eva

europe
GENEVA 2009

2009, CErn, HEg, AutHors - tHis mAtEriAl is proVidEd CourtEsy of EVA EuropE 2009, tHE EuropEAn orgAnisAtion for nuClEAr rEsEArCH(CErn), tHE gEnEVA sCHool of businEss AdministrAtion (HEg) And tHE AutHors. All rigHts rEsErVEd. tHE ContEnts mAy not bE rEproduCEd witHout pErmission of tHE AutHors And EVA EuropE.
EVA EuropE 2009 wAs jointly orgAnisEd by gold sponsors pArtnErs

Haute cole de gestion de Genve Geneva School of Business Administration

Earned Value Management Fundamental Principles

Olivier Lazar, Msc., MBA, PMP

Earned Value Measureme nt

Earned Value Measurement (EVM) Definition

Technique...integrates project Scope, Cost and Schedule measures to help the project management team assess project performance.
PMBOK Guide, 2008

EVM History
EVM emerged as a financial analysis specialty in United States Government programs in the 1960s on DoDs programs (Polaris missiles) EVM was not limited to the DoD for long. It was quickly adopted by the National Aeronautics and Space Administration also received greater attention by publicly traded companies in response to the Sarbanes-Oxley Act of 2002

EVM Objectives and Benefits

Going beyond 2 dimensional project assessment (Cost vs Allocated Budget) by integrating Technical Achievement monitoring Exactly measure What did we get for the money we spent? Anticipate rather than React Provide Vision over the project from Now to Completion Easy to use, to report and to analyze

Earned Value Principles

EVM Measures: 1. Planned effort (Planned Value PV) Baseline Person-days estimated at current date Cumulative cash flow of project 2. Actual effort (Actual Cost AC) Person-days expended at current date If measuring cost, use committed cost 3. Scope achievement (Earned Value EV) Percent of work (scope/deliverables) accomplished EVM Analyzes: Current status vs baseline (variance) Estimate to complete (Effort & Duration) (Baseline estimate x index actual effort) Corrective actions (if needed)

Earned Value Illustrated (S-Curve)

Cost
Estimate to Complete (ETC = BAC EV) Estimate At Completion (EAC = AC + ETC)

Budget At Completion (BAC)

Performance Measurement Baseline

Actual Cost (AC) Planned Value (PV) Cost Variance = EV - AC Actual Time Variance Schedule Variance = EV - PV

Performance Indexes: - SPI (Schedule): EV / PV - CPI (Cost): EV / AC

Earned Value (EV) = BAC x Physical %

Data Date

Time

Earned Value Calculations

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Planned Value (PV) = [(BAC/Project Duration) x Elapsed time units] Actual Cost (AC) Earned Value (EV) = BAC x Physical % Complete Cost Variance (CV) = EV - AC Schedule Variance (SV) = EV - PV Cost Performance Index (CPI) = EV / AC Schedule Performance Index (SPI) = EV / PV Estimate at Completion (EAC) = AC+ETC Estimate to Compete (ETC) = BAC EV To Complete Performance Index (TCPI) = (BAC-EV)/(EAC-AC)
Acronyms, see PMBOK Guide

What does these PI tell us?

Of course, about the current status But Its too late anyway!
Highlight the trends Predict deviations Evaluate resources

About the Quality of the Project Plan

Is the initial estimate accurate? Deviation can highlight a problem with the accuracy of the initial plan

About how realistic is an objective

The TCPI will tell you when used with CPI

Microsoft Excel Worksheet

Interpretation and Analysis

PV: Budgeted Cost AC: Actual Cost EV: Earned Value CV SV PROJECT STATUS
Over-achieving, but overspent for the achievement Money being wasted, e.g. unnecessary overtime? Over-achieving and underspending

Cost

1
Time

(-)

(+)

Cost

2
Time

(+)

(+)

No action needed (unless spending customers money is an issue!) Under-achieving on the project, but overachieving for the spend Team performing well but under-resourced Under-achieving, and overspending for the achievement Team under-resourced and under-performing

Cost

3
Time

(+)

(-)

Cost

4
Time

(-)

(-)

Difficulties and Limitations

Consolidation issues: If a consolidated indicator is green, get a look at the details. Some difficulties can be masked by over well-performing activities of workpackages. So called Support Activities (1FTE, 100% rate, long term) AC = PV, SPI and CPI correlated Datas time consistency (costs and % at same Data Date) Lack of Planning (Failing to Plan is Planning to Fail Ika, 2006) Difficult to obtain a stable and consistent Baseline Cultural Issues Earned Value Management is NOT addressing Quality

Progress Measurement
Progress measurement : difficulties to define a precise and accurate way of estimate the work performed Existing ways of measurement:
Physical % Complete (ex. 42.5% of task) Defined Steps (25/25/30/20) 0/100 Custom % Complete (n/y, ex. 20/80) Level of Effort (EV=PV) eg. Management tasks

References
ISO/WD 21500, International Organization for Standardization, to be published. Project Management Guide to Project Management. ISO 10600, International Organization for Standardization, 1997. Quality Management Guidelines to Quality in Project Management. American National Standard Institute, 1998. ANSI/EIA 748 EVMS Standard. AACE, Association for Advancement of Cost Engineering, 1956 2002. Project Management Using Earned Value, Gary C. Humphreys Humphreys & Associates, 2002. PMI , Project Management Institute, 2005. Practice Standard for Earned Value Management. PMI, Project Management Institute, 1996-2008. A Guide to the Project Management Body of Knowledge. Sarbanes-Oxley Act, 2002. Office of the Secretary of Defense & National Aeronautics And Space Administration, 1962. DOD & NASA Guide PERT COST.

Thats all Folks!

Olivier Lazar olivier.lazar@valense.com +41 78 936 00 62