Intro to Earned Value Management Systems (EVMS)

Intro to Earned Value Management Systems (EVMS) Robert E. Marmelstein, Ph.D. 10 Mar 2005

Past History Shows…. • Only 16% of software projects are expected to finish on time and on budget • 31% are cancelled before completion • The remaining 53% are late and over budget, with the typical cost growth exceeding the original budget by more than 89% • Of the IT projects completed, the final product contains only 61% of the original functionality. Note: Statistics from the Standish Group International Report: CHAOS Study, Standish Group, 1999.

Reasons for this? • Poor or Unrealistic Planning • Replanning often exacerbates the problem • Tasks not Sufficiently Resourced • Little or No Situational Awareness during Project Execution • Lack of Objective Criteria to Track Progress • Insufficient Data on Progress • No Tools to Correlate Progress Data Against Plan • Inability to Diagnose and Correct Problems

What is EVMS? • A system based on detailed project planning that enables managers to accurately: • Establish and control baseline • Track progress in terms of cost and schedule • Make forecasts • Isolate and diagnose problem areas

EVMS Objectives • Plan all work prior to beginning it; • Measure performance based on an objective set of technical criteria; • Analyze schedule status and projections • Analyze the expenditure of funds in light of the work accomplished (not work scheduled);

EVMS Objectives [continued] • Isolate problems: • Quantify technical problems within the context of cost and schedule parameters; • Not aimed at replacing or changing the process for technical problem detection; • Forecast completion date and final cost; • Take corrective action; • Maintain disciplined control of the performance measurement baseline.

The EVMS Building Blocks • Work Organization • Work Breakdown Structure (WBS) • Scheduling • Budgeting • Work Authorization • Work Tracking and Reporting • Variance Analysis (Cost, Schedule) • Efficiency Analysis • Estimate At Completion

Basic EVMS Terms • Budgeted Cost of Work Scheduled (BCWS) • The original plan • What was I supposed to do by this time & how much was it supposed to cost? • Budget Cost of Work Performed (BCWP) • What did the work I actually accomplished supposed to have cost? • Actual Cost of Work Performed (ACWP) • How much have I spent getting to this point?

Performance Variances • Cost Variance (CV): • CV = BCWP – ACWP • Budget for Completed Work vs. Actual Costs • Schedule Variance (SV) • SV = BCWP – BCWS • Budget for Completed Work vs. Scheduled Costs • Absolute Measures in Terms of $$ • What it Means: • Negative Variance – Behind Plan • Positive Variance – Ahead of Plan • No Variance – On Plan

Performance Indexes • CPI = BCWP / ACWP • SPI = BCWP/ BCWS • Relative Measures of Efficiency • How effective have I been at achieving my planned baseline? • What it Means: • PI > 1 – More Efficient than Planned • PI < 1 – Less Efficient than Planned • PI = 1 – Achieving Planned Efficiency

Planning from the WBS SOFTWARE INTEGRATION PROGRAM SELECTED PSWBS ELEMENTS Product Development Master Planning SELECTED REPORTING ELEMENTS Ada Products Software Tools Standards Ada Study Ada Conversion Ada Approach CWBS EXTENSION FUNCTIONAL ORGANIZATION CPCI #1 MOS CPCI #2 MOLE CPCI #3 MAC WBS DATA SUMMAR I ZAT I ON Control Account Control Account Control Account Marketing Ada Applications Software Engineering Secure Systems Control Account Engineering VP/GM Work Packages Hardware Engineering Control Account BCWSBCWP ACWPBACEAC Control Account LAN Applications Operations Planning Packages OBS DATA SUMMARIZATION

Control Account Elements Planning Packages Future work that has not been detail planned as work packages. They are always scheduled to occur in the future. Work Packages Detailed, short-span tasks, or material items, required to accomplish the CA objectives, typically in the near term Task 1 Work Packages Task 2 Task 3 Task 4 Planning Packages Task 5

Earned Value Techniques A predeterminedamount of value, i.e., budget, that is claimed, or earned, when the work is accomplished. The budget value is earned in one of the following ways: • 0/100 (All or Nothing) • X/Y Percent • 25/75 • 40/60 • 50/50 • Milestone Weights • Level of Effort

Example: 0/100 Task Plan: 2 weeks Budget = $1000.00 • What is: • BCWS? • ACWP? • BCWP? • CV? • SV? P Task #1 Actual: Cost to Date = $1500.00 P Task #1 3 weeks

0/100 Task: Answers • Plan: • BCWS = $1000 • Actual: • BCWP = $0 (No credit if product not finished) • ACWP = $1500 (Actual cost so far) • Variances: • CV = BCWP – ACWP = 0 - $1500 = -$1500 • SV = BCWP – BCWS = 0 - $1000 = - $1000 Need to Roll-Up Results Over ALL Planned Tasks

Earned Value Analysis -The Big Picture

Example: Cost and Schedule Performance (Earned Value) CPI = BCWP/ACWP SPI = BCWP/BCWS

CPI SPI 1.0 1.0 SPI CPI Characterize these Programs Accelerated Under-Executing

ALARMS EVMS Best Practices • Establish unambiguous exit criteria for each task • Take credit for scheduled tasks when the exit criteria have been verified as passed and report actual costs for those tasks • Establish cost and schedule budgets that are within uncertainty acceptable to the project • Realistically allocate labor and other resources to each task • Forecasting is not performed to completion • Soft task completion criteria • More than 20% of the total development effort is LOE • Long task durations • Data is old or inaccurate • Replans require radically more efficiency than achieved to date • Management doesn’t utilize the EVMS results 1.1

Benefits of EVMS • Forces Solid Planning to Occur Up Front • Realistic plan against which to measure performance • Provides Objective Measures of Task Completion • Ties Accomplished Work To Budget • Provides Clear Measures of Project Progress • Fosters Management Decisions within a Framework of Reality!

Don’t Take My Word For It…. “If you don’t measure, there is no real way of determining whether you are improving. And if you’re not improving, you’re lost.” -- Roger S. Pressman “A good metric lets you see if your technical people are doing the right things and doing them well. Moreover, it lets them know too.” -- Lawrence H. Putnam and Ware Meyers “When performance is measured, it improves (it improves by the mere fact it is being measured). When performance is measured and compared to goals, it improves still more. And when performance is measured, compared, and significant improvement is recognized and rewarded, then productivity really takes off.” -- W.L. Creech, General, USAF (ret.) Commander, Tactical Air Command (1979-1984) .

Were Done! Any Questions? Dr. Marmelstein

Books Earned ValueQuentin W. Fleming & Joel M. Koppleman Cost/Schedule Control Systems CriteriaQuentin W. Fleming Project Performance MeasurementRobert R. Kemps Visualizing Project ManagementKevin Forsberg, Ph.D., Hal Mooz and Howard Cotterman Software Artemis ViewsArtemis Management SystemsContact: Patrick Perugini (303) 581-3102Web: http://www.artemispm.com CobraWelcom SoftwareContact: Diana Melton (281) 558-0514Web: http://www.wst.com Software[continued] Dekker TRAKKERDekker Ltd.Contact: Ron Barry (909) 384-9000Web: http://www.dtrakker.com MicroFrameProject Manager (MPM)MicroFrame Technologies, Inc.Contact: Carl Amacker (415) 616-4000Web: http://www.microframe.com Internet Project Management Institutehttp://www.pmi.org US DoD Earned Valuehttp://www.acq.osd.mil/pm Earned Value Bibliographyhttp://www.uwf.edu/~dchriste/ev-bib.html Amazon.comhttp://www.amazon.com EVMS Resources Sean Alexander (703) 503-5000 or (888) 860-0700 salex@meridianet.com

Intro to Earned Value Management Systems (EVMS)