mahmood porter
TRANSCRIPT
2012 NASA PM Challenge:
Low Cost Earned Value Management System (EVMS) Implementation
Presented by:Zakir Mahmood CGFM, PMPAndrew Porter PMP, SSGB
Presented on: February 22-23, 2012
Agenda
Introduction to Earned Value Management (EVM)• Concepts• Business caseCase Study: Earned Value Management System (EVMS) Implementation at a Federal Agency• Background• Alternative Analysis• Requirements• Approach• Recession Proof EVM Solution• ResultsEVM with AgileConclusionQuestions & Answer
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How well is this project performing?
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Plan $ Actual $
Introduction to EVMConcepts
Time
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What is Earned Value Management (EVM)?EVM is a project management tool, which effectively integrates the scope of work with the schedule and cost elements for optimum investment planning and control.
Why is EVM important right now? Investment capital is scarceGreater emphasis on project success and valueIncreased demand for improved efficiency and ROIIncreased demand for accountability and transparency
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Introduction to EVMConcepts
Variance at Completion
Budget At CompletionEstimate At Completion
Planned Value (PV)
Projected Costs
Estimate To Complete
ProjectedSchedule Delayat Completion
Earned Value (EV)
Cost Variance (CV)
Actual Costs
Status Date
Schedule Variance (SV)
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Introduction to EVMConcepts
Cos
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Time
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Benefits DrawbacksIntegrates project’s scope, schedule, & cost
Time required for data measurement can be considerable
Improves organizational effectiveness
Schedule variances do not address the critical path
Allows for performance analysis Value earned without respect to quality
Provides early warning signals of schedule slippages & cost overruns Root cause of performance issues
are not revealed
Introduction to EVMBusiness Case
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Economic Correction of 2008 Businesses• Slashed budgets & projects• Abandoned or delayed applications
Fee-Funded Federal Agency• Revenues drop by 50% +• Discretionary budgets cut by similar rate
Office of Chief Information Officer (OCIO)• Virtually all projects reevaluated or halted • Delivering successful projects became top priority
Case Study: EVMS ImplementationBackground
Our task: Develop a mechanism, process, artifacts to convey state of IT Investments
Culture Reactive, low morale, high turnoverPolicies SDLC was not adheredProject Scheduling Approach variedProject Budgeting Processes not standardizedIntegration Little internal coordinationReporting Ad-hocAnalysis Rarely performed
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Case Study: EVMS ImplementationBackground
Start of 2008; significant issues within organization
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Criteria Recession-Proof EVM COTS
Duration of implementation process < 1 year > 1 year
Implementation cost 1-2 FTE 2-4% of project portfolio
Change management requirement Low Moderate
Personnel training requirement Low Moderate
PMO maturity requirement Low High
Forecasting accuracy Moderate High
Case Study: EVMS ImplementationAlternative Analysis
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Issue • Limited investment capital available• Little leverage from existing systems & artifacts
Requirements• Develop a project budget process• Improve project schedule process• Link schedule & budget processes• Develop project reporting & analysis processes
Approach• Recession-Proof EVM• Leverage existing systems and artifacts
Case Study: EVMS ImplementationApproach
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Analyze existing processes for EVM capabilities • Identify process to improve• Identify opportunities for automation
Design EVMS solution• Improve existing project scheduling process• Design new project budget process• Identify ways to link schedule & budget: “Four-way Match”
Implement EVMS • Build EVM tools to standardize and automate processes• Integrate schedule and budget processes• Standardize reporting & analysis procedures
Case Study: EVMS ImplementationRecession-Proof EVM Solution
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Planned Schedule Planned Costs
Actual Schedule
Actual Costs
“Four-Way Match”
Activity Resourcing
Activity Costing
Activity Sequencing
Activity Statusing
EVMS Elements
Case Study: EVMS ImplementationRecession-Proof EVM Solution
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EVMS Requirement Solution
Standardize project planning Use SDLC phases to proxy activities
Estimate duration at activity level Summarize planned start & end dates at SDLC phase level
Recession Proof EVM SolutionPlanned Schedule
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EVMS Requirement SolutionDevelop cost estimates at activity level
Require costs to be planned at SDLC phase level
Link resource rates to planned hours Upload blended government and contractor rates
Assign all procurement costs to an activity
Require PM to select a SDLC phase for all procurements
Provide time phased estimates by activity level
Require PM to select a SDLC phase for all procurements
Map control accounts to activities Links Budget Organizations with Project Codes
Recession-Proof EVM SolutionPlanned Costs
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Feature Previous Tool Implemented ToolCosts linked to phase Labor only Both labor & material
Time to cost project Two days Two hours
Excel lines 1,000 150
Rate table linkage Manual Macro-enabled
Time phased Yes; generic dates Yes; precise dates
Project Resource Estimation Worksheet (PREW):Excel based model - derives planned costs from planned schedule
Recession-Proof EVM SolutionPlanned Costs (cont.)
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EVMS Requirement SolutionProject activity start & end dates are routinely updated PM updates project schedule weekly
All project activity % physical complete amounts are updated PM updates physical percent complete
Recession-Proof EVM SolutionActual Schedule
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EVMS Requirement SolutionEnter internal labor time into T&A system by project activity
Leverage cost accounting system, provide training to ensure accuracy
Provide PM resource usage reporting Provide PM resource usage data for validation
Link internal labor costs to project activity level
Leverage Time & Attendance system, General Ledger
Link actual procurement cost to project activity level Leverage General Ledger
Recession-Proof EVM SolutionActual Costs
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Feature Previous Method
Implemented Tool
Leverage of Cost accounting Weak Substantial
Reporting level Project Activity
Data source for procurement costs Cuff records General ledger
Data source for internal labor Not used T&A system
Internal labor reporting Not Available Bi-weekly
Recession-Proof EVM SolutionActual Costs (cont.)
General Ledger, Time & Attendance System:Queries actual costs by project activity; links to project budget
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Feature Previous Method
Implemented Tool
Integrity of EVM Calculations Non-credible Highly credible
Reporting process Ad-hoc Mostly automatedCost & Schedule reporting level Project level Activity level
Variance reporting $ variance at project level
% and $ variance at activity level
Forecasting level Not Available Activity levelForecasting accuracy Not Available Moderately
dependable
Recession-Proof EVM SolutionIntegrate Schedule and Cost
EVM Model:Leverages “Four-Way Match” to calculate EVM scores; generate reports
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Evaluates EVMS elements• Planned costs vs. actual costs• Planned schedule vs. actual schedule
Examines key trends & variances of EVM scores
Values outside tolerances are flaggedLarge variances are researched for root cause• Programmatic• Accounting• Reporting
Recession-Proof EVM SolutionIntegrate Schedule and Cost
Analysis Tool:Provides analyst with overview of key metrics
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Planned CostsBudget Tool
Actual CostsGeneral Ledger,
Time & Attendance System
Actual ScheduleStatus Updates
Financial Analysis
Trend & Variance
Managerial AnalysisPerformance
Finance Division
EVM Reporting
Status Reports
Project Management Office
Recession-Proof EVM Solution Process Map
Planned Schedule
Project Plan
Integrated Process
Project Planning
Project Execution
Monitor & Control
Analyze
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Case Study: EVMS ImplementationResults
EVM reports generated for 30 reports (>$100+M)• Standard reporting performed• Forecast reliability increased• Executive reporting for strategic decision making
EVM analysis is routinely performed• EVM dashboards to draw focus to key EVM metrics• Client staff trained to analyze metrics
Accountability & transparency have increased• Project Manager• Project performance
Project success rate has improved
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ConclusionImplementing Recession-Proof EVM
Requires:• Smaller capital investment (~2 FTE for 1 year)• Lower personnel impact
Succeeds by leveraging existing:• Systems - General Ledger & Time and Attendance• Tools - Project formulation & execution• Policies & procedures – SDLC
Yields:• Majority of EVMS benefits• Foundation for transitioning to a COTS EVMS
EVM Schedule Information for Agile Investments
• Graphical comparison of scheduled Budget vs. Actual (using percentages over time)– Time phased line graph comparing:
• Linear burn rate of planned execution for investment• Planned Burn rate (if non-linear and known)
– Requires a tool that captures this data; update and refine throughout the project life
• Actual execution– Are we on ahead or behind schedule and why?
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EVM Cost Information for Agile Investments
• Compare percentages over time for the following:– Total Cost vs. Planned Cost– Labor Category Breakout Cost vs. Planned Cost
• Separate Labor, SW/HW, Indirect Costs, project contingency funds, etc.
– Labor only vs. Planned Labor Cost• More predictable than HW/SW purchases• Timing and amount of non-labor purchases
are known and under control
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• EVM is a management tool– Requires leadership sponsorship
• Update policies and procedures to drive success– Metrics should drive decision making
• Budget at Completion (BAC) is critical– Tied to every EVM metric except actual cost– Evaluate and improve budgeting tools
• EVM is only as good as the data used to report • Consider Materiality of Investments
– How significant are non-labor costs?– What is the probability that they will be different than the plan?
• Leverage best practices, but allow flexibility to make a tailored solution that works for your investment(s)
Lessons Learned
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Question & Answer
Thank You!
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Appendix
EVM Formulas• Foundation• Variance• Efficiency• Forecasting
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EVM MetricsFoundation
Metric Definition Analytical questionBudget At
Completion BAC Total baseline cost What is the budget for this project?
Planned Value PV Estimated cost of all work
scheduled to be completed
What is the estimated value of the work planned to be done?
Actual Cost AC Cost incurred to accomplish the work
What is the actual cost incurred for the work accomplished?
Earned Value EV Budgeted cost of actual
work completed
What is the estimated value of the work actually accomplished?
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EVM MetricsVariance
Metric Formula Analytical question
Schedule Variance SV SV=EV-PV How is the project progressing against
the planned schedule?
Cost Variance CV CV=EV-AC How is the project progressing against
the budget?
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EVM MetricsEfficiency
Metric Formula Analytical question
Schedule Performance Index SPI SPI=EV/PV
How are we progressing vs. the original plan?
Cost Performance Index CPI CPI=EV/AC What is the value earned per
dollar spent ratio?
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EVM MetricsForecasting
Metric Formula Analytical question
Estimate at Completion EAC EAC = BAC/CPI What is the new projected total
estimate based on CPI?
Estimate to Complete ETC ETC = EAC - AC How much more will the project
cost?