BENEFITS OF EVM EXPLORED Monitors a Project as It Progresses Shows Schedule/Cost Performance at a Glance Uses Numbers Rather than Dates
Quantifies and Tracks Delays Caused by External Factors
Embraces Change in a Project
Makes Project Monitoring Simple
Facilitates Having Projects On Time and Under Budget Improves Customer Satisfaction
Forecasts Cost/Effort and Time Required
Forecasts Future Efficiency Needed
Manages Trends Allows Total Control of a Project
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Chapter 4:
Why EVM?
Earned Value Management (EVM) has numerous benefits including continuous assessment of a project’s performance, cost, and status. Using performance measurement techniques, the future performance of a project can be estimated, and corrective or preventive action taken, to help ensure that a project is completed on schedule and within its budget and scope. This chapter discusses several benefits of EVM.
BENEFITS OF EVM EXPLORED
Monitors a Project as It Progresses
Tasks can be monitored as they progress, allowing preventive/corrective action to be taken during the course of a project. In the sample project shown in Figure 4.1, some summary activities have negative schedule and cost variances; these tasks need special monitoring going forward. In Figure 4.1, the project manager has objective evidence that some tasks are delayed; he can also see the contribution of these tasks to the overall delay in the project. He also has objective evidence of cost variance at the task level as well as the contribution of these tasks to the overall cost overrun in the project. By having this objective view, the project manager can make calculated decisions to improve the status of the project.
Figure 4.1: Objective evidence of how a project is progressing.
In Figure 4.1, notice that overall variances of the tasks are at project level. A drill-down view of the tasks and their contribution to overall project-level variances is shown in the columns and rows in Figure 4.1. Also notice that some tasks are ahead of schedule. The drill-down view allows a project manager to move between macro-level (the project macro-level) and micro-macro-level (the task macro-level) management easily and effectively.
In Figure 4.1, the circled tasks require the attention of the project manager. He needs to look into these tasks and take action. Knowing which tasks need attention allows a project manager to manage by exception rather than trying to focus his energy on the entire project. The key to obtaining this benefit is by periodically updating the schedule. The project manager must update the schedule periodically, depending on the size of the project, and then look into any variances so that he can take the necessary corrective/preventive action.
Shows Schedule/Cost Performance at a Glance
Having overall project schedule and effort parameters available at any given point in time also allows a project manager to take immediate preventive or corrective action. Continuing with our sample project, notice in Figure 4.2 that there is a negative schedule variance (in circle) which means that the project is behind schedule; therefore, corrective action needs to be taken. Notice also that there is a positive cost variance, meaning the project is running under budget—a good situation, but one that needs monitoring.
Effectively
by Sham Dayal
J. Ross Publishing © 2008Citation
Figure 4.2: Variances at a glance—the earned value view.
Using MPP, schedule and effort overruns are calculated correctly, with costs rolled up to the summary tasks, and made available with the click of a button. In Figure 4.2, notice that schedule and cost variances are available at all levels, which helps monitoring the tasks independently. It is important to remember is that by using this technique after every reporting period, variance data are immediately available to indicate where/when action needs to be taken. Choosing to update a schedule on a daily basis, but to report it, say weekly, is best because real-time information about project variances is accurate day by day.
Uses Numbers Rather than Dates
Dealing with numbers is easier and better than dealing with dates. Notice that Figure 4.2, the earned value view, uses numbers rather than dates. Figure 4.3 shows the traditional view and uses dates. Numbers provide quantitative information that is more specific and easier to use. Important: Dealing with dates is very difficult because dates must be remembered when checking a project to see if it is on or behind schedule. Additionally, dates do not give any indication of the effort/cost parameters and variances. Dates only show that tasks and the project are either behind or ahead of schedule. Using dates also makes estimating the effect of a delay in a particular task on the overall project very difficult—something that is easily done using the earned value view. Because quantitative values are not associated with dates, the use of dates is an ineffective method for tracking project progress.
Figure 4.3: Variances using dates—the traditional view; FS, finish to start.
Quantifies and Tracks Delays Caused by External Factors
The traditional method of sequencing tasks uses the Predecessor field in MPP, which is very time consuming and cumbersome. However, problems associated with using the Predecessor field can be avoided by using the
Priority field (Figure 4.5). The Priority field makes schedule changes and task sequencing for a particular
resource quite simple, which can significantly reduce the amount of time spent on project plan updates. When schedule updates and resequencing of tasks is facilitated, change is more welcome because it can be more easily incorporated into a schedule.
Figure 4.5: Changes caused by schedule and priority changes; FS, finish to start.
Makes Project Monitoring Simple
Project plan monitoring at any level (summary/activity) of a project is simple using earned value analysis. Notice in Figure 4.6 that earned value analysis has been performed using MPP at a subtask level (circled area in Application 1). Having a consistent way to look at an entire project at different levels of the schedule is a strong point for MPP.
Figure 4.6: Monitoring at subtask level.
Remember also that keeping the WBS at a granular level will help resolve issues when they are quite small. When not managed, small issues have the potential to cause serious effects on variances at the project level. A WBS at a granular level also helps a project manager to focus on a particular resource assigned to a task so that the necessary corrective or preventive action for this resource may be taken.
Figure 4.7: Earned value analysis—resources.
Notice in Figure 4.7 that all of the basic elements of earned value and the variances at each resource level are spread across time. The view in Figure 4.7 helps a project manager to reallocate critical work to resources that are performing at higher efficiency levels (as shown by earned value analysis) and to move less critical work to resources who are performing at lower efficiency levels. Remember: In every project, resources perform at different levels. No two resources will have the same efficiency levels throughout a project. However, there might be a specific reason for variance which is due to the work done by a particular resource. If this is the case, a project manager can quickly assess the situation so that future variances may be corrected or prevented.
Facilitates Having Projects On Time and Under Budget
Using EVM and MPP effectively, monitoring the schedule periodically, and taking the necessary steps to keep variances under control ensure delivery of projects that are on time and under budget (Figure 4.8). The chance of failure due to schedule and cost overruns is drastically minimized. This degree of control and the intensity with which projects are monitored using EVM and MPP are not possible using conventional methods of tracking dates and budgets separately. Although EVM and MPP involve significant intensity in the monitoring process, the amount of time actually spent by a project manager using these techniques is quite small—the reason why EVM and MPP will become the most preferred monitoring technique for all types of projects, small, medium, or large, going forward.
Figure 4.8: Project which is on time and under budget.
Important: Early indications of problems in a project revealed by EVM and MPP allow early corrective and/or preventive measures to be taken or approvals for an increase in the budget or time to be obtained (for external factors in the project for which the project team has no control). Remember: Costs of corrections at an early stage in a project are low compared to corrections taken during the late stages.
Improves Customer Satisfaction
Forecasts Cost/Effort and Time Required
Forecasting the effort and time required to complete the remainder of a project gives a clear picture of how a project is likely to end (e.g., with/without schedule/effort overruns). As you can see from Figure 4.10, the project is estimated to be completed earlier than the budgeted time, BAC (t-wks). Forecasting the future performance of a project using earned value analysis (as done in Chapter 3 using various estimate at completion scenarios) provides an understanding of the impact of current variances on the end result, which enables a project manager and project stakeholders to interject an appropriate amount of urgency into project monitoring to bring the project back on track.
Figure 4.10: Weekly status report showing forecast of current schedule underruns; wks,
weeks.
For example, utilizing EVM, a project manager can use several scenarios to present views of the future performance of a project to stakeholders:
Assuming that current variances will exist in the future, how much longer will the project continue?
Assuming that current variances will exist in the future, how much more will the project cost?
Assuming that current variances will not exist in the future, how much longer will the project continue?
Assuming current variances will not exist in the future, how much more will the project cost?
Assuming that original estimates are no longer valid, and using a new set of estimates, how long will the project continue?
Assuming that original estimates are no longer valid, and using a new set of estimates for the remaining work to be done, how much will the project cost?
Imagine the value obtained from having this information. It is available at a project manager’s fingertips using the EVM technique.
Forecasts Future Efficiency Needed
Figure 4.11: Weekly status report showing summary of forecast of needed performance efficiency; wks,
weeks.
Forecasting the future efficiency needed to bring a project back on track can be done using earned value analysis. Future efficiency needed provides another forecast view. Future efficiency needed uses the efficiency performance measures of TCPI (to-complete cost performance indicator) and TSPI (to-complete schedule performance indicator) and allows a project manager to assess quantitatively the amount of extra work needed to be done within the same time frame. For example, if we have a TCPI of 1.25, the project team needs to work 25% more efficiently. In a situation in which a team must work 25% more efficiently, suppose a task needs $100 to be completed. With a current TCPI of 1.25, a project team must complete this task with $75. This efficiency rate applies to all remaining tasks in the project.
However, if some tasks are completed with higher efficiency, depending on their weight (weighted average), TCPI will change. Therefore, computation of TCPI and TSPI is required for every reporting period, with adjustments made accordingly. Periodic tracking allows a project team to shift between working at higher efficiency levels in some periods to working at a more relaxed pace in other periods, which boosts team motivation. The team soon becomes aware that if extra effort is given in one reporting period, they might be able to ease off a bit during the periods that follow. However, this give-and-take mentality does not mean that a project manager can allow momentum to drop as soon as TCPI and TSPI reach 1 or below 1. Momentum must be maintained so that positive variances are maximized to the benefit of the end customer.
Figure 4.12 shows another view of forecast values. This time BAC (budget at completion) and EAC (estimate at completion) are used. In Figure 4.12, plotting BAC and EAC values has produced an S-curve or another way to view forecasts. At all points ensure that the EAC curve is always below the BAC curve, which results in a successful project.
Figure 4.12: S-curve showing forecast of needed future performance efficiency.
Manages Trends
Figure 4.13: Managing trends—effort variance.
Also notice schedule variance in Figure 4.13. Clearly schedule variance moves downward toward a negative trend, but then comes back on track. Notice the spikes on the negative side in downward trends. During downward trends, a project manager needs to take corrective and/or preventive actions to reverse the trend in the weeks that follow.
Trend analysis provides “triggers” that indicate potential risks in a project and allow a project manager to proactively assess a situation and take corrective and/or preventive action as required. Trend analysis also allows the addition of a trend line (linear, polynomial, logarithmic, etc.) which will indicate where variances are headed based on past performance data. Linear, polynomial, and logarithmic methods predict (forecast) the future with available past data. For example, a linear trend line indicates the linear path that will be taken by variances in the future based on past data. A moving average trend line, which smoothes out a trend to show an even better picture of the trend of past data, may also be used to predict the future performance of a project.
Allows Total Control of a Project
Figure 4.14 shows the curves produced by plotting three performance measures (earned value, planned value, and actual cost) for a project. In Figure 4.14, earned value is lower than actual cost throughout most of the project. With continuous improvement efforts by the project manager and his team, the project is back under control near the end of the project. The curves in Figure 4.14 are classic examples of project monitoring to perfection. The project is delivered on time and under budget.
Figure 4.14: Curves illustrating total control of a project.
The curves in Figure 4.14 are the result of periodic targeted management by the project manager which allowed him to have total control of the project. Total control not only enables the project manager and his project team to deliver the project on time and under budget, but it also helps reduce management time for the project manager—which is not possible without the use of EVM techniques and tools.
Needless to say, having total control of a project translates into increased customer satisfaction, increased team productivity, and as a result, better performance appraisals for the project manager—all with reduced
management effort by the project manager.
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