Earned Value Management

Prepared For: PMI-L.I. Chapter Prepared By: Jean Cronan Presentation on: 11 January 2017 Learning Objectives Earned Value

• Background • Definitions • Establishing a Performance Baseline • Performance Management • Summary Background Earned Value – Why Use - Benefits?

• Early trending leads to proactive management resolution • Improves customer communications and relationship • Ensures scope planned and risks and budget managed • Creates an open culture within IPT Background Earned Value – Current Standards

• ANSI/EIA-478 • PMI Practice Standard for Earned Value • PMI EVM Community of Practice Background How Does EVM Relate to PMBOK Process Groups and Knowledge Areas ?

Initiate Plan Execute Monitor and Control

Organize Project Establish a Direct and Measurement against PMB: through the Performance Manage Work Generate: Charter Measurement against PMB: • Change Requests Baseline (PMB): • Conduct • Variance Analysis Assign • Scope Procurements • Control Risks Responsibilities Management • Acquire through • Time Resources Stakeholder Management Management • Cost Management • Risk Management Background ANSI/EIA-748

Source: DAU;EMIG 2016 PMIAA – Program Management Background Improvement and Accountability Act Earned Value -Timeline 2011 PMI releases 2nd Edition EVM Standard,PMBOK Releases 2009 Weapons Systems Acquisition Reform Act, all US DoD contractors to have fully compliant ANSI/EIA-748B compliant 2002 Sarbanes Oxley Act 2005 PMI releases 1 st Edition EVM Standard 1999 Undersecretary of Defense adopts the ANSI/EIA-748 as agency standard on all US DoD acquisition contracts

1998 Initial issue of American National Standards Institute/Electronic Industries Alliance publishes Earned Value Management Systems (EVMS) called ANSI/EIA-A

1991 DoD issues DoD Instruction 5000.2 Defense Acquisition Management Policies; use of EVM on DoD-wide Programs

1972 C/S CSC Joint Implementation Guide launched for use by all military branches 1967 Department of Defense (DoD) creates Cost/Schedule Control System Criteria (C/S CSC) 1950’s Program Evaluation Review Techniques - PERT Increasing Oversight, Program Management Profession Acknowledged As Industry Experienced Delays and Overruns Source: EVMPEDIA, EVM History Background Earned Value - Summary

• Industry Standards Established • Continued Oversight • Increase use of EVM within DoD and Commercial Projects

DoD, Commercial Industry, and PMI recognizes EVM as a critical Project Management Tool Definition Earned Value • Based on: Technical, Schedule, Cost, Risk elements • Measures project performance by comparing work (hours/dollars) planned to work (hours/dollars) completed, formulae • Management Tool • Performance Measurement- what is going on • Performance Management – what can be done Definition Earned Value – “Demand Diamond”

Technical

Cost Schedule

Risk Definition Earned Value

Budget: $45 Actual: $55 How is this project performing ? Variance: ($10) Definition Earned Value - Revisit

AC= $55 PV=$45 EV=$60

SVAR= $15 SVAR= EV-PV 60-45

CVAR= $5 CVAR= EV-AC 60-55 How is this project performing adding EV ? Definition Earned Value – Formulae - Variances

Source: PMBOK, 5 th Edition Definition Earned Value – Formulae - Variances

Management Reserve Projected Slip Projected Definition Earned Value – Formulae - Variances

Management Reserve Projected Slip Projected

March Cumulative March Cumulative PV: $45 CVAR: EV-AC ($60-$55) $5 AC: $55 SVAR: EV-PV($60-$45) $15 EV: $60 CPI: EV/AC ($60/$55) 1.09 BAC: $85 SPI: EV/PV($60/$45) 1.33 EAC: $110 VAC: BAC-EAC ($85-$110) ($25) MR: $55 Total Authorized Budget/ Contract Baseline: $140 Definition Earned Value – Formulae ETC/EAC

Source: PMBOK, 5 th Edition Definition Earned Value – Formulae – ETC/EAC

1 3

2 4

# EAC Description EAC Formula EAC Calculation EAC

1 Cost expected to remain constant EAC=BAC/CPI $140/1.09 $128

Future work will be accomplished at EAC=AC+(BAC-EV) $55+($85-$60) $80 planned rate (PV) 2 Bottom-Up: Initial plan, PV, no longer EAC=AC+Bottum-Up ETC $55+55 $110 3 valid

4 CPI and SPI influence remaining work EAC=AC+((BAC-EV)/(CPI*SPI)) $55+(($85-$60)/(1.09*1.33)) $80 Establishing a Performance Baseline Organize The Work

Work Breakdown Structure

Organizational RADAR System Level 1 Breakdown Structure

Antenna Receiver Transmitter Level 2 Test Test IPT Antenna Transmit/Receive Antenna Control Level 3 Electronics Modules Reporting

Electrical Design Control Account Control Account Design Elect Elect IPT

Mech Design Control Account

Program Manager Control Account

Drafting/Checking Control Account MFG IPT MFG Organize The Work: Responsibility Assignment Matrix (RAM) Source: MIL STD 881-C Establishing a Performance Baseline Plan The Work

Work Breakdown Structure

Organizational RADAR System Level 1 Breakdown Structure

Antenna Receiver Transmitter Level 2 Test Test IPT Antenna Transmit/Receive Level 3 Antenna Control Modules Electronics Reporting

Electrical Design Control Account Control Account Design Elect Elect IPT

Mech Design Control Account Level 4+

Program Manager Control Account Planning Drafting/Checking Control Account and Performing MFG IPT MFG Establishing a Performance Baseline Planning Techniques • Detail Planning • LOE • % Complete • Apportioned • Rolling Wave • Planning Packages

Best Practice: No more than 10% of plan to consist of LOE Establishing a Performance Baseline Scheduling

Tier 0 – Customer/Contract Specified Milestones Horizontal/ Vertical

Tier 1 – Program Top Level Summary Schedule -Accountability • Customer, Executive Management, Program Office • Customer/Contract specified milestones -Integration • Program major milestones, phases • One page -Use of Rollingwave

Tier 2 – Integrated Master Schedule • Further delineation of Tier 1 • Major tasks within each phase • Significant inter-phase events • Task links/Critical path(s)

Tier 3 – Detailed IPT Schedules • Further delineation of Tier 2 • End item deliverables, Tests, Services • Functional commitment to IPT

Tier 4 – Control Accounts • Work Packages • Earned Value Performance Measurement Establishing a Performance Baseline Budgeting

Scope : WBS: Define the work

Time Management : Schedule the work

20 20 60 Cost Management : Distribute/allocate Budgets 60 20 60 20 60

Risk Management : Plan risk response s Establishing a Performance Baseline Incorporating Risk Plans

Risk #8 X

• Identify Risks • Plan Risk Response • Approved Reserves • Perform Qualitative Risk Analysis • Approved Change Request • Perform Quantitative Risk Analysis • Risk Mitigated

Risk Mitigation Leads to Proactive Project Management Establishing a Performance Baseline Baselined

• Ensure no more than 10% level of effort control accounts • Established management reserve, undistributed budget • Management Reserve Log established • Ready to start executing, monitoring/controlling, managing to baseline Performance Management Managing with Data -What Can Be Done

• 10% into project, trend forecasts future performance • Focus on indicators that reveal trends • Reporting includes root cause/corrective action plans • Rigorously review Risk Register, ensure mitigation steps incorporated into planning • Utilize data to drive projects to success

Ensures Oxley Act of 2002 Is Being Satisfied Summary

• Early trending leads to proactive management resolution • Improves customer communications and relationship • Ensures scope planned and risks and budget managed • Creates an open culture within IPT

Earned Value is a Management Tool , when used properly, can successfully measure and manage a project to increase internal and external customer satisfaction Questions