Earned Value Management

Mike Gowlett

Contents• Objective• Why Earned Value Management• EVM Challenges• Plan Maturity Level• Common problems organisations face when trying to implement EV• Earned Value Reporting Architecture• Tools Required• How to implement EV• EV Management Reporting• EV Calculations • Project Dashboard• Reports• Engagement Approach• Costs

Objective

The objective of this presentation is to provide the audience with the following:

• A high level overview of Earned Value Management and the benefits of using this analytical method to measure progress against the plan (schedule) and budget

• To show how to achieve EVM using a combination of Microsoft Sharepoint Services and Microsoft Project 2007

• To demonstrate how a “project dashboard “ provides a near-time consolidated view of project progress across the portfolio

• To communicate the knowledge and skills within the Banking Alliance PMO team

Why Earned Value Management?• The EVM technique allows an organisation to measure time, cost and quality more effectively

• EVM is recognised as an advanced tracking mechanism for projects and programmes originally developed by the US Government in the 60’s

• EVM provides advanced warning of cost and schedule overruns to enable preventative measures and corrective actions to be taken at an early stage

• EVM allows you to monitor the performance of suppliers and staff in near real time

• EVM provides a direct link between budgets, plans, resources and actual delivery

• EVM aids in negotiations with suppliers and internal customers as the schedule and cost impact of change can be identified in advance.

• EVM provides statistics to stakeholders and steering groups showing past, current and predicted performance against baselined plans and budgets

• Earned Value Management (EVM) enhances visibility allowing management to drill down from portfolio through programmes into projects, activities and tasks to retrieve statistics that can be measured against a baseline

• EVM provides a highly visual business change management reporting methodology that support and exception based management style

• Removes the “good news” reporting culture by showing consistently measurable statistics

EVM challenges • There are very few individuals or organisations who have the “know how” to introduce

EVM into banking projects

• MS Project 2007 & 2010 can be used for EVA (Earned Value Analysis) although its time consuming and complex to understand with many defects that impact the reliability of data produced. You need to know where the defects are to avoid issues.

• EVM data can be time consuming to maintain if you don’t utilise collaborative content management and database technology to reduce the cost of data collection

• EVM is beyond the reach of most PMO teams who often do not possess the pre-requisite experience to implement this complex methodology

• Requires basic business intelligence reporting skills to generate trend analysis, dashboards and ad-hoc reporting

• Requires a good understanding of the mathematical equations required to calculate EV

• There are very few training courses to acquire the skills to implement EVM

• While EVM increases the likelihood of success, it does add 0.5-1.0 FTE to a project

• EVM places a high demand on the PMO and project managers as they need to enhance their project plans to an advanced level to ensure the correct data is available ...

Plan Maturity LevelLevel 6 Level 5 Level 4 Level 3 Level 2 Level 1

EVM Requires Level 1

Common Problems Organisations Face When Trying to Implement EV

• Many people trying to implement EV do not understand the statistical analysis method and find it very hard to incorporate the relationships of the mathematical equations to validate & monitor project performance.

• Understanding how to measure EV and what tools to use to consolidate the data is another fundamental part to producing effective earned value analysis.

• Having the appropriate tolerances set prior to base-lining your project plans is key to measuring performance in-line with your contingency budget.

• Additionally knowing how to compare the data within the Earned value reports either on a month to month or a week on week basis.

• Knowing what measurements to monitor to indicate deviation or improvement in performance and understanding what indicators to be aware of within the critical path.

• A lot of organisations don’ t create a planning approach and they find it to complicated to understand the measurement of EV performance, however having the right approach improves senior managements understanding of the EV methodology in practice is formulated. The architecture is key to utilising this EV. Without this, it is very difficult to manage Microsoft project plans to the level of detail that's needed to retrieving Earned Value Management.

Plan Costs Table

ResourcesPlan Table

Resource CostsTable

Budget Table

Repo

rts

WBS

Earned Value Reporting Architecture

SQL Reporting Services

Resource Plan

Time Sheet Data

Budget

Detailed Tasks

Plan Detail Table

Data Mart

• The Banking Alliance Earned Value Management (EVM) approach relies upon three key technologies:

• MS Project 2007• MSP is used to track earned value at the phase or activity level depending upon

the level of granularity required

• Microsoft Sharepoint 2007• Used to track progress of tasks and deliverables within a project • Used to provide a high level dashboard of progress at the portfolio, programme

and project level and provide dynamic reporting to the stakeholders• Allows drill down from high level to low level detail• Stores MS Project plans in MPP and PDF format (for viewing/printing)

• Microsoft SQL reporting Services• Provides scheduled and ad-hoc reporting facilities• Business Objects, Cognos, SAS , Hyperion and MS Access can also be utilised

Tools Required

How to Implement Earned Value

• Establish Objective & Scope– Pick a suitable project

• Arrange Planning Workshop– Agree Management Requirements– Agree PMO Requirements– Agree Reporting Needs– Agree Planning Approach

• Implement Sharepoint – Agree Reporting Tool Set– Install or configure Sharepoint– Load Budget, Resources, Timesheet Data and Plans– Create Reports– Document & Sign Off Process

• Training• Knowledge Transfer• Handover

Programme PlanOverview

PortfolioDashboard

DetailedProject

Task & Deliverables

PlanningPortal

EV Management

Reporting

EV Calculations• The key measures of earned value management are CPI & SPIAcronym Algebraic Equation Explanation of Equation Explanation

BAC No Derivation N/A The sum of all budgets established for the work to be performed on the project

PV (BCWS) Planned % Comp x BAC PV of work at a status date in time The authorised budget assigned to the project or scheduled task

EV<AC = Cost or effort overrun

EV>AC = Under budget/effort

CV EV-AC Ratio of EV to AC A measure of cost performance on a project. A positive value indicates a favorable position and a negative value equals an unfavorable position

AC>EV=Cost overrun

AC<EV= Cost under budget

If SPI is = to 1, The Project/scheduled task is on time

SPI<1 The project/scheduled task is late

If SPI >1 The project/scheduled task is ahead of schedule

EAC (1) AC+ETC Ratio of AC + ETC at a given point in time What is the estimate at complete at the point in time for the remainder of the project or scheduled task.

EAC (2) AC + (BAC - EV) Actual Cost plus (Budget At Completion Minus Earned Value) This formula is called the ‘mathematical’ or ‘overrun to date’ formula However, using the term ‘overrun to date’ is incorrect because the project could be under

on costs and ahead of schedule.This formula assumes the plan will be met for the remaining work (CPI = 1.0), and yields the most optimistic EAC when a project is

not doing well.EAC (3) BAC/CPI Budget At Completion Divided By Cost Performance Index This is called the ‘cumulative CPI’, and assumes the entire project will be done at

the same cost performance (current CPI does not change)EAC (4) BAC/(CPI x SPI) Budget At Completion Divided By (Cost Performance Index

multiplied by Schedule Performance Index)This formula considers both cost and schedule impact on the EAC, and usually

yields the most pessimistic EAC for a project not doing well. If CPI is = to 1 = Within budget

If CPI <1 = Over budget

If CPI >1 = Project costs are under budget

VAC BAC-EAC Difference between BAC & EAC What would be the variance at the end of the project

ETC EAC-AC Difference between EAC and AC The expected cost needed to complete all the remaining work for a project or schedule task.

TCPI (BAC) TCPI = (BAC – EV) / (BAC – AC) Budget At Completion minus Earned Value divided by Budget at completion minus Actual Cost

TCPI (CPI) TCPI = (BAC – EV) / (EAC – AC) Budget At Completion minus Earned Value divided by Estimate at completion minus Actual Cost

CPI EV/AC A measure of cost efficiency on a project. A positive value indicates a favorable position and a negative value equals an unfavorable position

Provides a forecast of the required performance level, expressed as the CPI, which must be achieved on the remaining work in order to meet the project financial goal. The TCPI calculation can look at either the current authorized

budget or the current estimate-at-completion.

EV<PV = Project schedule overrun EV>PV = Ahead of schedule EV =PV =On schedule

AC No Derivation Total costs actually incurred to date in accomplished work performed for a schedule or activity

SPI EV/PV What is the efficiency of the time utilised on the project

EV Represents the cost of work performed at a given point in time i.e. when a status date is selected in MPP

SV EV-PV How much ahead or behind the schedule a project or scheduled task is in terms of cost efficiency.

Project Dashboard

Project Phase/Activity Level EV Report

Detailed Plan in Sharepoint

Analytical Earned Value Graph

1. An assessment on the planning skills available within the project is key to determining the timeline. The project plan(s) will need to be mature before EVM based reporting can be achieved

2. Based upon real life experience within a medium sized bank, It takes between 6 and 16 weeks to implement Earned Value Management into a project

3. The effort and timeline depends upon the size and experience of the PMO, the number of project managers and availability of the tools required to implement the methodology

4. Staff should have previous knowledge of MS Project 2007 and MS Sharepoint 2007

5. Two to three projects teams can be “coached” at the same time

6. A project with a strong PMO is the ideal first project to adopt EVM

Engagement Approach

• This service can be provided via an Consultancy or Systems Integrator Partnership Agreement to avoid increasing contractor headcount for organisations who have headcount constraints

• A fixed price service can be provided after an initial workshop to understand objectives

• Customised Sharepoint templates are provided at no extra cost

• The service can be supplied on a T&M and Fixed Price basis. Indicative figures are provided below :

Costs

Typical Man Days Project Type Cost30 Small Project 27,000.00£ 60 Meduim Project 54,000.00£ 90 Large Project 81,000.00£

120 Programme 108,000.00£

End of Presentation