls-Royce data – strictly private Filename 17 Summary This has been a simplistic overview of Earned Value, there are more complex applications Earned Value is an integral part of the IPM process It is the “best practice” performance management tool in the Aerospace industry Many of Rolls-Royce’s customers expect us to use it, mandatory on some contracts

18. Rolls-Royce data – strictly private Filename 18 Summary Earned Value Analysis enables us to: Review trends and effects on plans Understand the likelihood that the work will be achieved on time and to budget Manage by exception Take timely corrective action by providing an “early warning” of deviations Measure what we have achieved against an agreed plan However,to be effective, EVA requires a credible well thought out, baselined plan

19. Rolls-Royce data – strictly private Filename 19 Any questions?