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Earned Value ProjectManagement
Colonel John KeeseeColonel John Keesee
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Objective
To introduce and discuss the fundamentalsTo introduce and discuss the fundamentalsof earned value project managementof earned value project management
Work Breakdown StructuresWork Breakdown Structures
Program plans and schedulesProgram plans and schedules
Earned value management systemsEarned value management systems
Cost and schedule variancesCost and schedule variances
Estimates at completionEstimates at completion
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Scenario
You have been tasked to be the projectYou have been tasked to be the projectmanager for an important projectmanager for an important project
You have been directed to use an earnedYou have been directed to use an earned
value management systemvalue management system
Time to market is critical for thisTime to market is critical for this
developmentdevelopment
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Work Breakdown Structure
Identifies 100 % of the work to beIdentifies 100 % of the work to beaccomplishedaccomplished
WBS dictionary breaks the scope intoWBS dictionary breaks the scope into
measurable tasksmeasurable tasks
Each with an estimated valueEach with an estimated value
Responsibility for each task assigned toResponsibility for each task assigned to
individuals or work teamsindividuals or work teams
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Work Breakdown Structure
Launch Vehicle
Payload Spacecraft Reentry vehicle Integration, Assembly,Test and Checkout
Space Vehicle Ground Command,
Control, Communications
and Mission Equipment
Space System
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Project Master Schedule
Detailed plan and scheduleDetailed plan and schedule Identified dependencies between tasksIdentified dependencies between tasks
18 months18 months Estimated resources for each taskEstimated resources for each task
10 units at $150K each10 units at $150K each
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Project Master ScheduleTask/Event Jan - Jun Jul - Dec Jan - Jun
Award ^Design ^
Buy specifications ^
Vendor quotes ^
Purchase orders ^Receive materials ^
Factory plans ^
Tool design ^
Tool fabrication ^
Parts fabrication ^
Assembly: sub and final ^
Test & checkout ^
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Project Performance Display
0
200000
400000
600000
800000
10000001200000
1400000
1600000
Jan April July
October
January April July
BCWS
BCWP
ACWP
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Plan Review Before Go-Ahead
CEO:CEO: Time to market is critical. You have 12Time to market is critical. You have 12
months.months.
This looks goldThis looks gold--plated at $1.5M. Youplated at $1.5M. You
have $1.0M.have $1.0M.
Go ahead, but come back to me withGo ahead, but come back to me with
your progress in three months.your progress in three months.
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The Three Month Review
Three units scheduled for completionThree units scheduled for completion Two units actually completedTwo units actually completed
$300,000 budgeted at this point$300,000 budgeted at this point $300,000 actually spent$300,000 actually spent
Optimist PM: A little behind schedule butOptimist PM: A little behind schedule but
right on the cost plan.right on the cost plan.
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Earned Value Measurements
1.1. Work scheduledWork scheduled
2.2. Budgeted cost of work scheduled (BCWS)Budgeted cost of work scheduled (BCWS)
3.3. Work performedWork performed
4.4. Budgeted cost of work performed (BCWP)Budgeted cost of work performed (BCWP)
5.5. Actual cost of work performed (ACWP)Actual cost of work performed (ACWP)
6.6. Schedule variance (SV) = BCWPSchedule variance (SV) = BCWP -- BCWSBCWS7.7. Cost Variance (CV) = BCWPCost Variance (CV) = BCWP -- ACWPACWP
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New Project Performance
Display
0
200000
400000
600000
800000
1000000
1200000
January
April
July
Octob
er
Dece
mbe
r
BCWS
BCWPACWP
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Management Reserve
Budgeted to provide the ability to adjust forBudgeted to provide the ability to adjust foruncertaintyuncertainty
Always accounted at the total project levelAlways accounted at the total project level
Normally retained and controlled at the totalNormally retained and controlled at the total
project levelproject level
Must not be eliminated by negotiationsMust not be eliminated by negotiations
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Summary
Earned value management system providesEarned value management system providesa key link between the cost, schedule, anda key link between the cost, schedule, and
technical aspects of a projecttechnical aspects of a project
Provides an early and reliable prediction ofProvides an early and reliable prediction of
future performancefuture performance
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References
Fleming, Quentin W. and Joel M.Fleming, Quentin W. and Joel M.KoppelmanKoppelman,, Earned Value ProjectEarned Value Project
Management,Management, PMI, Newtown Square, PAPMI, Newtown Square, PA
20002000
Lewis, James P.,Lewis, James P., Fundamentals of ProjectFundamentals of Project
ManagementManagement, AMACOM, NY 2002, AMACOM, NY 2002