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Earned Value Project Management

Colonel John Keesee

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Objective
To introduce and discuss the fundamentals of earned value project management Work Breakdown Structures Program plans and schedules Earned value management systems Cost and schedule variances Estimates at completion
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Scenario
You have been tasked to be the project manager for an important project You have been directed to use an earned value management system Time to market is critical for this development

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Work Breakdown Structure
Identifies 100 % of the work to be accomplished WBS dictionary breaks the scope into measurable tasks Each with an estimated value Responsibility for each task assigned to individuals or work teams
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Work Breakdown Structure

Space System

Launch Vehicle

Space Vehicle

Ground Command, Control, Communications and Mission Equipment

Payload

Spacecraft

Reentry vehicle

Integration, Assembly, Test and Checkout

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Project Master Schedule
Detailed plan and schedule Identified dependencies between tasks 18 months Estimated resources for each task 10 units at $150K each

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Project Master Schedule
Task/Event Award Design Buy specifications Vendor quotes Purchase orders Receive materials Factory plans Tool design Tool fabrication Parts fabrication Assembly: sub and final Test & checkout Jan - Jun ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^
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Jul - Dec

Jan - Jun

Project Performance Display
1600000 1400000 1200000 1000000 800000 600000 400000 200000 0
n il nu ar y Ju ly il ob Ap r Ap r Ju ly Ja er

BCWS BCWP ACWP

ct O

Ja

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Plan Review Before Go-Ahead
CEO: “Time to market is critical. You have 12 months.” “This looks gold-plated at $1.5M. You have $1.0M.” “Go ahead, but come back to me with your progress in three months.”
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The Three Month Review
Three units scheduled for completion Two units actually completed $300,000 budgeted at this point $300,000 actually spent Optimist PM: “A little behind schedule but right on the cost plan.”

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Earned Value System
Requires a detailed, bottoms-up performance plan Performance measured against the plan Provides forecast of final expected results based on data

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Earned Value Measurements
1. 2. 3. 4. 5. 6. 7.

Work scheduled Budgeted cost of work scheduled (BCWS) Work performed Budgeted cost of work performed (BCWP) Actual cost of work performed (ACWP) Schedule variance (SV) = BCWP - BCWS Cost Variance (CV) = BCWP - ACWP
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New Project Performance Display
1200000 1000000 800000 600000 400000 200000 0
Ap ril y De ce m be r Ju ly Ja nu ar ct ob er

BCWS BCWP ACWP

O

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Estimate at Completion
Cost efficiency CPI = BCWP/ACWP Schedule efficiency SPI = BCWP/BCWS Estimate at completion BAC EAC1 = CPI
BAC − BCWP EAC 2 = ACWP + CPI * SPI
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Management Reserve
Budgeted to provide the ability to adjust for uncertainty Always accounted at the total project level Normally retained and controlled at the total project level Must not be eliminated by negotiations

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Summary
Earned value management system provides a key link between the cost, schedule, and technical aspects of a project Provides an early and reliable prediction of future performance

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References
Fleming, Quentin W. and Joel M. Koppelman, Earned Value Project Management, PMI, Newtown Square, PA 2000 Lewis, James P., Fundamentals of Project Management, AMACOM, NY 2002

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