Earned Value Management: Pure Common Sense

chasing And Procurement: What’s The Diffe

A. Elkhodaryrence?

Ian Moody

The Webinar Will Begin Shortly

Agenda

Welcome Housekeeping notes Session starts Q&A End of webinar

Housekeeping Slides will be available on our SlideShare page; the link will be emailed to you

Recording of the webinar will be available to download; the link will be emailed to you

Take the time to complete a post-webinar survey that will pop up at the end

You can type your questions throughout the session

Time will be allocated in the end for the speaker to address your questions

Your Presenter

Ashraf KodariAshraf Kodari, an independent management consultant, and has gained experience through multiple positions in the elds of utility operations, project management, training management, facility management, and health and safety in North America and the Middle East.

During his professional career, spanning over 26 years, Ashraf has spent 15 years managing/sponsoring projects and programs in different elds, including; utilities, training, construction, organisational engineering and IT.

Once upon a time …

Traditional Project Tracking

GANTT Chart ..

Float

TIMEScheduled duration

GANTT Chart … TODAY

Float TIMEScheduled durationActual duration

Cost Tracking

0

50

100

150

200

250

300

350

400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Budget

Actual

Traditional Project Tracking PM looks at schedule and tries to make sense of

data to see if project is on schedule or not. Consider if some activities are ahead and some are

behind … how do you sum up status Sponsor/Senior Management compare planned

expenditures to actual expenditures as project progress indicator

Alternative: EVM!

Started in the 1960s based on US Department of Defense (DOD) Cost/Schedule Control System Criteria (C/SCSC)

In the 1990s, it was mandated for all federal agencies in the US

1. Management2. Value3. Earned

So what do the words in EVM mean?

Definitions for this workshopM

anag

emen

t /

Con

trol

Definitions for this workshopM

anag

emen

t /

Con

trol

Includes:• Setting desired values (planning)• Measuring and comparing• Decision making, problem solving

and implementation.

Valuable Questions If you decide you want to buy a house with certain

features to live in, and you are willing to pay $1M for it …

then you find the house with the features @ $1M … Would you buy the house?

What is the value of the house for you? Then if the house prices drop by 10%, what is the value

of your house now?

Definitions for this workshopVA

LUE

What a customer is willing to pay for a product, service, result or behavior

What a “seller” would accept to part with a product, service or behavior

Value progression in projects 1

Customer is willing to pay certain price ($X) to obtain certain products or services in a specific amount of time.

Value of product or service to customer is $X Customer set the value

Value progression in projects 2

Sponsors/ Senior Management (of seller organization) determine that they are willing to pay $(X-M) to produce the product or service achieving $M gains for shareholders.

Value of product/service to sponsors is $(X-M) Sponsor set the value

Value progression in projects/programs 3 Project Manager (PM) breaks down product/service to

components PM estimates resource requirements to achieve components Estimates are aggregated. If the sum is < $(X-M) then

agreement on value exists between PM & Sponsor PM is now willing to invest $Y for each component, where ∑Y < (X-M)

PM set the value Scope defined

WBS

Cost/TimePlanning

Baseline Set

DefinitionsEA

RNED

Resources consumed and product, service or behavior achieved

Past Tense! The work has been done, and the

planned value was achieved

Questions … again

If you set the value for activity A to be $1000 You finish activity A, but you consumed $1400 in

resources … Did you earn any value, if so … how much?

More details

EVM Parameters

EVM Base Parameters PVPl

anne

d Va

lue

(PV

) Budgeted Cost of Work Scheduled

(BCWS) What the PM decided this work is worth

and approved by sponsor Phased over planned time for resource

expenditures to take place Future Value : Not a Fact

2/5/2015A. Elkhodary23

Jan Feb Mar Apr May Jun Jul Aug Sep OctPlanned Value (PV) $100 $500 $1,200 $2,200 $3,500 $5,500 $8,500 $13,500 $16,000 $17,000

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Planned (Desired) Value ASSUMPTION

EVM Base Parameters ACA

ctua

l Cos

t

(AC

)

Actual Cost of Work Performed (ACWP) The real cost of resources spent (how

much will accounting pay for the work) Mapped to work packages or activities

in progress or already finished Past Value : Measured Value: A Fact

2/5/2015A. Elkhodary25

Jan Feb Mar Apr May Jun Jul Aug Sep OctActual Cost (AC) $100 $205 $1,200 $2,500 $5,000 $8,000 $13,000Planned Value (PV) $100 $500 $1,200 $2,200 $3,500 $5,500 $8,500 $13,500 $16,000 $17,000

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Planned (Desired) Value Assumptionvs.

Actual (Measured) Cost Fact

EVM Base Parameters EVEa

rned

Val

ue

(EV

) Budgeted Cost of Work Performed

(BCWP) What the work performed was planned to

cost Unique amounts to each activity Past Value : Measured Value: A Fact …

with a twist!

2/5/2015A. Elkhodary27

Jan Feb Mar Apr May Jun Jul Aug Sep OctEarned Value (EV) $100 $500 $1,500 $2,500 $3,000 $4,000 $6,500Planned Value (PV) $100 $500 $1,200 $2,200 $3,500 $5,500 $8,500 $13,500 $16,000 $17,000

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Planned (Desired) Value Assumptionvs.

Earned (Measured) Value Fact

How it fits together

EVM Parameters together

EV vs. PV

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Planned (Desired) Value Assumptionvs.

Earned (Measured) Value Fact If we compare EV to PV

we get an indication of schedule performance

Value of work completed vs. Value of work that should have been completed by now

SV = EV - PV

SV

AC vs. PV

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Planned (Desired) Value Assumptionvs.

Actual (Measured) Cost Fact If we compare AC to

PV we get an indication of ???

Remember “Traditional Project Tracking” slide?

?

2/5/2015A. Elkhodary31

Jan Feb Mar Apr May Jun Jul Aug Sep OctEarned Value (EV) $100 $500 $1,500 $2,500 $3,000 $4,000 $6,500Actual Cost (AC) $100 $205 $1,200 $2,500 $5,000 $8,000 $13,000Planned Value (PV) $100 $500 $1,200 $2,200 $3,500 $5,500 $8,500 $13,500 $16,000 $17,000

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Desired & Measured ValuesCompare

SV

CV

Your own crystal ball!

Using EVM to forecast

Cost forecasting using EVM

ETC=BAC-EV

ETC=(BAC-EV)/CPI

EAC=AC+(BAC-EV)

EAC=BAC/CPI

EAC=AC+ETC

How much more money What is the expected final cost

2/5/2015A. Elkhodary34

VocabularyVariable AbbreviationSchedule Variance SVCost Variance CVSchedule Performance Index SPICost Performance Index CPIEstimate At Completion EACEstimate To Complete ETC

Thank you

QUESTIONS?