Earned Value Management

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Earned Value Management

• Zach Reeser
• Patrick Smith

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About EVM

• Focus
• Accurate measurement of physical performance
  against a detailed plan to allow for the accurate
  prediction of the final scope, costs, and
  schedule results
• Requirements
• Fully defined scope
• Baseline plan

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Origin of EVM

• Released by the Department of Defense (DOD) in
  December 1967
• Engrained in the Cost/Schedule Control System
  Criteria (C/SCSC)

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Evolution of EVM Concept

• Phase 0
• Late 1800s
• Industrial engineers three dimensional approach
  to asses cost performance efficiency
• Cost Variance definition
• EVM at most basic form

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Evolution of EVM Concept

• Phase 1 (PERT/COST)
• First introduced by the Navy in 1958
• Used from 1962 1965
• Strong emphasis on statistical probability
• Computer hardware nor software was adequate to
  implement the concept
• Introduced Earned Value concept in 1962
• Cost of Work Report

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Evolution of EVM Concept

• Phase 2 (C/SCSC)
• Used from 1967 1996
• Incorporated EV concept in the form of 35
  criteria rather than a control system (PERT)
• Imposed on contractors management control system
  when cost or incentive type contract was used
• Interpretations over the decades lead to
  modifications and additions

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Evolution of EVM Concept

• Phase 3 (EVM ANSI/EIA 748)
• Used 1996 Present
• Government realizes Earned Value concept needs to
  be made more user friendly
• Changes officially released in the American
  National Standard Institute/Electronic Industry
  Association 748 guide in 1998

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EVM Criteria

• Organization
• Planning, Scheduling, and Budgeting
• Accounting Considerations
• Analysis MGMT. Reports
• Revisions Data Maintenance

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Methods to Plan and Measure EV

• Weighted Milestones
• Individual work packages that exceed a short span
• Each milestone is assigned a specific budget
  value earned after completion of the event.
• Total work package budget is divided based on
  weighted value assigned to each milestone.

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Methods to Plan and Measure EV

• Fixed formula by task
• Partial percentage is earned when the activity is
  started, rest is obtained when activity is
  completed
• Percent complete estimates
• Allows for periodic estimates
• Estimates are subjective
• Companies often set maximum ceiling (80-90)

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Methods to Plan and Measure EV

• Equivalent completed units
• Allows planned value to be earned for each full
  unit of work completed
• Break individual cost elements into a percentage
  of the total value per unit

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EVM Maturity Model

• Level I
• An organization with no or limited EVM
  implementation in place. This level provides a
  defined starting point for an initial
  implementation of EVM and does not require a
  large commitment of resources.
• Level II
• An EVM implementation which is less than fully
  compliant with ANSI 748, but may be sufficient
  for smaller projects or for a simplified EVM
  implementation.
• Level III
• ANSI/EIA 748 compliant implementation.
• Level IV
• Adds guidelines for measuring the quality of EVM
  data and introduces metrics for measuring the
  health of an Earned Value Management System.
• Level V
• Requires monitoring the efforts to improve an
  Earned Value Management system. Organizations
  with an ANSI or DOD compliant EVM implementation
  can use Levels IV and V as goals for improving
  the utility, timeliness, accuracy, and cost
  effectiveness of their EVM systems.

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Planned Value

• The portion of the approved total cost planned to
  be spent on an activity during a given period
• If the Activity is to make a slide show in a week
  for 5000 then the Planned Value for making the
  slide show that week

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Actual Cost

• The total direct and indirect costs incurred in
  accomplishing work on an activity in a given time
  period
• If it actually cost 6000 dollars to make the
  slide show in the week you planned to do it, then
  the Actual Cost is 6000

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Earned Value

• Estimate for value of physical work actually
  completed. It is based on the original planned
  costs of the activity and the rate at which the
  team is completing the work. (Rate of
  Performance) (RP)
• Rate of Performance
• Is the ratio of actual work completed as compared
  to the work that was planned to be completed. If
  you plan to finish the whole slide show in a week
  and only half is done then your Rate of
  Performance.5
• Example
• EVPVRP
• EV5000.5
• EV2500
• Earned Value you tells you the value of you work
  to date

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Cost and Schedule Variance

• How far are you compared to your cost or schedule
  estimates
• Cost Variance (CV)
• CV EV-AC
• CV2500-6000
• CV-3500
• This tells you, you are over budget by 3500
• Schedule Variance
• SVEV-PV
• SV2500-5000
• SV-2500
• This tells you, you are behind schedule
• If either of these numbers is negative you are
  going to go over either time or budget. If they
  are zero you are right on and if you are positive
  you are going to finish early or under budget

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Cost and Schedule Performance IndexesCPI SPI

• Measures compared to schedule or budget plans
  shown as ratios or percentages.
• CPI EV/AC
• CPI 2500/6000
• CPI .416
• SPI EV/PV
• SPI2500/5000
• SPI.5
• These ratios show you weather you are over your
  budgeted amount of time or money. Anything less
  than one means you are over cost or behind
  schedule, 1 means you are right on budget or
  schedule and an numbers greater than one mean you
  are doing better than planned.

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Budget at CompletionEstimate at Completion
Estimated Time to Complete

• Budget at Completion can be divided by Estimate
  at Completion will tell you how much a project
  will cost upon completion.
• EACBAC/CPI
• EAC5000/.416
• EAC12019.23
• Because we are over budget upon completion the
  task will cost 12,019.23
• Estimated time to complete takes the given
  information and tells you the adjusted schedule
• Estimated time to completeOriginal time
  estimate/SPI
• Estimated time to complete 1week/ .5
• Estimated time to complete 2 weeks
• Because we are be hind schedule the take will now
  take 2 weeks instead of one

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Works Cited

• Fleming, Quentin W., and Joel M. Koppelman.
  Earned Value Project Management. Newton Square
  Project Management Institute, 2000.
• Stratton, Ray W. Earned Value Management Maturity
  Model. Vienna Management Concepts, 2006.
• "Earned Value Management." Earned Value
  Management. 23 Nov. 2007 lthttp//earnedvaluemanage
  ment.com/gt.