Earned Value Management: APM Guidelines

©Association for Project Management 2008 ©Association for Project Management 2008 APM Guidelines Earned Value Management Value Earned ©Association for Project Management 2008 ©Association for Project Management 2008 Association for Project Management Association for Project APM Guidelines Earned Value Management Value Earned ©Association for Project Management 2008 HP27 9LE Buckinghamshire Ibis House, Regent Park Ibis House, Copy editor: Merle Read Copy ISBN 10: 1-903494-26-5 ISBN 13: 978-1-903494-26-4 Cover design by Mark Design design by Cover Typeset by RefineCatch Limited RefineCatch by Typeset Association for Project Management for Association makes no claim to these trademarks. Publishing Manager: Ingmar Folkmans Summerleys Road, Princes Risborough Summerleys ©Association for Project Management 2008 ©Association for Project British Library Cataloguing in Publication Data is available Cataloguing in Publication Data British Library All registered trademarks are hereby acknowledged and the publisher acknowledged are hereby All registered trademarks as permitted under the Copyright, Designs and Patents Act, 1988, and its Act, 1988, and Designs and Patents Copyright, as permitted under the permission in writing of the Chief Executive of the Association for Project of the of the Chief Executive permission in writing these terms and in other countries should be sent to the Publishing Rights these terms and in other countries should the Copyright Licensing Agency. Enquiries concerning reproduction outside Agency. Licensing the Copyright Readers are responsible for the correct application of the information in this Readers are responsible for the correct application licences issued by the appropriate reprographic rights organisations, such as rights organisations, such the appropriate reprographic licences issued by Management. Within the United Kingdom exceptions are allowed in respect in respect Kingdom exceptions are allowed the United Within Management. The Association for Project Management cannot accept legal responsibility or Association for Project Management The Department, of the Association for Project Management at the address above. Department, of the All rights reserved. No part of this publication may be reproduced, stored in a of this publication may No part All rights reserved. retrieval system or transmitted, in any form or by any means, without the express means, without any by form or in any system or transmitted, retrieval amendments, or in the case of reprographic reproduction in accordance with the reproduction amendments, or in the case of reprographic of fair dealing for the purposes of research or private study, or criticism or review, or review, or criticism study, or private purposes of research of fair dealing for the publication and its conformity with all relevant legal and commercial obligations. and commercial legal publication and its conformity with all relevant liability for any errors or omissions in this publication or the consequences thereof. liability for any ©Association for Project Management 2008 1 8 2 3 9 9 5 5 6 4 37 37 39 13 24 32 33 36 36 40 45 51 53 55 25 v review alue management guidelines Contents performance measurements performance collection eillance What are the benefits? Analysis, review and action Foreword Basic requirements for an earned value system value for an earned Basic requirements 6.3 Surv 5.5 Change management 5.5 Change management 5.6 Risk 6.1 baseline review (IBR) Integrated 6.2 Demonstration 5.3 Data 5.4 4.1 principles management Earned value 4.2 5.1 Definition 5.2 Planning 4.3 Using

Bibliography A –Appendix Earned v 6 System review 6 System 1 Introduction 2 Applicability 3 4 management? is earned value What Appendix B – and glossary Terminology Appendix C – and acronyms Abbreviations Appendix D – equations Earned value Index 5 Process discussion 5 Process ©Association for Project Management 2008 6 7 12 18 27 28 29 17 23 16 14 vity vi kage, and acti ork pac Budget vs actual plus earned value graph plus earned value Budget vs actual matrix Responsibility assignment Earned value graph Earned value chart Bullseye trend graphs Variance Budget elements Budget vs actual graph Budget vs Hierarchy of schedules Hierarchy effort of subcontract Integration Relationship between control account, Relationship between w BCWP calculations based on the formula methodBCWP calculations based on the calculations package Apportioned work 22 Example of projecting anticipated performanceExample of projecting anticipated 31 Figures and tables Figures Figure 5.2 Figure 4.2 Figure 5.1 Figure 5.6 Figure 5.7 Figure 5.8 Table 5.1 Table 5.2 Figure 5.5 Table 5.3 Figure 4.1 Figure 5.3 Figure 5.4 ©Association for Project Management 2008 Steve Wake Steve Specific Interest Group 1 Chairman APM Earned Value Management Value APM Earned Chairman Foreword In late 2007 the guideline was reviewed and overhauled. Particular thanks are Particular reviewed and overhauled. was In late 2007 the guideline and to improve years the over revision aimed to fix errors identified This again in 2011. Please address any guide will be formally reviewed This The first edition of this guideline was published in 2002. It was well received well It was in 2002. published was of this guideline first edition The internationally. both nationally and through to its publication. the final draft for overseeing due to Jim Malkin Standard. Value 748 Earned ANSI American It is still reciprocal with the clarity. Manage- Value APM Earned the Chairman of the to comments and feedback Group at www.apm.org.uk. ment Specific Interest ©Association for Project Management 2008 2 1 Introduction defined scope and assumptions; in logical sequence; scheduled activities (labour and materials). resources/costs the plan is; what the project has achieved; what has been spent to date. what status; measurement of project data to enable objective providing a basis for estimating final cost; providing the project will be complete; predicting when management of resources; supporting the effective change. a means of managing and controlling providing of the plan; has been achieved what the planned work; it has cost to achieve what planned; is costing more or less than was achieved if the work if the project is ahead of or behind the planned schedule. The establishment of a performance measurement baseline (PMB) is essential establishment of a performance measurement The Earned value management is a project control process based on a structured a project control process based on management is Earned value It collection and performance measurement. to planning, cost approach the and of project scope, time and cost objectives facilitates the integration (Association baseline plan for performance measurement establishment of a 2006). for Project Management, EVM and consists of: to conducting successful • • • need to know: We • • • helps us manage by: Earned value • • • • • knowing: decision making is enabled by Informed and effective • • • • infor- Good planning leads to good project execution and good management planning can lead to poor execution and poor EVM information. mation. Poor plan must be maintained in accordance with authorised project changes. The not be immedi- deviations from the plan, but it may show EVM will accurately plan is being tracked. ately evident that a flawed ©Association for Project Management 2008 can be applied to projects of vary- can be applied to projects 3 2 Applicability project specific requirements; customer requirements; previous projects; lessons learnt from IT toolset requirements; and infrastructure. impact on resources Earned Value Management: APM Guidelines Management: Value Earned ing size, scope and duration to ensure that the EVM process is operated in a is operated to ensure that the EVM process duration ing size, scope and project implementing across all implementing teams. Each consistent manner should take into account: • • • • • progress and performance measurements Project managers should ensure that this guide. are realistic and are in accordance with ©Association for Project Management 2008 , the WBS and the OBS , the 4 3 define the scope (section 5.1.1); define the scope (section (section 5.1.2.2); the work structure (WBS) to define breakdown use a work accomplishment in an organ- for work establish organisational responsibility 5.1.2.3); structure (OBS) (section isation breakdown other each ensure management subsystems support (section 5.1.2.4); 5.2.4); WBS (section distribute the budget into the (section 5.2.2); using a logic-linked method all authorised work schedule 5.2.5); (section identify a method of measuring achievement (sec- for the work schedule time consistent with the spread the budget over tion 5.2.6); baseline the plan (section 5.2.6); 5.3.1); record direct and indirect costs (section on a peri- at the control account level collect and analyse performance data odic basis (section 5.4.2); 5.4.3); (section produce forecasts for remaining work controlled manner (sec- in a timely and all authorised changes incorporate tion 5.5). Basic requirements for requirements Basic an earned value system value an earned This document is a guide to the process for implementing and running an for implementing and running document is a guide to the process This list describes the fundamen- following The management system. earned value that should be undertaken: tal steps of the process • • • • • • • • • • • • • ©Association for Project Management 2008 wing: ork; , stated in the value of schedule, stated in the value 5 4 for the work actually achieved. for the work hieved should have cost, according to the cost, should have hieved management? ed actually cost. ces as necessary to meet project scope and schedule objectives. and schedule ces as necessary to meet project scope What is earned value What work to be performed, and is therefore a basis for both time and cost assess- work ment of the progress on a project. – or actual cost (AC) performed (ACWP) actual cost of work The the i.e. what achiev work It is important to understand that BCWS is a (EV) – i.e. performed (BCWP) or earned value budgeted cost of work The ac amount of work the what planned budget: the earned value development of a ‘baseline’ against which cost, schedule and technical per- and technical cost, schedule of a ‘baseline’ against which development formance can be measured; performance measurement; objective action reporting; analysis and corrective variance changes. of ‘baseline’ disciplined and timely incorporation status reports; verifiable analysis; clear objective considered reasoning; process; accountability in the decision-making and cost across the project; of impact on the schedule awareness visibility of results. (PV) – (BCWS) or planned value scheduled work budgeted cost of The i.e. of bud- for the expenditure we are going to do, the plan: the schedule what geted resour definition and authorisation of the contract scope of w definition and authorisation of the contract 2. 3. • • • • the follo provide management system (EVMS) will An earned value • • • • • • enable the measurement of the four key A system should be created that will data elements essential to EVMS, namely: 1. 4.1 PRINCIPLES MANAGEMENT EARNED VALUE the life of a project. and managing goals throughout EVM is about establishing It comprises the following: • ©Association for Project Management 2008 Budget Time 6 Time Now Time – Budget vs actual graph Figure 4.1 Figure

Actual Costs

APM Guidelines Cost The estimate at completion (EAC) of the project. This is the ACWP to date, ACWP is the This of the project. at completion (EAC) estimate The scope, requirements, of remaining estimate most knowledgeable plus the and cost. schedule hese guidelines are expressed in fundamental terms and provide flexibility and provide expressed in fundamental terms hese guidelines are for each company to optimise its system, and be fully accountable for the system, and be fully accountable to optimise its company for each as an guidelines (or criteria) are recognised These of its usage. effectiveness An EVMS that is A. Appendix at and are attached international standard, stakeholders, key intent of the criteria, will allow to meet the developed that projects are being and shareholders, to gain confidence notably customers consistent manner against and effective in an deployed managed and resources a recognised standard. 4.2 ARE THE BENEFITS? WHAT used It is traditionally budget vs. actual graph. the traditional 4.1 shows Figure to compare budget with actual spend. 4. and applying an EVMS. companies to use in establishing Guidelines exist for T Earned Value Management: Value Earned ©Association for Project Management 2008 Budget What is earned value management? value What is earned Time Earned Value 7 line. This additional line represents the pro- additional This line. Time Now Time – Budget vs actual plus earned value graph Actual Costs achievement show:

Figure 4.2 Figure

wn in Figure 4.2 is similar to the previous graph except that a to the previous graph 4.2 is similar wn in Figure Cost if the project is ahead of or behind schedule; is ahead of or if the project or underspending; over- if the project is truly money; for value if the project is getting spent on the right things; if money has been only just begun. or have over if the problems are Figure 4.2 indicates the following additional information: 4.2 indicates the following Figure measure of performance (or status value) has been included. The line included The has been included. (or status value) measure of performance or is the earned value that has actually been achieved. portion of the budget The graph does not does graph The • • • • sho graph The • ©Association for Project Management 2008 of the many criteria on of the many one of the efficiency or perform- of the efficiency 8 orse than was indicated on the traditional indicated on orse than was heduled; ver-expenditure coupled with underachievement ver-expenditure verspend is going to increase, even though the even is going to increase, verspend As such, they should be used as As such, verspent because the cost of the work completed is greater work the cost of the because verspent of planned work scope; of planned work as it is costing more to achieve money inefficiently, the project is spending to be contained, cost problems do not appear The progress than planned. budgeted cost line; the actual cost line is greater that the since the slope of the o this indicates that line some it will intersect the budget cost line does look like earned value the cost be possible, yet may recovery schedule While time in the future. impact is unlikely to be recovered. that the budgeted cost of work completed (earned value); cost of work that the budgeted is actually w the cost performance chart because it shows an o because it shows chart the project is underachieving because the amount (value) of work completed of work amount (value) because the is underachieving the project than that sc is less (earned value) is o the project Performance measurements indicate where shortfalls are occurring or likely to indicate where measurements Performance ance of a project. • MEASUREMENTS PERFORMANCE 4.3 USING measurements of performance are indicators Any • • • which project managers should base their decisions, having interpreted the interpreted having project managers should base their decisions, which information and placed it in context. management resources, extra can be used to identify where These occur. are They problems. in order to overcome actions or other support are required happen to the might what pointers as to early indicators of problems and give project if actions are not taken. Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 ork to be 9 5 vide guidelines as to the main elements contained vide guidelines as to the main elements ve structures? ve ables, for the project. It forms the basis for allocating work, ables, for the project. It forms the basis process is principally concerned with defining the w process is principally concerned with Process discussion Process definition definition; planning; data collection; action; analysis, review and management; change risk management. The extent to which the SOW fully describes the requirements of the project the SOW extent to which The Breakdown structures are essential to project management in the following Breakdown areas: 5.1.1 (SOW) scope/statement of work Project requirements, the overall can define the project scope to include A SOW including deliver requirements. budget and schedule meas- objective the ability of the EVM system to provide an impact on will have ures of performance against the original project requirement. structures breakdown 5.1.2 Project ha 5.1.2.1 Why done –WBS – as a of the project’s to specific parts and assigning that work OBS should be aligned and combined WBS and The organisation via the OBS. matrix (RAM). to produce a responsibility assignment within each process. At the end of each process, a checklist of key activities is of key activities process, a checklist At the end of each process. within each provided. 5.1 DEFINITION Organising the requirements of the project. the work and resources to achieve The Earned value management may be considered as a number of management be considered management may Earned value processes, as follows: • • • • • • sections pro following The ©Association for Project Management 2008 WBS and an OBS, and integrate the and integrate WBS and an OBS, 10 The WBS is developed by identifying high-level elements of identifying high-level by WBS is developed The ; a contract number; a contract WBS number and title; a WBSD issue number and date; the number; paragraph the contract to be produced as deliverables including all contract a statement of work element; part of the work the definition and clarification of the work to be performed; of the work and clarification the definition out the for carrying organisations responsible of tasks to the assignment work thorough planning; and control of baselines; the establishment where the plan at levels against measurement of achievement the objective is being performed; the work and the and reporting to higher management, the collection, summarising process; for use in the decision-making customer, performance measurements. alue Management: APM Guidelines alue Management: When developing a WBS, it is advisable to concentrate solely on the work solely to concentrate WBS, it is advisable a When developing structure dictionary (WBSD). breakdown to use a work choose Projects may should contain: WBS, the dictionary element of the each For two into a responsibility assignment matrix (see Figure 5.1 below). All control 5.1 below). (see Figure into a responsibility assignment matrix two steps are necessary These 5.1.2.4). accounts should be identified (see section be undertaken. measurements of performance can before any structure breakdown 5.1.2.2 Work is elements of work of a project into discrete subdivision hierarchical The WBS. as a known major elements are These necessary to meet the project requirements. work continues until breakdown This into smaller components. then broken down visibility and con- of detail deemed necessary for management level the lowest WBS can be included and the are All aspects of the contract trol is established. representation of the SOW. hierarchical viewed as a graphical content of the project. to be is to describe the entire scope of work purpose of the dictionary The scope and all contract contract the project. It must capture the undertaken by reference a ready it must provide enable this to be checked To requirements. the basis for the state- provides elements. It also WBS and contract between the Plans. included on the control account ment of work • • • • • • • • • • • • budgets are are made and the associated operating assignments Before work should establish a established, a project Earned V Earned ©Association for Project Management 2008 ve, then it ve, Process discussion 11 A fundamental requirement of a well-managed project is a of a well-managed project A fundamental requirement ork. A WBS reflects the way in which work has been subdi- work in which WBS reflects the way A ork. defined scope of work; measure of achievement; WBS; up through the traceability budget; assignment of responsibility; start and finish dates. To assign work responsibilities to appropriate organisational elements the WBS organisational elements the responsibilities to appropriate assign work To can be OBS at the control account level WBS and the of the integration The (WPs). packages a number of work A control account will normally comprise In order to clarify and define the organisation, an organisation chart or organ- chart define the organisation, an organisation In order to clarify and authorities and accountabilities will Loose definition of roles, responsibilities should be identified as a planning package within the control account –should be identified as a planning package see section 5.2.1. vided. break- work assignment of lower-level The must be interrelated with the OBS. a key control point for provides elements to responsible organisations down management purposes and cost collection. WBS axis and the as a matrix, with the OBS elements listed on one displayed each assignment matrix, where is the responsibility This elements on the other. with a control account manager (CAM) element is a control account (CA) responsible for its completion to budget. work Each package. work be a single In some cases, a control account may attributes: lowing the fol should have package • • • • • • to the detail noted abo package If it is not possible to define a work clear people organisation. Where matrix management structures are used, this Where matrix management structures clear people organisation. definition is particularly important. clarity in organisational and Roles, responsibilities should be developed. structure isation breakdown communicated across be clearly defined for all staff and accountabilities should a clear should have Staff being introduced into the project the project team. they are responsible. work to and for what they report of whom knowledge the management of the project. lead to ambiguities and confusion in accounts 5.1.2.4 Control the project has organised the people who in which An OBS reflects the way the w will achieve The WBS dictionary should include all elements to be subcontracted and be subcontracted all elements to should include WBS dictionary The WBS element. the undertaking the subcontractor identify should specifically structure breakdown 5.1.2.3 Organisation functions and departments of a variety people from Projects usually involve across a company. ©Association for Project Management 2008 Planning Packages Work Packages Work CA = Control Account (OBS)

Structure CA Breakdown Organisation

CA 12

CA – Responsibility assignment matrix

CA Figure 5.1 Figure Once the WBS (and the dictionary, if used) has been completed, it should be completed, it should if used) has been (and the dictionary, WBS Once the The area. work each the control account is identified for It is important that level system is the lowest management control account in an integrated The control that has been established. If of the level 5.1) shows RAM (Figure The reconciled back to the requirement and other formal agreements to ensure that to ensure other formal agreements the requirement and to back reconciled been included. of the project have all aspects and control of project the main action point for the planning control account is control responsibility for the individual management It is the point where work. control accounts, responsible for many be may A manager accounts is assigned. only one manager. have may but a control account costs between actual costs and budgeted comparisons in the structure at which analysis will also be done at However, management. by are normally required taken at control. Most management actions as required for local levels, lower control problems identified at the significant by are triggered higher levels selected for the establishment of the the levels this reason, For account level. should be carefully considered at the organisation and the control accounts outset of the project. they or too few, or too small, too many the accounts identified are too big accordingly. should be reconsidered and changed RAM Work Work Breakdown Structure (WBS) Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 APM Process discussion processes are Management: planning The 13 kages and planning packages). wing: y whom and by when? y whom and by in any subcontract. Reporting requirements should be consistent Reporting requirements should subcontract. in any budgets; schedules; forecasts; assignments; work cost collection; progress assessment; problem identification; actions. corrective a plan of logically scheduled activities that reflect the project objectives, activities a plan of logically scheduled goals and milestones; Determine and agree requirements for flowdown of EVM requirements into flowdown Determine and agree requirements for subcontracts. Review the project requirements and establish key deliverables. Review the project requirements and WBS. a Develop an OBS. Develop a RAM identifying control accounts. Generate the lowest to WBS element down WBSD statements for each Produce pac (e.g. work appropriate level The following aspects of the project come together at the control account: together at the of the project come aspects following The Processes should be in place to ensure that subcontractor’s plans are repre- plans that subcontractor’s Processes should be in place to ensure • • • • • • • • management 5.1.2.5 Subcontract of Earned Value It is appropriate to reflect the requirements primarily concerned with establishing a baseline for performance measurement that encompasses the follo • 6. 5.2 PLANNING b What needs to be done, Guidelines other factors. with project risk, size, complexity and a view of total proj- to derive in order sented within the project plans/schedules large and complex, very for a project can be ect performance. Plans derived be incorporated of detail to to be taken as to the level and so decisions have maintenance of the plan becomes detail, the into the plans. If there is too much the exact status of if there is insufficient detail, while a burdensome overhead, the project is difficult to ascertain. 5.1.3 in definition activities Key 1. 2. 3. 4. 5. ©Association for Project Management 2008 h the project will be h the project will hic 14 ycle lengths, and to consider when and how to earn and how consider when ycle lengths, and to YEAR2 YEAR3 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M13 M14 M15 M16 M17 M18 M19 M20 M21 M22 M23 M24 M1 Figure 5.2 –Figure Relationship between control account, work package, and activity. budgets/resources agreed and assigned to these activities; agreed and assigned budgets/resources measures defined. achievement objective Planning packages (PPs) represent work that cannot yet be planned as work that cannot yet (PPs) represent work Planning packages Each work package comprises a number of activities to be performed. Each to be performed. comprises a number of activities package work Each packages because of a lack of detailed information. Normally this is future because of a lack packages to be started for at least three full months from the that is not scheduled work packages in the near future that cannot be planned in work Work current date. definition. problem of work indicate a may ‘value’. Each work package must have a clearly defined start condition and a clearly defined start condition must have package work Each ‘value’. package work of each scope The defined. finish point, with all deliverables identified. the procedures to be followed must be unambiguously defined with is a step- activity Each package. can be assigned to only a single work activity a 5.2 shows Figure package. completion of its parent work ping stone towards and packages planning packages, of the relationship between work schematic and costs are estimated; resources duration, is where activity The activities. between activities. dependencies are shown monitored and controlled throughout its life cycle, and will allow the achieve- and will allow throughout its life cycle, monitored and controlled business success criteria. ment of project and 5.2.1 and activities planning packages packages, Work performance data is normally at which level is the lowest package work The and scope of the work important to balance the length analysed. It is therefore against reporting c package • • baseline against w will constitute the project These Activity 4 Activity 5 Activity 6 Milestone 2 Activity 1 Activity 2 Activity 3 Milestone 1 Planning Package 1 Planning Package Work Package 2 Package Work Work Package 1 Package Work Control Account 1 Task Name Task Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Process discussion hedule logic spec- 15 Schedules can be created to reflect various elements of the WBS, from the the elements of can be created to reflect various Schedules from the within the schedule milestones should be included All contractual critical path are iden- on the current EVMS that activities It is essential in any planning of project process permits the integrated scheduling overall The PPs are structured below the control account level, have a defined scope of have account level, the control below PPs are structured before work packages into work be converted must Planning packages to work package from planning requirement for a periodic conversion, The ifies when an activity should start or end on the basis of duration, predecessors, duration, should start or end on the basis of an activity ifies when a For or target dates. availability external predecessor relationships, resource Appendix B. see definition of a schedule the lowest containing schedules package plan to detailed work highest-level and form the basis for assessing actual progress schedules These of activity. level performed. comparing actual cost against work should be logically linked to milestones contractual These start of the project. applied through- to forecast dates are changes so that any appropriate activities out the schedule. to be appropriately categorised from the plan will enable variances This tified. – pre- To path’. e.g. ‘late but float remains’ as opposed to ‘late and on critical to exclude choose on large projects, a project may workload clude excessive used for critical path analyses. from the network of schedules the lower-levels support the summary-level always must schedules level the lower However, the same basis. so that all analyses have schedule a of the project, and provides objectives with the cost and schedule resources and work means of measuring progress against planned effort. Scheduling scope definition are prerequisites for basic project management and effective cost control. work and are allocated a time-phased budget. They have scheduled start and scheduled have They budget. a time-phased and are allocated work and scope. a defined budget and (hence a duration) finish dates or have achievement, them, i.e. before they can ‘earn’ can commence upon the planning from budget is withdrawn The them. costs booked against as their start date nears and packages work and is used to establish package will packages resulting work The tasks become clearer. the details of the and achievement logic, milestones, resources activities, contain the detailed measures. planning, wave up the project using rolling is the result of setting package, future a project is planned in detail and only the current phase of whereby process is a fundamental aspect conversion The phases are planned in outline. in a more controlled project baseline. of project control using EVM and results 5.2.2 Schedules will take place activities project is the process of determining when Scheduling Sc activities. and preceding depending on defined durations ©Association for Project Management 2008 Master Levels Schedule Schedules Schedules Schedules Integrated Contractor Work Package Work Subcontractor Control Account Summarisation Schedule Milestones Work Package

CA

Team 2

Functional Work Package

16

CA

ack and manage progress. These activities These manage progress. and ack – Hierarchy of schedules Project Level Key Milestones Key Work

Package

CA Team 1

Functional Figure 5.3 Figure Work Package

CA Work Package The baseline should respect all key milestones: the agreed contractual the agreed contractual all key milestones: should respect baseline The to be performed and resources for activities the time frame provide Schedules for requirements, it is common practice individual project has Although each Plan Master will be shown in the project schedule as either work packages/planning packages/planning as either work in the project schedule will be shown 5.2.3 baseline relationship and schedule Subcontractor plans should detail an appropriate number of activities/ supplier’s The tr milestones required to effectively delivery milestones and appropriate internal indicator milestones. The key The indicator milestones. appropriate internal milestones and delivery control. for measurement and should be used milestones to be utilised. series data set consisting of a a single schedule by the project to be supported all data set covers This network. into an integrated built of detailed schedules can be schedule The the requirements of the project. necessary to meet work of levels various of detail to accommodate the levels summarised to different 5.3). criteria required (Figure visibility and selection Stages Milestone Handover Schedules Schedules Milestones Integration Subcontractor Control Account Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Control Account Process discussion Sub- Major contractor Sub- Minor contractor 17 – Integration of subcontract effort Sub- Minor contractor Figure 5.4 Figure Sub- Major Control Account Control Account Control Account contractor The resourcing/budgeting of the work should reflect the value of the item or the value should reflect of the work resourcing/budgeting The into the baseline (Figure effort is integrated subcontractor in which way The accounts, should be structured as single control major subcontractors Ideally, packages/PPs, within single work should be structured Minor subcontractors packages or as individual control accounts, depending on the level of detail to of level on the accounts, depending control or as individual packages to provide sufficient detail of incorporation, the level Whatever be reported. is problems and issues of potential early warning of actual status and visibility to packages to structure the control accounts/work vital. It is also important effort and spe- of both ‘in-house’ supplier management enable the recording effort. cific subcontractor service – – as agreed in the contract profile or a realistic expenditure to allow ‘mile- Furthermore, there should be a discrete to be generated. budget curve of the measurement reporting period to allow in every stone’ identified should be expected to the supplier However, on a regular basis. achievement of the detail of irrespective report (or equivalent), a monthly progress provide be used report can This the project schedule. contained within their schedule (or otherwise). as the basis for claiming achievement distinction The to the project. 5.4) will differ according to their importance as be based upon factors such should between major and minor subcontractor supply) (e.g. single source criticality (risk) to the project equipment value, they are an ‘off the shelf’ supplier. and/or whether the ability to to provide importance but also not only because of their relative status. clearly monitor their overall minor subcontractors. containing several with a control account conceivably visibility of performance, but not at the lower for appropriate still allows This baseline. within the integrated levels Subcontractor Detailed Programme Integrated Baseline ©Association for Project Management 2008 Margin The hierarchy of hierarchy The hole. Management Reserve Undistributed Budget As work packages are subdivisions of are subdivisions packages As work 18 – Budget elements ailable for expenditure in the accomplish- v Figure 5.5 Figure Planning Packages Control Account Budgets Packages Work Contract Price Contract Budget Baseline Measurement Baseline Performance Distributed Budget Budget cannot be spent; it is the funds that are consumed. Funds are autho- Budget cannot be spent; it is the funds the project with provides formulation of estimates at completion (EACs) The ment of the effort. Budgets are established for the relevant elements of the work for the relevant ment of the effort. Budgets are established structure and are time-phased. breakdown on a total or periodic basis. the company the customer or by rised by forecasting the actual visibility of the anticipated/out turn funds required by element. statement of work approved funding requirements for any 5.2.4.2 Budget cost types and rates different types of costs that need to be sum- many Projects usually involve of detail. levels marised through various 5.2.4.1 Budget versus funds versus 5.2.4.1 Budget is different from the concept of an EVM system the concept of budgets Within the cost performance target for a specific While a budget represents funds. effort, funds represent the money a budget elements is shown in Figure 5.5. This illustrates how the intermediate how illustrates This 5.5. in Figure shown budget elements is budget baseline. leading to the contract summations are defined 5.2.4 Setting budgets 5.2.4 Setting to individual cost targets distributing or allocating is the process of Budgeting must exist at all times in Strict budget element relationships segments of work. w the sum of the parts is equal to the order to ensure that Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Process discussion ork-scope require- ork for the contract DB UB 19 PMB , section 5.2.4.7). ation of the project. It is equal to the total allocated budget less distributed budget Management reserve must never be used to eliminate past or current cost or be used to eliminate must never Management reserve scope originat- in work changes should not be used for Management reserve Generally, the CBB is fixed throughout the duration of the project, unless of the project, the CBB is fixed throughout the duration Generally, the further dissection of the CBB results in Project baseline budgeting activity Budgets (in terms of pounds, hours or other measurable units) should be of pounds, hours or other measurable Budgets (in terms It is the summation of all budgeted work that forms the performance meas- that forms the performance of all budgeted work It is the summation management reserve, and is represented as the BCWS. The PMB consists of The and is represented as the BCWS. management reserve, undistributed budget (UB) and distributed budget (DB): ments due to any unforeseen changes that fall within the overall scope of the scope the overall that fall within unforeseen changes ments due to any contract. to future efforts of reserve does not preclude allocation This variances. schedule agrees there is due cause. in problem areas if the project manager agreed amendments with contract by are covered These ing from the customer. scope and in work to reflect the changes CBB is then increased The prices. budget. baseline measurement 5.2.4.5 Performance PMB is the time-phased budget plan, representing all budgets against which The spread across the is measured, performance (cost and schedule) the contract planned dur comprising the management reserve (MR) and PMB. This should equal the sum This and PMB. (MR) comprising the management reserve of the authorised budgets. change. amended through contractual with a PMB and a management reserve. reserve 5.2.4.4 Management allocation to control for future It is held separately MR is a portion of the CBB. increased w to cover accounts and will be used, if required, work, then each work package will comprise a number of differing types of of differing types a number will comprise package work then each work, types. for different cost raised should not be packages work costs. Separate to denote terms are used systems, specific management earned value Within area of the budget has specific inclusions/exclusions. each types of budgets, and account. Budgets should control each within package work allocated to every other direct costs and any subcontract material, identify labour, separately (see urement baseline. baseline budget 5.2.4.3 Contract minus the mar- value contract budget baseline (CBB) is the total contract The w CBB represents the total budget of all authorised The gin. ©Association for Project Management 2008 y or the cus- y be subject to et started. 20 et been allocated to control accounts. As work is defined As work to control accounts. et been allocated issues h has not y amount available; time-phasing of funding availability. Changes to projected funding may include: Changes to projected funding may measurement problem, since these presents no performance Completed work then the activities, and is tied to schedule If the earning method is objective Undistributed Budget is allocated primarily to accommodate temporary temporary is allocated primarily to accommodate Undistributed Budget aside for specific but be in place to ensure that UB set Procedures should tomer, and as such is subject to external commercial constraints. is subject to external commercial and as such tomer, • • ma and schedule work In these cases, the budget and associated change. 5.2.5 of progress measures Objective in assessment of work measurement is the objective key to performance The progress or not y is completed, in All work progress. will not be measured until the been closed. Future work have packages work to be concerned about are those packages only work The gets under way. work that are planned to be or are actually in progress at the end of the reporting will lie largely in the difficulty of assessment of those packages The period. of detail and the earnings method that has been selected. level and can be automated. If the earnings method is job is straightforward completion, then a manual denoting a percentage to events or tied subjective is in progress (also referred package a work assessment will be necessary while to as being ‘open’). The difference between funds and budget has been described above (section funds and budget has been described above difference between The from the compan available 5.2.4.1). Funding represents the money and assigned to control accounts, the UB should be reduced accordingly. accounts, the UB should be reduced and assigned to control requirements contract accounts can be agreed, or where situations until control terms. general in very can be defined only distributed elsewhere. is not unallocated work budget 5.2.4.7 Distributed will form the majority is allocated to control accounts and Distributed budget of budgets within the PMB. 5.2.4.8 Funding 5.2.4.6 Undistributed Budget Undistributed 5.2.4.6 scope of work, to a defined is identified PMB which within the UB is an amount but whic Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Process discussion 21 vities with duration spanning three or more vities with duration The method used is dependent on the type of method used is dependent on the type The hniques (EVTs). hieved, that proportion of the budget has been earned. This method This been earned. that proportion of the budget has hieved, Judgements have to be made every reporting cycle from analysis by the proj- analysis by from cycle reporting be made every to have Judgements Assignment of the EVT should be made at the work package level and consol- level package EVT should be made at the work Assignment of the some of the commonly used methods. It sections highlight following The the mile- the budget, and when milestone is assigned a proportion of Each ect team on aspects of achievement, risk status and work to complete. Short to complete. status and work risk on aspects of achievement, ect team but do not easier, of achievement the assessment will make packages work the work to shorten in job planning and scheduling breaks introduce arbitrary goal of EVM. the objectiveness as this goes against duration package value earned 5.2.5.1 Measuring as known value, or methods of measuring earned approaches are several There tec earned value of calculating earned value works best when there are a large number of fre- there are a large best when works of calculating earned value milestone completion. If the is only taken on quent milestones. Earned value becomes too coarse then the measuring process number of milestones is low, manager. and is no longer useful to the project complete 5.2.5.3 Percentage This in progress. assessment of work the CAM’s is determined by Earned value be applied to acti may technique for determining per- basis exists reporting periods and where an objective centage complete for the work package. units 5.2.5.4 Equivalent been method is based on measuring the number of units or items that have This items completed and comparing the result with the total number of units or to be completed. that have work being performed. Although a mixture of methods can be used on a single a mixture of methods can be used Although being performed. work assigned only a single method. Once can be or activity package project, a work the method should not be changed. has been opened, package the work Measurement of total project level. WBS and OBS up to the idated through the to support the EVT. level practicable performance should be taken at the lowest as long as they can be developed, methods should be remembered that hybrid is planned to be that the work of the way and representative are objective, undertaken. complete 5.2.5.2 Milestones of mile- the achievement is measured by package of the work Achievement stones. stone is ac ©Association for Project Management 2008 C) to the A ve a specific end result ve C/EAC BA 22 ACWP ACWP Table 5.1 provides examples of BCWP after examples of BCWP 5.1 provides Table BCWP BCWP calculations based on the formula method Table 5.1 Table MonthACWP 1EAC 200 1000 2 400 1000 700 1200 3 1000 1300 4 1400 1400 5 BCWP 200 400 583 769 1000 Since LoE earned value is measured by the passage of time, it is important to is measured by Since LoE earned value (CV), and recorded a cost variance can generate packages LoE work However, This approach is normally used in manufacturing, where the BCWP is the manufacturing, where used in is normally approach This This relies on a monthly update of the EAC to be accurate. It is useful in to be accurate. update of the EAC relies on a monthly This directly related to spend – progress can genuinely be situations where e.g. consumables, direct line feed. or product and are not directly related to the generation of a specific result or to the generation or product and are not directly related include some aspects of project activities of such examples product. Possible of these activities, many However, administration. management and contract should use the appor- management, and configuration e.g. quality assurance (section 5.2.5.7). technique tioned effort earned value of the baseline ensure that the time-phased budget distribution is representative set equal to the BCWS, is always of the BCWP the achievement Thus schedule. never variances means schedule This has not started. package if the work even schedule meaningful earned value and hence LoE tasks do not allow occur, analysis to be carried out. be meaningfully compared to the BCWP. can still ACWP 5.2.5.6 Level of effort of 5.2.5.6 Level are neces- which are those within a project packages of effort (LoE) work Level ha do not but which sary for the project to be successful, applying the formula method based on a BAC value of 1000 units. value on a BAC applying the formula method based EAC: measured as the number of units produced – as the number of measured of if large quantities for example, suited method is not particularly This produced. item are being a particular element. has a repetitive unless it activity to development method 5.2.5.5 Formula for low-value/non-critical performance formula method is used where The on the basis of actual direct cost categories can be earned material and other (B relationship of the budget at completion the cost, multiplied by Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Process discussion AF AF 0.33 ork package BCWS ork package 60 120 210 23 en by the base account. en by reference work package BCWP package work reference reference w reference actual cost incurred from accounting system actual cost incurred from accounting ACWP 0 30 70 120 250 ACWP 0 10 40 50 65 BCWP 0 0 60 120 210 Apportioned work package calculations based on AF kage. Actual costs are directly recorded and reported against the Actual costs are directly recorded 0.33 BCWP 0 0 20 40 70 ACWP ACWP ork pac Table 5.2 Table apportioned BCWS apportioned BCWP package AF package LoE work packages should be separately defined from other work packages to packages from other work defined be separately should packages LoE work no recovery where for those activities be used only should LoE technique The The use of apportioned effort is demonstrated in Table 5.2. Table in effort is demonstrated use of apportioned The Apportioned effort is normally used for tasks such as inspection (during man- as inspection is normally used for tasks such Apportioned effort calculated from the an apportioned factor (AF) is determined by Earned value Apportioned work BCWS 0 20 40 70 avoid distorting any earned value analysis. value earned any distorting avoid were not undertaken. the work be taken if action would effort 5.2.5.7 Apportioned pack- into short itself is not readily divisible is effort that by Apportioned effort progress within related to, and dependent upon measurable ages but is directly another w There is no similar apportionment of ACWP values for apportioned effort type for values ACWP of is no similar apportionment There packages. work work package, resulting in the generation of cost variances where they exist. where of cost variances resulting in the generation package, work Hence: The control account manager of the apportioned account still controls the control account The but the time-phasing of that budget and assignment of budget to the account, of earnings are driv the percentage ufacturing). The link between an apportioned account and a base account is a link between an apportioned account The ufacturing). is in the apportioned account that the schedule link: this means schedule of the base account, and the earnings schedule analogy to the work by derived accomplished analogy to the work by in the apportioned account are derived in the base account. BCWS apportioned The package. for the apportioned and reference work BAC the apportionment factor as applying by and apportioned BCWP is calculated follows: Reference work BCWS 0 ©Association for Project Management 2008 a collec- ork pack- dat The ve or financial events ve ati 24 his PMB forms the basis for measuring all future progress and per- his PMB forms the basis for measuring processes are concerned with ensuring that complete and accurate cost processes are concerned with ensuring that complete and accurate ages. control. Establish performance measurement baseline under configuration Identify master milestones and deliverables. and durations. with logic dependencies, activities/milestones Develop and planning packages. packages to work Group activities costs) to activi- other direct material, subcontracts, (labour, Apply resources ties. and planning packages the work Distribute the appropriate budget across contained within the control account. packages type for the w Determine and assign the appropriate earned value The plan should include all elements of the project. The PMB consists of an The all elements of the project. plan should include The should be used to record progress, not to update progress updates Periodic plan, should to an established additional plans, or significant changes Any system is to ensure that the baseline a proper management key to having The tion 7. COLLECTION 5.3 DATA What is the cost to the organisation of the project activities? formance, and consequently allows the project to be managed. the project formance, and consequently allows for all and EVTs schedules set of baseline data, including all DB, approved together with UB. and planning packages, packages work using and be actively All project team members should the plan. and change reporting against a common plan. a baseline plan. process before they become undergo a formal approval be achieved may This for the project. plan represents the authorised execution – baseline review (IBR) conducting an integrated by see section 6.1. 5.2.7 in planning activities Key 1. 2. 3. 4. 5. 6. (e.g. booking of actual costs or invoice payment). Therefore, BCWS should nor- Therefore, payment). costs or invoice (e.g. booking of actual should be and BCWP with a project event in accordance mally be scheduled be used may events or financial Administrative occurs. the event earned when occur in the same report- indicators such when events as indicators for contract events. ing period as the contract project the 5.2.6 Baselining and agreed as and stable, it is frozen sufficiently developed When the plan is T the PMB. 5.2.5.8 typesfor material items: value Earned element of other any is measured like for material measurement Earned value that reflect progress in to permit assessment of events cost. It is thus intended not measurement of administr project performance, Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Process discussion i.e. the correct numbering ACWP should be recorded in a man- ACWP 25 This section is concerned with the evaluation of the measured section is concerned with the evaluation This ANALYSIS, REVIEW AND ACTION ANALYSIS, erify actual costs to ensure only valid costs are booked to valid book- costs are booked to valid erify actual costs to ensure only valid ing/charge numbers. ing/charge system is set up (based upon the WBS) and correct booking/charge correct booking/charge WBS) and system is set up (based upon the to book to as required. numbers are available required to ensure that there are no Use the estimated actuals process as lag. due to payment variances V Ensure that procedures are in place to protect the integrity of bookings to Ensure that procedures are in place – accounts and soon packages/control work labour costs (direct costs and indirect costs); labour costs (direct direct expenses; material costs; done. costs of work subcontractor Ensure that BCWS, BCWP and ACWP are created in the same time frame. are created in the ACWP Ensure that BCWS, BCWP and not for material. It may measurement Section 5.2.5.8 discussed earned value during a period, it is recommended or mis-booked As costs can be transferred How well are we performing against the baseline plan, and what actions are and well are we performing against the baseline plan, How required? 5.4 2. 3. ner consistent with the budget and should include all expenditure. ner consistent with the budget and should in the same period that is claimed be possible to ensure that earned value use esti- to choose may the company actual costs are applied. In these cases, management system, and earned value mated actual costs (or accruals) in the the process, be in place to cover A procedure should the associated reports. ‘real’ costs. and the subsequent replacement with the period should calculations. Costs for costs be used in any that cumulative costs last between the cumulative therefore be calculated as the difference costs. period and the current cumulative 5.3.2. COLLECTION ACTIVITIES IN DATA KEY 1. information is collected in a timely manner to enable the transfer of actual cost of actual enable the transfer timely manner to is collected in a information system. management value into the earned information 5.3.1 and committed costs Measuring costs calculations include: value used in the earned ACWP The • • • • the cost elements that will identify be collected at a level Actual costs should to cost variance. and factors contributing ©Association for Project Management 2008 100 100 100 ACWP BCWS EAC (VAC/BAC) (VAC/BAC) y comparing how much time the much y comparing how (CV/BCWP) (SV/BCWS) BAC BCWP BCWP – far behind or an indication of how

26 AC% AC% hievement of milestones and deliverables, of milestones hievement CV SV SV% CV% V VAC – the cost comparison of the budget at ork the project is (in terms of the value of ork the project is (in terms of the value – has been earned the cost comparison of what ve types of variances/indices commonly used. types of variances/indices ve – has been earned to the cost comparison of what w to calculate variances/indices hat has been spent: ahead of the planned w to what was budgeted. It measures the difference in value between budgeted. It measures the difference in value was to what actually accomplished: planned and the work the work w completion with the current estimate at completion: C at completion Variance SPI performance index Schedule VA CV Cost variance SV variance Schedule activity actual start/finish dates; activity to complete the task; estimate of time remaining finish dates for future activities. estimated start and review of the critical path activities; against key milestone forecasts; review of schedule requirements. review of future resource When updating the schedule status, the following should be considered: status, the following schedule When updating the The following aspects of schedule assessment may be performed at both detail be may assessment aspects of schedule following The All variances are measured in terms of cost and apply equally to all methods of are measured in terms of cost and All variances are fi There measurement. and to monitor how task dependencies are affected by any task movement. any dependencies are affected by task and to monitor how • • • then be determined b status may Schedule performance as compared to the baseline plan. Appropriate management and management Appropriate to the baseline plan. as compared performance together will be generated, performance reports) reports (e.g. cost customer management actions. implementation of and with the identification status 5.4.1 Schedule to gain an in a timely manner the status of schedules It is essential to update understanding of the ac objective activity is ahead of or behind the baseline schedule. activity and project level: • • • 5.4.2 earned value Calculating and reporting 5.4.2.1 Ho Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 w Process discussion ailing trends. Final Estimated Cost (EAC) Estimated Final Final Planned Budget (BAC) Planned Final slip

Forecast Forecast

project time Planned Budget at Completion Scheduled Budgeted Cost of Work (earned value) Performed Budgeted Cost of Work Performed Actual Cost of Work Original Duration planned for the work to date Actual Time Expended for the work to date completion BCWP/ACWP BCWP/BCWS wn on a cumulative spend graph, the spend graph, wn on a cumulative Planned Budget (BCWS) KEY EACBAC BCWS Estimate at Completion BCWP ATE ACWP OD 27 (cost) variance overrun Schedule – Earned value graph – to actual costs. value the index of earned Forecast cost Forecast CPI SPI (time) Time variance Schedule Cost variance (cost) Figure 5.6 Figure ATE Time ‘now’ OD Earned Value (BCWP) Earned Value w 1.0 is unfavourable; above 1.0 is favourable: above w 1.0 is unfavourable; the work accomplished); it tends towards 1.0 as the project pro- 1.0 as towards it tends accomplished); the work nears completion: as the project is of less value gresses. It Belo Contract Budget Baseline CPI index Cost performance

In addition to these variances being sho variances In addition to these end conditions. It can also be used as a basis for forecasting the project It may date for the previous and the forecast completion include, if required, the EAC reporting periods. improving (or worsening) performance. (or worsening) improving graphs 5.4.2.2 Reporting value of a project using the earned the performance 5.6 demonstrates Figure and prev view of project status a quick data elements. It provides indices can also be plotted cumulatively through the life of a project to sho through the life plotted cumulatively indices can also be

Actual CostsActual (ACWP) Original estimated project budget Cost ©Association for Project Management 2008 aph gives a aph gives he gr CPI < 1, SPI > 1 CPI > 1, SPI > 1 Overspent and early Underspent and early 1 (SPI) INDEX SCHEDULE PERFORMANCE 28 Figure 5.7 –Figure Bullseye chart CPI > 1, SPI < 1 CPI < 1, SPI < 1 Over spent and late Underspent and late These thresholds are set to minimise the detail included in thresholds are set to minimise the These 1 COST INDEX(CPI) If any of the values being monitored fall within predefined limits then full fall within predefined limits then being monitored of the values If any set for values The or both. as a percentage can be set as a value, Thresholds PERFORMANCE 5.4.2.4 Performance trend charts trend 5.4.2.4 Performance performance in schedule the change 5.7) shows (Figure chart bullseye The T reporting period. index and cost performance index at each summary view as to whether performance is improving or deteriorating and or deteriorating performance is improving summary view as to whether reports when there are only minor variances. there are only reports when of the variances any when However, on the variances. details are not required methods analysis, together with then a full variance fall outside the thresholds be reported. should of recovery, and so on of each risk size, complexity, the by project will be decided each reporting period thresholds to be set for last for separate project. It is normal to the con- should also be given performance. Consideration and cumulative the life of the project. of thresholds over vergence 5.4.2.3 Variance thresholds Variance 5.4.2.3 will This established. thresholds be that variance recommended It is strongly at each need be printed or explained in detail variances ensure that not all reporting cycle. Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 TIME Process discussion 29 – trend graphs Variance Figure 5.8 Figure COST VARIANCE COST VARIANCE SCHEDULE COMPLETION AT VARIANCE vailable. NEGATIVE POSITIVE VARIANCE An alternative approach to the bullseye chart is to show the change in the change is to show chart to the bullseye approach An alternative CPI and SPI that shows curve that can be used is the CPI/SPI Another graph should variance through cost and schedule assessment of performance The whether the variances are outside the agreed thresholds. The central circle central The are outside the agreed thresholds. the variances whether and SPI are plotted on the CPI The thresholds. the maximum variance shows in the project. reporting cycle at each graph (figure 5.8) a graph on a time phase. Such and cost variance variance schedule performance is improving. indicates whether on a time phase. another over one budget type of any potential ‘washout’ take into account any – higher than the cost of the labour material cost is significantly e.g. where pack- work required to process/use the material. In these instances, separate should consideration Similarly, ages should be created for material and labour. of effort and indirect cost elements from of level separation to the be given measured elements. completion at 5.4.3 Estimates plans An estimate at completion is the estimate of final cost based on realistic management and using the most current and accurate and assumptions by information a ©Association for Project Management 2008 (TCPI) allows a projection (TCPI) allows ETC Cumulative 30 ACWP ACWP EAC EAC o complete performance index hese should be used in conjunction with the comprehensive in conjunction with the comprehensive hese should be used past performance; to recover; required efficiency committed) to date; costs (incurred and to cost pools) overhead (incorporating rates charging the use of contract obtain the cost of labour based estimates; assessment of tasks remaining; technical incurred to date; variances cost and schedule expected future efficiency; risks (risk review and completed and remaining of task already percentage probability of cost impact); actions; ongoing or outstanding management completion of the task; forecast schedule to the scope of work; anticipated changes and escalation indices; changes rate future economic conditions, forecast trend. previous EAC A figure greater than 1.0 indicates that future efficiency will need to be greater A figure greater than 1.0 indicates that future efficiency additional can provide This TCPI should also be compared with the CPI. TCPI. the use of 5.3 demonstrates Table The following should be considered when defining a detailed EAC: defining a detailed should be considered when following The a ‘performance to date’ CPI) will provide Current performance indicators (SPI, The EAC is the sum of the actual costs (ACWP) up to the present, plus the best up to the present, costs (ACWP) is the sum of the actual EAC The Thus: OBS. WBS or of the level analysed at any are calculated and EACs There are several methods for generating EACs, some of which are described in some of which EACs, methods for generating are several There T Appendix D. of the anticipated performance to achieve either the BAC or the EAC (depen- or the EAC BAC either the of the anticipated performance to achieve – formula is employed) dent on which needs to of performance level i.e., what or EAC. meet the BAC to be achieved be less may less than 1.0 indicates future efficiency than planned, conversely formula is on which (dependent or EAC BAC than planned to achieve employed). TCPI is greater than the current CPI, future performance information. If the the BAC/EAC. if the project is to achieve must improve efficiency bottom-up EACs developed at control account level. at control developed bottom-up EACs • • • • • • • • • • • • • 5.4.3.1 Simple tests of reasonableness that can tests of reasonableness formulae, there are several As well as the above be applied to project data. view of the project. T estimates of the costs still to be incurred, (estimate to completion, ETC). to completion, be incurred, (estimate of the costs still to estimates Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Process discussion BCWP)/CPI Period C original completion/SPI 31 BAC/CPI (BA ETC EAC EAC 12 3 4 5 101012 20 10 15 50 20 30 80 60 80 120 100 110 120120 120 130 120 160 120 150 120 130 1.02 0.96 0.77 0.86 1.00 0.831.02 0.67 1.05 0.67 1.11 0.75 1.50 0.91 2.00 forecast completion forecast Example of projecting anticipated performance using TCPI (BAC) and TCPI (EAC) (BAC) and TCPI performance using TCPI projecting anticipated Example of Update control accounts with achievement, in line with the calendar. Update control accounts with achievement, forecasts, in line with the calendar. status and schedule Update schedule Determine estimate to completion as required. project, to determine impact on critical path (if used). whole Integrate to baseline, and focus on problem areas. Analyse variances action as required. corrective Take In this example, for period 3 a TCPI (BAC) of 1.11 is required to complete the of 1.11 is required to complete TCPI (BAC) In this example, for period 3 a approaches: of forecasted costs there are two the accuracy corroborate To Table 5.3 Table To check forecast completion dates (in weeks from project start): forecast completion dates (in weeks from project check To Appendix D. formulae, see the earned value a full description of For 5.4.4 and action review in analysis, activities Key 1. 2. 3. 4. 5. 6. TCPI (EAC) remainder of the work within the budget at completion. When this is compared completion. within the budget at remainder of the work that significant performance improve- with the current CPI of 0.67, it is clear a CPI of 0.77 is required However, ments are required if this is to be achieved. the estimate at completion. By within to complete the remainder of the work, with some be achievable, may CPI (0.67) this comparison with the prevailing 2 looking at period be seen by It may consistent performance improvement. –data that the required performance improvement TCPI current CPI of 0.67 to 0.96 –(EAC) of the viabil- this should prompt a re-evaluation is unachievable; ity of the EAC. TCPI (BAC) BCWP ACWP BAC EAC CPI BCWS ©Association for Project Management 2008 kage. If the cur- ork scope and/or This section con- This

32 an authorised change to the scope, cost or schedule of the project; of to the scope, cost or schedule an authorised change material or overhead); (e.g. labour, to standard rates changes between control accounts. and budget transfer work transferred; solely for the budget can be generated packages new work opened to packages can be closed and new work packages existing work budget. plus the additional include the outstanding work to the control account. necessary changes Identify and raise to associated risks. applicable, change where Integrate, The approved project baseline is the time-phased budget against which proj- against which baseline is the time-phased budget project approved The and structures for a not only the financial baseline A baseline plan defines be strictly controlled in order to main- Changes to the current baseline must not be made because of an overspend Changes to the current baseline should into the project as follows: can be incorporated additional budgets The siders the controlled pro cesses whereby the project formally maintains the cesses whereby pro siders the controlled measurement budget baseline and the performance integrity of the contract to past, present and future information that all changes baseline. It is important so that it manner, PMB in an orderly and documented are embodied in the of all authorised work. representation remains an accurate baseline is used This are measured and reported. ect progress and performance scheduled. of work as the budgeted cost plan. and boundary of the timescales, resources project but also the current baseline must The basis for project performance assessment. tain a valid reconcilable to the current to the original baseline, and be back be traceable and cost objectives. authorised scope, schedule to the baseline include for a change warrant Conditions that may or a delay. example: • • • budget for additional w adding extra Baselines are updated by baseline. MR budget can be into the budget management reserve transferring docu- should be All transfers only with management approval. transferred mented and authorised. • • pac Additional budget should not be assigned to a closed work the focus rent baseline is being amended, history should not be changed; plan for the accomplishment of the should be on establishing a workable remaining efforts. 5.5.1 management in change activities Key 1. 2. 5.5 CHANGE MANAGEMENT 5.5 CHANGE incorporated is assessed and ensures change management process The change in a timely and controlled manner. into the project baseline Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Process discussion 33 Analysis and Management is a process which enables the analysis enables which Analysis and Management is a process e list has been reproduced from BS6079-3:2000 (British Standards, more realistic business and project planning; be effective; actions being implemented in time to and project objectives; business goals greater certainty of achieving all beneficial opportunities; appreciation of, and readiness to exploit, loss control; improved control of project and business costs; improved understanding all options and their increased flexibility as a result of associated risks; and business development; innovation greater control over contingency and transparent fewer costly surprises through effective planning. Ensure that all changes to the PMB are reflected within the associated fore- are reflected within to the PMB all changes Ensure that cast plans. of management within all elements are embodied changes Ensure that reports etc.). system (toolset, documentation, for change. Seek appropriate approval Earned value management and risk management are complementary Earned value The benefits of systematic risk identification and risk management (RM) benefits of systematic The Institution, 2000b). As may be seen, the benefits are almost identical to those As may Institution, 2000b). management in section 1. attributed to earned value project management discipline. processes. Both are key aspects of the overall happen in the future; earned may Risk management is largely related to what happened to pre- has already management is concerned with using what value inte- be great synergies to be realised by may There dict and control the future. processes. the two grating and management of the risks associated with a project. Properly undertaken it and management of the risks associated completion of a project to cost, time will increase the likelihood of successful part of project as an integral It should be regarded and performance objectives. (Associa- as a set of tools or techniques. or business management and not just tion for Project Management, 2000) include: • • • • • • • • • abov The 5.6 RISK MANAGEMENT 5.6 RISK more realistic provide EVM and risk management should The integration of completion a better estimate of the project assessments and give earned value cost and timescale. Project Risk 3. 4. 5. ©Association for Project Management 2008 Interfacing Risk and Earned Value Interfacing Risk and Earned 34 hedule for risk management activities in hedule for risk management activities e been defined, namely the work breakdown e been defined, namely the work all project management activities that cover risk that cover activities all project management vities in the baseline schedule; vities in the baseline hedule forecast (time); risk mitigation activities; project earned value; overall on is likely to be achieved e.g. identifying if the mitigation plan activities, time and to budget; – modelling with the risk network; – RM acti incorporating – activities; contingency – establishing dependencies; –statistical risk network using by determining risk inherent within schedule analysis; – risk modelling to optimise project schedules; – cost and sc including resource, – of the risk management to determine the performance using earned value – estimate at completion (cost); – sc – project activities; – change management: incorporation of MR budget for contingency activities. contingency of MR budget for management: incorporation change management (not to be confused with the MR budget); to be confused with the MR management (not scheduling: establishing management reserve budget; reserve establishing management – for the RM process the budget and schedule creating and controlling i.e. the over those elements of analysis: in project performance including RM activities of forecasts: development estimating the project activities (cost and schedule): activities estimating the project In 2008 APM published further guidance, In 2008 lies in the that the key to EVM and RM interfacing takes the approach This The following list suggests areas where risk management may be usefully management may risk suggests areas where list following The structure and the project schedule/network. These structures are ideal for stor- These structure and the project schedule/network. log- therefore provide project and would ing and defining information about the in the structure element Each structures for risk reporting. ical and convenient risk analysis and to inform quantitative contains the data that is commonly used risks at the point place for noting qualitative a convenient also provide would proj- if the structure defines the whole Further, are likely to occur. they where can be stored and compiled with no danger ect then a complete risk checklist of oversight. Management. can be found in both disciplines through com- recognition that added value • in accordance with this guide, then the If the EVM system has been established structures will hav key integrating • • • • • integrated with earned value management: earned value with integrated • Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Process discussion 35 Risk identification Risk assessment Produce response strategy The guide has set out to establish the principles and potential practices for a and potential practices guide has set out to establish the principles The monality of purpose in setting, measuring and achieving project targets. A base- project targets. achieving measuring and of purpose in setting, monality similarly, unlikely to be achieved; risk is extremely no account of line that takes are monitored effectively and are not resourced actions that risk response the desired results. unlikely to produce principles can These between the EVM and RM disciplines. closer relationship of organisations, RM and EVM the advancement and inform be used to develop capability. 5.6.1 in risk management activities Key 1. 2. 3. ©Association for Project Management 2008 . integrated exists. from previous projects is cap- to conclude the planning phase. 36 6 heckpoints. They validate reliable performance data, validate They heckpoints. ve tool to put the focus on performance measurement. ve asted subsequent work based on unsound information. based on unsound asted subsequent work should be held as soon as possible after the project has should be held as soon as possible System review System w fixed cut-off point a fixed hey will provide integrated project management system confirm that an They T tured. can be an effecti They They are pre-planned c They reduce risk. They historic experience should ensure that They thus avoiding w thus avoiding An IBR is a formal process conducted to assess the content and integrity of the An IBR is a formal process conducted to assess the content and integrity of The earned value management reviews provide confirmation of an early cap- confirmation management reviews provide earned value The benefits: several reviews provide Earned value 6.1 BASELINE REVIEW (IBR) INTEGRATED baseline plan, an developed In order to review the quality of the baseline revie gone through at least one reporting cycle following the establishment of the following cycle gone through at least one reporting during the ensures that performance data is available This initial baseline. review. cost technical, It should ensure the timely establishment of the integrated PMB. and adequacy sufficiency baseline. It determines the credibility, and schedule The other. with each are integrated of the planning, and ensures that activities and maintain a project, as well as and ultimate purpose of the IBR is to achieve customer understanding of the risks inherent in the PMB and the management during its execution. control processes that will operate Once an EVMS has been established it is considered good practice to review good practice been established it is considered Once an EVMS has and is com- effectively, to ensure that it is being operated the system in order be reviews may The standards (the EVM criteria). pliant with recognised oper- companies many a customer; alternatively, by demanded and conducted against the same standards. ate an internal process the structure to with it in terms of cost and schedule ture of scope, quantifying review will iden- A thorough manner from there on. manage it in a controlled early on. It is important improvements tify areas of weak planning, enabling that reviews are conducted professionally. 1. 2. 6. The three main categories of EVM system reviews are discussed below three main categories of EVM The 3. 4. 5. ©Association for Project Management 2008 y System review demonstration ays a possibility that the project ays 37 may be held. This is different from an IBR because it reviews the total from an IBR because it reviews the is different This be held. may w organisation; and budgeting; planning, scheduling accounting; analysis and management reports; revisions and data maintenance. vie There is also the possibility that both management and CAMs have undergone have is also the possibility that both management and CAMs There Like any dynamic control system, there is alw dynamic Like any In addition to the EVMS review, data traces and interviews are undertaken. data traces EVMS review, In addition to the demonstra- The assessed against all the EV guidelines. time, the EVMS is This The conduct of the review process should not be restricted to project person- restricted to project should not be of the review process conduct The IBR is contained in the purpose and conduct of an Further detail on may run out of control: with an EVMS, it can sometimes be easy for the proj- run out of control: with an EVMS, it can sometimes may and let the management system run without doing ect to fall into complacency At this stage data integrity problems. any highlighting data checks further any made to the pro- been substantial changes of the project there are likely to have the system which aimed at improving will include changes These system. ject’s EV will need to be reviewed to ensure they are still in accordance with the A. Appendix guidelines of the criteria set out in New managers need to be interviewed to ensure that change. considerable with the management of earned value. they are fully conversant reports on system deficiencies. 6.3 SURVEILLANCE being maintained, periodic surveillance In order to confirm that standards are remainder of the project. should be conducted throughout the system, looking particularly at the system operations. The EVMS is checked The at the system operations. system, looking particularly criteria. against all the earned value fully for compliance as such the system are included, a role in operating areas that play Covering as the managers. finance and project controls, as well guideline based on the five the review, tion review report is written during groups of: • • • • • well and addresses the discrepanc the system is working It highlights where nel but should cover all personnel, both project and customer, that are critical that are project and customer, all personnel, both cover nel but should objectives. of the project’s achievement to the successful Reference 5. REVIEW 6.2 DEMONSTRATION a the new project management system, In order to examine re ©Association for Project Management 2008 hedule and technical 38 vides information that depicts actual conditions and trends; vides information provides comprehensive variance analysis at the appropriate levels, includ- levels, analysis at the appropriate variance comprehensive provides to cost, sc action with regard ing proposed corrective performance, and other problem areas. performance, and provides timely and reliable cost, schedule and technical performance infor- performance and technical schedule and reliable cost, timely provides system; internal management directly from the project’s mation summarised EVM guidelines; complies with the problems; timely indications of actual or potential provides integrity; maintains baseline pro Surveillance must ensure that the project’s EVMS: project’s ensure that the must Surveillance • • • • • • Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 th 5 Work ANSI/EIA–748- Guide to the Guide to Project Analysis and Man- Analysis BS6079-3: 2000 APM Body of nowledge, Project Risk Project Project Management: Project Project Management: Project 39 alue Management Systems, alue Management MIL-HDBK-881 Bibliography BS6079-1: 2000 .aof.mod.uk/aofcontent/tactical/ppm/downloads/evm/uk IBR .aof.mod.uk/aofcontent/tactical/ppm/downloads/evm/uk Review Guide Issue 2 January 2005.doc Review Guide Issue 2 January 1998 Management (2000) Association for Project agement Guide Management (2006) Association for Project Risk, Project Management of Business Related US (1998) Department Department of Defense of Defense Handbook: Structure, Breakdown Management Implementation Group IBR Sub-com- Value Defence Earned Reviews, URL: Baseline A Guide to Conducting Integrated mittee (2005) http://www edn Management (2008) InterfacingAssociation for Project and Earned Risk Management Value British Standards Institution (2000a) American National Standards Institute/Electronic Industries Alliance (1998) Standards Institute/Electronic Industries American National V Industry Guidelines for Earned Management, British Standards Institution (2000b) British Standards Institution (2000b) • • • • • • Useful publications include the following. Useful publications • • ©Association for Project Management 2008 ork, and define the organ- 40 Establish organisational responsibility for work Define authorised work and resources via contract and resources Define authorised work Appendix A Earned value Earned e been reproduced with minor amendments from the industry e been reproduced with minor amendments araphrase of criterion: araphrase of criterion: work breakdown structure (CWBS). breakdown work Identify the project organisational structure, including the major subcon- w the authorised responsible for achieving tractors Define the authorised work elements for the project. A work breakdown A work the project. elements for Define the authorised work internal management control, is com- structure (WBS), tailored for effective monly used in this process. P will be planned and controlled. work isational elements in which of criterion: Paraphrase OBS. via achievement budgeting, planning, scheduling, of the project’s for the integration Provide other and, as authorisation and cost accumulation processes with each work provides timely and reliable information about work progress; work timely and reliable information about provides achievement; and technical properly relates cost, schedule of summarisation. level at a practical supplies managers with information It is expected that compliance with the requirements detailed herein will It is expected that compliance with data management control systems to provide criteria require projects’ The management guidelines management 2. standard (American National Standards Institute, 1998) and are organised in standard (American National Standards major categories. five A.1 ORGANISATION 1. 3. This section provides the basic criteria for projects to use in establishing the basic criteria for section provides This criteria The management system. earned value an integrated and operating that are intended to describe a system but a set of criteria concept does not management of a project considerations and operational state the qualities system-level management without mandating value system using earned characteristics. and shareholders, to gain confi- key stakeholders, notably customers allow in an effective deployed and resources dence that projects are being managed manner. which: • • • criteria hav The ©Association for Project Management 2008 y which to y which , hours, or other ho is responsible for overhead cost for overhead ho is responsible 41 Appendix A: Earned value management guidelines value A: Earned Appendix h project performance can be measured. Ensure management subsystems support each subsystems Ensure management Identify interim goals (milestones) b Identify interim goals (milestones) Establish/maintain at the control account level a Establish/maintain at the control account level Integrate CWBS with OBS. Integrate Establish budgets by element of cost. Establish budgets by Schedule all authorised work logically. all authorised work Schedule araphrase of criterion: araphrase of criterion: araphrase of Criterion: araphrase of Criterion: measurable units. Where the entire control account is not subdivided into Where the entire control account is not subdivided units. measurable To the extent it is practical to identify the authorised work in discrete work to identify the authorised work the extent it is practical To money in terms of establish budgets for this work packages, Establish and maintain a time-phased budget baseline, at the control Establish and maintain a time-phased against whic account level, control. structure and the breakdown project work of the for integration Provide cost and schedule structure in a manner that permits project organisational as of either or both structures elements by performance measurement needed. the sequence of in a manner that describes the authorised work Schedule required to meet the and identifies significant task interdependencies work requirements of the project. accounts until an be held in higher-level efforts may Budget for far-term Initial budgets control account level. appropriate time for allocation at the will be based on either internal established for performance measurement negotiated target cost includ- management goals or the external customer base- If an over-target work. ing estimates for authorised but undefinitised reporting purposes, prior is used for performance measurement line (OTB) senior manager and cus- to the appropriate notification must be provided tomer (if required). of criterion: Paraphrase performance measurement baseline. with identification of significant cost Establish budgets for authorised work, material etc.) as needed for internal management and for elements (labour, control of subcontractors. P Identify physical products, milestones, technical performance goals or products, milestones, technical Identify physical measure progress. other indicators that will be used to other, the CWBS and the OBS. other, (indirect overhead responsible for controlling Identify the organisation costs). Identify w of criterion: Paraphrase Paraphrase of Criterion: of Criterion: Paraphrase measure work achievement. measure work P Paraphrase of criterion: of criterion: Paraphrase appropriate, the work breakdown structure and the organisational organisational structure and the breakdown the work appropriate, structure. Paraphrase of criterion: Paraphrase 8. 5. 6. 9. 7. 4. 10. A.2 PLANNING, SCHEDULING AND BUDGETING ©Association for Project Management 2008 . CA able or for which Budget PP budget MR. h will become indirect costs. Reflect in h will become indirect 42 BAC Identify applicable unit costs. Identify MR and UB separately. Sum of all WP Sum of all the use of LoE. identify and control Separately costs. Establish budgets for overhead Record all allocable indirect costs. Prohibit multiple accounting as direct costs are Formally record all direct costs and establish budg- record all direct Formally CBB APM Guidelines wn structure elements. araphrase of criterion: araphrase of criterion: Identify and control level of effort activity by time-phased budgets estab- by of effort activity level Identify and control is unmeasur Only that effort which lished for this purpose. For EVMS, the material accounting system will provide for: EVMS, the material accounting system will provide For Prohibit multiple accounting as direct costs are Prohibit multiple accounting as direct of criterion: Paraphrase WBS. summarised through the accounts into the organisational Summarise direct costs from the control or more structure without allocation of a single control account to two organisational elements. Record all indirect costs that will be allocated to the contract. ets in a consistent and thus comparable manner. ets in a consistent and thus comparable breakdown accounts into the work Summarise direct costs from control or more control account to two structure without allocation of a single breakdo work needed. unit costs or lot costs when Identify unit costs, equivalent of criterion: Paraphrase Provide that the project target cost goal is reconciled with the sum of all that the project target cost goal is Provide reserves. internal project budgets and management of criterion: Paraphrase the project budgets, at the appropriate level, the amounts in overhead level, the project budgets, at the appropriate to the project as indirect costs. pools that are planned to be allocated of criterion: Paraphrase with the budgets in a formal sys- Record direct costs in a manner consistent books of account. the general tem controlled by P work packages, identify the far-term effort in larger planning packages for packages in larger planning effort the far-term identify packages, work purposes. scheduling budget and package budgets at the work/planning Establish of criterion: Paraphrase level. budgets plus planning package package all work that the sum of Provide budget. account equals the control account budgets within a control of criterion: Paraphrase measurement is impractical may be classified as level of effort. as level be classified may measurement is impractical of criterion: Paraphrase organisational component significant each budgets for Establish overhead whic for expenses of the company budget. and undistributed Identify management reserves of criterion: Paraphrase Paraphrase of criterion: Paraphrase summarised through the OBS. of criterion: Paraphrase 12. 21. 18. 19. 17. 20. 15. A.3 ACCOUNTING CONSIDERATIONS A.3 ACCOUNTING 16. 11. 13. 14. Earned Value Management: Value Earned ©Association for Project Management 2008 ve control, along with the rea- ve ariances in the detail needed by 43 Appendix A: Earned value management guidelines value A: Earned Appendix Establish an acceptable material accounting Establish an acceptable Identify overhead performance measurement data Identify overhead ork achieved–this comparison provides the sched- comparison provides ork achieved–this Identify management response to variances. y customer reporting specified in the contract. system. Paraphrase of criterion: of criterion: Paraphrase comparison of the amount of planned budget and the amount of comparison of the amount of planned budget earned for w ule variance; – costs for the same work appropriate) direct (applied/estimated where the cost variance. this comparison provides accounts in a manner consistent with the budgets using recognised, with the budgets in a manner consistent accounts costing techniques; acceptable, no earlier than the time of but involved, the category of material of material; or actual receipt progress payments the residual inventory. At least on a monthly basis, generate the following information at the con- the following At least on a monthly basis, generate control using as necessary for management trol account and other levels with, the accounting system: actual cost data from, or reconcilable (1) (2) point in time most suitable for performance measurement at the cost (3) for the project including of all material purchased full accountability (1) accurate cost accumulation and assignment of costs to control of costs to and assignment cost accumulation accurate (1) Paraphrase of criterion: Sum performance measurement data elements of criterion: Paraphrase through the CWBS and OBS. infor- Implement managerial actions taken as the result of earned value mation. of criterion: Paraphrase project management. a and cost deviations on at least Identify schedule of criterion: Paraphrase monthly basis. and fre- indirect costs at the level Identify budgeted and applied (or actual) management for effecti needed by quency significant variances. sons for any of criterion: Paraphrase as needed. through the project Summarise the data elements and associated variances structure to support management breakdown organisation and/or work needs and an (2) comparison of the amount of the budget earned and the actual comparison of (2) data elements Identify performance measurement of criterion: Paraphrase basis. on a monthly level at the CA the significant differences between both planned at least monthly, Identify, and actual cost perform- performance and planned and actual schedule the reasons for the v ance, and provide A.4 REPORTS AND MANAGEMENT ANALYSIS 22. 26. 24. 25. 23. ©Association for Project Management 2008 alue y management and 44 hedules. In the directed effort prior to nego- hedules. In the directed Only the senior manager or the customer may Only the senior manager or the customer Reconcile original budgets with current budgets. Reconcile original budgets with current to records. changes Control retroactive Document PMB changes. Develop EACs and compare with staffing plans and and compare with staffing EACs Develop ve control. ve revise the CBB. baseline. to the performance measurement Document changes of criterion: Paraphrase or budgets. Adjustments should be made only for correction of errors, rou- Adjustments should be made only or budgets. of customer or management directed tine accounting adjustments, effects of performance the baseline integrity and accuracy or to improve changes, measurement data. of criterion: Paraphrase Paraphrase of criterion: of criterion: Paraphrase that performed to records pertaining to work changes Control retroactive v previously reported amounts for actual costs, earned change would for authorised changes. revisions to the project budget except Prevent of criterion: Paraphrase any applicable customer reporting requirements. applicable customer reporting any of criterion: Paraphrase the CBB. recording the effects of a timely manner, in authorised changes Incorporate and sc in budgets changes such estimated and bud- revisions on the amount base such tiation of a change, geted to the project organisations. in a timely all authorised changes Incorporate of criterion: Paraphrase manner. to the budgets in terms of changes Reconcile current budgets to prior manage- the detail needed by and internal replanning in authorised work ment for effecti Develop revised estimates of cost at completion based on performance to on performance at completion based estimates of cost revised Develop conditions. and estimates of future for material values date, commitment baseline to measurement the performance this information with Compare to compan at completion important identify variances 32. 30. 31. A.5 MAINTENANCE DATA REVISIONS AND 28. 29. 27. Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 w basis. 45 The costs actually incurred and recorded costs actually incurred The Includes work that has been authorised, but for that has been authorised, but Includes work total allocated budget. Appendix B Terminology Terminology The actual direct costs recognised in the time period associ- actual direct costs The and glossary Effort that by itself is not readily measured or divisible into divisible itself is not readily measured or Effort that by See All work performed, pursuant to the contract, within the con- performed, pursuant to the contract, All work performance measurement baseline. performance measurement . The costs actually incurred and recorded in accomplishing work incurred and recorded in accomplishing costs actually The . See An element of work performed during the course of a project. An activ- during the course of a project. performed An element of work The resources (in money and/or hours) assigned for the accomplishment resources The labour, material or other direct resources are actually consumed; are actually material or other direct resources labour, for use; from inventory are withdrawn material resources to the contract; that are uniquely identified are received material resources or are specifically and uniquely identi- major components or assemblies that flo on a line item are received fied to a single serially numbered end performed. tract price. tract which the cost has not been finalised by virtue of a formal contract amend- contract virtue of a formal the cost has not been finalised by which ment. in achieving the work performed. the work in achieving discrete work packages but which is related in direct proportion to the planning is related in direct proportion to the but which packages discrete work effort. and performance on other measured Budget. Authorised work. Authorised Baseline. Apportioned effort. (AUW). unpriced work Authorised Allocated budget. costs. Applied direct Activity. Actual cost performed (ACWP). Actual cost of work ated with the consumption of labour, material and other direct resources, with- other direct resources, material and ated with the consumption of labour, amounts These or the date of payment. out regard to the date of commitment takes place: of the following any when to work-in-process are to be charged • • • • ity normally has an expected duration, an expected cost and expected resource an expected cost and expected duration, ity normally has an into tasks. subdivided are often Activities requirements. of a specific task or group of tasks. ©Association for Project Management 2008 ACWP). BCWP The complete WBS for a con- complete The The sum of the budgets for completed The The sum of the budgets for all work pack- sum of the budgets for all work The 46 The performing manager who is responsible for performing manager who The work-package budgets. work-package The contract target cost plus the estimated cost of target cost plus contract The The total authorised budget for achieving the for achieving budget total authorised The See A contractually required report, prepared by the con- required report, prepared by A contractually A management control point at which actual costs can be actual costs can A management control point at which The total of the sum of all control accounts plus undistrib- total of the sum of The A metric for the cost performance of a project. It is the alge- The price payable by the customer under the contract for the the customer under the contract by price payable The That portion of purchased items or services which has been services which items or portion of purchased That ages, planning packages etc. scheduled to be achieved (including in-process to be achieved scheduled etc. ages, planning packages of effort and apportioned effort sched- of level plus the amount packages), work time as the BCSW within a given be expressed may This uled to be achieved. BCWS. or cumulative as period BCWS period, such ordered, but for which no actuals have been incurred. no actuals have ordered, but for which work packages and completed portions of open work packages, plus the appli- packages, of open work and completed portions packages work effort. of effort and apportioned budgets for level cable portion of the tractor, containing information derived from the internal system. Provides sta- from the internal system. Provides containing information derived tractor, tus of progress on the contract. Cost variance (CV). Cost variance Control account manager (CAM). Control Cost performance report. Control account (CA). account Control Contract target cost. target Contract Contract budget baseline (CBB). budget Contract price. Contract Budgets for work packages. Budgets for work Commitment. Budgeted cost of work performed (BCWP). performed Budgeted cost of work (BCWS). scheduled Budgeted cost of work Budget at completion (BAC). Budget at proper delivery of the supplies and services specified in the scope of work of in the scope of work of the supplies and services specified proper delivery the contract. authorised unpriced work. planning, performing and monitoring the elements of work defined within that planning, performing and monitoring the elements of work control account. uted budget plus management reserve. (CWBS). structure breakdown work Contract tract, developed and used by a contractor according to the contract work state- work according to the contract a contractor and used by developed tract, in the contract. specified CWBS includes the levels The ment. accumulated and compared with earned value and budgets (resource plans) for budgets (resource and value accumulated and compared with earned management account is a natural A control management control purposes. since it represents the work planning and control point for cost/schedule work element for one contract assigned to one responsible organisational structure (CWBS) element. breakdown braic difference between earned value and actual cost (CV difference between earned value braic project scope of work. It is equal to the sum of all allocated budgets plus any allocated budgets to the sum of all It is equal of work. project scope is not included). reserve budget (management undistributed Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Appendix B: Terminology and glossary Terminology B: Appendix An integrated management system An integrated 47 A best practice project control process that is project control process that A best practice A technique used to objectively assess progress. used to objectively A technique The forecast of labour hours and costs required to The Actual direct costs, plus indirect costs allocable to Actual direct costs, plus indirect costs All budgets that have been assigned to the control been assigned All budgets that have When material actual costs are not applied in the same When material actual costs are not applied estimate at completion. A network analysis technique used to predict project dura- used analysis technique A network See The value of completed work expressed in terms of the budget expressed of completed work value The The costs of resources expended in the achievement of work, of expended in the achievement costs of resources The The actual money available for expenditure in the achievement of con- for expenditure in the achievement actual money available The accounts. Distributed budget excludes management reserve and undistributed budget excludes management reserve accounts. Distributed budget. complete the remaining authorised work. It is based on a bottom-up analysis of complete the remaining authorised work. and past and future performance, along with the availability remaining work, is taken into consideration. of resources, which are directly charged to the project, without inclusion of indirect costs. to the project, without are directly charged which Funding. Estimate to completion (ETC). cost. estimated Final Estimated actuals process. Earned value management system (EVMS). Earned value (EVT). technique Earned value Estimate at completion (EAC). Earned value (EV). Earned value management (EVM). Earned value Direct costs. Direct (DB). Distributed budget Critical path analysis. A positive value indicates a favourable position and a negative value indicates value and a negative position a favourable indicates value A positive position. an unfavourable which uses earned value to measure progress objectively. uses earned value which the contract, plus the estimate of costs (direct and indirect) for remaining autho- plus the estimate of costs (direct the contract, rised work. assigned to that work. period as earned value is claimed, an estimate of the material cost is placed in is claimed, an estimate of period as earned value ‘real’ a subsequent period by system until it is replaced in the earned value costs. tion by analysing which sequence of activities (which path) has the least path) has the (which sequence of activities analysing which tion by dates are cal- (the least amount of float). Early flexibility amount of scheduling are using a specified start date. Late dates pass means of a forward culated by from a specified completion pass starting means of a backward calculated by early finish date). calculated project pass’s date (usually the forward based on a structured approach to planning, cost collection and performance to planning, based on a structured approach cost, risk of project scope, schedule, measurement. It facilitates the integration plan for perform- and the establishment of a baseline objectives, and resource ance measurement. tract work. The planning of work and the time-phasing of budgets and ETCs planning of work The work. tract funding for that period. available should be consistent with the known ©Association for Project Management 2008 Indirect See A functionally oriented code established 48 A formal process conducted to assess the con- A formal process conducted An agreed Contract Budget Baseline (CBB) which Budget Baseline (CBB) An agreed Contract An amount of the total allocated budget withheld for An amount of the total allocated budget A group of costs which can be identified to specific A group of costs which Effort of a general or supportive nature which does not pro- which nature or supportive Effort of a general original budget. The duration established at, or near, the time the contract was time the contract the or near, established at, duration The The budget established at, or near, the time the contract was the time the contract at, or near, budget established The The costs for common or joint objectives which cannot be cannot be which objectives common or joint costs for The See Indirect labour, material, supplies, services costs and other charges Indirect labour, An activity of zero duration, principally used to enhance the clarity principally used to enhance of zero duration, An activity All non-labour classes of resource. identified specifically with a particular project or activity. Also referred to as Also or activity. a particular project specifically with identified cost or burden. overhead signed, based on the negotiated contract cost. signed, based on the negotiated contract which cannot be consistently identified with individual projects. cannot be consistently identified with individual which Costs. management control purposes rather than designated for the achievement of a designated for the achievement than management control purposes rather a part of the performance measurement specific task or set of tasks. It is not baseline. of the project structure. tent and integrity of the PMB. The purpose of the IBR is to achieve and main- purpose of the IBR is to achieve The the PMB. tent and integrity of inherent in the PMB and customer understanding of the risks tain a project and its execution. during processes that will operate the management control tasks, other than labour, material and subcontract. Included in ODC are such Included material and subcontract. tasks, other than labour, computer time and services. accommodation, insurance, costs as travel, Overhead. Other direct costs (ODC). Other direct (OTB). baseline Over-target Organisation breakdown structure (OBS). structure Organisation breakdown Original budget. Original duration. Materiel. Milestone. Level of effort (LoE). Level (MR). Management reserve Initial budget. (IBR). baseline review Integrated Indirect costs. Indirect exceeds the contract target cost (CTC) against which a baseline is set to meas- a baseline which target cost (CTC) against exceeds the contract are deemed insufficient to com- When remaining budgets ure performance. seeking approval be increased by the budgets may plete the remaining work, exceeds from the customer to report to a new total budget which in advance the total allo- baseline. Now budget base, or an over-target the original contract cated budget equals the previous CBB plus the previously budgeted margin contribution. contractor plus any signed, based on the negotiated contract cost. signed, based on the negotiated contract duce definite end products. Earned value (BCWP) for LoE always equals the (BCWP) for LoE always products. Earned value duce definite end is performed. work or not any date (BCWS) whether planned budget to to identify the performance responsibility for work on a specific contract. for work to identify the performance responsibility Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 Appendix B: Terminology and glossary Terminology B: Appendix The time-phased budget plan against budget plan time-phased The A depiction of the relationship between 49 Those differences between planned and actual per- differences between Those A defined unit within the contractor’s organisational the contractor’s A defined unit within . A narrative description of products or services to be description of A narrative . A metric for the schedule performance of a project. It is performance of a project. A metric for the schedule The sum of all budgets allocated to the contract. Total sum of all budgets allocated to the contract. The A logical aggregation of work within a control account, of work A logical aggregation A structured process that allows individual risk events and risk events individual A structured process that allows budget). A positive value is a favourable condition while a neg- condition while is a favourable value A positive budget). The action of converting a planning package into a work package. into a work package a planning action of converting The The timing and sequence of tasks within a project, as well as the timing and sequence The The goods and services, including intellectual property, required to be goods and services, including intellectual property, The Schedule. of tasks, dependencies among consists mainly schedule The project duration. project information. and time-oriented resources constraints, tasks, durations, which contract performance is measured. It is formed by the budgets assigned the by It is formed performance is measured. contract which future budgets. For the applicable indirect accounts and control to scheduled measurement the performance to the control account level, effort, not planned and CWBS elements budgets assigned to higher-level baseline also includes less management It equals the total allocated budget undistributed budgets. reserve. overall project risk to be understood and managed proactively, optimizing proj- project risk to be understood and managed proactively, overall opportunities. minimizing threats and minimizing ect success by the difference between earned value and the budget (schedule variance variance budget (schedule and the the difference between earned value earned value ative value is unfavourable. value ative delivered by the project. by delivered supplied under the contract. Statement of work (SOW) Statement of work Supplies. allocated budget. Total Significant variances (SV). Significant variances Schedule variance (SV). variance Schedule Risk management. Rolling wave. Responsible organisation. Responsibility assignment matrix (RAM). Planning package (PP). Planning package Performance measurement baseline (PMB). baseline measurement Performance normally the far-term effort, that can be identified and budgeted in early base- can be identified and budgeted in early effort, that normally the far-term packages. defined into work is not yet line planning, but allocated budget consists of the performance measurement baseline plus all allocated budget consists of the performance measurement baseline plus total allocated budget reconciles directly to the con- The management reserve. budget base. tract formance which require further review, analysis or action. Appropriate thresh- Appropriate analysis or action. require further review, formance which that will the magnitude of variances olds should be established as to analysis. automatically require variance the contract work breakdown structure elements and the organisations structure elements breakdown work the contract accomplishment. assigned responsibility for ensuring their structure which is assigned responsibility for achieving specific tasks. for achieving is assigned responsibility structure which ©Association for Project Management 2008 50 . A product-oriented family-tree division of family-tree division A product-oriented The difference between the total budget assigned difference between the total budget The Budget applicable to contract effort that has not yet effort to contract Budget applicable Resources which are formally assigned by the contractor are formally assigned by which Resources A group of related activities that are defined at the same that are defined A group of related activities significant variances . A description of all individual elements within each level of the level elements within each A description of all individual . See to a contract, WBS element, organisational entity or control account, and organisational entity or control account, WBS element, to a contract, or of expected overrun It represents the amount the estimate at completion. underrun. WBS which is sufficient to define their scope, including tasks, dependencies is sufficient to define their scope, including WBS which and deliverables. been allocated into the performance measurement baseline or placed in baseline measurement into the performance been allocated reserve. to achieve a work package, expressed in money, hours, standards or other expressed in money, package, a work to achieve units. measurable Work package (WPs). package Work budgets. Work-package Variances. (WBS). structure breakdown Work WBS dictionary Variance at completion (VAC). Variance Undistributed budget (UB). Undistributed level within a work breakdown structure. breakdown within a work level hardware, software, services and other work tasks which organises, defines and organises, which tasks services and other work software, hardware, to be done as well as the work the product to be produced, displays graphically the specified product. to achieve Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 51 Actual cost of work performed Apportioned effort Apportioned factor Actual time expended Budget at completion Budgeted cost of work performed Budgeted cost of work remaining Budgeted cost for work scheduled Control account, also known as cost account Control account manager Contract budget baseline Cost performance index Critical path method Cost performance report Cost variance Cost variance percentage Distributed budget Estimate at completion Estimate to completion Earned value management system Integrated baseline review Level of effort Latest revised estimate (same as EAC) Management reserve Organisation breakdown structure Other direct costs Over-target baseline Performance factor Contract target cost Contract work breakdown structure Earned value Earned value analysis Earned value management Earned value technique Original duration Appendix C and acronyms Abbreviations f PMB Performance measurement baseline AE AF ATE BAC BCWP BCWR BCWS CA CAM CBB CPI CPM CPR CTC CV CV% CWBS DB EAC ETC EV EVA EVM EVMS EVT IBR LoE LRE MR OBS OD ODC OTB P ACWP ©Association for Project Management 2008 52 Project master schedule Project master Planning package Planned value matrix Responsibility assignment Risk management Statement of requirement Statement of work index Schedule performance Schedule variance Schedule variance percentage Total allocated budget index To complete performance Undistributed budget Variance at completion Variance at completion percentage Variance analysis report Work package Work breakdown structure PP PV RAM RM SoR SOW SPI SV SV% TAB TCPI UB VAC VAC% VAR WBS WP PMS Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 hieved to hieved 53 SV (cum) 100 100 Appendix D Average Monthly BCWP Monthly Average er/under 1.0 indicates greater/lesser efficiency. er/under 1.0 indicates greater/lesser CV SV BCWP BCWS ACWP BCWP BCWS BCWP BCWP – ACWP BCWP – e/negative indicates ahead/behind planned schedule. e/negative BCWP – BCWS ositive/negative indicates under/over planned cost for work performed. planned cost for work indicates under/over ositive/negative SV Positiv budget. Ov SV (mths) CV% Over/ schedule. achievement. under 1.0 indicates greater/lesser than schedule CV P CPI SPI accomplished so far has been ac work Indicates whether Indicates whether work accomplished so far has been completed within accomplished work Indicates whether SV% Schedule variance Schedule Schedule variance in months in variance Schedule Cost variance percentage Cost variance Cost variance Cost performance index performance index Schedule Schedule variance percentage variance Schedule 4. 7. 2. 1. 3. 6. 5. Earned value equations Earned D.1 BASIC FORMULAE D.1 BASIC ©Association for Project Management 2008 54 SPI BCWP 100 100 ACWP BCWP ACWP C CPI 100 C BA ETC AC – BCWP AC BAC BAC BCWP) BA B EAC EAC BAC BAC BAC BCWP CPI ACWP ACWP BAC BAC VAC VAC AC – EAC AC CWP B A ACWP ACWP (BAC (BAC apolations of future cost assuming past performance include: apolations of future centage complete C Extr VAC % VAC % Spent ETC TCPI (EAC) index required to meet the calculate the future cost performance To estimated out-turn costs. EAC EAC % Compt VAC EA TCPI (BAC) TCPI (BAC) index required to meet the calculate the future cost performance To planned budget. Variance at completion percentage at completion Variance Percentage spent Percentage Independent estimate to completion Independent estimate out-turn costs complete performance index for estimated To Estimate at completion Estimate at Per at completion Variance Independent estimate at completion Independent estimate To complete performance index for planned budget complete performance index for planned To 4. 1. 2. 5. 1. 2. 3. 3. 4. D.3 OTHER FORMULAE D.3 OTHER D.2 FORMULAE FORECAST STATISTICAL INDEPENDENT Earned Value Management: APM Guidelines APM Management: Value Earned ©Association for Project Management 2008 33 4, 15, 19, 36 34, 47 27, 31 36, 39, 48 34, 48 Critical path Critical path 21, 31, 47 D 37 review Demonstration Direct costs 42, 47 19, 24, Distributed budget 18, 19, 42, 47 E Earned value 31 2, 7, 21, 23, 27, management Earned value 5, 9, 3, management system Earned value techniques Earned value 21, 22 units Equivalent 22 Estimate at completion 6, 27, 29, Estimate to completion 30, 47, 54 F cost at completion Forecast 13, 47 20, Funding 18, Funds 18 I Indirect costs 4, 25, 41, 42, 48 baseline review Integrated 17, 24, L of effort Level 22, 29, 42, 46 M Management reserve 18, 19, 32, Material 2, 19, 22, 24, 29, 42 Materiel 48 Milestone 13, 14, 16, 21, 24, 26 complete 21 Milestones 55 INDEX See 25 Commitment 27 46 27, 46 5, 32, 46 27, 32, 46 40, 46, 49 42 46 A Accrual Activity Activity 42 14, 15, 19, 21, 26, performed Actual cost of work 5, Actual time expended 27 Applied direct costs 45 Apportioned effort 22, 23, 46 unpriced work Authorised 45, 46 work Authorised 4, 19, 32, 40, 45 B Baseline 2, 5, 10, 14, 32, 36, 45 Baselining 24 Budget at completion 22, 26, 31, Budget cost type 18 performed Budgeted cost of work scheduled Budgeted cost of work C Change management 9, 32, 34 46 45, Commitment 44, costs 25 Committed budget baseline Contract 18, 19, 45 price 18, Contract target cost Contract 46, 48 structure breakdown work Contract Control account 4, 10, 17, 24, 30, Control account manager 11, 23, Cost performance index 27, 28, 54 Cost performance report 26, 46 Cost variance 22, 25, 46, 53 Criteria 14, 16, 32, 37, 40 ©Association for Project Management 2008 30, 54 46, 50 50, 54 18, 34 40 dictionary 10, 18, 20, 23, 32 Schedule variance variance Schedule 49 22, 27, 43, of work Statement 9, 10, 36, 49 Subcontract 48 13, 19, 25, Subcontractor 25 11, 13, 16, 40 37, Surveillance T index complete performance To allocated budget Total 19, 45, 49 U Undistributed budget 18, 19, 20, V Variance 5, 26, 27, 38, 44, 50 at completion Variance 26, 29, 44, 29 thresholds 28, Variance W 50 dictionary 11, WBS structure breakdown Work 4, 10, structure breakdown Work package Work 11, 13, 14, 15, 16, 56 structure 11, 12, 48 12, 11, structure baseline 18, 19, 20, 2, 5, 8, 13, 36, 49 9, 11, 12, 49 28, 41 O breakdown Organisation Other direct costs 19, 24, 48 48 baseline 41, Over-target Overhead 13, 30, 32, 42 P 54 complete 21, Percentage measurement Performance organisation 49 Performing Planning 2, 13, 18, 24, 41, 49 Planning package 11, 14, 49 Project 2, 7, 9, 10, 21, 32 R Reporting 36, 41, 43, 44 Responsibility assignment matrix 49 organisation 11, Responsible Risk management 9, 33, 49 49 15, wave Rolling S Schedule 5, 13, 15, 23, 27, 36, 49 performance index Schedule Index ©Association for Project Management 2008