1. 1 RELATIONSHIP-OBJECTIVE ANALYSIS Getting Full Value From Earned Value With a Value-Added Way of Looking at Performance Measurement Presented at the 14th Annual International Integrated Program Management Conference Tysons Corner Sheraton Premiere Hotel November 19, 2002 Presented By Will Gran Windmill International, Inc. Nashua, New Hampshire 03060-5830 (603) 888-5502

2. 2 Value-Added From Earned Value Review some basics Traditional analyses –Line graph presentation –EAC formula Relationship-Objective Analysis –Variances –Efficiencies –Resource use rates –Estimates at completion Some closing thoughts...

3. 3 When I Say... I Mean... Planned Value BCWS Completed Value BCWP Resources UsedACWP Remaining Planned ValueBCWR Baseline Total Value BAC Resource Value VarianceCV Time Value VarianceSV Resource Use Efficiency IndexCPI Time Value Efficiency IndexSPI Contract At CostTC Contract At PriceTP Contract LiabilityCP

4. 4 EVMS 32 Criteria Industry Standard EIA 748, paragraph 2.4.f “Develop revised estimates of cost at completion based on performance to date, commitment values for material, and estimates of future conditions. Compare this information with the performance measurement baseline to identify variances at completion important to company management and any applicable customer reporting requirements including statements of funding requirements.”

5. 5 Performance Analysis Process Objective analysis from the data: –Status performance to time now –Look for performance trends –Compare tends with a baseline plan –Project performance trends into the future –Relate projected trends to some meaningful objective Subjective analysis from information: –Investigate root causes of variances –Identify future influencing factors and risk –Adjust projected trends –Assess resource requirements –Compare with contract parameters

6. 6 Traditional Performance Analysis The Line Graph X-Axis:Passage of time Years, quarters, months, weeks, days, etc. Y-Axis:Measure of Resources Dollars, items, lengths, volumes, etc.

7. 7 The Line Graph

8. 8 Line Graph Charts The presentation is limiting... –Depicts absolute values versus a time scale –That focus on performance history –Difficult to identify trends –Difficult to compare trends to a baseline plan –Difficult to develop credible cost projections to completion

9. 9 Estimate At Completion Formula EAC = Actuals + PF X Remaining Planned Value –Assumes Performance Factor will be a constant –And 1 unit of Planned Value will convert to 1+/- unit of Actual The Estimate At Completion Formula –Provides a point estimate –Is a limited predictive metric –That inherently underestimates overruns –And inherently underestimates underruns

10. 10 The Traditional Analyses Line Graph Charts and the Estimate At Completion Formula Provide partial value from Earned Value

11. 11 Why The Difference In EACs?

12. 12 A Different Look At Performance Relationship-Objective Analysis X-Axis:Value of work completed Y-Axis:Progress toward an (Objective) Percent Complete = Work Completed Baseline Total Value X 100 Percent Of (Objective) = Resources Value Value Of (Objective) X 100

13. 13 Relationship-Objective Graph An X - Y Scatter Diagram

14. 14 An (Objective) May Be Baseline Total Value Estimate At Completion Contract At Cost Contract At Price Contract Liability Or any general (Objective) that is a specific resource value

15. 15 Variance As Percent Line Graph

16. 16 Variances As % Of Baseline Plan Deviation from baseline time plan Deviation from baseline resource plan Reduces volatility of variance trends in early periods of the project. Time Variance = Completed Value - Planned Value Baseline Total Value X 100 Resource Variance = Completed Value - Resources Used Baseline Total Value X 100

17. 17 Variances As % Of Baseline Plan An X - Y Scatter Diagram

18. 18 Performance Efficiency Since Start Value of work completed with resources used History of past performance efficiency Efficient > 100% Inefficient < 100% Resource Use Efficiency Index Since Start = Completed Value Resources Used X 100 Time Value Efficiency Index Since Start = Completed Value Planned Value X 100

19. 19 Resource Use Efficiency Since Start An X - Y Scatter Diagram

20. 20 Performance Efficiency To Finish Ability to accomplish work within (Objective) Future performance required Efficiency Index To Meet (Objective) = Remaining Planned Value (Objective) Resources Remaining X 100 Efficiency Index To Meet (Objective) = Baseline Total Value - Completed Value (Objective) - Resources Used X 100

21. 21 Resource Use Efficiency To Finish

22. 22 Rate Of Using Resources History of a “resource burn rate” Resource Use as % Of (Objective) = Resources Used (Objective) X 100 Planned Value as % Of (Objective) = Planned Value (Objective) X 100 Completed Value as % Of (Objective) = Completed Value (Objective) X 100

23. 23 Rate Of Using Resources

24. 24 EAC = Actuals + PF X Remaining Planned Value –Assumes Performance Factor will be a constant –And 1 unit of Planned Value will convert to 1+/- unit of Actual The Estimate At Completion Formula –Provides a point estimate –Is a limited predictive metric –That inherently underestimates overruns –And inherently underestimates underruns Estimate At Completion (EAC)

25. 25 Performance Factors Should be related to performance Running Average ~ Resource Use Efficiency Index (Period of Time) Product ~ Resource Use Efficiency Index X Time Value Efficiency Index Weighted ~ 0.8 Resource Use Efficiency Index + 0.2 Time Value Efficiency Index Time Value Kicker ~ Resource Use Efficiency Index + 0.2 Time Value Efficiency Index Cumulative ~ Resource Use Efficiency Index

26. 26 Estimate At Completion

27. 27 Trend Line Projection Analysis Identify performance trend Select set of data to project trend Determine “best fit” line –Y-Axis intercept –Slope of “best fit” line Extrapolate to 100% complete Projects performance trend to end of effort

28. 28 Resource Use Trend Projection

29. 29 EAC Trend Projection

30. 30 Best Case - Worse Case - Most Likely

31. 31 Thoughts While Showering... Focus on the BIG picture first, then dig deeper Volatility indicates poor baseline plan, poor discipline, or both Watch for front loading due to optimistic planning Significant change in scope creates a new baseline Don’t be fooled by the early “resource variance hump” Time variances are associated with Work-In-Progress Time variances disappear when work is completed Resource variances accumulate when work is completed Time variances lead resource variances Look for long term trends and assess impacts

32. 32 Thoughts While Shaving... An Index produces a ratio EAC formula produces a point estimate EAC as percent of an (Objective) produces a rate of change Trends usually appear before 20% Complete Relationship-Objective Analysis extrapolates rate of change trend to completion...... And gives you Full Value from Earned Value

33. 33 Thoughts While Sitting... The Performance Factor is not constant as the Estimate At Completion formula assumes The trend of the Performance factor is the key determining parameter for the most realistic Estimate At Completion Understand which Performance factor should be the best predictor and why

34. 34 Agathe Christie Says... “Getting Full Value from Earned Value with Relationship-Objective Analysis is like a good detective story. The main characters are introduced, the plot is established, and the clues to Who Dunit emerge in the first 20% of the story.”