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Copyright 2012 by Eastwood Harris Pty Ltd. No part of this publication may be reproduced or
used in any form or by any method without the written permission of the author.
This presentation was developed by Eastwood Harris Pty Ltd. This presentation contains
copyright material from other publications created by Eastwood Harris Pty Ltd.
For further information please contact:
Paul E Harris
Director
Eastwood Harris Pty Ltd
P.O. Box 4032
Doncaster Heights 3109
Victoria,
Australia
Mobile: [61] 04-1118-7701
Email: harrispe@eh.com.au
Web: www.eh.com.au
Companies that are Registered Education Providers (REP) with the Project Management Institute
may award Professional Development Units (PDUs) to attendees of this course.
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COURSE MARKETING
Make sure people selling the course validate attendees and they have the appropriate experience,
refer to course information sheet.
COURSE SETUP
Full stop at the end of the last sentence in each slide.
If you wish to reorder slide points use Animations, Custom Animations and use Appear from LH
window.
This course needs a minimum of 7.5 hours face to face classroom time.
Check if users have internet access to download a layout.
Establish the emergency evacuation procedures, toilet locations and meal times prior to
conducting the course.
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COURSE CONDUCT NOTES:
Course is lead with a PowerPoint slide show in a classroom environment with workshops
conducted in groups.
Students are encouraged to share their experience and to ask questions if they do not understand.
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This course is not just about defining EVPM and calculating formulas but discusses what
management actions are required to create and establish an effective EV system and
takes a more holistic approach than other courses.
This course was developed by Paul Harris after many years of experience implementing
EV systems across a range of small and medium sized construction and development
projects.
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During the PowerPoint presentation the instructor will expand on the slide content.
It is intended that the presentation will prompt the students to ask questions and generate
discussions.
Initially, student workshops are intended to be completed individually and later in a group
environment.
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AS4817 has been purchased for the student sand is a copyright material that may not be
reproduced.
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Difference between EVM and EVPM:
EVM is a term used by many standards and often does not include the Estimate to Complete
Curve. For example the PMI Practice Standard for Earned Value Management does not draw
the Estimate to Complete Curve.
EVPM is a term specifically used by AS 4817 and specifically includes the Estimate to
Complete Curve.
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C/SCSC often called C/S squared and was adopted by many governments in 1980s for the
management of complex projects.
History of EVM may be found at http://en.wikipedia.org/wiki/Earned_value_management
In 1991, Secretary of Defense Dick Cheney cancelled the Navy A-12 Avenger II Program because
of performance problems detected by EVM. This demonstrated conclusively that EVM mattered to
secretary-level leadership.
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Definitions of Earned Value Management:
Englert and Associates Inc define it as, "A method for measuring project performance. It
compares the amount of work that was planned with what was actually accomplished to
determine if cost and schedule performance is as planned."
Project Magazine defines it as, "A methodology used to measure and communicate the real
physical progress of a project taking into account the work complete, the time taken and the
costs incurred to complete that work."
The user guide for Microsoft Project 2003 defines Earned Value as, "A method for measuring
project performance. It indicates how much of the budget should have been spent, in view of
the amount of work done so far and the baseline cost for the task, assignment, or resources."
NASA defines it as, "An integrated management control system for assessing, understanding
and quantifying what a contractor or field activity is achieving with program dollars. EVM
provides project management with objective, accurate and timely data for effective decision
making.
APM Guidelines 2008 Appendix B defines EVM as a best practice project control process
that is based on a structured approach to planning, cost collection and performance
measurement. It facilitates the integration of project scope, schedule, cost, risk and resource
objectives, and the establishment of a baseline plan for performance measurement.
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EVPM applied properly will allow the project manager to determine the Estimate At Completion
(EAC) and when the project will be completed
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Schedule Variance (SV) = EV PV, or BCWP BCWS,
+ ahead of plan & - behind plan,
Cost Variance (CV) = EV AC, or BCWP ACWP,
+ below costs & - above cost,
Three S-Curves show Planned, Earned and Actual,
Cost Variance metric. A positive variance depicts a good outcome (i.e., the work is making
money) and a negative variance depicts a bad outcome (i.e., the project is losing money),
Schedule Variance metric. A positive variance depicts a good outcome (i.e., the work is ahead
of schedule) and a negative variance depicts a bad outcome (i.e., the project is behind
schedule).
Earned Schedule (ES)
Earned Schedule is an extension to the theory and practice of Earned Value Management (EVM)
(*http://en.wikipedia.org/wiki/Earned_schedule).
As the project approaches completion the Schedule Variance and SPI become meaningless with
the SV = 0 and SPI = 1. Earned schedule is used to supplement EVPM and attempts to address
this problem with Time Variance SV(t), more in a future slide.
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Earned Schedule gives you additional variances for recording your performance to date based in
time value as opposed to dollars or units of work, more info at http://www.earnedschedule.com/
Earned schedule (ES) is an extension to the theory and practice of earned value
management (EVM).
Traditionally, EVM tracks schedule variances not in units of time, but in units of currency (e.g.
dollars) or quantity (e.g. labour hours). Of course, it is more natural to speak of schedule
performance in units of time, but the problems with traditional schedule performance metrics are
even deeper. Near the end of a project -- when schedule performance is often a primary concern -
- the usefulness of traditional schedule metrics is demonstrably poor.
In traditional EVM, a schedule variance (SV) of 0 or a schedule performance index (SPI) of 1
indicates that a project is exactly on schedule. However, when a project is completed, its SV is
always 0 and SPI is always 1, even if the project was delivered unacceptably late. Similarly, a
project can languish near completion (e.g. SPI = 0.95) and never be flagged as outside acceptable
numerical tolerance. (Using traditional SV as an exception threshold, it is not uncommon that an
SPI > 0.9 is considered acceptable.)
Source http://en.wikipedia.org/wiki/Earned_schedule
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Definition: A Committed Cost Management (CCM) system is where the final forecast cost is
calculated from the addition of Committed work plus Uncommitted work.
Committed work is the value of Contracts and Purchase Orders, plus any other costs such as
day labour,
Uncommitted work is work that has not been awarded to contractors or suppliers or completed
by day labour.
If the value of the Budget for a project is $100, you place an order for the project of $110, then the
Final Forecast Cost (FFC) will go up by $10 to $110.
At any point in time you do not need to know the value that has been invoiced or paid as that will
not affect the FFC. This is the simplicity of a CCMS for managing costs and you do not need to
talk to the accountants!
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The difficulties come in CCM systems when you try to do cash flow when there is no WBS.
If it is not planned and set up at the very start of a project to create a cash flow from an estimate
and schedule it may be impossible to achieve this without reformatting either or both of the
estimate and schedule.
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Different documents focus on different areas.
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The author of this course Paul Harris represented the Australian Cost Engineering Society in the
writing of AS4817.
The standard is not specific to any one industry and was contributed to by multiple stakeholders
across multiple industries including construction, defence, banking (IT) etc.
Establishes a common dictionary of terms to try and avoid confusion and to also remove older /
redundant terms. (EG BCWS, ACWP etc).
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The APM is the Association for Project Management (http://www.apm.org.uk/) a UK based project
management organisation.
This book cover some very interesting topics not in AS4817 or the PMI Standard including
Responsibility Assignment Matrix where it maps the OBS and WBS and assigns work to roles,
which is important.
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The two different structures cover the same scope of work.
The upper picture would be more suitable for when contracts are to be let for Design,
Procurement and Construction.
The lower picture would be more suitable for when contracts are to be let for each individual
building or they were to be built in different town or different times.
The WBS should consider your delivery methodology and the way you will contract out your work.
Therefore you have to understand your methodology and how you will execute your project before
you can complete your WBS.
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This is delivered when you have created your schedule, assigned the cost against the schedule
and created a S-curve representing your Budget at Completion in a time-phased budget.
The schedule needs to be resource-loaded (resources are defined as either a cost or unit that can
be assigned to an activity and consumed or produced by that activity).
Most commercial software baseline on the early curve which is probably not achievable because
there are always natural delays in a project.
Being contractually measured on the early curve rather than somewhere between the late and
early curve will make things very hard for the contractor performing the work.
All stakeholders should review and agree the PMB.
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There are many techniques that may be developed that provide useful information that is outside
the traditional EVPM techniques documented in Standards.
Granulating the level of the EV measurement down will allow greater and more accurate
information but there will be a corresponding impact to the level of schedule and cost data
required.
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You need to consider all these parameters when you do EV to make sure that your plan costs and
actual costs are calculated on the same basis.
Another issue will be raised if the hours worked for mobile equipment are tracked differently then
how will these hours be collected.
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The early and late dates are determined by the application of the Critical Path Analysis algorithm
which forms the basis of CPM scheduling. The amount of total float (slack in MSP terms)
separates the early and late dates. This can also be influenced by the activities calendar, working
periods, duration, constraints and logic (relationships).
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Some scheduling software will attempt to calculate and draw these curves for you with varying
degrees of success. Eg P6 will draw an ETC curve but its inability to draw a late and midpoint
curve lead many users to using other 3
rd
party products such as excel.
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