Importance of Earned Value Management in Projectminisites.qaiglobalservices.com/PML07/Presentation... · The importance of Earned Value Management in IT Projects 1. It is a single

The importance of Earned Value Management in IT Projects

Project Management Leadership conference 2007 The Importance of Earned Value Management

in IT Projects Sujit Mishra,PMP Delivery Manager, Dell, Bangalore [email protected] / [email protected]

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mailto:[email protected]


Introduction: Earned value management is critical to project’s success in today’s competitive market place. It ensures that the project is running smooth and it alerts a PM of what is the actual performance and the risks interms of cost, Schedule and scope.If implemented in project the project has a greater chance of giving On-cost and on-time delivery.We will discuss about the importance of Earned value to IT projects and discuss the process of implementing with an example What is Earned Value Technical Definition:- The value of completed work expressed in terms of the budget assigned to that work Layman definition::- How much work did we accomplish for the money we spent during a specific period of time? Did we get what we paid for?

• Objective percentages are assigned to specific tasks • When the tasks are completed their values are “earned”

Why Use Earned Value ? Earned Value is the only project planning and control methodology which integrates project Cost performance Schedule performance AND Technical performance into a single methodology From which objective measures of project performance are readily available including

• Variance metrics and indices (cost and schedule) • Which helps confirm project performance to date; and • Provides guidance into areas for corrective action

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• Formula based predictors of future performance


It Provides tools to management which allow them to make informed decisions in a timely manner

• Defines/Integrates: Scope, Schedule, Budget • Provides early warning capability to identify and control potential problems

and implement corrective action plans • Provides objective project status • Provides a quantitative measure of schedule deviation in dollars • Provides a more accurate estimate of project completion costs which

impacts revenue/profit projections • Contractual requirement on many projects

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Let us start with an example Without Earned Value Management Reporting Plan $1000 Actuals $800 How many people think that the person managing this project is doing a good job? It would appear that way, but lets bring earned value into the equation . . . With Earned Value Management Reporting BCWS (Baseline Plan) $1000 ACWP (Actuals) $700 BCWP (Performance) $800 How many people NOW think that the person managing this project is doing a good job Earned Value Measurement Techniques 0/100: work that typically begins and ends within the same month. No credit is earned when the activity starts but all the credit is earned when the activity is complete. 50/50: work that is scheduled to last at most two months. Half of the credit is earned when the activity starts and half of the credit is earned when the activity is complete. Milestones with Weighted Values: work which spans greater than two months. The work is divided into discrete milestones, with weighted values assigned to each.Credit is earned when the milestone is completed at the weight that it has been assigned. Milestone % Complete: similar to Milestones with Weighted Values, however credit is earned as a percentage of the milestone value assigned. Percent complete: cumulative estimate of the percentage of work completed Apportioned effort: effort directly related to another measured effort Level-of-effort: work that cannot be measured discretely and can only be measured through the passage of time. This measurement method should be limited as much as possible and segregated within the WBS. Why Calculate Earned Value ?

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Once EV can be assessed with “reasonable accuracy”


Virtually all Earned Value Variances, Indices and predictive formulae are calculated from the basic

o Budgeted Costs or “Planned Values” [BCWS or PV] Which includes Budgeted Costs at Complete [BAC]

o Actual Costs [AC or ACWP] o Earned Value [EV or BCWP]

A spreadsheet which automates the calculations and graphs the results allows the Project Manager to

o Sanity check, analyse and understand the results o Objectively determine the adverse impacts affecting the project o Proactively plan and implement corrective actions

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Benefits of EVMS


1. It is a single management control system that provides reliable data 2. It integrates work, schedule, and cost using a work breakdown structure 3. The associated database of completed projects is useful for comparative analysis 4. The cumulative cost performance index (CPI) provides an early warning signal 5. The schedule performance index provides an early warning signal 6. The CPI is a predictor for the final cost of the project 7. It uses an index-based method to forecast the final cost of the project 8. The “to-complete” performance index allows evaluation of the forecasted final cost 9. The periodic (e.g., weekly or monthly) CPI is a benchmark 10. The management by exception principle can reduce information overload

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Guidelines of using EVM in projects


You should use EVM if

1. project is more than $2M or 2. More than 5000hrs 3. Has 3 medium/Large Risks

How EVM is implemented in Projects The different phases of EVM Implementation

Engage Phase Exit Criteria 1. The focus program has been identified by the Business

Office. 2. The EV PM role has been assigned by Management and

the Concept Phase and Plan Phase exit dates have been established.

4. The EV PM has scheduled meetings with the project team to implement EVM.

5. The project’s PM’s have completed the EVM MS Project lab exercises

Deliver Phase Exit Criteria 1. A project structure has been defined and interlocked by

the SPM and Management. The components of the project structure include: subproject name, subproject lead, subproject contractual funding and a list, by subproject, of the earned value metrics to be reported.

2. Project plans have been detailed by the project team and quality assured by the EV PM

3. The e2e project plan has been built, integrated and baselined by the EV PM

4. An EVM Management System has been defined by the SPM and interlocked with the project team

5. The EVM CoC has reviewed the project's plans and EVM Management System and concurs they meet requirements for EVM Integration

6. The SPM and EV PM have completed the EVM Executive Status Report lab exercises

2.2.1.3 Operate Phase Exit Criteria 1. Setup for the EVM Executive Status Report has been

completed by the EV PM. 2. Project teams have provided project plan inputs for the

first reporting period.

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3. The first EVM Executive Status Report has been finalized by the EV PM.


4. The EVM CoC has reviewed the project's EVM Executive Status Report and concurred with its' contents.

5. The EVM Executive Status Report has been reviewed by management and client management during a status review.

The Earned Value Methodology assets integrate to provide support for the following items: • Earned Value Metrics

o (BAC, SPI, SV, TCPI, CPI, CV, EAC) • Extended Metrics

o (Ahead/Behind, %Plan Complete, %Complete) • Key Issues • Key Detractors • Project Sponsorship, Description and Key Assumptions • Major and Key Milestones • Major Dependencies • BTOP Work Products • Risk Plan • Financial Status • Resource Status • Integrated Red/Yellow/Green Status • Project Plan Scorecard • Earned Value Reports

o Behind Schedule tasks o Ahead of Schedule Tasks o Milestones Exposed o Milestone Outlook o Milestones Past Due o Estimate at Completion task variance reports

• Project Plan Quality Assurance Toolset • Project Recovery Plans

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Project Plan Quality Assurance Scorecard The project plan quality assurance scorecard provides the foundation for assuring high quality earned


value measurements and reports. Project plans must meet or exceed the checklist criteria prior to implementation of Operational reporting

Item 1. Key Milestones Green /Yellow/Red

2. Dependencies and Deliverables

Green /Yellow/Red

3. BTOP/BTMS Decision Checkpoint Work products

Green /Yellow/Red

4. Predecessor and Successor designations

Green /Yellow/Red

5. Task quality, size and resource assignments • Sized in the range of 40 to 80 hours of work per task • Single owner • Objective/measurable task outputs • Realistic support and project management workload assumptions

Green /Yellow/Red

6. Task labor rates • $1/hour for std • $1/hour for overtime • $0/hour cost use

Green /Yellow/Re

d

Assuming project performance will be tracked and reported using hours as the basis for the earned value calculations

7. Schedule Conflicts Green /Yellow/Red

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The steps -

• Define the scope of work in MS Project. Take an EVM template plan and create the deliverable-oriented WBS with dependency - predecessor and successor ,

• Create a schedule identifying when the scope of work is to be accomplished with Start and end dates,

• Assign Duration/Work, Task Initial Sizing, Task outlook Cumulative • Identify and apply resources (people and budget) to schedule. • Define Gives/Gets, External Give /External get

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• Define Milesotne including Major(VP), Major Dependency (VP) and Key milestones.


• Run all EV:QA reports in the Project plan. Work on any discrepancies if any. EV QA examples – Error Check Filter,Milestones not linked correctly,New tasks or milestones not baselined,Resources assigned to summary tasks,Tasks with no resources assigned,Tasks not linked or total slacks > ??, Tasks with incorrect earned value method

• Organize the work • Authorize the work • Have weekly team meetings and Update the task actual(Sandbox) in the

plan. • Run the Macro and go to view-more tables-earned value and analyze the

EV metrics. • Provide meaningful variance explanations which define corrective action

plans to achieve project objectives. Provide a weekly recovery plan for tasks with more than 8 hrs behind schedule.

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• Prepare 7-up charts(As shown in the figure above) on the trend of CPI,SPI,CV,SV and other EV metrics and analyze the report. When we have for example CPI and SPI are less than 1 and SV and CV are negative. It means project health is either Yellow or Red. Work out a solution to meet the target with Fast tracking or Crashing or any other methods which may fit the situation.Regularly update these results and corrective actions to management and let him/her know what measures you are taking to ensure that your project is on track. Concentrate on tasks which are behind schedule by more than 8 hrs. Make note that


External dependencies are risks to the projects. Analyze the Gives/Gets and see if the task is getting delayed because of some other team. Follow up with that team on a daily basis and track the Risk to closure.

The Executive Status report - Portion of the ESR report

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References – Implemented Full scale EVM in very large projects and successfully completed the program on time. About the Author: Sujit Mishra is a PMP, currently working as a Delivery Manager in Dell in Bangalore. He has over 15 years of Experience in IT. He has a superior record of delivering simultaneous large-scale, mission-critical projects on time and under budget with impressive results. Received many awards for delivering on-cost and on-time in several large projects/programs. He has worked in many international locations and gained experience in their way of managing projects. Based on his practical experience in Project management he has written a book on Project Management which is getting published by J Ross Inc in US early next year. He was also a Faculty member in PMI, Bangalore chapter. He has published many articles in International journals. He has received several awards for his work in different companies including Service Excellence awards.

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Importance of Earned Value Management in Projectminisites.qaiglobalservices.com/PML07/Presentation... · The importance of Earned Value Management in IT Projects 1. It is a single