introduction to earned value november 14, 2002. definition earned value is a method for measuring...
DESCRIPTION
The Basics BCWS –Budgeted Cost of Work Scheduled BCWP (also referred to as Earned Value) –Budgeted Cost of Work Performed ACWP –Actual Cost of Work PerformedTRANSCRIPT
Introduction To Earned Value
November 14, 2002
Definition
• Earned Value is a method for measuring project performance. It compares the amount of work that was planned with what was actually accomplished to determine if cost and schedule performance is as planned. (PMBOK)
• In other words, its a way of determining for the money we spent, are we on budget and on schedule?
• EV is in Monetary terms $$$
The Basics
• BCWS– Budgeted Cost of Work Scheduled
• BCWP (also referred to as Earned Value)– Budgeted Cost of Work Performed
• ACWP– Actual Cost of Work Performed
BCWS
• Budget applied to tasks in a schedule
• Example– Task X Start Date 1/1/01 End date 2/28/01
• Duration = 2 months– Task Y Start Date 2/1/01 End Date 2/28/01
• Duration = 1 month– Task Z Start Date 3/1/01 End Date 3/31/01
• Duration = 1 month
BCWS
• If resources were applied to each task and the cost of those resource worked out to :– Task X $100 Task Y $100 Task Z $100
– Then assuming an even distribution over the duration of the task, the budget would be :
• Incremental Task(s) Cumulative
– Jan $50 X $50– Feb $150 X,Y $200– Mar $100 Z $300
Earned Value Analysis
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J an-01 Feb-01 Mar-01 Apr-01 May-01 J un-01 J ul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01
BCWS 50 200 300 400 500 550 600 600J an-01 Feb-01 Mar-01 Apr-01 May-01 J un-01 J ul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01
BCWP
• BCWP is how much work was accomplished• Example:
– At the end of January, we find that we are 25% complete with Task X
• BCWP for Task X = .25*$100=$25– Task Y & Z have not started (and not scheduled to start),
Therefore 0% complete– Incremental BCWP for Jan = $25– Cumulative BCWP for end of Jan = $25
BCWP
• At the end of February, we find that we are 75% complete with Task X– BCWP for Task X = .75*$100=$75
• BCWP for Feb for Task X = $75-$25 = $50
• At end of February, Task Y is complete.– BCWP for Task Y = $100
• At end of February, Task Z is 25% complete.– BCWP for Task Z = .25*$100=$25
• Incremental BCWP for Feb = $175 ($50+100+$25)• Cumulative BCWP for end of Feb = $200
Earned Value Analysis
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Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01
BCWS 50 200 300 400 500 550 600 600
BCWP 25 200
Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01
BCWP
• For end of February, the overall project is on schedule– Task X: BCWS = $100, BCWP = $75– Task Y: BCWS = $100, BCWP = $100– Task Z: BCWS = $0, BCWP = $25
• Schedule Variance = BCWP - BCWS– Negative Schedule variance indicates behind schedule– Positive Schedule Variance indicates ahead of schedule
Schedule Variance
• For end of February, the overall project is on schedule, but the individual tasks are:
• Task X: BCWS = $100, BCWP = $75$75 - $100 = -$25 BEHIND SCHEDULE
• Task Y: BCWS = $100, BCWP = $100$100 - $100 = $0 ON SCHEDULE
• Task Z: BCWS = $0, BCWP = $25$25 - $0 = +$25 AHEAD OF SCHEDULE
Percent Complete
• Engineering Estimate• Based on quantitative means such as number of
programs coded• 0 / 100 rule : receive 100% when task is complete• 20 / 80 rule : receive 20% when you start a task,
the other 80% when you complete • 50 / 50 rule: 50% complete when you start an
activity, the other 50% when you complete
ACWP
• ACWP is the actual cost spent to accomplish work– Labor $ (Salaries, Benefits, Overhead)– Other Direct Costs (Software costs, Hardware costs,
Maintenance fees, License fees, Supplies)• Example
– At end of January, Task X has accumulated costs of $50
ACWP
• At end of February– Task X has accumulated costs of $150– Task Y has accumulated costs of $150– Task Z has accumulated costs of $10– TOTAL ACWP = $310 (end of Feb.)
Earned Value Analysis
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Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01
BCWS 50 200 300 400 500 550 600 600
BCWP 25 200
ACWP 50 310
Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01
ACWP
• Overall, through the end of February, the project is over cost for the work that has been performed.– BCWP = $200– ACWP = $310
• Cost Variance = BCWP - ACWP– Negative Cost Variance indicates you spent more than
you performed in $– Positive Cost Variance indicates you spent less than
you performed in $
Cost Variance
• At end of February– Task X BCWP = $75, ACWP = $150– Task Y BCWP = $100, ACWP = $150– Task Z BCWP = $25, ACWP = $10– TOTAL BCWP = $200, ACWP = $310
Cost Variance
• At end of February– Task X BCWP = $75, ACWP = $150
• CV = -$75, Over Cost– Task Y BCWP = $100, ACWP = $150
• CV = -$50, Over Cost– Task Z BCWP = $25, ACWP = $10
• CV = $15, Under Cost– Overall Project BCWP = $200, ACWP = $310
• CV = -$110, Over Cost
Indexes
• Schedule Performance Index– BCWP / BCWS– Greater than 1 indicates ahead of schedule– Less than 1 indicates behind schedule– Examples:
• SPI = .75, means for $1 of work scheduled, you only performed $.75 of work.
• SPI = 1.25, means for $1 of work scheduled, you performed $1.25 of work.
Indexes
• Cost Performance Index– BCWP / ACWP– Greater than 1 indicates under cost– Less than 1 indicates over cost– Examples:
• CPI = 1.35, means for every $1 spent, you performed $1.35 of work
• CPI = .5, means for every $1 spent, you accomplished $.50 of work
Indexes
• End of January – BCWS = $50, BCWP = $25, ACWP = $50– SPI = $25/$50 = .50 Behind Schedule– CPI = $25/$50 = .50 Over Budget
• End of February– BCWS = $200, BCWP = $200, ACWP = $310– SPI = $200/$200 = 1 On Schedule– CPI = $200/$310 = .65 Over Budget
Indexes
• Typically don’t calculate these at Task level– How do you divide a number by zero when you
perform work before it is scheduled?
• CPI can be used to project costs at completion.
Budget At Completion
• Total value of incremental BCWS.
• Should be total budget for project as allocated to the tasks to complete the project.
• If not all budget allocated to tasks, it is usually unallocated or held in reserve. It is however, still considered to be part of the budget at completion. This varies by application area.
Estimate At Completion
• Total cost to be incurred based on actual dollars spent to date + estimate to complete (ETC)
• (Latest Revised Estimate (LRE) = Estimate at Completion (EAC))
• Calculation 1° EAC = ACWP + (Remaining BCWS /CPI)° EAC = $310 + ( $400/.65) = $925– Compare to BAC of $600. This infers that we will
continue to work at same efficiency we’ve incurred to date.
Estimate At Completion
• Calculation 2° EAC = BAC+CV° EAC = $600+$110 = $710° This infers that we will work to plan from this point
forward
Estimate to Complete
• Cost of remaining work– Formula based (BCWS/CPI)
• Beware of formulas using one or two data points– Engineering estimate
• SWAG• Bottoms-Up detailed estimate
– Straight remaining budget
Earned Value Analysis
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Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01
BCWS 50 200 300 400 500 550 600 600
BCWP 25 200
ACWP 50 310
BAC 600 600 600 600 600 600 600 600 600 600 600 600
EAC 625 710
Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01
Variance at Completion
• Difference between BAC and EAC– BAC - EAC = VAC– Positive is Good– Negative is bad
Earned Value Analysis
• Charts or reports are used to identify trends so that corrective action can occur– Project level or group of significant like tasks.– Cost/Schedule Status Report (C/SSR)or Cost
Performance Report (CPR)• Establishing parameters (% or $) on variances help
management not overreact to natural aberrations.• Project Manager wants to be able to explain
unfavorable variances and actions taken to correct.
Corrective Actions?
• Schedule slippage for a specific task on the critical path or for the project as a whole.
• Cost overrun on a specific task on the critical path of for the project as a whole.
• Insufficient or inadequate resources• Changes in scope that affect project cost or schedule• Quality problems resulting in excessive rework• Material shortages from suppliers• Changes in customer or user requirements
Summary
• BCWS : Budgeted Cost of Work Scheduled• BCWP : Budgeted Cost of Work Performed• ACWP: Actual Cost of Work Performed• SV: Schedule Variance: BCWP - BCWS
– Negative is Bad, Positive is good• CV: Cost Variance: BCWP - ACWP
– Negative is bad, positive is good• SPI: Schedule Performance Index: BCWP/BCWS
– Greater than 1 is good, Less than 1 is bad
Summary
• CPI: Cost Performance Index: BCWP/ACWP– Greater than 1 is good, Less than 1 is bad
• BAC: Budget at Completion• EAC (LRE): Estimate at Completion / Latest
Revised Estimate• VAC: variance at Completion: BAC - EAC
– Negative is bad, positive is good• ETC: Estimate To Complete