earned value analysis software project management · pdf filesoftware project management tools...

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Software Project Management

Tools for Monitoring and Control

Earned Value Analysis

L9


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Ä Monitoring of performance of the entire project. One way of measuring overall performance isby using an aggregate performance measure -Earned Value (EV)

Ä Earned Value chart helps identify 3 variances◆ Time variance (TV)

◆ Cost or spending variance (CV)

◆ Schedule variance (SV)

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Ä Acronyms & Definitions

◆ ACWP = Actual cost of work performed◆ BCWP = Budgeted cost of work performed (also called EV)◆ BCWS = Budgeted cost of work scheduled◆ ATWP = Actual time of work performed◆ STWP = Scheduled time of work performed◆ BAC = Budget at completion◆ FCAC = Forecasted cost at completion

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CV = Cost variance = BCWP - ACWP

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TV = Time variance = STWP - ATWP

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SV = Schedule variance = BCWP – BCWS

The variances can be stated as ratios rather than differences

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Ä The variances can be stated as ratios rather than differences.(Under performance being indicated by a ratio < 1)

Cost variance becomes cost performance index (CPI)= BCWP/ACWP

Time variance becomes time performance index (TPI)= STWP/ATWP

Schedule variance becomes schedule performance index= BCWP/BCWS

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Earned Value – chart

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Time

TimeNow ACWP

BCWP

BCWS

Sch e

dule

Var

ianc

e

CostVariance

STW

P

Cost

TimeVariance

AT

WP

Value Completed

Actual Cost

Baseline CostSchedule Plan

Example

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Assume that operations of a work package were expected to cost $1,500 to complete the package. They were scheduled to have been finished today.

At this point, however, we have spend $1,350, and we estimate that we have completed two- thirds of the work.

Cost variance = BCWP – ACWP = $1500(2/3) - 1350 = - $350

Schedule variance = BCWP – BCWS = $1500(2/3) - $1500 = -$500

➨ We are spending at a higher level than our budget plan indicates,and we have not completed as much work as we should have.

Earned Value Analysis – points to note

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Ä Problems with Isolated Time and Cost Analysis

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Comparing actual cost data against baseline cost data is meaninglessUNLESS the amount of work accomplished is taken into account

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Comparing actual schedule data against baseline schedule data canindicate whether individual tasks are completed BEHIND, ON or AHEAD of Schedule (but not the cost of achieving this performance)

Ä Problems with Overall Progress Analysis

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Individual tasks must be carefully monitored and controlledbecause their timing and co-ordination is fundamental to controlledprogress of the project

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An analysis of overall progress is also required, and not easily estimatedby examining many tasks in various states of completion that are relatedby complex precedence relationships


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Ä Is an Integrated Time/Cost Analysis

Ä Is based onCalculating and tracking three time/cost curves, and comparingtheir values at each time increment

The three Time/Cost curves are ◆ Budgeted Cost

cumulative Baseline Cost vs Time

◆ Actual Costcumulative Actual Cost vs Time

◆ Earned Valuecumulative Budgeted (not Actual) Cost of WorkPerformed (not scheduled) vs Time

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EV terminology

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Ä Time NowUp to which actual data has been captured and processed

Ä Percentage Complete (PC)Of an ongoing activity at Time Now

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Activity = work package, task or project

It is an estimate based on output (not time, cost or resource input)

Ä Remaining Duration (RD)Of an ongoing activity at Time NowIt is an estimate based on output (not time, cost or resource input)

Simplistic Linear Formula often used to relate PC

PC = (Dur - RD)/Dur (Dur = baseline duration)

Earned Value Terminology (cont.)

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Ä Budgeted cost of work scheduled (BCWS)Cost of work to be completed at time, t according to baseline schedule and budget

Ä Budgeted cost of work performed (BCWP)Cost of work actually completed at time, taccording to actual data in progress reports and

baseline budget

Ä Actual cost of work performed (ACWP)Cost of work actually completed at time, taccording to actual data in progress reports

Bud ge te d C

o sto f W

o rk

Cost of W

orkA

ctu all y Com

ple ted

Earned Value Terminology (cont.)

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Ä Schedule Variance (SV)Cost variance between cost of baseline work completed andactual work completed

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SV = BCWP - BCWS

Ä Cost Variance (CV)Cost variance between baseline cost and actual cost of workcompleted

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CV = BCWP - ACWP

Ä Budget at Completion (BAC)Baseline planned cost of an activity at its completion

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Activity = work package, task, project

Ä Forecast Cost at Completion (FCAC)Current revised cost based on “Current Productivity”

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Simple Formulae : FCAC = (ACWP/BCWP)*BAC

Example - EV Chart

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0

500

1000

1500

2000

2500

3000

3500

BCWP ACWP BCWS

Budget Overrun

Schedule Overrun

Budget Overrun

UnderBudget

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Earned Value Analysis - Single Activity

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Baseline Data

BAC = $4,000Duration = 4 daysRate = $1,000/day

Actual Data

ACWP = $3,000PC = 25%

Time Now

BCWS What should have been earnedBCWP What has been earnedACWP What has been spent

BCWS = Baseline PC * BAC = 50% * 4000 = $2,000BCWP = Actual PC * BAC = 25% * 4000 = $1,000FCAC = (ACWP/BCWP) * BAC = (3000/1000) * 4000 = $12,000SV = BCWP - BCWS = 1000 - 2000 = - $1,000SV% = SV/BCWS = -1000/2000 = - 50%CV = BCWP - ACWP = 1000 - 3000 = - $2,000CV% = CV/BCWP = - 2000/1000 = - 200%

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Assume the following information is available

Example – EVA for multiple activities

D1200E

B2600D

A31200C

A2400B

--1100A

PrecedenceDurationBACActivity

Earned Value Analysis - Multi Activities

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Activity BAC1 100 1002 400 200 2003 1200 400 400 4004 600 300 3005 200 200

Planned Daily Cost 100 600 600 700 300 200BCWS 100 700 1300 2000 2300 2500Planned PC 4% 28% 52% 80% 92% 100%

t = 4

Act PC ACWP

1 100% $1002 100% $5003 75% $10004 25% $2005 0% $0

Actual Data at time t = 4

Activity 1 at time t = 4

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Activity BAC BCWS PC BCWP ACWP SV SV% CV CV% EAC1 100 100 100% 100 100 0 0% 0 0 1002 400 400 100% 400 500 0 0% -100 -25% 5003 1200 1200 75% 900 1000 -300 -25% -100 -11% 13334 600 300 25% 150 200 -150 -50% -50 -33% 8005 200 0 0% 0 0 0 0% 0 0% 200

Total 2500 2000 1550 1800 -450 -22% -250 -16% 2903

BCWS = Baseline PC * BAC = 100% * 100 = 100BCWP = Actual PC * BAC = 100% * 100 = 100FCAC = (ACWP/BCWP) * BAC = (100/100) * 100 = 100SV = BCWP - BCWS = 0SV% = SV/BCWS = 0/100 = 0%CV = BCWP - ACWP = 0CV% = CV/BCWP = 0/100 = 0%

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Total 2500 2000 1550 1800 -450 -22% -250 -16% 2903

BCWS = Baseline PC * BAC = 100% * 400 = 400BCWP = Actual PC * BAC = 100% * 400 = 400FCAC = (ACWP/BCWP) * BAC = (500/400) * 400 = 500SV = BCWP - BCWS = 400 - 400 = 0SV% = SV/BCWS = 0/400 = 0%CV = BCWP - ACWP = 400 - 500 = - 100CV% = CV/BCWP = - 100/400 = - 25%


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Total 2500 2000 1550 1800 -450 -22% -250 -16% 2903

BCWS = Baseline PC * BAC = 100% * 1200 = 1200BCWP = Actual PC * BAC = 75% * 1200 = 900FCAC = (ACWP/BCWP) * BAC = (1000/900) * 1200 = 1333SV = BCWP - BCWS = 900 - 1200 = - 300SV% = SV/BCWS = - 300/1200 = - 25%CV = BCWP - ACWP = 900 - 1000 = - 100CV% = CV/BCWP = - 100/900 = - 11%


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Total 2500 2000 1550 1800 -450 -22% -250 -16% 2903

BCWS = Baseline PC * BAC = 50% * 600 = 300BCWP = Actual PC * BAC = 25% * 600 = 150FCAC = (ACWP/BCWP) * BAC = (200/150) * 600 = 800SV = BCWP - BCWS = 150 - 300 = - 150SV% = SV/BCWS = - 150/300 = - 50%CV = BCWP - ACWP = 150 - 200 = - 50CV% = CV/BCWP = - 50/150 = - 33%


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Total 2500 2000 1550 1800 -450 -22% -250 -16% 2903

BCWS = Baseline PC * BAC = 0% * 200 = 0BCWP = Actual PC * BAC = 0% * 200 = 0FCAC = (ACWP/BCWP) * BAC = (?) * 200 = 200SV = BCWP - BCWS = 0SV% = SV/BCWS = (?)CV = BCWP - ACWP = 0CV% = CV/BCWP = (?)

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EVA of whole Project at time t = 4

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Total 2500 2000 1550 1800 -450 -22% -250 -16% 2903

BCWS = 2000BCWP = 1550FCAC = (ACWP/BCWP) * BAC = (1800/1550) * 2500 = 2903SV = BCWP - BCWS = 1550 - 2000 = - 450SV% = SV/BCWS = - 450/2000 = - 22.5%CV = BCWP - ACWP = 1550 - 1800 = - 250CV% = CV/BCWP = - 250/1550 = -16%

Earned Value Analysis - Multi Activities

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Ä Critical RatioCR = (actual progress/scheduled progress)*(budget cost/actual cost)

= (AP/SP)*(BCWP/ACWP)

(assumes that two Ratios are weighted equally)

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Useful for Larger Projects

Activity AP SP BCWP ACWP CR Status1 2 3 6 4 1.00 On2 2 3 6 6 0.67 Behind3 3 3 4 6 0.67 Behind4 3 2 6 6 1.50 Ahead5 3 3 6 4 1.50 Ahead

Another Simple Example

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Consider a project to develop a specializedsoftware to control a packaging machine, and install it at the customer’s factory.

Design

1 4

Develop

2 6

Install& Test

3 2

activitynumber

durationEstimate (wks)

WBS for the software development projectfor the packaging machine

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Design$24,000

Develop$60,000

Install& Test$16,000

Software Project$100,000

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Budgeted cost by period forthe software project

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Week

TBC 1 2 3 4 5 6 7 8 9 10 11 12

Design 24 4 4 8 8

Develop 60 8 8 12 12 10 10

Install & Test 16 8 8

Total 100 4 4 8 8 8 8 12 12 10 10 8 8

Cumulative 4 8 16 24 32 40 52 64 74 84 92 100

(amounts are in thousand dollars)

Actual cost by period for the software project

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WeekTotalSpent1 2 3 4 5 6 7 8

Design 2 5 9 5 1 22

Develop 2 8 10 14 12 46

Install & Test 0

Total 2 5 9 7 9 10 14 12 68

Cumulative 2 7 16 23 32 42 56 68


Cumulative percentage complete by period for the software project

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Week

1 2 3 4 5 6 7 8

Design 10 25 80 80 100 100 100 100

Develop 0 0 0 5 15 25 40 50

Install & Test 0 0 0 0 0 0 0 0

Cumulative Earned Value by period for the software project

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Weeks

TBC 1 2 3 4 5 6 7 8

Design 24 2.4 6 19.2 21.6 24 24 24 24

Build 60 3 9 15 24 30

Install & Test 16

Cumulative 100 2.4 6 19.2 24.6 33 39 48 54


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Cost performance index (CPI) and cost variance (CV) for the software project

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CPI = BCWP/ACWP = $54,000/$68,000 = 0.79

This ratio indicates that for every $1.0 actually spent,only $0.79 of earned value was received.

CV = BCWP - ACWP = $54,000 - $68,000 = - $14,000

This indicates that the value of work performed through to week 8 is $14,000 less than the amount actually spent.

Cost Forecasting for the software Project

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1. Assuming that the remainder of the project continues to beperformed at the same efficiency rate

FCAC = Total Budgeted Cost/ CPI= $100,000/ 0.79 = $126,582

2. Ignoring the past efficiency rate, assuming that the work on the

remaining portion of the project will be done according to budget

FCAC = ACWP + (TBC – BCWP)= $68,000 + ($100,000 - $54,000) = $114,000

Budgeted cost, Actual cost and Earned Value for the software project

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0

10

20

30

40

50

60

70

80

90

100

1 2 3 4 5 6 7 8 9 10 11 12

Weeks

Cos

t ($’

000)

Budgeted

Actual

Earned Value

Budgeted Cost, Actual Cost and Earned Value for the software project

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0

10

20

30

40

50

60

70

80

90

100

1 2 3

Series164%68%

54%

Percentage Budgeted

Costto have been

spent

Percentage Cost

Actually spent

Percentage of Work

Completed

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Other project monitoring methods include

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➨ Cost/Schedule Control System Criteria (C/SCSC)It is an extension of EVA. It spells out a number of standardsof organization, accounting, budgeting, etc.{Lambert L R, C/SCSC: An Integrated Project Management Approach UsingEarned Value Techniques. The AMA Handbook of Project Management, 1993.}

➨ Milestone ReportingThese reports show project status at a specific time.

➨ Project TrackingActivity tracking, error tracking, issues tracking, etc

Cost Monitoring

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Ä Does the source of the actual cost data give information for a sufficiently recent time Now

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Timely EV analysis

Ä What is the exact source of costs

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Equipment, Payments

Ä Valid EV analysis

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For each activity ACWP and actual PC must correspond, otherwiseEV analysis is not valid

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Actual progress to time Now (PC) must be compared withACWP necessary to achieve that progress

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Parent organisation costing systems are usually derived fromreceived invoices and are 4-6 weeks behind

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Need to set up a timely project order based costing system

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Kemerer C F, Software Cost Estimation Models: SoftwareProject Management Readings and Cases. McGraw- Hill, 1997.

Further Readings

Brandon D M, Implementing Earned Value Easily and Effectively.Project Management Journal, 2(29) 1998 pp 11- 18.

Simmons D B, Ellis N C, Fujihara H and Kuo W, SoftwareMeasurement: A Visualization Toolkit. Prentice- Hall, 1998.

McConnell S, Rapid Development: Taming Wild Software Schedules. Microsoft Press, July 1996.

Standards Australia, Project Performance Measurement usingEarned Value. AS 4817- 2003.

earned value analysis software project management · pdf filesoftware project management tools...

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