Earned Value Management: An Introduction and Short Tutorial: Wayne Baggett

Space Telescope
Science Institute GSET Technical Seminar Series
Earned Value Management:

An Introduction and Short
Tutorial
Wayne Baggett
November 21, 2005 1

Space Telescope
Outline
 What is Earned Value?
 Government Requirements
 Small Project Usage
 Why Use Earned Value?
 Earned Value in a Nutshell
 Conclusions
November 21, 2005 2

Space Telescope
What is Earned Value?
How does
Dilbert know
this?
November 21, 2005 3

Space Telescope
What is Earned Value?

 Project Management Technique
• Integrates technical performance requirements,
resource planning, and cost accounting with
schedule
• Provides insight into project status
• Provides “early warning signals” for problems
Provides a disciplined means of

managing the project
November 21, 2005 4
Space Telescope
Government Requirements
 OMB Circular A-11, Exhibit 300 (2004)
• Requires EVMS for all major acquisitions
• Agencies must have ANSI-compliant EVMS in place
by December 31, 2005
• EVMS data must be used to identify problems and
provide realistic final cost estimates as a part of
decision packages
 Federal Acquisition Regulations (2005) amended
to require contractor-maintained EVMS
November 21, 2005 5

Space Telescope
Government Requirements
 These requirements apply to large projects or
programs; DOD requires
• Contract Value ≥ $50M: validated ANSI-compliant
EVMS, structured reports and reviews, ongoing
surveillance
• $50M > Contract Value ≥ $20M: ANSI-compliant
EVMS (validation not required), tailored reports and
reviews, ongoing surveillance
• Contract Value < $20M: EVMS optional, ongoing
surveillance
 Very rigid, heavily constrained system at this level
November 21, 2005 6
Space Telescope
Small Project Usage

 Small projects provide “the best opportunities
for earned-value employment”
• Consider its use for “… all in-house funded
developmental projects where a firm commitment
is made to management.”
• “Software projects can especially benefit from the
employment of a simple earned-value approach.”
(Fleming and Koppelman, “Earned Value Project Management: A
Powerful Tool for Software Projects,” Crosstalk, July, 1998, p. 19.)
November 21, 2005 7

Space Telescope
Small Project Usage

 The Personal Software Process (PSPSM) and Team
Software Process (TSPSM) use EVM
• PSP has practitioners estimate task efforts and track
their actual efforts
 Tasks estimated are very small – about 10 hours each
 Data are used to improve future estimates
• TSP expands the use of EVM to the project level
• Use of PSP and TSP helps projects meet their
commitments (Tuma, D. and Webb, D., “Personal Earned Value:
Why Projects Using the Team Software Process Consistently Meet
Schedule Commitments,” Crosstalk, March 2005, p. 17.)
PSP and TSP are registered service marks of Carnegie Mellon University
November 21, 2005 8

Space Telescope
Small Project Usage

 Several projects at STScI have used EVM:
• Most used a tailored version of EVM
• JWST S&OC development
FOS, PPS, PRDS
• JWST FITS Writer development
• INS Master Schedule development
• DMS Automated Test System development
November 21, 2005 9

Space Telescope
Why Use Earned Value?

 Obligates planning to the level of task
management
• Less likely to overlook work
 Provides objective measures of progress
 Allows early detection of budget and
schedule problems
 Allows an objective projection of eventual
project cost and schedule
November 21, 2005 10
Space Telescope
Key to Earned Value
Determine the value for every task

prior to starting work!

Space Telescope
Guidelines for Setting/Earning Value

 Use a consistent unit of measurement that makes
sense for the project
• Dollars – required for large gov’t projects
• Hours – useful on small projects; PSPSM
• Arbitrary number – not recommended, but still used
 Consider task duration
 Select Earned Value Methods that are as objective
as possible

Space Telescope
Earned Value Methods

Method Usage Examples
Equivalent Value based on completed portion of a large number S/W Implementation, H/W
Units of completed activities Production
0-100 Value earned upon completing work that starts and Outlines, Document Preparation,
ends within one status period Formal Reviews
50-50 Part of value earned when work starts and remainder Short Engineering Analyses,
when it ends, usually when work straddles two System Design, Build and
reporting periods; percentages are determined by the Acceptance Tests
Objectivity
manager
Interim Value earned at the completion of objective Long-Term Analyses, System
Milestones milestones; usually for work that straddles several Design, Requirements Definition
consecutive status periods
Apportioned Value earned is prorated based on a portion earned QA, Configuration Management,
Effort for another unit of work Database Management
Percent Value earned based on subjective estimate; usually Long-Term Studies, Maintenance
Complete for work that has no objective measure of and Operations
completeness
Level of Value based on passage of time; usually for work that Project Management,
Effort cannot be defined or measured Receptionist, Help Desk
Space Telescope
Example: Planned vs. Actuals

$250
$200 Current Date

Value ($1000s)
$150
Planned
Actual
$100
$50 $13,000 under budget!
$-
11/26/2005
10/28/2006
12/23/2006
11/24/2007
10/1/2005
1/21/2006
3/18/2006
5/13/2006
2/17/2007
4/14/2007
9/29/2007
1/19/2008
3/15/2008
5/10/2008
7/8/2006
9/2/2006
6/9/2007
8/4/2007
Date

Space Telescope
Example: Earned Value

$250
BAC=$200
PV
$200
Value ($1000s)
$150
PV
PMB EV
AC
$100
SV=EV-PV=($30) CV=EV-AC=($17)
$50
EV
AC
$-
8/4/2007
5/13/2006
7/8/2006
9/2/2006
2/17/2007
6/9/2007
10/1/2005
1/21/2006
3/18/2006
4/14/2007
9/29/2007
1/19/2008
3/15/2008
5/10/2008
11/26/2005
10/28/2006
12/23/2006
Date 11/24/2007

Space Telescope
Earned Value Concepts

 Planned Value (PV) – planned cost of doing
the scheduled work (formerly BCWS)
 Earned Value (EV) – planned cost of the
work completed (formerly BCWP)
 Actual Cost (AC) – actual cost of the work
completed (formerly ACWP)
 Performance Measurement Baseline (PMB)
– the time-phased budget plan against
which performance is measured
Space Telescope
Earned Value Concepts (cont.)

 Schedule Variance (SV) – measures how
project is doing relative to the schedule
SV = EV – PV
Positive Ahead of Sched., Negative  Behind Sched.
 Cost Variance (CV) – measures how project
is performing; productivity measure
CV = EV – AC
Positive Efficient, Negative  Inefficient

Space Telescope

 Budget Variance (BV) – measures how
project is doing against the budget
BV = PV – AC
Positive  Under Budget, Negative  Over Budget
 Budget At Completion (BAC) – sum of the
planned value plus the Undistributed
Budget

Space Telescope
Example: Earned Value

$250 EAC=AC + ETC=$233
$200 SPI=EV/PV=0.70
CPI=EV/AC=0.81
Value ($1000s)
PV
$150
EV
AC
$100
VAC=BAC-EAC=($33) ETC
$50
ETC=(BAC-EV)/CPI=$146
$-
11/26/2005
1/21/2006
9/2/2006
2/17/2007
4/14/2007
8/4/2007
9/29/2007
5/10/2008
10/1/2005
3/18/2006
5/13/2006
7/8/2006
10/28/2006
12/23/2006
6/9/2007
11/24/2007
1/19/2008
3/15/2008
Date

Space Telescope

 Schedule Performance Index (SPI) –
measure of schedule compliance: is work
being done at the planned rate?
SPI = EV/PV
<1  Slower than planned, >1  Faster than planned
 Cost Performance Index (CPI) –
productivity measure: is the work costing
what was expected?
CPI = EV/AC
< 1 Inefficient, > 1  Efficient
Space Telescope

 Estimate To Complete (ETC) – estimate of
the effort required to complete the project
from the current date
ETC = (BAC – EV)/CPI
 Estimate At Completion (EAC) – the
estimated total cost of the project
EAC = AC + ETC
Space Telescope
Earned Value Concept Summary

Acronym Definition Equation Interpretation
PV Budgeted cost of task (none)
EV Earned value for task (none)
AC Actual cost of task (none)
SV Schedule Variance SV=EV - PV >0 = Ahead, <0 = Behind
BV Budget Variance BV=PV - AC >0 = Under, <0 = Over
CV Cost Variance CV=EV - AC >0 = Productive, <0 = Unproductive
BAC Budget At Completion BAC= UB +  PV “UB”=Undistributed Budget
SPI Schedule Perf. Index SPI=EV/PV >1 = Faster, <1 = Slower
CPI Cost Perf. Index CPI=EV/AC >1 = Efficient, < 1 = Inefficient
ETC Estimate to Complete ETC=(BAC-EV) /CPI

EAC Estimate At Completion EAC=AC+ETC
VAC Variance at Completion VAC = BAC - EAC >0 = Under, <0 = Over

Space Telescope
Costs of EVMS
 Marginal cost of using EVMS is estimated at less
than 1% to a few% of total contract cost
• Based mainly on large DOD contracts with
experienced EVMS users
• Some costs are unnecessary according to EVMS
criteria, but effort is put into those activities anyway
 Expect costs to be higher at STScI due to
inexperience in using EVM and our culture
• Mitigated by our implementation
Christensen, David S., “The Costs and Benefits of the Earned Value Management
Process,” Acquisition review Quarterly, Fall, 1998, p. 373.

Space Telescope
Benefits of Earned Value

 It is a single management control system that
provides reliable data.
 It integrates work, schedule, and cost using a work
breakdown structure.
 The associated database of completed projects is
useful for comparative analysis.
 The cumulative cost performance index (CPI)
provides an early warning signal.
 The schedule performance index provides an early
warning signal.
Process,” Acquisition review Quarterly, Fall, 1998, p. 373.

Space Telescope
Benefits of Earned Value

 The CPI is a predictor for the final cost of the project.
 It uses an index-based method to forecast the final
cost of the project.
 The “to-complete” performance index allows
evaluation of the forecasted final cost.
 The periodic (e.g., weekly or monthly) CPI is a
benchmark.
 The management by exception principle can reduce
information overload.
Process,” Acquisition Review Quarterly, Fall, 1998, p. 373.

Space Telescope
“The most common problem product teams face is

unreasonable schedule pressure. … When teams are
forced to work to unreasonable schedules, they are
unable to make useful plans. Every plan they
produce misses management’s edicted schedule and
is therefore unacceptable. As a result, they must
work without the guidance of an orderly plan. Under
these conditions, the team will generally take much
longer to complete the project than they otherwise
would.”
Watts Humphrey, “Pathways to Process Maturity: The Personal Software Process
and Team Software Process,” SEI Interactive, June 1999.

Earned Value Management: An Introduction and Short Tutorial: Wayne Baggett

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Earned Value Management: An Introduction and Short Tutorial: Wayne Baggett

Uploaded by

Copyright:

Available Formats

Space Telescope

Science Institute GSET Technical Seminar Series

Earned Value Management:

November 21, 2005 1

November 21, 2005 2

What is Earned Value?

November 21, 2005 3

What is Earned Value?

Provides a disciplined means of

November 21, 2005 5

Small Project Usage

November 21, 2005 7

Small Project Usage

November 21, 2005 8

Small Project Usage

November 21, 2005 9

Why Use Earned Value?

Key to Earned Value

Determine the value for every task

November 21, 2005 11

Guidelines for Setting/Earning Value

November 21, 2005 12

Earned Value Methods

Example: Planned vs. Actuals

$200 Current Date

$50 $13,000 under budget!

November 21, 2005 14

Example: Earned Value

November 21, 2005 15

Earned Value Concepts

Earned Value Concepts (cont.)

November 21, 2005 17

Earned Value Concepts (cont.)

November 21, 2005 18

Example: Earned Value

November 21, 2005 19

Earned Value Concepts (cont.)

Earned Value Concepts (cont.)

Earned Value Concept Summary

BV Budget Variance BV=PV - AC >0 = Under, <0 = Over

CV Cost Variance CV=EV - AC >0 = Productive, <0 = Unproductive

BAC Budget At Completion BAC= UB +  PV “UB”=Undistributed Budget

SPI Schedule Perf. Index SPI=EV/PV >1 = Faster, <1 = Slower

CPI Cost Perf. Index CPI=EV/AC >1 = Efficient, < 1 = Inefficient

ETC Estimate to Complete ETC=(BAC-EV) /CPI

November 21, 2005 22

November 21, 2005 23

Benefits of Earned Value

November 21, 2005 24

Benefits of Earned Value

November 21, 2005 25

“The most common problem product teams face is

November 21, 2005 26

You might also like