CSE4316 Earned Value

7/29/2019 CSE4316 Earned Value

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CSE Senior Design I

Earned Value Management

Some slides in this presentation were originally developed by Mr. TomRethard, and most have been further enhanced and modified by Mr. Mike

ODell for use in the CSE Senior Design class.

Instructor: Mike ODell


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Earned Value - What is it?Simply, it is a project monitoring andmeasurement system that:1. establishes a clear relationship between

planned accomplishments and actual accomplishments

2. reinforces and rewards good planning

practices


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Earned Value - What is it?Basic concepts of Earned ValueManagement (EVM)

Each task in a project earns value as plannedwork is completed

For example (perhaps), if you were paid on thisbasis, you wouldearn $$ at key milestones based onthe value of what you have completed (earned value)

Earned value can be compared to actual costand budgeted cost to determine variance andpredict future performance


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Earned Value ComponentsPlanned Value (a.k.a.BCWS)

How much work (person-hours) you planned to haveaccomplished at a given point in time (this is from theWBS in your plan)

Actual Cost (a.k.a. ACWP)How much work (person-hours) you have actually spentat a given point in time

Earned Value (a.k.a. BCWP)The value (person-hours) in terms of your base budgetof what you have accomplished at a given point in time(or, % complete X Planned Value)


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Earned Value: Example

On Day X:PLANNED VALUE(Budgeted cost of the work scheduled, BCWS) =18 + 10 + 16 + 6 = 50

EARNED VALUE(Budgeted cost of the work performed, BCWP) =18 + 8 + 14 + 0 = 40

ACTUAL COST (of the work performed , ACWP) =45 (from your project tracking - not evident in above chart)

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Today


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C o s

t ( P e r s o n - H o u r s

)

Time (Date)

Planned Value : what your plan called for sending onthe tasks planned to becompleted by this date.

Today

Earned Value : value (cost)of what you haveaccomplished to date, per the base plan.

Actual Cost : what youhave actually spent tothis point in time.


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C o s

t ( P e r s o n - H o u r s

)

Time (Date)

Today

BehindSchedule

Over Budget


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VarianceAnyschedule or cost deviation from aspecific plan.Used within an organization to verify thebudget and schedule for a projectFrequently used as a key component ofplan reviews and performancemeasurement


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VarianceMust compare scheduling and budgetvariance at the same time

Schedule variance : deviations from workplanned not a measure of changes in costCost variance: deviations from thebudget not a measure of work scheduled vs.

work completedExample: applying more $$/people to a task maymaintain the schedule, but it adds to costschedule on track over budget on expenses (cost)


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Performance IndicesCost Performance Index

CPI = BCWP/ACWPSchedule Performance Index

SPI = BCWP/BCWSAnalysis

CPI > 1.0 exceptional performance

CPI < 1.0 poor performanceSimilar for SPI


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QuizThe EV measurement of work you planned tohave accomplished at a given point in time :a. BCWPb. ACSPc. BCWSd. ACWSTrue or False: At any point in time, the SPItells you exactly how far ahead or behindschedule you are on your project.a. TRUEb. FALSE


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QuizIf BCWP is 20 pm and ACWP is 15 pm, CPI:a. .75b. 1.33c. 1.0d. 0If BCWP is 27 pm BCWS is 25 pm, you areprobably:a. On scheduleb. Ahead of schedulec. Behind scheduled. None of the above


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Earned Value & Variance: Example

On Day X:PLANNED VALUE (BCWS) = 18 + 10 + 16 + 6 = 50EARNED VALUE (BCWP) = 18 + 8 + 14 + 0 = 40ACTUAL COST (ACWP) = 45 (from your project tracking)

Therefore:Schedule Variance = BCWP BCWS = 40 - 50 = -10 (behind schedule)Schedule Performance Index = 40 / 50 = 0.8, or 80% of plan (a B-, at best)Cost Variance = BCWP - ACWP = 40 - 45 = -5Cost Performance Index = 40/45 = .89, or youre getting an 89 return on every$1.00 (or, person-hour) spent on this project

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Primary Measurement MethodsMeasurable efforts

Discrete increments of work with definableschedule and tangible results (i.e., real taskswith a deliverable)

Level of effortWork that is not discernable in discrete ,

measurable tasks (e.g., project management,training)


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Determining % Complete When?

Allocate based on time spent but what if youspend more time than allocated?Allocate 50% at start of task, 50% at end

But only for small, discrete tasksAllocate 100% at start of taskAllocate 100% at end of task

Best solution if you keep tasks very small

Allocate value at Critical MilestonesGood solution when using with contract workOthers?

Our approach


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Another Example ProjectPlans to spend $100K in each of first 4 weeks(baseline budget, per documented plan)Actuals, at end of week 4 show: $325K spent

BCWS = $400K ($100K x 4)ACWP = $325K

What conclusions can you draw?Under budget?

Is project on schedule?


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Another Example ProjectSuppose BCWP is $300K

How is this determined?What conclusions now?

SV = BCWP BCWSSV = $300k - $400K = -$100K

Behind schedule, but what does the $100K in

variance really mean?CV = BCWP ACWP = $300K - $325K

Over budget by $25K


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Earned Value ManagementHow can you use this information?

Careful analysis of variance and trendsResetting schedule or budget, when appropriate

Variance Analysis QuestionsWhat is the problem causing the variance?What is the impact on time, cost and performance?What is the impact on other efforts, if any?What corrective action is planned or under way?What are the expected results of the correctiveaction?


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Earned Value ManagementExtraordinary variance or alarming trends maybe cause for reset or cancellation of a project,but where do you draw the line?

How much variance to allow depends on anumber of factors:Life-cycle phaseLength of life-cycle phase

Length of projectType of estimateAccuracy of estimate


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Variance Projection


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Performance Index Trends


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Ideal Performance Index


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Closing Thoughts: ManagementReserveThe padding always added to a project forunexpected costs that are within projectscope

Not an allowance for changes to scopeNot part of the cost estimate

Added by upper management, not theproject manager.


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Closing Thoughts: GovernmentRequirementsU.S. government contract cost tracking oftenmust include:

BCWS

BCWPACWPEstimated cost at completionBudgeted cost at completion

Cost and schedule variances with explanationsTraceability


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4 SummaryCost, in the form of Earned Value orBCWP, can be used to analyze progress ofa projectUsing Earned Value data to make criticalproject decisions must be based on carefulanalysis of data, variances and trends

CSE4316 Earned Value

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