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Earned Value and PRINCE2®
John Chapman
PRINCE2® is a Registered Trade Mark of the Office of Government Commerce in the United Kingdom and other countries.
Why are we here?
Do PRINCE2® and Earned Value relate to each other?What could be shared for mutual improvement?
PRINCE Processes and the Project Control Lifecycle
PRINCE 2 : the De facto standard
5
Earned Value in 10 Steps1. Requirement
2. WBS
3. OBS
I
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SSMTWTFSSMTWTFSSMTWTFSSMTWTFSSMTWTFSSMTWTFSSMTWTFSSMTWTN15 N22 N29 N06 D13 D20 D27 D035. Plan
6. Budget
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2 0
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S e t B
a s e l i n e
4. RAM
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2 0
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7. Actual Cost
8. Work Performed
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9. Earned Value
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10. Analysis ?
C h a n g e C
o n t r o l
Remember these 3 thingsEV profiles budget over time using standard techniques.
How will we know we’ve delivered it?
EV monitors budget against physical progress.Where are we?
EV calculates value for money by monitoring how efficiently we are turning budget into deliverable.
How are we doing?
What is your cultural IQ?Is asal bapak senan?
1.A mystical form of spirituality?2.A method of reinforcing economic and social alliances?3.A tradition of keeping bad news hidden?
Answer:Asal bapak senan is the Indonesian tradition of honouring
their boss by shielding him from bad news in public. It means ‘keeping father happy’. Supervisors are often told what they want to hear.
So how do we track % complete?
1. Requirement
Project Description : Do we have a project?
3. OBS
4. RAM
2. WBS
WBS : Work Breakdown StructureOBS : Organisation Breakdown StructureRAM : Responsibility assignment matrix
Project Planning & Stage Plan
WBS includes Product Breakdown
Case StudyProduct BreakdownWork BreakdownOrganisation BreakdownResponsibility assignmentQuality Management Strategy
Case Study
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5. Plan
6. Budget0
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2 0
3 0
4 0
5 0
0 1 2 3 4 5
Project Planning & Stage Plan
Case StudyProject plan gives milestone dates with estimated dates by StageStage plan which has the allocation of resource assignment against activities
Case Study
Case StudyBottom up estimate of time by level 4 WBSTotalled by Project Stage
These are days not financial values
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5. Plan
6. Budget0
10
2 0
3 0
4 0
5 0
0 1 2 3 4 5
S e t B a s e l i n e
Case StudyIn the Stage Plan set the baselineIncludes resource allocation by nameAssign costs by name The Cost calculation based on resource cost
In MS Project setting the baseline creates the BCWS (the Planned Value)
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2 0
3 0
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7. Actual Cost
8. Work Performed
Checkpoint Report
Case StudyThe project is underwayWe collect Actual Cost information by WBS element through timesheet analysisWe have weekly reviews to collect % complete and remaining durationThis is reported through a checkpoint report
In MS Project setting the baseline creates the BCWS (the planned value)As we update the Actual duration and remaining duration the CPI is calculated
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2 0
3 0
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0 1 2 3 4 5
9. Earned Value
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2 0
3 0
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10. Analysis?
Time toleranceCost toleranceException report
Earning the valueFor example on an IT ProjectTraining is 0-100 : either you are trained or not trained!
Design could be by weighted milestone
25% on completion of a design workshop50% on issuing a design document25% on design signoff
US Survey says…..over 800 military programs show
that ......no program has ever improved performance
better than the following EAC calculationEAC = BAC
CPIat 15% complete point in programNo-one pays enough attention in the
early stages
Courtesy of Steve Wake
US Survey says…..
Estimate at Complete• Thanks to CPI and SPIt, and a
budget that represents all the work to be done (BAC), .. it is possible to predict when the project will be done and how much will be spent getting there… There is common knowledge and statistical evidence showing this assumption to be valid. The project work is as difficult as it is. Page 34
Case Study : Key Performance Indicator
A mathematical projectionEAC = BAC / CPIEstimate at Complete = Budget at Complete / Cost Performance IndexAssume – BAC is £150,000– CPI is 0.95– EAC = £150,000 / 0.95– EAC = £157,895
Case StudyThis is a quick method of identifying of the estimate at complete(EAC).It does not involve bottom up analysis but does provide a metric and financial value‘However when there is a significant technical issue, only detailed planning of the remaining work can result in a valid EAC’.1
1. Performance Based Earned Value . Paul J Solomon and Ralph R Young, ISBN 9780471721888, page 100
Case Study
A bottom up calculationEAC = AC + ETCEstimate at Complete = Actual Costs plus Estimate to Complete
Case StudyAt End Stage Assessment we now have– Budget At Complete (BAC)– Estimate To Complete (ETC)– Estimate At Complete (EAC)
Is the project still financially viable based on the Estimate at Complete?– Used at End Stage Assessment
Case StudyWe assess risk by type of work and make budget provision on this basisWe consider unknown risks based on a % assessment of the total work
Case Study
Case Study
37
Reporting Graphs
TIME
CO
ST
Plannedcompletion
Planned BudgetBAC
Planned(BCWS)
EAC
Forecast projecttime slip
Actual Cost(ACWP)
Earned value(BCWP)
OD ATE
Forecast cost overrun
Time‘now’
BAC Budget at completionBCWS Budgeted Cost of Work ScheduledOD Original Duration plannedATE Actual Time ExpendedACWP Actual Cost of Work PerformedBCWP Budget Cost of Work PerformedEAC Estimate Cost at Completion
Schedule Variance (time)
ScheduleVariance (cost)
Cost variance
Forecastcompletion
© APM 2008. Reproduced under licence from APM
Concluding messageThe methods used to monitor physical progress in Earned Value can be used in PRINCE2® projects, large or small, simple or complex, any industry.
Book ReferencesThe Earned Value Management Maturity Model, Ray W Stratton, ISBN 1-56726180-9Earned Value Project Management, 3rd Edition, Quentin W Fleming and Joel M Koppelman, ISBN 193069989-1EVA in the UK, Steve WakeAPM Body of Knowledge, 5th Edition, Association for Project Management, ISBN 1-903494-13-3Interfacing Risk and Earned Value Management, Association for Project Management,
ISBN 1-903494-24-9The Mythical Man Month and Other Essays on Software Engineering, Frederick Brooks,
ISBN 0201835959‘Project and Programme Accounting, a practical guide for Professional Service
Organisations and IT’, John Chapman, Project Manager Today Publications, ISBN: 1-900391-14Earned Value Management using Microsoft Office Project, Sham Dayal, J.Ross Publishing,
ISBN 978-1-932159-98-1Work Breakdown Structures, The Foundation for Project Management Excellence, Eric S Norman, Shelly A Brotherton, Robert T Fried, Wiley, ISBN 978-0470-17712-9Performance Based Earned Value, Paul J Solomon, Ralph R Young, Wiley Interscience, ISBN 978-0-471-721888
Thank you to…Steve Wake
Graham Williams [email protected]
John Chapman, Touchstone [email protected]
John Flaherty, OTC [email protected]
Alex Davis, MOD [email protected]
… and members of the EVM SIG
