2015 06-09 1345 - brunton - houston pmi conference - final3
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Transcript of 2015 06-09 1345 - brunton - houston pmi conference - final3
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Using Earned Value Management Concepts to Improve Commercial Project Performance
R. Scott Brunton, PMP, PMI-RMP/SP, EVP
Principal Solutions Consultant
Lewis Fowler, LLC – www.lewisfowler.com
Welcome to the PMI Houston Conference & Expo and Annual Job Fair 2015
• Please put your phone on silent mode
• Q&A will be taken at the close of this presentation
• There will be time at the end of this presentation for you to take a few moments to complete the session survey. We value your feedback which allows us to improve this annual event.
EV Within PMI®
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Project Cost Management Knowledge AreaControlling and Monitoring Process Group
Reference: PMI PMBOK and PMI
EV Within PM Methodology
• As an analytical technique for assessing progress of technical maturity through cost and schedule Performance Measurement
3Reference: PMI PMBOK
Capabilities of EV Management
• Objective, measurable metrics• Informs the organization decision
making process• Supports project controls to enable
successful project execution through Performance Measurement
• Relevant to internally driven business efficiency requirements for commercial programs
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Why EV Was Developed
• Late 1800s– Optimize performance of factories
• 1950s and 1960s– Navy developed into PERT/Cost techniques– Cost/Schedule Control Systems Criteria (C/SCSC)
• 1998– 32 guidelines in ANSI/EIA-748 by NDIA
• Performance Measurement as a means to make better business decisions
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What’s In A Name
• Historically driven and mandatedwithin the defense industry
• Perception of being operationallyburdensome
• “Uncomfortable”– Involves “a priori” planning and periodic reporting– Requires root cause analysis and mitigation– Drives accountability and active management
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Earn
ed V
alue
Man
agem
ent
Reference: Earning Value from Earned Value Glen Alleman, Aug 2013
What EV Isn’t or Won’t Do
• Performance Measurement– Will not ensure project success by itself– Is not a one size fits all strategy– Does not make up for a bad plan, incomplete
requirements, or poor project management– Is not just a government reporting requirement
• Performance Measurement is not a solution as much as it is an efficiency enabling methodology
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Here’s The Value
• Success enabler– Element of PM fundamentals– Disciplined project controls and performance
monitoring• Performance Measurement enhances program
management capability through insight• Increase the probability of program success• Equally applicable in commercial business
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Cost of EVM Process
9Reference: The Costs and Benefits of the EVM Process D. Christensen, Fall 1998
Author (Year) Source of Estimate Cost Range
Kouts(1978)
Survey of Industry 0.5% to 5%
MITRE Corp.(1982)
Survey of Industry 0.1% to 0.2%
DOD IG(1984)
Survey of DoD Experts 5.0%
Decision Planning Corp. (c1992)
Industry Cost Estimating Model 0.6% to 1.0%
Humphreys and Assoc. (c1992)
Consultant Experience 0.5% to 4.0%
Lampkin(1992)
Average of Five Studies Above 0.4% to 1.63%
Program Customer Satisfaction
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Best
Worst
MinimalCapability
CompositeWorld Class
QualifiedPerformer
Program Management Capability
Reference: DCMC Conference, March 2000
When to Consider EV
• High value programs• Long duration programs• Progress payment programs• Contract types: Firm Fixed, Cost Plus, T&M• In support of broader corporate mission to
drive efficiency and effectiveness in program execution and utility of organizational resources
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Performance Measurement
• In support of objective technical maturity• Objectively validated and measured time-
phased cost and schedule performance• Alerts program to potential execution problems
– Absolute or trend measures• Enables problem diagnosis by variance analysis
that leads to active program risk management
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Why Measure Performance?
• To further increase the probability of program success through:– Risk and opportunity management– Program governance and controls
• Answer the questions– Is the program performing according to plan?– Are there performance trends emerging?– How does this program relate to corporate success?
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Concepts
• Validate the technical scope• Establish ‘The Plan’
– What scope, by when, for how much• Measure performance and assess variance• Analyze to reveal root cause• Implement corrective actions• Inform the organization
– Project and Portfolio levels
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Portfolio Dashboard
PerformanceMeasurement/Analysis
Scope
Schedule
Cost / Resources
Concept as a System
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Earned Value Management
System
• Performance Analysis• Root Cause Determination• Corrective Action Planning
Cost and Schedule PerformanceData Collection
ProgramFunding
Performance Measures
• Cost Measures: CV = EV – AC ; CPI = EV / AC• Schedule Measures: SV = EV – PV ; SPI = EV / PV• Estimate-at-Complete (EAC): Various• Estimate-to-Complete (ETC): ETC = EAC - AC
16Reference: PMI PMBOK, Table 7-1
Establish the Plan• Plan what you know in objective terms
– Entire plan, Rolling Wave• “Don’t create variances during planning”
17Reference: 8-31-2013 © Scott Adams, Inc
Measure Performance
• Collect cost and schedule data based on predefined, objective, measureable criteria
• Scope management through governance
18Reference: Jorge Cham © 2014
Assess Variance
• Mechanical process of determining performance as compared to ‘The Plan’
• Provides visibility in objective terms• Focus on primary drivers of plan variance
– Absolute and relative measures
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Root Cause
• Meaningful level of detail• Ask ‘Why’ more than once• Recommend and
implement solutions• Capture in risk action register• Informs the program of risks and opportunities
20Reference: MindToolshttp://www.mindtools.com/pages/article/newTMC_5W.htm
Implement Corrective Action
• Supports the program controls function• Assess cost and schedule impacts• Baseline program governance• Log, track, and report• Archive
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Broader Context
• Risk and opportunity management• Dashboard reporting• Project portfolio management
– Projects | Programs | Portfolios• Supportive of enterprise strategic objectives
and “Value Chain” of the organization
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Deploy Incrementally
• Reconcile objective sources of performance information for cost and/or schedule
• Measure performance period-over-period• Allow the variance analysis to inform next
steps in evolving measurement maturity– Rigorous management of baseline plan– Reveal need for scope management
through governance
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• ANSI/EIA 748: Compliant versus Certified• Begin with cost or schedule performance
Tailored Solution
24Reference: Earning Value from Earned Value Glen Alleman, Aug 2013
Overhead Burdens
• Training and education– Stakeholders, PMO Team,
Project Managers• Supporting IT infrastructure
– Cost and schedule information collection– Excel spreadsheets to enterprise solutions
• Reporting and analysis time• In comparison to value of improved performance
and project delivery
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Frame the Conversation
• Speak in terms ofPerformance Measures
• Recognize the value ofperformance insight
• Recognize performance data as a corporate asset• Value of improved probability of program success
outweighs organizational cost factors• Improved internal/external customer satisfaction• Align to corporate objectives
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Prepare for Implementation
• Shared vision of whatsuccess looks like
• Stakeholder alignmentand visible support
• Project identity and organizational brand• Motivated, capable, and visionary team• Integrated governance, change management• Build open cross functional relationships
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Company Return On Sales
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+15%
MinimalCapability
CompositeWorld Class
QualifiedPerformer
Program Management Capability
Reference: DCMC Conference, March 2000
+10%
+5%
-15%
-10%
-5%
0%
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Using Earned Value Management Concepts to Improve Commercial Project Performance
R. Scott Brunton, PMP, PMI-RMP/SP, EVP
Principal Solutions Consultant
Lewis Fowler
383 Inverness Parkway, Suite 475
Englewood, CO 80112
www.lewisfowler.com
Phone: 719.339.0748E-mail: [email protected]: www.linkedin.com/in/sbrunton