november 9, 2009 - mpug - microsoft project training and ... · forecasting: - estimate to complete...

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An overview of the core

NOVEMBER 9, 2009An overview of the core elements of the Earned Value Management technique

Presenter:

G M

Ji A d PMPJim Anderson, PMP

Atlanta PMI Presentation, Earned Value Management, 11/09/2009

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Goal of the Presentation

A t ti d l th tA presentation on earned value that allows PM’s to come away with one or two new insights into how to think about and apply earned value.

3Atlanta PMI Presentation, Earned Value Management, 11/09/2009

What It Is Not

A ft t ti A software presentation Highly technical New A suggestion:gg Don’t worry about taking notes I will send you a copy of the slides


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Earned Value Management

P id th t th tiProvides the answer to the question:“How are we doing on the project?”

The typical answers to this question offer comparisons of actualoffer comparisons of actual performance (cost and schedule) to planned performance.



Wh t’ Mi i ?What’s Missing?

An assessment of how much of the project’s objectives (value) have been met versus how much was planned pto be complete by the status date


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P id tit ti i fProvides a quantitative view of:

Cost and schedule variances,

Efficiency indexes (ratios) that are used to predict future cost and schedule performance,

Value created to the status date.



C l i t b t th fCommon complaints about the use of earned value: It’s too complicated. It’s hard to implement (cost/time). Small projects don’t benefit from it.


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T f t i d fi d i Types of cost variances defined in 1950’s

EV concepts emerged from the PERT movement of the 1960’s

Adopted as DoD policy in 1967



Provides an early warning on cost and Provides an early warning on cost and schedule performance. Reliable long-term cost and schedule

performance indicators emerge as early as 15-20% into a new project’s lifecycle.

Allows for true management by Allows for true management by exception. Negative variances attract attention Large positive variances also attract attention


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Core Elements of Earned Value ReportingCore:- Planned Value (BCWS) - Earned Value (BCWP)- Actual Cost (ACWP) - Budget at Completion (BAC)

Cost: Schedule:- Cost Variance (CV) - Schedule Variance (SV)- Cost Variance % (CV%) - Schedule Variance % (SV%)- Cost Performance Index(CPI) - Schedule Performance Index (SPI)- To Complete CPI (TCPI)p ( )

Forecasting:- Estimate to Complete (ETC) - Estimate At Completion (EAC)- Variance at Completion (VAC)


EVM View in MS Project


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EVM Tables in MS Project


Earned Value View [Earned Value Table]


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Earned Value View [Cost Indicators Table]


Earned Value View [Schedule Indicators Table]


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Core Elements of Earned Value Reporting

Planned Value (BCWS) The estimated cost of work scheduled to the status date.

Earned Value (BCWP) The true value of work performed to the status date.

Actual Cost (ACWP) Actual cost of work performed to the status dateto the status date.

Budget at Completion The total budget allocated to a project


Earned Value Reporting isreferenced to a status date

1. Status Date2. Actual Cost3. Earned Value

Planned Value


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Planned Value(BCWS: Budgeted Cost of Work Scheduled)

BCWS is the cumulative cost of work scheduled to the status date.

A graph of cumulative planned values produces the well known S-curve.

Example: The budget for a 4-day task is $100.

If the status date is day three, BCWS is $75.


Cumulative Planned Value Cost Curve

Res

ourc

es

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Time


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Earned Value(BCWP: Budgeted Cost of Work Performed)

BCWP = the value of the work performed to the status date.

BCWP = Project value earned to the status date.

BCWP = Actual Cost (ACWP) +

Cost Variance (CV)


Earned ValueThe True Value of Work Performed

Microsoft Project calculates earned value using:j g

%Complete or,

Physical-% Complete.

%-Complete - calculated automatically, or entered manually.

Physical % Complete is entered manually when the task'sPhysical-% Complete - is entered manually when the task s %-Complete value is not deemed to be an accurate measure of the true value of the work performed or of the work remaining.


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Earned Value CalculationTools > Options > Calculations Page


Microsoft Project Default is %-Complete for Earned Value


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%-Complete

A %Complete value is required in MSP A %Complete value is required in MSP. %complete is the percent of work

completed relative to the amount of work scheduled to the state date.

An easy %Complete scheme: Have not begun work = 0% Working on the task = 50% Finished the task = 100%


Actual Cost Data for EV

Oft ti t l t tOftentimes actual costs are not obtainable in a timely manner or not at all; when that is the case: Use estimated resource rates, or Use loaded labor rates, or Cost all resources at a $1 rate.


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Earned Value = True ValueHow %-Complete and Physical-%Complete differ:

Example Project: Building Stone WallExample Project: Building Stone Wall

Project Goal: Build a stone wall consisting of 100 stones stacked 5 rows high.

The first row of 20 stones can be laid in 20 minutes.

The second row will take 25 minutes because you now have to lift the stones up one row higher, so it takes a little longer.

The third row will take 30 minutes.

The fourth row 35 minutes,

The last row will take 40 minutes to lay, for a total duration for the project of 150 minutes .


Earned Value = True ValueUsing %-Complete vs. Physical-%Complete:

After laying the first three rows the project could beAfter laying the first three rows the project could be said to be 60% physically complete.

First row (20 min.) - 20 minutes total duration.

Second row (25 min.) - 45 minutes total duration.

Third row(30 min.) - 75 minutes total duration.

However, only 75 of the 150 minutes have been spent, so in terms of project duration, the job is 50% complete.


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Earned Value = True ValueUsing %-Complete vs. Physical-%Complete:

fWhich method would you choose for calculating earned value: %complete or physical-% complete?

The answer is it depends.

Whether you are getting paid by the stone or by the minute.or by the minute.

Choose the measure that reflects the true value earned for the work completed.


Actual Cost(ACWP: Actual Cost of Work Performed)

ACWP = Actual Cost of Work Performed to the status date.

Example:

A four day task has a planned value (BCWS) of $100.

The actual costs the first two days were $35/day The actual costs the first two days were $35/day,

If the status date is day three, the actual cost for the reporting period is $95, but the BCWS is still $75.


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Relationships Between the Core EV Elements

Earned Value (BCWP) VS Planned Value (BCWS)Earned Value (BCWP) VS. Planned Value (BCWS)

BCWP VS. BCWS [Work Performed][Work Scheduled]

Earned Value (BCWP) VS. Actual Value (ACWP)a ed a ue ( C ) S ctua a ue ( C )

BCWP VS. ACWP [Budgeted Cost][Actual Cost]


BAC = Budget at Completion

BAC is the sum of the planned value of each task (total cost) in the project schedule.

BAC is the estimate of the final project cost.

BAC is the project’s baseline budget


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Cost Performance Indicators

- Cost Variance (CV)

- Cost Variance % (CV%)

- Cost Performance Index (CPI)

T C l C P f I d (TCPI)- To Complete Cost Performance Index (TCPI)


Cost Variance (CV)CV = (BCWP - ACWP)CV = (BCWP - ACWP)

CV is the amount that has been overspent or under spent for the work performed to the status date.

Answers the question, “By how much is the project is over or under budget?”project is over or under budget?”

0 (on-budget), Negative (over budget), Positive (under budget).


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Cost Variance Per Cent (CV%)CV% = CV / BCWPCV% = CV / BCWP

Relative to planned value, CV% shows what % of planned value was spent to achieve the value earned to the status date.

Answers the question, “By what percent is the project over or under budget?”

The variance can be: CV-% > 0 (over budget), CV-% < 0 (under budget).


Cost Performance Index (CPI)CPI = BCWP / ACWPCPI = BCWP / ACWP

Ratio of earned value to actual cost for the work performed to the status date.

This is a cost efficiency index that shows how efficiently resources are being utilized on the project. y g p j

CPI >= 1 (resources are being utilized well).

CPI < 1 (resources are not being utilized well).


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Cost Performance Index (CPI)

Assumption:Assumption:

Resources on a project will perform at 100% efficiency to achieve the planned schedule, on time and on budget.

For every dollar spent relative to plannedFor every dollar spent relative to planned costs, CPI allows the project manager to monitor how efficiently the project’s budget is being consumed.


To Complete (TCPI)TCPI = (BAC - BCWP) / (BAC - ACWP)TCPI (BAC BCWP) / (BAC ACWP)

The ratio of [remaining work] / [remaining funds] as of the status date.

TCPI is an efficiency index that forecasts how efficiently project resources should be utilized for the remainder of the project to stay on budget or to get back on budgetback on budget.

TCPI > 1 (Resource utilization should be managed closely) TCPI < 1 (Resource utilization can be managed less

stringently)


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Schedule Performance Indicators

- Schedule Variance (SV)

- Schedule Variance % (SV%)

- Schedule Performance Index (SPI)


Schedule Variance (SV)

SV (BCWP BCWS)SV = (BCWP - BCWS)

Measures whether the project is ahead or behind schedule:

0 (on-schedule) 0 (on-schedule),

Negative (behind schedule),

Positive (ahead of schedule).


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Schedule Variance % (SV%)

SV% = SV / BCWSSV% = SV / BCWS

Shows % of scheduled work that has slipped relative to the planned duration, or the % of work that is complete over and above the work scheduled to the status date.

Answers the question, “By what percent is the project behind or ahead of schedule?”

The variance can be: SV-% < 0 (% of work behind schedule), SV-% > 0 (% of work ahead of schedule).


Schedule Performance Index (SPI)

SPI BCWP / BCWSSPI = BCWP / BCWS

This is a schedule efficiency index that shows how efficiently the project team is utilizing the time that is allotted to the project.

SPI >= 1 (good) SPI >= 1 (good).

SPI < 1 (not good).


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Forecasting IndicatorsEstimate To Complete (ETC)Estimate To Complete (ETC) Answers the question, “From the status date forward,

how much will it cost to complete the remaining work?”

Estimate At Completion (EAC) Forecasts the likely final cost of the project at

completion; it includes actual cost to date plus the estimated cost of work remainingestimated cost of work remaining.

Variance At Completion (VAC) A forecast of the difference between the budget at

completion (BAC) and the estimate at completion (EAC)


Estimate To Complete (ETC)

(BAC BCWP) E ti t d t f th k(BAC – BCWP) = Estimated cost of the work remaining from the status date

ETC is used when prior estimating assumptions have become invalid and you need a revised estimate of the cost to complete the remainingestimate of the cost to complete the remaining work.


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Estimate At Completion (EAC)

EAC = ACWP + (BAC - BCWP) / CPI

EAC is an estimate of the likely cost of the project at completion. It accounts for the work already completed plus the cost of the remaining work from the status date

EAC lib t th j t d fi l t b d t EAC calibrates the projected final cost based on past cost performance to the status date.


Variance At Completion (VAC)

VAC = (BAC – EAC)

VAC = the difference between the original project budget and the revised estimated final budget.

In MS Project, EAC is the Total Cost field and BACjis the Baseline Cost field.


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Earned Value Performance Measures

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PMI Practice Standard for Earned Value Management


References: PMI Practice Standard for Earned Value PMI Practice Standard for Earned Value

Management Earned Value Management Using

Microsoft Office Project (Sham Dayal, PMP) Essentials of Project Controls

(Editors: Jeffrey K. Pinto and Jeffrey W. Trailer)( d o s e ey o a d e ey a e )

Applying earned value analysis to your project(http://office.microsoft.com/en-us/project/HA010211791033.aspx)


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Chart The Course

Thank You!

Jim Anderson, PMP, MSPM, [email protected]


Questions?


november 9, 2009 - mpug - microsoft project training and ... · forecasting: - estimate to complete...

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