Evms Presentation (July2006)Repro

GET SMART WITH EVMS

Presented atInstitute of Management Consultants, National Capital RegionJuly 13, 2006

Jim Kendrick, CMCP2C2 Group, [email protected]

EARNED VALUE MANAGEMENT SYSTEMS

Table of Contents

GET SMART WITH EVMS

PowerPoint Presentation 3

Where to Go for More Information 21

PowerPoint Appendix 22

OMB Exhibit 300 EVMS Table 27

EVMS in Civilian Agencies 29

EVMS Guide (excerpts) 31

Presenter: Jim Kendrick Certified Management Consultant P2C2 Group, [email protected] Credits: A Simple but Edible Example of EVMS

• Courtesy of Glen B. Alleman, Niwot Ridge Consulting [email protected]

Slide 14

Software Demo and Contact Information • Ed Knox, C/S Solutions

[email protected]

Slide 32

The P2C2 Group works on the business side of federal programs and information technology. We provide expert support for IT capital programming, which integrates the planning, acquisition and management of capital assets into the budget decision-making and control process. Our consulting services assist agencies and leading contractors in improving asset management, mission results, and compliance with regulatory requirements.

• Strategic Planning • IT Capital Planning and Investment

Control (CPIC) • Business Cases - OMB 300s • CPIC Supporting Documents • Acquisition

• Architecture & Information • Security • Project Management • Earned Value Management • Performance Measurement

http://www.p2c2group.com/

mailto:[email protected]

http://www.niwotridge.com/


http://www.cssi.com/


www.p2c2group.com 3

Why EVMS Is Important

EVMS is like the Project Manager’s headlights looking forward into the future.

Where will the project be in six months, a year, and what can we do to get there on time and on budget?

EVMS is NOT like the taillights looking backwards into the past pointing fingers at what went wrong or could have been.

The headlight idea helps debunk some of the myths about Earned Value Management.

- Matthew J. Morris

www.p2c2group.com 4

EVMS Is …

A Standardized approach to assessing value

Predictive in estimating where your costs and schedules are headed

Diagnostic in locating where the problems are

Proactive by signaling the need for corrective action

Strategic in identifying problems and opportunities across multiple projects

GET SMART WITH EVMS 3

www.p2c2group.com 5

EVMSWhat It Is

What It Measures

www.p2c2group.com 6

EVMS is a Project and Investment Management Process

Integrates:ScopeScheduleCostResourcesTechnical Milestones Estimates final project

costs

Compares planned to actual costs and schedule

Measures project performance


www.p2c2group.com 7

EVMS Helps Answer Questions

When will the project be completed?What is the final cost likely to be?Are we in budget?Is the schedule on track?What’s holding us up?

SOX: The CEO wants to claim that the new software product underdevelopment is an asset worth $2.5 million in annual financial report. That’s what has been spent on the project, but what is the current value of work completed???

www.p2c2group.com 8

Limits of What EVMS Measures

YES: Earned value is direct measurement of the quantity and timeliness of work accomplished.NO: The quality and technical content of work performed is controlled by other processes.


www.p2c2group.com 9

Official Definition of EVMS

An Earned Value Management System (EVMS) is the overall methodology that organizations use to plan, manage, control, and analyze the cost and schedule performance of projects. It encompasses organizational policies, business processes, automation support, standards, and accountability for results.

ANSI-EIA Standard 748

www.p2c2group.com 10

EVMS & Project Management



EVMS and Project Management

© Project Management Institute, 2004, PMBOK

http://www.pmi.org


EVMS: An Adult Approach to Project Management

OrganizationWork BreakdownProject OrganizationResponsibility Assignments for Control AccountsWork AuthorizationScheduling

BudgetTime-Phased Budget as Performance Measurement BaselineManagement Reserve for in-scope RisksDistributed and Undistributed BudgetPlanning Packages for Far-Term Activities

Cost AccumulationDirect CostsIndirect Costs

Performance MeasurementIndicators of work progress and schedule statusRelationship of planned cost and schedule to actualEarned ValueActual Cost

Variance AnalysisUsing and Acting on EVMS Calculations

Replanning (must be authorized)Improvements to EVMS TrackingInternal Monitoring and Control



Hands On: The Cookie Project

A Taste of EVMS


A Simple but Edible Example

EVMS© by Glen B. Alleman, dba Niwot Ridge Consulting, Niwot Colorado. All rights reserved.



EVMS of Our Cookie Baking Process

Our “Plan”40 cookies per batch5 batches per hour (200 cookies per hour)Schedule: 5 hours to make 1,000 cookiesBudget cost per cookie: $0.05Total Budget = $50.00

AnalysisAfter one (1) hour we’ve produced 150 edible cookiesOthers were burnt, some hit the floor, the kids ate some, the dogs begged for othersActual cost of ingredients after one hour (ACWP) + $9.00

© by Glen B. Alleman, dba Niwot Ridge Consulting, Niwot Colorado. All rights reserved.


After One Hour of Making Cookies

Simple EVMSBCWS = $10.00

BCWP = 150 cookies x $0.05/Cookie = $7.50

ACWP = $9.00

Cost and Schedule VarianceSV = BCWP – BCWS = -$2.50 (we’re behind schedule)

CV – BCWP – ACWP = $7.50 - $9.00 = -$1.50 (we’re over budget)

SPI = BCWP / BCWS = 0.75 (we’re running at 75% of planned schedule)

CPI = BCWP / ACWP = 0.833 (we’re running about 17% over budget)




Forecasting the Cookie Schedule and Budget

Independent Estimate at Completion (IEAC) = BAC / CPI

= $50.00 / 0.833 = $60.00

VAC = BAC – IEAC = $50.00 - $60.00 = -$10.00 ($10 over)

ISAC = 5 hours / SPI = 5 / 0.75 = 6.67 hours

It will take 6-2/3 hours and $60.00 to make 1,000 edible cookies if the productivity of this project doesn’t improve.



Can We Catch Up?

TCPI = “To Complete” Performance Index

TCPI = (Budget – BCWP) / EAC – ACWP

EAC = the amount we estimate we will spend at the end

The numerator (Budget – BCWP) is how much work is left

The denominator (EAC – ACWP) is how much we have left to spend

If EAC = IEAC, then TCPI = CPI

“If we don’t change our performance, IEAC is

the correct estimate of the final cost.”




Our “Catch Up” Plan

We want to finish this little baking exercise with a $50.00 budget

TCPI = (Budget – BCWP) / EAC – ACWP

TCPI = (50.00 – 7.50) / 50.00 – 9.00)

= 42.50 / 41.00 = 1.036

We must perform at 103.6% of the originally planned performance in order to maintain the budget goal.



A Simple EVMS Chart




Putting this Simple Concept into Practice

EVMS can be deployed in many ways. A

straight forward way is to “micro-schedule” the

work activities.



Micro-Schedule

Micro-scheduling does NOT mean micro-managing

It means planning at a sufficient level of detail to identify useful tasks that can be measured in days (3 to 5) or at most a week.

Micro-schedule consists of:

Objective completion criteria – so we know when we are done

“Budgets” and “Values” = usually representing person days and some measurable value to the customer in terms of dollars

Planned Completion Dates – so we know when to expect these tasks to be done.




The Basic Recipe for EVMS


The Standard: ANSI/EIA 748

The standard is copyrighted and may be ordered for about $60 from:

GLOBAL ENGINEERING DOCUMENTS15 Inverness Way E. Englewood, CO 80112 (303)397-7956 (800)854-7179

Related information but not the entire standard is available at the website of the Office of the Secretary of Defense:www.acq.osd.mil/pm



The 32 Criteria of the Standard

Incorporate authorized changes in a timely manner, reflecting the effects of such changes in budgets and schedules …

2.5 Revisions and Data Maintenance

At least on a monthly basis, generate the following information on the control account and other levels … (cost and schedule comparisons)

2.4 Analysis and Management Reports

Record direct costs in a manner consistent with budgets in a formal system controlled by the general books account

2.3 Accounting Considerations

Schedule the authorized work in a manner which describes the sequence of work and identifies task interdependencies …

2.2 Planning, Scheduling, and Budgeting

Define the authorized work elements for the program …

2.1 Organization

Example CriterionCategory


What You Need to Do EVMS

TO START:

A projectA project manager in chargeA defined scope of workA Work Breakdown Structure (WBS) with clearly assigned work packagesAccurate cost estimates broken down by WBSA Schedule tied to the WBSIntegration with policies and financial information

TO CONTINUE:

Effective project managementAccurate project status dataDetailed tracking of milestones, resource use including money and people, and schedulePrompt and accurate financial informationStatus reviews at least monthlyCorrective actionOngoing project control



Analyze

Control

Manage

Plan Project PlanWBS – Schedule - Cost

Manage Work, Schedule, Cost

Performance Review –Corrective Action

Lessons LearnedPolicy Improvement – Process Improvement

The EVMS Process


The EVMS Measurement Norm is 1.0

CostsLess than 1.0 is more expensive than planned Greater than 1.0 is more cost efficient than planned

ScheduleLess than 1.0 means behind schedule, less efficient performanceGreater than 1.0 is better than planned

1.0 = 100% = as planned



EVMS Formulas

Estimated Cost to Complete (ETC) - Example Uses EAC1: (EAC1-BCWP)ETC

Percent Variance at Completion 2 (VACBAC x 100%)VAC2%

Percent Variance at Completion 1 (VACBAC x 100%)VAC1%

Variance at Completion2 (VAC2) (BAC minus EAC2)VAC2

Variance at Completion1 (VAC1) (BAC minus EAC1)VAC1

Estimate at Completion2 (EAC2) = ACWPcum +(Performance Factor (PF2) X (BAC-BCWP)EAC2

Estimate at Completion1 (EAC1) = ACWPcum +(Performance Factor (PF1) X (BAC-BCWP). PF1 is (1/CPI).

EAC1

Schedule Performance Index (SPI) (CPI) _ (BCWP/BCWS)SPI

Percent Schedule Variance (SVBCWS) x 100%SV%

Schedule Variance (BCWP-BCWS)SV

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

Percent Cost Variance (CVBCWP) x 100%CV%

Cost Variance (BCWP-ACWP)CV


The Power of EVMS

EVMS Transforms Your Basic Project Data into Powerful Measures of Performance



EVMS GraphsCost

Actual Costs(ACWP)

Earned Value(BCWP)

Planned Value(BCWS)

EAC(Forecast)

BAC(Total Budget)

ScheduleSlippage

Cost Overrun

SpendingVariance

ScheduleVariance

(SPI)

CostVariance

(CPI)

ETC

NowStart Done


Software for automating the EVMS process

Time ProjectManagement

Software

EVMSTools

Software

AccountingSystem

Purchasing

Organizations use many different combinations of applications software to

integrate EVMS with overall business systems



EVMS Software

Large projects and enterprise-wide EVMS require software supportSummary EVMS functions in products like MS Project and eCPIC cannot fully implement EVMS Several leading software companies provide excellent solutionsA critical issue is how well the EVMS software integrates with other enterprise systems


Demo by C/S Solutions

A demo is worth a thousand words

Ed KnoxSales Manager, Federal Sector C/S Solutions, Inc. http://www.cs-solutions.com/

P.O. Box 231420 Centreville, VA [email protected](703) 266-7980 (Office) (571) 334-4214 (Cell)

C/S Solutions is a leading software company supporting project management with earned value analysis, schedule risk software, and implementation services.



Putting EVMS to Use


EVMS can boost consulting profits

Monthly or WeeklyProgress Reports

OptimizedFinancial Results

Cost,Schedule

Status

ScopeWBS,IBR

DetailedBudgeting &

Planning

Profits

Change methods?Change staffing?

Rebaseline?Ask for more money?

CorrectiveAction



Walk on Water for Clients

Engage in Change Management Necessary for EVMSUse EVMS analysis to pinpoint problemsImprove organizational effectivenessAlign financial systems and project/investment accountabilityReduce cost and schedule overrunsImplement corrective actions to address problems

Learn more about EVMSUse best practices for project managementPartner with EVMS expertsIntegrate EVMS with other critical capabilities necessary for client organization effectiveness:

Planning and budgetingInvestment decisionsQualityHuman ResourcesFinancial managementStrategic Outcomes

Help Clients to: Success Tips for Consultants:


EVMS: One of the Tools in the P2C2 Consulting PracticeDepartment of Labor:Planning Department-Wide

ImplementationRequirementsStatus ReviewGap AnalysisAlternatives / CBAImplementation PlanAcquisition User GuideChange ManagementPilot ImplementationPolicy SupportInterface with Core FinancialsAssessment and Recommendations

Department of Homeland Security:Integrate EVMS Into Major New Initiative

Project PlanWork Breakdown StructurePhasing, Schedule, MilestonesIndependent Government Cost EstimateAcquisition Plan

Department of AgricultureApply EVMS to Exhibit 300s

Funding TableEVMS StatusCost Analysis for Supporting Documents



Where to Go for More Information

OMB’s Refers to the Office of the Secretary of Defense EVMS Site:

http://www.acq.osd.mil/pm/

HHS OCIO IT Earned Value Management Processes and Procedures:

http://irm.cit.nih.gov/policy/HHS-EVM-Procedures.doc

EVM Bibliography – David Christensen, Ph.D.

http://www.suu.edu/faculty/christensend/ev-bib.html

http://www.p2c2group.com

Project and Program Management Solutions, International

http://www.ppmsintl.com/

Humphreys & Associates, Inc.http://www.humphreys-assoc.com/

Niwot Ridge Consultinghttp://www.niwotridge.com/

Project Management Institutehttp://www.pmi.org/


Scheduling Is Important

© The New Yorker, April 24, 2006



APPENDIXMore Information


EVMS Requirements for Federal Projects: Legislation

Government Performance and Results Act of 1993 – Mandates the use of performance metrics.

Federal Acquisition Streamlining Act of 1994 – Requires agency heads to achieve, on average, 90% of the cost and schedule goalsestablished for major and non-major acquisition programs of the agency without reducing the performance or capabilities of the items being acquired.

Clinger-Cohen Act of 1996 – Requires establishment of the processes for executive agencies to analyze, track, and evaluate the risks and results of major investments in IT and requires reporting on the net program performance benefits achieved by agencies.



EVMS and Sarbanes-Oxley Act

Corporate financial statements must estimate accrued cost and investment valueWill schedule delays impact revenue?What if EAC deviates from planned costs?

EVMS can help provide more accurate information needed for corporate financial statements.


EVMS Requirements for Federal Projects: Policy

OMB Circular A-11 (Part 7, Planning, Budgeting, Acquisition & Management of Capital Asset) – Outlines a systematic process for program management, which includes integration of program scope,schedule, and cost objective; requires use of earned value techniques for performance measurement during execution of the program; specifically identifies ANSI/EIA Standard 748.

OMB Memorandum M-04-24, “Expanded Electronic Government (E-Gov) President’s Management Agenda (PMA) Scorecard Cost, Schedule and Performance Standards for Success.”

OMB Memorandum M-05-23, “Improving Information Technology (IT) Project Planning and Execution.”



EVMS principles: ANSI/EIA 748Plan all work scope for the program to completion.Break down the program work scope into finite pieces that can be assigned to a responsible person or organization for control of technical, schedule and cost objectives.Integrate program work scope, schedule, and cost objectives into a performance measurement baseline plan against which accomplishments may be measured. Control changes to the baseline.Use actual costs incurred and recorded in accomplishing the workperformed.Objectively assess accomplishments at the work performance level.Analyze significant variances from the plan, forecast impacts, and prepare an estimate at completion based on performance to date and work to be performed.Use EVMS information in the company’s management processes.


Key Concepts

STATEMENT OF WORK. The SOW communicates the work scope requirements for a program, and should define the requirements to the fullest extent practicable. It is a basic element of control used in the processes of work assignment and establishment of program schedules and budgets. If the work scope can only be defined in general terms, it will be necessary to maintain added flexibility in program plans and controls to allow for future developments.



Key Concepts

CONTROL ACCOUNT - A management control point at which budgets (resource plans) and actual costs are accumulated and compared to earned value for management control purposes. A control account is a natural management point for planning and control since it represents the work assigned to one responsible organizational element on one program work breakdown structure element.

WORK PACKAGE - A task or set of tasks performed within a control account.


Key Concepts

MILESTONE - A schedule event marking the due date for accomplishment of a specified effort (work scope) or objective. A milestone may mark the start, an interim step, or the end of one or more activities.

PERFORMANCE MEASUREMENT BASELINE - The total time-phased budget plan against which program performance is measured. It is the schedule for expenditure of the resources allocated to accomplish program scope and schedule objectives …



Interpreting EVMS numbers:A positive variance indicates that the project is ahead of schedule or under

budget. Positive variances might enable you to reallocate money and resources from tasks or projects with positive variances to tasks or projects with negative variances.

A negative variance indicates that the project is behind schedule or over budget and you need to take action. If a task or project has a negative CV, you might have to increase your budget or accept reduced profit margins.

Ratios, such as the cost performance index (CPI) and the schedule performance index (SPI), can be greater than 1 or less than 1:

A value that's greater than 1 indicates that the project is ahead of schedule or under budget.

A value that's less than 1 indicates that you're behind schedule or over budget. For example, an SPI of 1.5 means that you've taken only 67 percent of the planned time to complete a portion of a task in a given time period, and a CPI of 0.8 means that you've spent 25 percent more time on a task than was planned.

This slide © 2006 Microsoft Corporation

http://www.microsoft.com/office/showcase/earnedvalue/default.mspx


Interpreting EVMS ChartsPlanned Costs and Schedule

1. The vertical y-axis shows the projected cumulative cost for a project.

2. The horizontal x-axis shows time.3. The planned budget for this project shows a steady

expenditure over the lifetime of the project. This line represents the cumulative baseline cost.

Actual Costs and Schedule

1. The status date determines the values Project calculates.

2. The actual cost (ACWP) of this project has exceeded the budgeted cost.

3. The earned value (BCWP) reflects the true value of the work performed. In this case, the value of the work performed is less than the amount spent to perform that work.

This slide © 2006 Microsoft Corporation

http://www.microsoft.com/office/showcase/earnedvalue/default.mspx


OMB Exhibit 300 EVMS Table



FEDERAL SECTOR REPORT

June 2004

EVMS IN CIVILIAN AGENCIES Earned Value Management Systems (EVMS) are galloping into the federal civilian arena, promising to change the way agencies and their contractors conduct business. The change is occurring because the Office of Management and Budget (OMB) has mandated that agencies must comply with an EVMS standard in order to receive funding for the development, modernization, or enhancement (DME) of major information technology investments. EVMS is popping up on agency management reviews. And, if OMB has its way, there will be a requirement in the Federal Acquisition Regulation (FAR) requiring an EVMS clause in certain contracts. EVMS is a structured procedure for project and investment management. It integrates the investment's scope of work with schedule and cost elements for better investment planning and control. The qualities and operating characteristics of earned value management systems are described in American National Standards Institute (ANSI)/Electronic Industries Alliance (EIA) Standard -748. Earned Value is also becoming an area of practice recognized by the Project Management Institute, a certifying body for project managers. EVMS has been used for years and years at the Department of Defense, but the emphasis that OMB is placing on the ANSI/EIA standard ensures that it will be widely applied at civilian agencies as well. Defense uses it largely to track and evaluate contractor performance, take corrective action to avoid or mitigate cost overruns, and follow through on performance management of its planning and budgeting system. It fits in very well with the emphasis on Performance Based Service Acquisition (FAR 37.6) and annual performance plans. There are software tools for tracking EVMS--with names such as C/S wInsight, Welcom Cobra, and Dekker Trakker. Primavera has a powerful EVMS component, and Microsoft has been busy adding EVM functions to MS Project. However, EVMS is primarily a business process and project management method, not a "software thing." As business process, EVMS is a methodology for:

• Planning all work for the program to completion. • Breaking down the program work scope into finite pieces that can be assigned to a responsible

person or organization for control of technical, schedule and cost objectives. • Integrating program work scope, schedule, and cost objectives into a performance measurement

baseline plan against which accomplishments may be measured (including the control of changes to the baseline).

• Using actual costs incurred and recorded in performing the work. • Objectively assessing accomplishments at the work performance level. • Analyzing significant variances from the plan, forecast impacts, and preparing an estimate at

completion based on performance to date and work to be performed. • Applying EVMS information in the agency management processes.

The ANSI/EIS standard is based on 32 criteria, which are accessible at http://www.acq.osd.mil/pm/faqs/criteria.htm. Additional links:


• A helpful listing of articles about EVMS is at Niwot Ridge Resources, http://www.niwotridge.com/Resources/DomainLinks/EarnedValue.htm.

• David Christensen maintains a huge EVMS bibliography at http://www.suu.edu/faculty/christensend/ev-bib.html

• The EVMS website referenced by OMB is http://www.acq.osd.mil/pm/.

WHAT CAN YOU DO WITH EVMS?

Now that you're required to embrace EVMS, what can you do with it?

For a fairly simple-minded management tool (costs, schedule, work performed), you can actually do quite a bit with it:

It's "project management for adults," as one person put it. It builds on project management software, like MS Project and Primavera, to give you a very good idea of how you're doing in terms of schedule and cost … and whether you will complete the project over or under budget.

Agency leaders, even non-quantitative types, get the idea very quickly. EVMS results can be summarized visually with bulls-eye charts and trend analyses. Projects that are over budget, behind schedule, or crash diving into oblivion will be identifiable immediately.

For government project managers, EVMS can quickly identify which work packages in the Work Breakdown Structure are causing problems. It is also a tool for monitoring contractor performance, and EVMS gives the government mid-level manager some leverage: Shape up, contractor, or top management will know you're a turkey because of the EVMS results.

On the other hand, well-managed contracts look really good, and this can be a competitive edge for winning new business. What's more, financial executives in contracting firms love it: The project is tracked by the value of work completed, and you have a pretty good idea of whether the contract is profitable or headed for doom. For the increasingly popular firm-fixed price contracts, the EVMS tool is crucial.

Of course, good management doesn't happen through artificial intelligence. It takes qualified managers--on both the government and contractor sides--to use EVMS well. This means a carefully planned work scope, Work Breakdown Structure, milestones, realistic metrics, and a realistic cost baseline. Accurate data about the schedule, work performed, and costs are needed on at least a monthly basis. What's more, the bottom line is to use the EVMS results regularly to monitor results and take corrective action. EVMS tools require smart and experienced managers who are proactive.

For Exhibit 300s, Circular A-11 requires agencies to use EVMS for DME investments. So obviously, Section I.H. Funding Plan requires considerable detail. But EVMS should also tie to the Acquisition Plan, since major contractors are required to have/use an ANSI/EIA-748 compliant EVMS system. EVMS also is a tool for mitigating Project Risks, and generally the project risk cost should be monitored in EVMS.

LINK OF THE MONTH: OMB UPDATES

Go to http://www.feapmo.gov for updates to the Federal Enterprise Architecture.

Jim Kendrick Certified Management Consultant P2C2 Group, Inc. 4101 Denfeld Avenue Kensington, MD 20895 [email protected] 301-942-7985


P2C2 Group, Inc. Federal Applications of EVMS

Earned Value Measurement Methodology Earned Value Management Federal Agencies are implementing an Earned Value Management Methodology. It will be applicable to the "Select" and "Control" phases of large information technology (IT) investments. It will also be applicable to projects in a mixed lifecycle where large investments are made to upgrade or extend systems or applications in the operations and maintenance phase.

What Is Earned Value Management? Earned Value Management (EVM) is an approach to project and investment management that integrates the investment's scope of work with schedule and cost elements for optimum investment planning and control.

OMB Guidance for IT Capital Investment According to Office of Management and Budget (OMB) Circular A-11, "you should use earned value management (EVM) and an EVM system that meets ANSI/EIA Standard 748-A, to plan and control both government and contractor cost and schedule for any development work whether conducted during the planning phase (like building and testing prototypes) or in the full acquisition phase (like designing, developing, producing, implementing or integrating assets). Comprehensive planning, performance baseline maintenance and earned value analysis provides early insight into performance trends and variances from initial plans, allowing decision makers enough time to take corrective action." In addition, OMB suggests that agencies "require contractors to use earned value management to plan, manage and report contract performance, especially for technically complex and high risk development or integration efforts." Goals for the EVM initiative are to:

• Achieve compliance with OMB requirements and the ANSI/EIA standard

• Provide the CIO and Agencies with a structured method for reviewing IT cost and schedule performance

• Implement automation support for IT project managers that is practical and usable

• Integrate EVM into a comprehensive IT management strategy that fits well with project management best practices, the capital planning and investment control, acquisition planning, and system development and lifecycle management.

• Implement a cost-effective solution for launching and maintaining an ongoing EVM system.

Why Is an Earned Value System Important? EVM puts schedule variances in the spotlight—something that generally cannot be seen in traditional financial reporting, which is usually limited to planned and actual costs. With EVM, it is possible to compare the value of work actually performed to the work that had been scheduled. To illustrate, perhaps an annual budget of $20,000 has been planned to train 100 system users. Over the year, the actual cost is $18,000 but only 50 users have been trained. Cost reporting alone would make it appear that the training expenditure is under budget, but in fact the training activity is behind schedule and ultimately may cost much more than the $20,000 originally planned.

Cost

Work

Schedule

EVMEVM


P2C2 Group, Inc. INTRODUCTION TO EVM

Costs

Schedule

WBS with Milestones

Overall Work Scope

Costs

Schedule

WBS with Milestones

Overall Work Scope

Data Needed for EVM

You Already Use the Data Elements for Tracking Earned Value

Earned value measurement depends on data elements that are already developed or monitored by project managers:

• The foundation is the work scope, which drives the overall requirement.

• The Work Breakdown Structure (WBS) organizes the overall work into manageable activities with milestones.

• The schedule orders the activities and milestones in the WBS into a logical sequence. EVMS compares planned and actual schedules.

• Costs are identified for activities, both in terms of budgeted costs and actual costs.

EVMS Transforms Your Basic Project Data into Powerful Measures of Performance

Variance Analysis

By Work Breakdown Structure Description SV CV VAC SV CV ACV SPI CPI TCPI1.0 Upgrade Application ↓ ↔ ↑ -$875 -$28 -$1,360 0.67 0.98 0.84

1.1 Data Conversion ↔ ↔ ↔ -$1 1.00 0.99 1.00

1.2 Web Hosting Environment ↓ ↔ ↑ -$875 -$24 -$1,356 0.64 0.98 0.78

1.3 Network Switch ↔ ↔ ↔ 1.00 1.00 1.00

1.4 COTS Upgrade ↔ ↔ ↔ 1.00 1.00 1.00

1.5 Integration Services ↔ ↔ ↔ -$1 1.00 0.95 1.00

1.6 Testing ↔ ↔ ↔ -$2 1.00 0.98 1.00

Values in K Dollars

EVM reports provide a clearer idea of what is happening within the WBS for each project by tracking: Schedule Variance (SV), Cost Variance (CV), estimated Variance at Completion (VAC), At Completion Variance (ACV), Schedule Performance Index (SPI), Cost Performance Index (CPI), To Complete Performance Index (TCPI), and other measures.


P2C2 Group, Inc. Steps for Implementing EVM at the Project Level

Organize the project team and the scope of work, using a work breakdown structure. Each task should have a single WBS number with a single organizational unit responsible for it.

Schedule the tasks in a logical manner so that lower level schedule elements support other

elements and the top level milestones. Use of robust project management software, such as MS Project or Primavera, is recommended.

Allocate the total budget resources to time-phased segments. Where useful for

management, the data may be broken down by Federal and contractor costs.

Establish objective means for measuring work accomplishment. Budget should be earned in the same way that it was planned.

Control the project by analyzing cost and performance variances, assessing final costs,

developing corrective actions, and controlling changes to the integrated baseline.

Measurement of work accomplishment for EVM depends on the nature of your project. Here are some examples:

Instructor hours of training delivered Student hours of training received Number of students who achieve certification (or pass tests) based on training Number of mail servers replaced Number of mail server accounts upgraded Development of software module Completion of beta testing of software module with 100 trial users Acceptance of system documentation for software module Acceptance testing of software module Certification and Accreditation of Software module 1,000 hours of hotline support provided 99% of hotline questions answered in 24 hours or less 1,000 client desktops upgraded to XYZ


P2C2 Group, Inc. EVMS Terminology AWCP: Actual Cost of Work Performed. Shows actual costs incurred for work already performed by a resource on a task, up to the project status date or today's date. Shows actual costs incurred for work already performed by a resource on a task, up to the project status date or today's date.

BAC: Budget at Completion. An estimate of the total project cost.

BCWP: Budgeted Cost of Work Performed. Shows how much money the work actually performed should have cost, according to the project baseline.

BWCS: Budgeted Cost of Work Scheduled. Indicates how much of the budget should have been spent in view of the baseline schedule and cost. BCWS is calculated as the cumulative timephased baseline costs up to the status date or today's date.

Control Accounts. A management control point at which budgets (resource plans) and actual costs are accumulated and compared to earned value for management control purposes. A control account is a natural management point for planning and control since it represents the work assigned to one responsible organizational element on one program work breakdown structure element. In control accounts, defined segments (packages of work that must be accomplished) have clearly defined budgets that can be compared to actual cost data from the financial system. In addition, the segments (work packages) must be defined in such a way that it is possible to measure or clearly estimate the extent to which they have been completed. Using control accounts requires the integration of data from budgets, cost accounting, project plans, and actual project performance.

CV: Cost Variance. The difference between the budgeted cost of work performed [BCWP] on a task and the actual cost of work performed [ACWP]. If the CV is positive, the cost is currently under the budgeted amount; if the CV is negative, the task is currently over budget.

CV%: Cost Variance (Ratio). The CV expressed as a percentage.

ACV: At Completion Variance.

SV: Schedule Variance. The difference between the budgeted cost of work performed [BCWP] and the budgeted cost of work scheduled [BCWS]. This is calculated as follows: SV = Budgeted Cost of Work Performed - Budgeted Cost of Work Scheduled. If the SV is positive, the project is ahead of schedule in cost terms; if the SV is negative, the project is behind schedule in cost terms.

SV%: Schedule Variance (Ratio). The SV expressed as a percentage.

VAC: Variance at Completion. The earned value field that shows the difference between the budget at completion [BAC] and the estimate at completion [EAC].

CPI: Cost Performance Index. Ratio of budgeted costs of work performed to actual costs of work performed [BCWP/ACWP]. The cumulative CPI [sum of the BCWP for all tasks divided by the sum of the ACWP for all tasks] can be used to predict whether a project will go over budget and by how much.

Planning Package. A logical aggregation of work, usually future efforts that can be

identified and budgeted, but which is not yet planned in detail at the work package or task level.


P2C2 Group, Inc. SPI: Schedule Performance Index. The ratio of the budgeted cost of work performed [BCWP] to the budgeted cost of work scheduled (BCWS), which is often used to estimate the project completion date. This is calculated as follows: SPI = BCWP/BCWS.

EAC: Estimate at Completion. The expected total cost of a task or project, based on performance as of the status date. EAC is calculated as follows: EAC = ACWP + (BAC-BCWP)/CPI. EAC is also called forecast at completion.

IEAC: Independent Estimate at Completion.

TCPI: To Complete Performance Index. The ratio of the work remaining to be done to funds remaining to be spent, as of the status date: [BAC - BCWP]/[BAC - ACWP]. A TCPI value greater than 1 indicates good projected performance for remaining work; less than 1 indicates poor projected performance.

Work Package. A task or set of tasks performed within a control account

For More Information about EVMS: MS Project: www.microsoft.com/projectwInsight: http://www.cs-solutions.comFederal Earned Value Website: http://www.acq.osd.mil/pm/ANSI-EIA 32 Criteria: http://www.acq.osd.mil/pm/faqs/criteria.htm


http://www.microsoft.com/project

http://www.cs-solutions.com/

http://www.acq.osd.mil/pm/

http://www.acq.osd.mil/pm/faqs/criteria.htm

8

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Defense Acquisition University

VARIANCES Favorable is Positive, Unfavorable is Negative

Cost Variance CV = BCWP – ACWP CV % = (CV / BCWP) *100 Schedule Variance SV = BCWP – BCWS SV % = (SV / BCWS) * 100Variance at Completion VAC = BAC – EAC

PERFORMANCE INDICES Favorable is > 1.0, Unfavorable is < 1.0

Cost Efficiency CPI = BCWP / ACWPSchedule Efficiency SPI = BCWP / BCWS

OVERALL STATUS

% Schedule = (BCWSCUM / BAC) * 100% Complete = (BCWPCUM / BAC) * 100% Spent = (ACWPCUM / BAC) * 100

ESTIMATE AT COMPLETION #

EAC = Actuals to Date + [(Remaining Work) / (Efficiency Factor)]

EACCPI = ACWPCUM + [(BAC – BCWPCUM) / CPICUM ] ==== BAC / CPICUMEACComposite = ACWPCUM + [(BAC – BCWPCUM) / (CPICUM * SPICUM)]

TO COMPLETE PERFORMANCE INDEX (TCPI) #

TCPIEAC = Work Remaining / Cost Remaining = (BAC – BCWPCUM) / (EAC – ACWPCUM)

# To Determine Either TCPI or EAC; You May Replace BAC with TAB

Management Reserve

Cost Variance

Schedule Variance

ACWP

BCWP

BCWS

$

EAC

TimeNow

Completion Date

PMB

TAB

BAC

time

EVM Home Page = https://acc.dau.mil/evmDAU POC: (703) 805-5259 (DSN 655)

eMail Address: [email protected] May 2005

TERMINOLOGYNCC Negotiated Contract Cost Contract price less profit / fee(s)

AUW Authorized Unpriced Work Work contractually approved, but not yet negotiated / definitized

CBB Contract Budget Base Sum of NCC and AUW

OTB Over Target Baseline Sum of CBB and recognized overrun

TAB Total Allocated Budget Sum of all budgets for work on contract = NCC, CBB, or OTB

BAC Budget At Completion Total budget for total contract thru any given level

PMB Performance Measurement Baseline Contract time-phased budget plan

MR Management Reserve Budget withheld by Ktr PM for unknowns / risk management

UB Undistributed Budget Broadly defined activities not yet distributed to CAs

CA Control Account Lowest CWBS element assigned to a single focal point to plan & control

scope / schedule / budget

WP Work Package Near-term, detail-planned activities within a CA

PP Planning Package Far-term CA activities not yet defined into WPs

BCWS Budgeted Cost for Work Scheduled Value of work planned to be accomplished = PLANNED VALUE

BCWP Budgeted Cost for Work Performed Value of work accomplished = EARNED VALUE

ACWP Actual Cost of Work Performed Cost of work accomplished = ACTUAL COST

EAC Estimate At Completion Estimate of total cost for total contract thru any given level;

may be generated by Ktr, PMO, DCMA, etc. = EACKtr / PMO / DCMA

LRE Latest Revised Estimate Ktr’s EAC or EACKtrSLPP Summary Level Planning Package Far-term activities not yet defined into CAs

TCPI To Complete Performance Index Efficiency needed from ‘time now’ to achieve an EAC

EVM POLICY: DoDI 5000.2, Table E3.T2 . EVMS in accordance with ANSI/EIA-748 is required for cost or incentive

contracts, subcontracts, intra-government work agreements, & other agreements valued > $20M (Then-Yr $). EVMS contracts > $50M (TY $) require that the EVM system be formally validated by the cognizant contracting officer. Additional Guidance in Defense Acquisition Guidebook and the Earned Value Management Implementation Guide (EVMIG 2005). EVMS is discouraged on Firm-Fixed Price, Level of Effort, & Time & Material efforts regardless of dollar value.

EVM CONTRACTING REQUIREMENTS:DFAR Clauses - 252.242-7001 for solicitations and 252.242-7002 for contracts

Contract Performance Report – DI-MGMT-81466A * 5 Formats (WBS, Organization, Baseline, Staffing & Explanation)Integrated Master Schedule – DI-MGMT-81650 * Integrated Baseline Review (IBR) - Mandatory for all EVMS contracts > $20M

* See the EVMIG 2005 for CPR and IMS tailoring guidance.

Management Reserve

Work Packages Planning Packages

OVERRUN

AUW

Control Accounts

NCC

UndistributedBudget

OTB CBB

TAB Profit / Fees

PMB

Summary Level Planning Packages

Contract Price
