All of the above information is hindsight. What managers also need is a reliable forecast of when the work will be completed and how much it will cost at completion. EarnedValue enables these forecasts to be made with a reasonable degree of accuracy. When the full set of EarnedValue information is available, the manager knows how much work has actually been performed and what it has cost. Since they know from the original budget how much work there is in total, the amount of work remaining can be calculated and used to forecast the eventual cost and (in conjunction with the schedule) the completion date of the work.
About the Author
Francisco-Javier Rodríguez holds a degree in
Telecommunication Engineering (1995) by the University of Vigo (Spain). He also holds a MBA degree (2005), a master’s degree in Project Management from the George Washington University (2005), and the Project Management Professional (PMP) ® credential (2009). He has developed most of his professional career at Motorola, having joined the company as radio systems engineer in 1996. Since 2001, he has worked as project manager in charge of different projects related to field trials, new products introduction, support provided to Motorola customers, and quality or definition of metrics included in the company balance scorecard. Since 2006, he has worked as senior project manager in charge of the turnkey projects carried out by the Motorola Spanish Local Office, and in this capacity has been responsible for the planning and control of several projects.
“I intend to continue the direction contained in DOE Order 413.3. The
responsibilities contained in the Order require that you know what is going on with your projects and that you assist your program managers and project managers in resolving issues and problems. The quarterly performance reviews, monthly status updates utilizing the EarnedValueManagement System as a metric, and periodic independent reviews are all sources for project information that allow us the opportunity to intercede before projects get off track.”
Why is EarnedValue Different?
Why is EarnedValue Different?
Integrated project performance is determined by the three parameters displayed in the “Performance Triangle” below
All three dimensions of project performance must be monitored and controlled to ensure that all project deliverables are attained
and EAC will be equal. EAC will vary from BAC only when actual costs (ACWP) vary from the planned costs (BCWP). Most common forecasting techniques are some variations of:
1. EAC = Actuals to date plus a new estimate for all remaining work. This approach is most often used when past performance shows that the original estimating assumptions were fundamentally flawed, or they are no longer relevant to a change in conditions.
“How much work should be been completed by this date?”
Budgeted Cost of Work Performed – “EarnedValue”
This is the cost originally budgeted to accomplish the work that has been completed. It answers the question “how much work has been actually completed?”
• The total earnedvalue to date gives you a point on the ($,time) graph – the Budgeted Cost of Work Performed (BCWP).
• You could compare this to the actual amount of work that you were supposed to have completed by this point in the schedule, as measured by its budgeted cost – the Budgeted Cost of Work Scheduled (BCWS), another point on the ($,time) graph.
The prime purpose of any planning and control process (including C/SCSC or EVPM) must be directed towards assisting management to manage the project in a proactive way.
Gary E. Christle (Lessons in the Power of Monitoring Insight - 1997) has been advocating for a number of years the use of trend graphs to supplement the standard ‘S-Curves’ used to display Cost Performance data. This simple addition to the reporting process highlights the trends in a way that is difficult to ignore. The following example simply plots EarnedValue against Baseline for two scenarios on the same project. The SPI for both projects is 0.8 at the final status, however the trend graph shows a significantly different story.
Estimate to Complete (ETC) – The expected cost needed to complete all the remaining work for a schedule activity, work breakdown structure component, or the project.
The ETC can be calculated based on either performance to date or a more subjective assessment based on other factors. For example, higher than anticipated right-of-way costs may not show up in a simple calculation but should be included in the evaluation to reflect accurately the cost of completing remaining work.
EVM adoption has grown slowly. Its traditional cost management focus has been an inhibitor, especially as time-drive (often, fixed price) projects have become the norm. Lipke’s new approach will help remove this barrier.
The increased professionalism evidenced by the growth in project management certifications will also help. Along with professionalism come both an expectation of disciplined practice and the use of more objective measures of project performance. The days of flying-by-the-seat-of-our- pants are over. Quantitative analysis does not replace experience and intuition, but it is a necessary supplement and support to them.
This option is preferred by PMI and is the most useful. TCPI measures the degree of change needed to achieve a project objective. It is a measure of the cost performance that must be achieved with the remaining resources in order to meet a specified management goal, expressed as the ratio of the cost to finish the
Resolution of “disagreement” between DCMA EVM Center and DCAA puts contractors in the middle. EVM Center did not give DCAA enough time to review contractor performance.
- The report recommended the EVMC “work with DCAA to establish reasonable due dates for conducting audits, hold discussions with DCAA to help resolve
Appendix C (Change Control) to EVM Best Practices
Appendix C – Change Control: Revision To, And Changes Of, EVM Data
The establishment of an approved performance measurement baseline (PMB) and the tracking of project status represent only the beginning of project management control efforts. Variances, which must be addressed, will inevitably occur. Unanticipated changes to the baseline plan will also occur. Such changes may affect the technical scope, schedule, and budget of the project and, therefore, may require revisions to the baseline. If changes are not documented and controlled, the project being measured may turn out to be something other than the project that was intended. A firm basis for project control can only be assured when the approved baseline incorporates changes timely as they occur.
Nothing works better to enforce acceptance and use of a practice than having executive management understand and use the data and ask questions that can only be answered by understanding and following that standard. For instance, if you are in a project review with the executive staff and someone asks, “How can you support this EAC (Estimate at Completion) when your TCPI (To-Complete Performance Index) is 13 points higher than your CPI (Cost Performance Index)?” and you can answer the question, that is an organization that uses EVMS as a way of doing business. For that to happen, EVMS needs to be understood at every level of management, and executive management must be trained and supportive of the process.
DOE G 413.3-10 IV-1 DRAFT XX-XX-08
SECTION IV—SURVEILLANCE PROCESS
Surveillance is the recurring process of reviewing a contractor’s EVMS to ensure continued compliance with the ANSI/EIA Standard 748-A. An effective surveillance process ensures that the key elements of the system and the use of the system are maintained over time and on subsequent applications (e.g., on new projects). DOE uses as its guide the standard industry surveillance approach identified by the National Defense Industrial Association, Program Management Systems Subcommittee, Surveillance Guide. The purpose of surveillance is to ensure that the contractor is continuing to use their EVMS effectively to monitor and manage cost, schedule, and technical performance. Through the process of surveillance, successful practices may be shared as part of the lessons learned process.
Step 13 – Estimate at Completion and Schedule Forecasting
Organizations are very concerned with bottom line performance. One of the essential pieces of corollary information needed to evaluate an ongoing project is, “When is it going to finish and what is it finally going to cost?” This answer will be used for many purposes, ranging from reward of project participants with better positions on new projects to project cancellation. The “Esti- mate at Completion” is so important that it can become a highly political number. A well-defined EarnedValueManagement System will have objective means of determining and evaluating estimates at completion to improve their accuracy even in the early stages of a project. This can only be achieved with defined performance fac- tors that provide an accurate picture of what has happened to date and what is forecast to happen.
analytical techniques between Earned Schedule and traditional integrated schedule analysis.
EarnedValueManagement (EVM) was created within the United States Defense Department in the 1960s and has been demonstrated over nearly four decades of usage to be a very valuable project management and control system which uniquely connects cost, schedule, and the “physical progress” achieved by the project team. EVM has allowed for the creation of quantitative project performance indicators and predictors of future performance, which project managers are able to use to objectively manage their projects and proactively take corrective actions.
Accuracy of determining actual performance is directly related to the ability to unambiguously determine progress and earnedvalue within a given work package or control account. Consequently, level of effort (LOE) tasks should only be used in those work packages where no deliverables or other material means of determining actual progress exists. The earnedvalue of LOE only documents the passage of time and not actual project progress. Consequently, within a discrete control account, the inclusion of the LOE activity should be avoided and is kept to a minimum in order to prevent any distortion of the performance measurement data. When unavoidable, and LOE work is combined with discrete work within the same control account, then segregated work packages are established for the discrete and LOE portions, as appropriate.
However, the level where information is managed is often at a much lower level on production activities.
In development and production, company EVMS’s track cost and schedule performance at control account and work package levels where the control account is below the lowest level WBS indenture and the associated work packages are below the applicable control account. While there may be activities below the work package in the schedule, in development this level of detail usually corresponds to how the effort is managed, reported and analyzed. For production, while the reporting and analysis may be to this same level, the work is managed at a more detailed level on the factory floor. It is often the case, that labor hours (and associated standard hours – to be discussed more fully in the manufacturing labor section) are managed well below the work package level. In fact, labor hours are usually tracked at the shop floor paperwork level or even the specific operations on the paperwork. This low level of tracking and managing is necessary in order to ensure daily/weekly shop workloads are maintained and supervisors can monitor progress. Likewise, material dollars may be tracked and managed to a specific purchase order and supplier to ensure parts arrive on time to the required process point.
# Department of Civil Engineering, EBETi Kangayam, Thirupur Dist, Thamilnadu, Anna University Chennai
* Associate professor, EBETi Kangayam, Thirupur Dist, Thamilnadu, Anna University Chennai Abstract — EarnedValueManagement (EVM) is a
project control technique which provides a quantitative measure of work performance. It involves a crediting (earning) of budget as scheduled work is performed. The earnedvalue technique is a proven method to evaluate work progress in order to identify schedule slippage and areas of budget overruns. Valueearned for a given task is computed as budgeted cost of work performed and is a function of time, work completed, and budget. Budgeted cost of work performed is compared against actual cost of work performed and budgeted cost of work scheduled to assess cost and schedule variances, respectively. Cost and schedule variances identified at the individual cost account level.