handouts

1/ASCEWebinarEarnedValue 1

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/ASCEWebinarEarnedValue 2

A Seminar SponsoredA Seminar Sponsoredby theby the

ASCE Continuing Education ProgramASCE Continuing Education ProgramIn cooperation with In cooperation with

ASCE Leadership DevelopmentASCE Leadership DevelopmentFriday, January 28, 2011Friday, January 28, 2011

MONITORING PROJECT BUDGETS AND SCHEDULES:MONITORING PROJECT BUDGETS AND SCHEDULES:INTRODUCTION TO THEINTRODUCTION TO THE

EARNED VALUE METHODEARNED VALUE METHOD

Presented byStuart G. Walesh, PhD, PE

D.WRE, Dist.M.ASCE, F.NSPEConsultant and Author

[email protected]

www.linkedin.com/in/stuwalesh

Copyright 2011 S. G. Walesh


B: PRESENTER

A: RESOURCES FOR FURTHER STUDY

D: OTHER NOMENCLATURE

APPENDICESAPPENDICES

C: ADDITIONAL NOW SCENARIOS

E: TESTIMONIALS


TOPICSTOPICS

TASK VALUE

RECAP

EVM: OVERVIEW

STEP 1: PREPARE TASKS, BUDGET, SCHEDULE

STEP 2: TRACK ACTUAL COST

STEP 3: TRACK EARNED VALUE

STEP 4: CELEBRATE/CORRECT

TIPS

BENEFITS

INTRODUCTION


Need to accommodate all 3 pulls or tensions

PROJECT

Providedeliverables

Meetschedule

Stay withinbudget


Plan our work Work our plan+

Project plan(PP)

How are we doing?and

How do we know?


Now scenarios

Valueof

resultsproduced

Actualcosts

Plannedcosts

Valueof

resultsproduced

PMknows

Accounting department

tells PM

PMneeds

Howare wedoing?

ActualcostsPlanned

costsHow

are wedoing?


Planned costsActual costs

Value of results produced

We need to know


Audience?


As a result of this webinar, you should be able to:

Estimate earned value the value of work completed at any time in a project

Use earned value to determine project status and celebrate or correct


The EVM has many other names

Earned value analysis

S curve method

3 curve method

Integrated budget and schedule method

Earned value management

?


Source: www.pmibookstore.org


TOPICSTOPICS

INTRODUCTION

RECAP

EVM: OVERVIEW





TIPS

BENEFITS

TASK VALUE


Cost

and

Value


You will pay $2000

You hire a college studentto paint your house


One week into the painting project

The work is 3/4 complete

How much value have you gained?

$1500


How much value has the painter earned?

$1500


TEMPLATE For

WORK TASK AND BUDGET BREAKDOWN AND SCHEDULE

A B C1 C2 C3 D1 D2 E1 E2

WEEK DESCRIPTION LABOR EXPENSES BUDGETOF

TASKSHOURS BILLING COST ITEM COST TASK CUMU-

RATE COST LATIVEPLANNED

COSTS

$/Hr $ $ $ $

TOTALS: ? ? ? ?

10


Thinkthrough

the project


WORK TASK AND BUDGET BREAKDOWN AND SCHEDULE FOR HYPOTHETICAL PROJECT

A B C1 C2 C3 D1 D2 E1 E2



RATE COST LATIVEPLANNED

COSTS

$/Hr $ $ $ $

1 Set up files. 1 75 75 75 75

2 Study draft. 2 90 180 Support 100 280 920Outline suggestedimprovements. 4 90 360 Postage 25 385

Pose questions. 2 90 180 180

3 Draft style guide. 7 90 630 Support 50 680 1600

Etc. Etc. Etc. Etc. Etc. Etc. Etc. Etc. Etc.

TOTALS: ? ? ? ?

11


Negotiate an agreement with client/owner/stakeholder

Projectmanager

Client/owner/stakeholderrepresentative


WORK TASK AND BUDGET BREAKDOWN AND SCHEDULE FOR HYPOTHETICAL PROJECT

A B C1 C2 C3 D1 D2 E1 E2



RATE VALUE LATIVEPLANNED

VALUE

$/Hr $ $ $ $

1 Set up files. 1 75 75 75 75

2 Study draft. 2 90 180 Support 100 280 920Outline suggestedimprovements. 4 90 360 Postage 25 385


3 Draft style guide. 5 90 450 Support 50 500 1420

Etc. Etc. Etc. Etc. Etc. Etc. Etc. Etc. Etc.

TOTALS: ? ? ? ?

12


Explicitly agree on thevalue

of each task

If we dont negotiate task-by-task, we implicitly agree on the

valueof each task

or


TOPICSTOPICS

INTRODUCTION

TASK VALUE

RECAP





TIPS

BENEFITS

EVM: OVERVIEW

13


Step 1:Prepare

tasks,Budget, and

schedule

Step 2:Trackactualcost

Step 3:Track

earnedvalue

Step 4:Celebrate

and/orcorrect


Work Taskand

BudgetBreakdown

Schedule

CumulativePlannedValue

Step 1

Celebrateand/or

Correct

Step 4

TrackCumulative

ActualCost

Step 2

CumulativePlanned Value and Actual Costs

Now

TrackCumulative

EarnedValue

Step 3

CumulativePlanned Value, Actual Costs, and Earned Value

Now

PV

AC

EV

14


Color convention

Cumulative planned value (PV)

Cumulative actual costs (AC)

Cumulative earned value (EV)


Work Taskand

BudgetBreakdown

Schedule

CumulativePlannedValue

Step 1

Celebrateand/or

Correct

Step 4

TrackCumulative

ActualCost

Step 2

CumulativePlanned Value and Actual Costs

Now

TrackCumulative

EarnedValue

Step 3

CumulativePlanned Value, Actual Costs, and Earned Value

Now

PV

AC

EV

15


TOPICSTOPICS

INTRODUCTION

TASK VALUE

RECAP

EVM: OVERVIEW




TIPS

BENEFITS



WORK TASK AND BUDGET BREAKDOWN AND SCHEDULEFor

EXAMPLE 1

WEEK DESCRIPTION LABOR EXPENSES BUDGET SCHEDULEOF


RATE VALUE LATIVE COMPLE-PLANNED TION

VALUE WEEK

$/Hr $ $ $ $

1 Set up files. 1 75 75 75 75 1

2 Study draft. 2 90 180 Support 100 280 920 2Outline suggestedimprovements. 4 90 360 Postage 25 385


3 Draft style guide. 5 90 450 Support 50 500 1420 3

4 Arrange meeting 3 90 270 Support 50 320 2010 4time.

Develop agenda. 3 90 270 270

Etc. Etc. Etc. Etc. Etc. Etc. Etc. Etc. Etc. Etc.

TOTALS: ? ? ? ?

16


WORK TASK AND BUDGET BREAKDOWN AND SCHEDULEFor

EXAMPLE 1

BUDGET SCHEDULE

TASK CUMU-VALUE LATIVE COMPLE-

PLANNED TIONVALUE WEEK

$ $

75 75 1845 920 2500 1420 3590 2010 4

1515 3525 52500 6025 63000 9025 72600 11625 82300 13925 92490 16415 101200 17615 11

900 18515 12

TOTAL: 18515

1 2 3


Planned value (PV)

EARNED VALUE METHOD EXAMPLE 1

Cumu

lative

Plan

ned V

alue

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

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

Weeks

PV

17


TOPICSTOPICS

INTRODUCTION

TASK VALUE

RECAP

EVM: OVERVIEW




TIPS

BENEFITS



EXAMPLE 1a:PROJECT STATUS AT END OF WEEK 6

1 2 3 4

BUDGET SCHEDULE CUMU-LATIVE

ACTUAL TASK CUMU- COSTS

VALUE LATIVE COMPLE-PLANNED TION

VALUE WEEK

$ $ $

75 75 1 75845 920 2 650500 1420 3 950590 2010 4 1300

1515 3525 5 27002500 6025 6 48003000 9025 72600 11625 82300 13925 92490 16415 101200 17615 11

900 18515 12

TOTALS: 18515

18


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

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

EARNED VALUE METHOD EXAMPLE 1a

Weeks

Cumu

lative

Plan

ned V

alue,

Actua

l Cos

t, and

Ear

ned V

alue

Planned value (PV)Actual cost (AC)

PV

AC


TOPICSTOPICS

INTRODUCTION

TASK VALUE

RECAP

EVM: OVERVIEW




TIPS

BENEFITS


19


EXAMPLE 1a:PROJECT STATUS AT END OF WEEK 6

1 2 3 4 5 6 7

BUDGET SCHEDULE CUMU- EARNED VALUE LATIVE

ACTUAL TASK CUMU- COSTS PORTION EARNED PREVIOUS

VALUE LATIVE COMPLE- OF TASKS VALUE CUMU-PLANNED TION COMPLETE LATIVE

VALUE WEEK (Col 1 x EARNEDCol 5)/100 VALUE

$ $ $ % $ $

75 75 1 75 100 75 75845 920 2 650 100 845 920500 1420 3 950 75 375 1170590 2010 4 1300 75 443 1465

1515 3525 5 2700 75 1136 26012500 6025 6 4800 50 1250 41243000 9025 72600 11625 82300 13925 92490 16415 101200 17615 11

900 18515 12

TOTALS: 18515 4124


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

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


Weeks

Cumu

lative

Plan

ned V

alue,

Actua

l Cos

t, and

Ear

ned V

alue

Planned value (PV)Actual cost (AC)Earned value (EV)

PV

AC

EV

20


TOPICSTOPICS

INTRODUCTION

TASK VALUE

RECAP

EVM: OVERVIEW




TIPS

BENEFITS



0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

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


Weeks

Cumu

lative

Plan

ned V

alue,

Actua

l Cos

t, and

Ear

ned V

alue


PV

AC

EV

21


Optional further quantification1

Cost Variance for Example 1a

Cost variance = Earned Actual = $4124 $4800 = -$676(in $) value cost

(EV) (AC)

The project is $676 over budget

Cost variance = (EV AC) x (100/EV)(in percent)

= (4124 4800)(100/4124) = -16.4%

1) For additional detail, see Anbari, 2003, Kezsbom et al., 1989, and PMI, 2005.

The project is 16.4% over budget


Schedule Variance for Example 1aSchedule variance = Earned value Planned value

(in $) (EV) (PV) = $4124 $6025 = -$1901

The project is $1901 behind schedule

Schedule variance = (EV PV) x (100/PV)(in %)

= (4124 6025)(100/6025) = -31.6%

The project is 31.6% behind schedule

22


Example 1b:

Higher rate of cost accumulationwith

no change in earned value accumulation


EXAMPLE 1b:PROJECT STATUS AT END OF WEEK 6

1 2 3 4 5 6 7





$ $ $ % $ $

75 75 1 90 100 75 75845 920 2 1060 100 845 920500 1420 3 1700 75 375 1170590 2010 4 2510 75 443 1465

1515 3525 5 4580 75 1136 26012500 6025 6 8130 50 1250 41243000 9025 72600 11625 82300 13925 92490 16415 101200 17615 11900 18515 12

TOTALS: 18515 4124

23


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

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

EARNED VALUE METHOD EXAMPLE 1b

Weeks

Cumu

lative

Plan

ned V

alue,

Actua

l Cos

t, and

Ear

ned V

alue


PV

AC

EV


Optional further quantificationCost Variance for Example 1b

Cost variance = EV AC = $4124 $8130 = -$4006(in $)

$4006 over budget

Cost variance = (EV AC) x (100/EV)(in %)

= (4124 8130)(100/4124) = -97.1%

97.1% over budget

24


Schedule Variance for Example 1bSchedule variance = EV PV = $4124 $6025 = -$1901

(in $)

$1901 behind schedule


= (4124 6025)(100/6025) = -31.6%

31.6% behind schedule

Note: Schedule variance for Example 1b is the same as for Example 1a


Example 1c:

Lower rate of cost accumulationwith

higher rate of earned value accumulation

25


EXAMPLE 1c:PROJECT STATUS AT END OF WEEK 6

1 2 3 4 5 6 7





$ $ $ % $ $

75 75 1 75 100 75 75845 920 2 920 100 845 920500 1420 3 1420 100 500 1420590 2010 4 2010 100 590 2010

1515 3525 5 2500 100 1515 35252500 6025 6 4500 100 2500 81753000 9025 7 50 15002600 11625 8 25 6502300 13925 92490 16415 101200 17615 11900 18515 12

TOTALS: 18515 8175


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

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

EARNED VALUE METHOD EXAMPLE 1c

Weeks

Cumu

lative

Plan

ned V

alue,

Actua

l Cos

t, and

Ear

ned V

alue


PV

AC

EV

26


Optional further quantificationCost Variance for Example 1c

Cost variance = EV AC = $8175 $4500 = $3675(in $)

$3675 under budget

Cost variance = (EV AC) x (100/EV)(in %)

= (8175 4500)(100/8175) = 45.0%

45.0% under budget


Schedule Variance for Example 1cSchedule variance = EV PV = $8175 $6025 = $2150

(in $)

$2150 ahead of schedule


= (8175 6025)(100/6025) = 35.7%

35.7% ahead of schedule

27


Likeit?


TOPICSTOPICS

INTRODUCTION

TASK VALUE

RECAP

EVM: OVERVIEW





BENEFITS

TIPS

28


Tips for readingproject profiles


CumulativeValues/

Cost

Time

Solid performancethroughout

CumulativeValues/

Cost

Time

Poor performancethroughoutPV

AC

EV

29


CumulativeValues/

Cost

Time

Disastrous startGreat finish

CumulativeValues/

Cost

Time

Great startDisastrous finish

PV

AC

EV

PV

AC

EV


CumulativeValues/

Cost

Time

Solid performancethroughout with

compensatedscope changewell into the

project

Scopechange

30


Tips for taking corrective actions

CumulativeValues/

Cost

Time

PV

AC

EV

Now


Sacrifice deliverableslower the end of red line

Sacrifice scheduleshift the end of red line later

Sacrifice budgetraise the end of green line

Increase productivitywork smarterSource: Based, in part, on Durrenberger, 2006

CumulativeValues/

Cost

Time

PV

AC

EV

Now

31


Tips for identifying tasks and task sizes

1. Consider location

Surveyeast

approach

Surveychannel

Surveystructure

Surveywest

approach

Surveystructure

andsite

Restorethis

bridge


2. Phase long tasks

Seek grant

Research Apply Track

Many months

32


3. Cross-check tasks against deliverables

Deliverables

_______________________________________________________

Tasks

_______________________________________________________


4. Keep tasks small

Big taskLittletasksinstead

33


5. Assign responsibility

XSurveywestapproach

XSurvey channel

XSurvey east approach

JoseJackJaneResponsible personTask


Tips for estimating task percent complete

1. Rely on those responsible for tasks

2. Use predetermined percentages

3. Apply done not done rule

5. Mix approaches

Source: Based, in part, on Anbari, 2003; Durrenberger, 2006; Hatfield, 2004; and PMI, 2005.

4. Key to milestones within tasks

34


Dont kid yourself

andothers


TOPICSTOPICS

INTRODUCTION

TASK VALUE

RECAP

EVM: OVERVIEW





TIPS

BENEFITS

35


1. Reinforces need for upfront thinking

PP

2. Causes team members to think more about how much theyve producedand less about how much theyve spent X


4. Encourages accountingto provide more timely and valuable data X

3. Helps PMs determinewho is and who is not performing

36


6. Strengthens relationshipswith clients/owners/stakeholders

5. Identifies budget/schedule/deliverables problems earlyso that they can be fixed


7. Improves bottom line

Likeit?

37


TOPICSTOPICS

INTRODUCTION

TASK VALUE

EVM: OVERVIEW





TIPS

BENEFITS

RECAP


How are we doing?

Need earned value

Task value: Explicitly or implicitly established

38


Earned value method

Step 1:Prepare

task,budget,

schedule

Step 2:Trackactualcost

Step 3:Track

earnedvalue

Step 4:Celebrate/

correct

New


Tips for identifying tasks and task sizes

Tips for estimating task percent complete

Tips for reading project profiles

Tips for taking corrective actions

39


Benefits

PP

X

X


QuestionsCom

ments

Critiques

Suggestion

s

Tips

[email protected]

40


Note: Listed here are sources cited earlier plus additional materials for individual and group study. If you know of a useful resource that should be included, please let me know.

Thank you,Stu [email protected]

APPENDIX A: RESOURCES


Anbari, F. T. 2003. Earned Value Project Method and Extensions,Project Management Journal, December, pp. 12 23. (Provides brief history of the earned value method; describes the method using planned value, actual cost, and earned value terminology; and offers optional ways to address the percent complete estimates needed for use of the method.)

Bettis, N. T. 2006. Earned Value Management: Manage The Future, Not Just The Past, and Prevent Projects From Trending In A Negative Direction, CE News, December, pp. 18-19. (Notes that as of July 5, 2006, Federal Acquisition Regulations were changed torequire EVM on all projects Though each agency will define the dollar threshold for deciding when to use EVM. Argues that using EVM gives E/A/C firms a competitive advantage because clients have added assurances.)

Books and Articles

41


Durrenberger, M. 2006. An Earned Value Tutorial, Oak Associates, Inc., Maynard, MA (http://www.oakinc.com/resources/articles.asp). (Provides a simple examplea new second story deck for a houseand advocates no partial credit. That is, an activity or task is credited with earned value only when it is completed. An activity or task is either Done or not done.)

Ellegood, M. S. 2007. Keeping Projects on Schedule and Under Budget, presented at the NSPE Annual Conference, Denver, CO, July 27. (The author is with PSMJ Resources which offers free use of a lite version of their Excel-based EVM tool.)

Fleming, Q. W. and J. M. Koppelman. 2005. Earned Value Project Management Third Edition, Project Management Institute, Upper Darby, PA.


Fleming, Q. W. and J. M. Koppelman. 2006. Start With SimpleEarned Value On All Your Projects, CrossTalk The Journal of Defense Software Engineering, June, pp. 16-19. (Describes 10 criteria for implementing the EVM. The criteria are consistent with and extend the material presented in this webinar.)

Fretty, P. 2007. Added Value, PM NETWORK, October 2007, pp. 37 41. (Cautions that a careful, major effort is needed to move organizations into use of the EVM. That effort includes having achampion, providing solid education and training, and acquiring the right tools. Notes that EVM helps identify problems but does notsolve them.)

Gido, J. and J. P. Clements. 1999. Successful Project Management,Chapter 13, Cost Planning and Performance, South-Western College Publishing, Cincinnati, OH. (The cited chapter provides detailed discussions and examples of project cost estimating, determining actual cost, and estimating earned value.)

42


Hatfield, M. 2004. Pop Earned Value, PM Network, July, p. 80. (Briefly identifies various ways of determining earned value.)

Kezsbom, D. S.; D. L. Schilling and K. A. Edward. 1989. Dynamic Project Management and Engineers. Section 5.3.2, Earned Value Analysis, John Wiley & Sons, New York, NY. (Includes an earned value example. This book uses the BCWS, ACWP, and BCWP terminology.)

Project Management Institute. 1996. A Guide to the Project Management Body of Knowledge, PMI, Upper Darby, PA, pp. 108 110. (Provides an overview of the earned value method.)

Project Management Institute. 2004. Practice Standard for Earned Value Management, PMI, Upper Darby, PA, November.


Rizzuto, J. 2006. Hard Earned Value, Projects @ Work,(http://www.projectsatwork.com/article.cfm?ID=230677).

Walesh, S. G. 2000. Engineering Your Future, Second Edition, Chapter 5, Project Management, ASCE Press, Reston, VA. (Presents fundamentals of network diagrams and describes their use in the critical path method.)

Walesh, S. G., 2004. Managing and Leading: 52 Lessons Learned for Engineers, Lesson 36, Fruits of Effective Project Management and Lesson 37, Every Project is Done Twice, ASCE Press, Reston, VA. (Stresses the importance of project management and project work plans.)

43


Whitten, N. 2005. Celebrate. PM Network, August, p. 21. (Stresses the need to celebrate team milestones or events noting that, based on his experience, the number one reason employees leave a company is that they dont feel appreciated. Note from S. Walesh: The EVM provides information that, while it may point to problems that must be resolved, it also identifies progress that warrantsrecognition and perhaps celebration.)

Whitten, N. 2002. Inspect What You Expect. PM Network, August, p. 20.

Whitten, N. 2006. Sole Control: Sharing Power Almost Always Harms People, Projects, and Outcomes, PM NETWORK,November, p. 24. (Offers eight reasons why sharing power should be avoided within project management and beyond.)


E-Newsletter

Point Lookout, a free weekly e-newsletter from Chaco Canyon Consulting. Featured are essays and white papers on teamwork, conflict and project management. Many previously published essays and white papers are available at no cost. To subscribe go to http://www.chacocanyon.com/. (12/10)

Websites

Deltek (http://www.deltek.com). Deltek offers software solutions that include the EVM. (12/10)

Helping You Engineer Your Future(http://www.HelpingYouEngineerYourFuture.com) offers, ideas and information to help individuals and organizations improve their project management knowledge and skills. Provides links to online resources and summarizes news and events. (12/10)

44


Microsoft Project 2010,(http://office.microsoft.com/project/en/us/default.aspx). Search under earned value and obtain articles on using Microsoft Project for application of earned value method. (12/10)

Oracle and Primavera, (http://www.oracle.com/primavera/index.html). Click on Oracles Primavera Earned Value Management. (12/10)

The Project Management Institute, (http://www.pmi.org/) is the official website of the 500,000 member 185 country PMI. Included are membership information, conference and seminar announcements, calls for paper, and a bookstore. (12/10)


APPENDIX B: PRESENTER

Dr. Stuart G. Walesh, PE provides management, engineering, education/training, and marketing services. He draws on more than 40 years of engineering, education, and management experience in the government and private sectors to help individuals and organizations engineer their futures. Walesh has functioned as a project manager, department head, discipline manager, marketer, professor, and dean of an engineering college.

Representative clients: include ASCE; Boston Society of Civil Engineers; BSA Life Structures; Castilla La Mancha University; CDM; Clark Dietz; Daimler Chrysler; DLZ; Earth Tech; Harris County (TX) Flood Control District; Hinshaw & Culbertson; Indiana Department of Natural Resources; Indiana Department of Transportation/Purdue University; J. F. New; Leggette, Brashears & Graham; Midwest Geosciences Group; MSA Professional Services; PBS&J; Town of Pendleton, IN; Pennoni Associates; Taylor Associates; City of Valparaiso, IN; University of Wisconsin Engineering Professional Development; and Wright Water Engineers.

Walesh authored Urban Surface Water Management (Wiley, 1989), Engineering Your Future (ASCE, 2000), Flying Solo: How to Start an Individual Practitioner Consulting Business (Hannah Publishing, 2000), Managing and Leading: 52 Lessons Learned for Engineers (ASCE, 2004), and Managing and Leading: 44 Lessons Learned for Pharmacists (ASHP, 2008, co-authored with Paul Bush, Pharm.D). Walesh is author or co-author

45


of over 200 publications and presentations and has facilitated or presented over 200 workshops, seminars, webinars, and meetings throughout the U.S.

Walesh is a member of ASCEs Committee on Academic Prerequisites for Professional Practice, was Special Issues Editor for ASCEs Committee on Publications, and chaired several national committees. In 1995, he received the Public Service Award from the Consulting Engineers of Indiana; in 1998, the Distinguished Service Citation from the College of Engineering at the University of Wisconsin; in 2003, the Excellence in Civil Engineering Education Leadership Award presented by ASCE; in 2004, he was elected an Honorary Member of ASCE; in 2005, he was elected a Diplomate of the American Academy of Water Resource Engineers; in 2007, he was named Engineer of the Year by the Indiana Society of Professional Engineers and received a Distinguished Service Award from the National Society of Professional Engineers; in 2008, he received the William H. Wisely American Civil Engineer Award from ASCE for leadership in promoting engineering as a profession; in 2009, he received the George K. Wadlin Distinguished Service Award from the Civil Engineering Division of the American Society for Engineering Education; and, in 2010, he was named a Fellow Member of the National Society of Professional Engineers.

Address: 3006 Towne Commons Drive, Valparaiso, IN 46385-2979, Tel: 219-464-1704Fax: 219-464-2978Email: [email protected]


Now scenarios

Valueof

resultsproduced

Actualcosts

Plannedcosts

Valueof

resultsproduced

PMknows


tells PM

PMneeds

Howare wedoing?

ActualcostsPlanned

costsHow

are wedoing?

APPENDIX C: NOW SCENARIOS

46


Valueof

resultsproduced

ActualcostsPlanned

costs

Valueof

resultsproduced

PMknows


tells PM

PMneeds

Howare wedoing?

Actualcosts

Plannedcosts

Howare wedoing?

Now scenarios


Other Nomenclature1

Cumulative planned value (PV)

Also known as Budgeted Cost for Work Scheduled (BCWS).

Cumulative actual costs (AC)

Also known as Actual Cost of Work Performed (ACWP).

Cumulative earned value (EV)

Also known as Budgeted Cost of Work Performed (BCWP).

1) For example, see Kezsbom et al., 1989.

APPENDIX D: OTHER NOMENCLATURE

47


APPENDIX E: TESTIMONIALS

The following comments are provided courtesy of PSMJ Resources, Inc. of Atlanta, Boston, San Diego, and Sydney at Tel: 800-537-PSMJ and www.psmj.com. For additional information, contact Michael S. Ellegood, PE at Tel: 602-690-1428 or Email: [email protected].

An EVM tool, called Plantrax, is sold by PSMJ. The company also gives it with a one-year license to participants in its two-day project management workshop.

Representatives of five firms commented on the effectiveness of PSMJ project management Bootcamp training where EVM is a core topic and EVM is the core tool for measuring progress during pre-construction phases of projects. Accordingly, these comments at least indirectly attest to the effectiveness of the EVM.

ACKNOWLEDGEMENT


Firm A: We have seen an exceptional ROI and profit from the PM training. Before PSMJ, we had a 5% profit before discretionary distribution. We are currently at 25% profit before distribution, and the current goal is 30%. Before PSMJ, we would write off almost30%. Now utilization vs. realization is at 9%. We have happier, more loyal clients. Because of PSMJs training, we have been able to transition to a more diversified client base. The training has allowed us to service institutional and municipal clients with differingneeds.

TESTIMONIALS

48


Firm B: The improvements are out of scale to any investment weve made. 1000% return in the first year. Since PSMJ training, weve seen probably 50% fewer projects over budget. We have reduced approximately 10 days in getting jobs billed and collecting accounts receivable. We have a more consistent effort to keep on budget and avoid scope creep. Weve had more satisfied clients. Employee turnover has been down. The PM training creates an atmosphere where up-and-coming PMs get involved earlier.


Firm C: This firm has increased their achieved direct labor multiplier from 2.4 to 3.5 in the four years since PSMJ began helping them. The following comments are from their CEO:

Weve greatly reduced budget overruns. PM training taught us to do a more appropriate project budget. More than twice as many projects are staying under budget.

Since PM training, our multipliers are at target or above target.

Weve seen a huge decrease in accounts receivable and billing cycle days. PMs are now responsible for sitting down with clients and going over the bill, squaring up any issues that are out there.

There has been a reduction in claims and lawsuits. Document quality has markedly increased.

Employee turnover at our firm has always been low, but very low over the last five years (correlating with PSMJ training). Fewer project problems translate into a happier workplace. I attribute much of this improvement to PM training.

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Firm D: After working with PSMJ for two years, the COO of this firm told us the following:

Summary of four-year performance on projects prior to PM training: 320 projects, $32.4 million revenue, average 7.1% profit.

Most recent year following PM Bootcamp institutionalization: 84 projects, $11.2 million revenue, average 11.2% profit.

Analysis shows a solid 50% increase in profitability. We have seen a reduction of project budget overruns, and

have reduced the days required to get jobs billed and collect accounts receivable (no figures).

We have seen a much more satisfied work environment. We are in a project oriented business. With less problems on our projects, there is a greater sense of well-being in the workplace.


Firm E: Weve seen at least a 50% reduction in project overruns. We now have the lowest DSO (Day Sales Outstanding) in the industry. Less than 60 days. The biggest improvement: Less write-offs. Four years ago, we averaged four major write-offs a year. Last year, we had none. Biggest write-off four years ago: $7,000,000. Last year, $6,000. Weve seen overhead cost reductions. Were more efficient on the accounting side. All of our PMs know and understand the earned value system. Our client perception surveys show a more satisfied client. Our second largest client has a certified PM who was unhappy with our performance. Now she loves us. It is the most successful PM program Ive ever seen.

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