1. “Reading the Abba Charts” Wayne Abba PMI WDC Tool Time, July 18, 2006
Understanding Program Resource Management through Earned Value Analysis
“Reading the Abba Charts”
Wayne Abba
PMI WDC Tool Time, July 18, 2006
Abba Consulting

2. Agenda Earned Value Management and Resource Management
Essential Data Elements and Graphics
Earned Value Analysis
EVA Scenarios
EVA and Funding Status
Baseline Management
Summary

3. Resource Management Earned Value Management = Resource Management
Resources are labor, material and other direct and indirect costs required to execute the program
FAA applies EVM at Program level to include prime and subcontractors, government FTEs, support contractors
Managed in dollars, hours, or any measurable unit
Cost and schedule data summarized directly from contracts and programs for management and reporting at all levels

4. EVM Terminology and Resource Management
- Approved baseline time-phased plan for resources to be consumed (e.g. 100 hours)
- Work accomplished in terms of planned resources (e.g. 100 hours)
- Actual cost of the resources consumed (e.g. 120 hours)
- Reconcilable to accounting system
Budgeted Cost for Work Scheduled
Budgeted Cost for Work Performed
Actual Cost of Work Performed
Assume basic understanding –
Earned Value Management Concept and Terminology

5. Agenda Earned Value Management and Resource Management
Essential Data Elements and Graphics
Earned Value Analysis
EVA Scenarios
EVA and Funding Status
Baseline Management
Summary

6. EVM Trend Analysis: Cumulative
At Complete Variance
Risk
Time Now
Prog
Budget
Management Reserve
Schedule Slip
ACWP (Actual Cost)
Resources
Cost Variance
BCWS
(Planned Value)
400
BCWP (Earned Value)
Schedule Variance
300
200
100
Time J M A J ▲ J A F M
Approx. Time Variance

7. EVM Trend Analysis: Cost/Schedule Variances
Management Reserve Consumption
$ Favorable
Schedule Variance at Completion
$ Unfavorable
Purpose: To relate contract performance to profitability.
Description: This chart shows variance trends with respect to the fee structure.
Cost Variance at Completion
Time
Schedule Slip
Cost Variance ---
Schedule Variance
Management Reserve

8. Agenda Earned Value Management and Resource Management
Essential Data Elements and Graphics
Earned Value Analysis
EVA Scenarios
EVA and Funding Status
Baseline Management
Summary

9. DoD Experience A-10 A-12 B-1 B-2 C-17 DDG-51 F-18 F-22 C-130H & J
Chinook
Apache
Longbow
Blackhawk
Kiowa
Seahawk
Comanche
T-45
T-46
CVN-68
SSN-21
SSN-688
SSN-774
T-AOE-6
LHD-1
Crusader M1
M2/M3 FVS
MK-48 ADCAP
MK-50 ALWT
SSBN-726
CG-47
MH-53
V-22 Osprey
P-3 Orion
RCAS
LIF Hawk
B-1 Engines
F-414-GE-400 Engines
Chem. Demilitirization
D-5 TRIDENT II
Javelin
Pershing II
FAMECE/UET
Satellites
AN/BSY-2
THAAD
ABL
GBL
* Aggregate overrun 5.5% on 115 largest DoD contracts ($3.0B on 60% complete), adjusted for over target baselines a/o 4/30/2000
* OUSD(AT&L)ARA/AM, 1/16/01

10. Earned Value Analysis
Earned Value Analysis = Understanding the relationships among the EVM data elements
EVM discipline provides confidence
Contractor and PM management systems are adequate
Data are summarized from the Control Account level, where technical/schedule/cost integration occurs
Use the data for management and oversight
Data quality becomes “self-policing”
Ask questions – be an informed, critical consumer

11. Planned Resource Consumption
Program
Budget $M 40
Management Reserve 35 30 25
Resources
BCWS
(Planned Value)
Time-Phased Plan
for Consumption of Resources
Typical “S” Curve 20 15 10 5 J ▲ F M A M J J A S O N D
Time

12. Integrated Baseline Review (IBR): Does Planned Resource Consumption Make Sense?
Program
Budget
$ Resources
Front Loaded
Normal
400
300
End Loaded
200
100
Time J M A J J A F M

13. Baseline Extremes: Front-Loaded
Rapid start
Most resources to be consumed early in plan
Questions
What is basis for plan?
Are resources available?
Do IBR and review supporting documentation J F M A
Time
$ Resources
400
300
200
100
Program
Budget
Front Loaded

14. Baseline Extremes: End-Loaded
Slow start
Most resources to be consumed late in plan
Questions
What is basis for plan?
Is schedule realistic?
Do IBR and review supporting documentation J F M A
Time
$ Resources
400
300
200
100
Program
Budget
End Loaded

15. Normal Baselines Normal “S” curve for planned value Questions
Is scope fully and mutually understood (using WBS)?
Does the baseline capture all work?
Labor resources
Are in-house resources available and adequate?
Are contractor resources available and adequate?
Material resources
Are contracts awarded/planned?
Is the schedule logical and complete?
Risk management
Is Management Reserve adequate given expected risk?

16. Normal Baselines cont’d
Management System
Does management system meet ANSI EVMS guidelines?
Are managers trained?
Are EVM techniques objective?
Is “Level of Effort” scope properly categorized?
The Bottom Line
Does the program have an executable plan that integrates scope, planned cost and schedule resources and risk?
If “no,” go slow… better to do it right than to fail

17. Time - Based Planning Horizons
Rolling Wave 1
Rolling Wave 2
Rolling Wave 3
Program Budget
$ Resources
Initial detail
planning
(6 Months)
400
300
Future work in planning packages
Detail planning based on calendar
Arbitrary
200
100
Time D M J S D M J S

18. Event - Based Planning Horizons
Preliminary
Design Review
Critical
Design Review
Program Budget
$ Resources
Initial detail
planning
Future work in planning packages
Detail planning based on technical objectives
Facilitates event-based reporting incentives
Better integration of technical, schedule and cost performance and risk management
400
300
200
100
Time D M J S D M J S

19. Agenda Earned Value Management and Resource Management
Essential Data Elements and Graphics
Earned Value Analysis
EVA Scenarios
EVA and Funding Status
Baseline Management
Summary

20. Earned Value Analysis Scenarios
The Ideal
Portfolio Management
Early Warning Indicators
Know How to Get Help

21. Schedule Slips Problem indicators
Early, large and unfavorable schedule variance
Front-loaded baseline
Zero variance
“Too good to be true”
Slow resource consumption
“Can’t get there from here”

22. Unfavorable Schedule Performance
Time Now
Prog
Budget
BCWS
(Planned Value)
Schedule Slip
$ Resources
400
Schedule Variance
BCWP (Earned Value)
300
200
100
Time ▲ J F M A M J J A

23. Unfavorable Schedule Performance
Time Now
Schedule Variance at completion is zero by definition- even if program completes late
$ Favorable
$ Unfavorable
Time
Schedule Variance
Schedule variance should supplement “real” schedule analysis

24. Cost Overruns Problem indicators
Early, large, unfavorable schedule variance
Time is money
Unfavorable cost variance
Front-loaded baseline
Zero variance
“Too good to be true”
Excessive resource consumption
“Can’t get there from here”

25. Unfavorable Cost Performance
At Complete Variance
Time Now
Prog
Budget
Management Reserve
ACWP (Actual Cost)
$ Resources
Cost Variance
BCWS
(Planned Value)
400
BCWP (Earned Value)
300
200
100
Time J M A J ▲ J A F M

26. Unfavorable Cost Performance
Time Now
$ Favorable
$ Unfavorable
Time
Cost Variance ---
Management Reserve

27. Evaluating Future Performance
Time Now
$ Favorable
PM Variance at Completion
$ Unfavorable
Time
Cost Variance ---
When/how will performance improve?
Review at appropriate time
Tie PM evaluation to predictability
Management Reserve

28. Evaluating Future Performance
Time Now
$ Favorable
PM Variance at Completion
$ Unfavorable
Time
Cost Variance ---
When/how will performance improve?
Review at appropriate time
Tie PM evaluation to predictability
Management Reserve

29. A-12 Contract – Front Loaded
Large unfavorable variances
“Connect the dots”
Front-loaded Baseline
(or completion date is wrong)
No work planned ’93 – ’96?

30. A-12 Contract – Actual Cost vs. EAC
Contractor and PM EACs both imply no cost accrual for several years during key manufacturing/test phases
Realistic EAC “off the chart”

31. Excessive Optimism Problem indicators
Future performance predicted to be significantly better than historical performance
Variance trend analysis
Cost Performance Index compared to To Complete Performance Index (CPI vs TCPI)
Actual trend and implied future trend diverging
One of most powerful EVA techniques
Independent EV analysis balances PM bias

32. A-12 Contract – Optimistic EACs
Contractor estimates program will begin to underrun
PM estimates all problems will be resolved – and no new problems will occur
Realistic EAC variance “off the chart”

33. Super Hornet Cumulative Trends
Cost-type contract
Significant cost risk
No variances
Too good to be true?
No scope change
Effective planning
IPTs used EVM effectively
Excellent performance

34. Super Hornet Variance Trends
Substantial Management
Reserve

35. Past vs. Future Efficiency: CPI vs. TCPI
Time Now
TCPI
EAC Efficiency Index
CPI Cum
CPI Current
>1.0
Average Future Performance must Equal TCPI
1.0
To Achieve Indicated Efficiency in Estimate at Completion
<1.0
Given Performance to Date
(cumulative CPI)
Time

36. Confidence in Estimate Can program complete at PM’s current estimate?
( ) 1
x 100
No Confidence
Questionable
CPICUM
TCPIEAC
Cumulative Efficiency / Required Efficiency
Percent Difference
Acceptable
Contract: FAA XXX Contractor: Air Systems Inc. as of January 2006
Adapted from USAF

37. Zeroing in on the EAC $19 $20 $21 $22 $23 Contract Budget:
PM Estimate:
Independent High:
Independent Low:
$20.8M
$23.3M
$22.0M
$ $ $ $ $23
Contract: FAA XXX Contractor: FAA Contractor as of April 2006
Adapted from USAF

38. Agenda Earned Value Management and Resource Management
Essential Data Elements and Graphics
Earned Value Analysis
EVA Scenarios
EVA and Funding Status
Baseline Management
Summary

39. Approved/Planned Funding
EVA and Funding Status
Time Now
Prog
Budget
BCWS
(Planned Value)
Resources
400
ACWP (Actual Cost)
Approved/Planned Funding
300
200
BCWP (Earned Value)
100
Time D J S M J S M D

40. Profitability Analysis on Flexibly Priced Contracts
Cost Variance levels related to:
Time Now
$ Favorable
Min/Max Fee
Cost Sharing
$ Unfavorable
Contractor Loss
Time
Cost Variance ---
Schedule Variance
Management Reserve

41. Profitability Analysis on Flexibly Priced Contracts
Cost Variance levels related to:
Time Now
$ Favorable
Min/Max Fee
Cost Sharing
$ Unfavorable
Contractor Loss
Time
Cost Variance ---
Schedule Variance
Management Reserve

42. Agenda Earned Value Management and Resource Management
Essential Data Elements and Graphics
Earned Value Analysis
EVA Scenarios
EVA and Funding Status
Baseline Management
Summary

43. Baseline Discipline
Effective performance management requires disciplined baseline management
Initial baseline reflects go-ahead decision
Scope, schedule, resources, risk
Approve baseline changes to
Revise work scope (increase or decrease)
Restore meaningful performance management
Manage funding reductions (“salami slices” or prioritized cuts?)
Balance scope, schedule, cost, risk assumptions
Do not approve baseline changes to
“Get to Green”
Eliminate cost and schedule variances

44. Baseline Discipline No Variances Lack of definition and discipline
Time Now
Program
Budget
BCWS
ACWP
$ Resources
No Variances
Lack of definition and discipline
Baseline & schedule growth preclude measurement
400
300
BCWP
200
100
Time J J O A J O A J

45. Rebaselining
When the original baseline becomes unrealistic as a basis for management and measurement, it may be necessary to establish a new baseline
A question of degree – what is ‘unrealistic?’
Challenge assumptions
Issues:
Visibility to original baseline
Reporting to stakeholders

46. Establishing a New Baseline
Time Now
Program
Budget
Management Reserve
$ Resources
ACWP
400
Baseline no longer meaningful to manage performance
BCWS
300
200
BCWP
100
Time D J S M ▲ A D

47. Establishing a New Baseline
Time Now
Revised
Budget
Program
Budget
Original
Budget
Management Reserve
New Baseline
BCWS
$ Resources
ACWP
400
BCWS
“Single Point Adjustment”
Eliminates variances
Establishes new baseline including Reserve if needed
300
200
BCWP
100
Revised Schedule D J S M ▲ J S A D

48. Establishing a New Baseline
Time Now
$ Favorable
$ Unfavorable
Time
Cost Variance
Schedule Variance
Management Reserve

49. Establishing a New Baseline
Time Now
$ Favorable
“Single Point Adjustment”
Eliminates variances
Establishes new baseline including MR if needed
History is lost
Temptation to “get to Green”
$ Unfavorable
Time
Cost Variance
Schedule Variance
Management Reserve

50. Establishing a New Baseline
Time Now
$ Favorable
$ Unfavorable
Time
Cost Variance
Schedule Variance
Management Reserve

51. Establishing a New Baseline
Time Now
Complete program picture
Preserves historical visibility
Identifies added baseline amount including MR if needed
Changes chart dynamic by measuring future performance against anticipated overrun
$ Favorable
Budget for Variance
$ Unfavorable
Budget for Future Work
Time
Cost Variance
Schedule Variance
Management Reserve

52. Agenda Earned Value Management and Resource Management
Essential Data Elements and Graphics
Earned Value Analysis
EVA Scenarios
EVA and Funding Status
Baseline Management
Summary

53. Summary Pulling it all together
Understand EVM/A and Resource Management
From a single database, use EVM to
Manage the program
Measure program performance
Take appropriate management actions
Report to senior management and to customers
Fix the problem, not the blame
Encourage timely problem identification and objective reporting
Don’t necessarily equate program performance with manager’s performance
Develop organizational history and “IQ”

54. Program Baseline, Funding and Program Performance are Reported in the OMB-300 Tables