earned effort analysis

_________________

* Industrial Engineer by FAESA, Business Administrator and Specialist in Business Management by Unilinhares,

MBA in Project Management by FGV e certified as Project Management Professional (PMP) by PMI. More than

14 years of experience in project management activities in several branches and industries, also acted in

Project Management Offices, development of methodologies and implementation of projects in Companies of

Supply Chain, Oil & Gas, Mining, Environment and Consulting in Management. It is currently working as project

control manager in a Multinational Company.

EARNED EFFORT ANALYSIS

RODRIGO CARVALHO PINHO*

ABSTRACT

This paper presents concepts and explanations about how to apply the Earned Effort Analysis

in Projects, showing how the use of this technique should contribute to the project controls

management and predictability of the project results. It describes the elements, formulas,

indicators, results obtained by method and also presents examples of how the Earned Effort

can be implemented.

Keywords: Effort; Project; Project management.

1. INTRODUCTION

Project Management is gaining more prominence in organizations day after day and the best

practices have fundamental importance in this context, mainly when the companies are

planning to improve their performance index and project results.

According to the PMBOK Guide, control is, to compare actual performance, analyzing

variances, assessing trends to effect process improvements, evaluate possible alternatives,

and recommend appropriate corrective action as needed. It can also be defined as an area of

the organization that has expert professionals in project control, responsible for receiving and

treating the information about the performance indicators, to share the results with the

whole project team.

Selection of Project indicators is very important, a critical factor of success, and should be

done as early as possible. Remembering, that the function of an indicator is to provide

necessary information to make a decision and to promote action to keep the project

according to the expected results. If the indicator contributes to the project management and

supports the analysis of performance, showing exactly where the deviation is, we can consider

him effective.

The Earned Effort Analysis was created to provide information to the project manager and / or

project controls area, ensuring that the information about the team effort are available for

analysis and decision-making. The companies that will decide to use this method will show

that they will improve their project controls and see more information, beyond the

conventional indicators.

Currently, the need to evolve and mature in Project management has demanded best

practices, tools and techniques with the potential to contribute, and show the importance of

implementation of better methods in organizations. Aligned to this perspective, the Earned

Effort Analysis is presented to follow with concepts, formulas and practical examples that can

be applied and utilized easily in Projects.

2. ELEMENTS OF THE EARNED EFFORT

The project control is an important way to contribute to the success of projects, and the

Earned Effort Analysis helps the project managers to measure performance and find variances

based on the comparison of worked performed and work planned.

Earned Effort Analysis (EEA) is a method structured to be utilized in all projects that require to

control the effort spent during the implementation period and verify the performance

regarding planned effort.

Based on Earned Value Analyses Method, EEA methodology was developed to show the

results of the project effort through performance indicators, with a comparative between

which the project obtained and what the project spent. It is an easy tool to generate early

warning signals to detect problems and to point opportunities of improvement. It is a valuable

technique to determine gains and losses and provides a means to analyze the performance

and apply corrective actions in projects.

Earned Effort Analysis is not a planning tool. It is an excellent tool to manage the effort

performance during the execution phase. EEA works with cumulative values, integrates

project scope, time and effort through periodic measurements, and allows analysis of project

progress in terms of effort as a function of time, against a baseline set up early in the project.

All elements of the analysis, terms and formulas are presented below:

a. Planned effort

When the project is planned to create the baseline, the scope is divided in work packages and

this structure is named Work Breakdown Structure (WBS). For each work package it is

necessary to create the schedule and estimate the effort. The effort, schedule and scope form

the baseline, represented as a graph of planned effort over time. This is the Planned Effort,

that will represent how the effort must occur over time of the project.

Abbreviation: PE

Description: Amounts of hours planned for a specific period of time.

Unit of measure: Hours

b. Actual effort

During the project execution, it can be verified periodically how the much effort was spent by

project team in the work packages in a specific period of time. This is the actual effort.

Abbreviation: AE

Description: Actual project effort for a specific period of time.


c. Earned effort

Abbreviation: EE

Formula: PE * PPI

Physical Performance Index

Abbreviation: PPI

Formula: Physical Progress Actual / Physical Progress Planned.

Description: Ratio of the Actual progress and planned progress.

Unit of measure: %

Description: It is the value of the work obtained expressed in terms of effort, in a specific

period of time, and considering the ratio of the planned effort and the physical performance

index.


Below is the graph representation of the Planned Effort, Actual Effort and Earned Effort,

considering the distribution of the effort in a specific period of time.

d. Effort Variation

Abbreviation: EV

Formula: EE – AE

Description: Effort Variation (EV) is the difference between the amounts (hours) of the Earned

Effort (EE) and of the Actual Effort (AE).


EV > 0: The level of the actual effort is better than planned effort. Less effort has been spent,

than planned, to complete the planned work. (Good)

EV < 0: The level of the actual effort is worse than planned effort. More effort has been spent,

than planned, to complete the planned work. (Bad)

e. Effort performance index

Abbreviation: EPI

Formula: EE / AE

Description: Effort performance index (EPI) is the ratio of the Earned Effort (EE) and the Actual

Effort (AE).

Unit of measure: %

EPI > 100%: The performance of the project effort is higher than planned. Less effort has been

spent, than planned, to complete the planned work. (Good)

EPI < 100%: The performance of the project effort is lower than planned. More effort has

been spent, than planned, to complete the planned work. (Bad)

f. Total planned effort

Abbreviation: TPE

Description: Total planned project effort (accumulated), at the end of the project.


g. Remaining effort estimate

Abbreviation: REE

Formula: (TPE – EE) / EPI

Description: Is the forecast estimate of the remaining effort, considering the difference

between the amounts (hours) of the Total planned Effort (TPE) and of the Earned Effort (EE),

and ratio of this amount and the Effort performance index (EPI).

This formula considers that the performance for the remainder of the project will be the

same, as it has been until this moment.


h. Effort estimate at completion

Abbreviation: EEAC

Formula: AE + REE

Description: It is the forecast effort (accumulated) at the end of the project. Is the sum of the

Actual Effort (AE) with the Remaining Effort Estimate (REE).


i. Additional Effort to Complete

Abbreviation: AETC

Formula: EEAC - TPE

Description: It is the difference between the Effort Estimate at Completion (EEAC) and the

Total Planned Effort (TPE).


As with other methods, it is recommended that some subjects are considered to obtain

success during the utilization of the Earned Effort Analysis (EEA) in projects, of which stand

out:

• Obtain high organization commitment;

• Promote training for all professionals involved;

• Scope defined, with work break down structured;

• Team defined, with the list of functions;

• Schedule structured, considering all scope defined;

• Effort defined, considering the schedule;

• Database organized to show the EEA indicators;

• Procedures to consistency analysis and validation of information;

• EEA report model and periodically;

• Lessons Learned for continuous improvement.

3. EARNED EFFORT PERFORMANCE

In last topic information were provided about the Earned Effort Analysis as elements,

concepts and formulas, and in this topic examples with simulate situations in a Project will be

presented. Examples following are:

A project in implementation phase, whose scope is the construction & assembly of a small

industrial plant of oil derivatives, planned spent 6.500.000 hours of effort (PE - Planned Effort)

until this period. However, the actual effort (AE) in the same period is 6.900.000 and the

physical performance index (PPI) is 87% showing that the project is behind schedule.

Considering the planned effort (PE) of 6.500.000 hours and the physical performance index

(PPI) is 87%, we can see: Earned Effort (EE) is: 6.500.000 x 87% = 5.655.000 hours

Calculating the Effort Variation (EV), that is the difference between the amounts (hours) of the

Earned Effort (EE: 5.655.000) and of the Actual Effort (AE: 6.900.), we can see:

Effort Variation (EV) is: 5.655.000 – 6.900.000 = - 1.245.000

As the Effort Variation (EV) is less than zero (EV < 0), the level of the actual effort is worse

than planned effort and the project has spent more effort than planned to complete the work.

In that case, this is bad news!

Calculating the Effort performance index (EPI), that is the ratio of the Earned Effort (EE:

5.655.000) and the Actual Effort (AE: 6.900.00), we can see:

Effort performance index (EPI) is: 5.655.000 / 6.900.000 = 81,95 %

As the Effort Performance Index is less than hundred percent (EPI < 100%), the performance

of the project effort in lower than planned and the project has spent more effort than planned

to complete the work. In that case, this is bad news!

Calculating the Remaining effort estimate, that is the difference between the amounts (hours)

of the Total planned Effort (TPE: 7.400.000) and of the Earned Effort (EE: 5.655.000), and ratio

of this amounts and the Effort performance index (EPI: 81,95%), we can see:

Remaining effort estimate (REE) is: (7.400.000 – 5.655.000) / 81,95% = 2.129.347 hours

Calculating the Effort Estimate at Completion (EEAC), that is the forecast effort (accumulated)

at the end of this project, is necessary to sum the Actual Effort (AE: 6.900.000) with the

Remaining effort estimate (REE: 2.129.347).

Effort Estimate at Completion (EEAC) is: 6.900.000 + 2.129.347 = 9.029.347 hours

The results of the project shows that will be necessary more effort than planned to complete

the deliverables, and this Additional Effort to Complete (AETC) the project is the difference

between the Effort Estimate at Completion (EEAC: 9.029.347) and the Total Planned Effort

(TPE: 7.400.000), so it is obtained:

Additional Effort to Complete (AETC) is: 9.029.347 – 7.400.000 = 1.629.347 hours

4. CONCLUSION

The Earned Effort Analysis (EEA) is a methodology of control of effort that can be applied in

projects of all branches, sizes and amounts. It is a complete tool that permit verify the actual

situation of the effort project performance and predicts a likely future results based on

actual performance.

As well as other methods, EEA can be applied in different levels of the work breakdown

structure (WBS) and can allow that change management of the project has information to

keep to the final budget of the project, providing alternatives to decide which deliverables

the effort should be reduced, to save money, or which deliverables should receive more

effort.

It also provides an important contribution to the project control management and

contributes to keeping the project as planned and on budget.

earned effort analysis

Leadership & Management