levelup! · •content committee for the pmbok® guide 6th edition •co-author of “project...

LEVELUP!Taking your career to the next level

Understand Earned Value

in“Under an Hour!”

Wayne R. Brantley, MS Ed, PMP, PMI-ACP, CSM, A-CSPO, CRM

• Adjunct Faculty for Florida Institute of Technology

• President 360° Training Solutions –www.360trainingsoluions.com

• Content Committee for the PMBOK® Guide 6th Edition

• Co-Author of “Project Management ROI: A step-by-step guide for measuring the impact and ROI for projects”

• Past-President PMI Tampa Bay / 2019-2020 VP-Marketing

• ATD Suncoast CPLP Manager

• International Project Management lecturer

• AF Retired

Overview

• Establish the link between the requirements and the performance measurement baseline

• Understand what the Earned Value calculations are measuring

• Explain Earned Value as an easy to use tool for project performance measurement

What does EV and the Davinci Code have in common?

Why Do We Need Earned Value?

• 1994 Chaos Report by The Standish Group woke up an industry• Approximately 70% of projects are:

• Over budget

• Behind schedule

• 52% of all projects finish at 189% of their initial budget

How do your projects perform today?

• Do you have projects that are over budget?

• Do you have projects that are late?

• Do you have projects that have scope creep?

How do your projects perform today?

Why Don’t We Measure Project Performance?

No one wants to know they have an ugly baby!

Variance Analysis is the Great Lie!

Variance Analysis is the Great Lie!

• Planned – Actuals

• You planned to do $100k of work in one month

• You spent $110k

• You spent $110k

• Now tell me how much of the work is completed?

What is Earned Value Management?

• “Earned Value Analysis” is:

• An industry standard way to:

• Measure a project’s progress

• Forecast its completion date and final cost

• Provide schedule and budget variances along the way

EV Compares

The PLANNED amount of work (PV)

that has actually been COMPLETED (EV)

and how much the work ACTUALLY COST (AC)

What EV Tells You

Where you are on schedule

Where you are on budget

Where you are on work accomplished

Why you should know Earned Value

• So you can say that you are an EVM expert

• Because there are some questions on the PMP exam

• Because you need to control project delays and overruns

• Government legislation requires it

• An RFP required it

Six Essential Elements to Implementing an Earned Value Management System

1. Good Requirements

2. A detailed WBS

3. A good schedule

4. Good estimates for durations

5. Good estimates for budgets

6. A performance measurement baseline

How is learning Earned Value like eating an elephant?

One bite at a time

1. Good Requirements

• What documentation do you have to start with?

• Request for Proposal

• Statement of Work

• Contract

• Project Charter

• Any others?

The Project Charter

• The project charter puts everyone on the same page.

• What should be in the project charter?1. Sponsor authorization and signs-off2. Project Manager assigned

• Other considerations?• Requirements• Business need• Project purpose• Milestones• Stakeholder influences• Functional organizations• Assumptions and constraints• Summary budget

Why are good requirements essential?

• Requirements define the most important part of the triple constraint:

SCOPE

Steps to obtaining good requirements

1. Take time to do it

2. Ask the right people the right questions

3. Draw a picture

4. Build a model

5. Build a little

6. Check and re-check (CYA)




3. Draw a picture

4. Build a model

5. Build a little

6. Check and re-check (Cover Your A)




3. Draw a picture

4. Build a model

5. Build a little

6. Check and re-check (Cover Your Activities)

A view from an industry expert

2. A detailed WBS

• What is a WBS?

“A deliverable-oriented hierarchical decomposition of the work to be executed by the project team to accomplish the project objectives and

create the required deliverables.”

The WBS

• Project (1.0)• Deliverables (1.1, 1.2, 1.3, …..)

• Tasks (1.1.1, 1.1.2, 1.1.3, …….)• Activities (1.1.1.1, 1.1.1.2,…….)

How low do you go?

• Task?• Activity?

• Work Package?

• The work package should not be greater than 80-hours• Where does the 80-hour rule come from?

Moses provided us with the 80-hour rule!

3. A good schedule

A view from an industry expert

Create a Schedule

• What do we have at this point?• Requirements

• WBS

• Who would you go to determine what must be done and in what order?

• What tools are available for scheduling?

The Most Powerful Scheduling Tool

•Yes, the post-it!

Critical scheduling questions

• What comes first?

• What comes second?

• Any restrictions or dependencies?

• Any constraints?

The Precedence Diagram

The Gantt Chart

4. Good estimates for durations

• What do you have at this point?

• Requirements

• WBS

• Schedule

• Where do your duration estimates come from?

• Where should they come from?

• What are the differences?

Considerations for duration estimates

• Use different techniques

• Are there similar projects?

• What expertise do you have in your organization?

• Involve the team

• Assess available resources

Techniques for estimating duration

• Analogous• Similar

• Recent

• Quick l Cheap l Leas Accurate

• Parametric• Repeatable projects

• Scalable

• Once done repeatable l Accuracy depends

• Three-point estimating• Optimistic l Most-Likely l Pessimistic

• O + 4(ML) + P / 6

5. Good estimates for budgets

• What do you have at this point?

• Requirements

• WBS

• Schedule

• Duration estimates

• Where do your cost estimates come from?

• Where should they come from?

• What are the differences?

Techniques for estimating costs

• Analogous• Similar• Recent• Quick l Cheap l Leas Accurate

• Parametric• Repeatable projects• Scalable• Once done repeatable l Accuracy depends

• Three-point estimating• Optimistic l Most-Likely l Pessimistic• O + 4(ML) + P / 6

• Bottom-up estimating

6. A performance measurement baseline

How is the PMB created?

• Tasks cost $10,000 per day per taskTask

1.1.1 Days 1 - 6

2.1 Days 1 - 2

1.2 Days 3 - 4

3.1 Days 3 - 4

2.2.2 Days 5 - 9

1.1.2 Days 7 - 9

2.2.1 Days 10 - 15

3.2 Days 16 - End

Days 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Cumulative cost curve $10,000/day each task

PMB = Time-phased distribution of spending

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

BAC =$290kPV = $200k

Variance

• Will there be variance?

• Who knows what the acceptable variance on their projects are?

• Is it +75/-25, +25/-10, +10/-5 or +/-50, +/-25, +/-10?

• So what do you manage to?

Earned Value Management (EVM)

• Values for EVM are based on the PMB

• The PMB is the time phased distributed spending of the project work

• The projected spending is reflected in the PMB

The Values Used in EVM

• Planed Value (PV) = The amount projected to be spent at a certain date

• Earned Value (EV) = The percentage of the planned work that was accomplished

• Actual Cost (AC) = The amount spent on the work that was completed

• Budget at Completion (BAC) = Total of all spending

EVM Values on the PMB

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

BAC =$290kPV = $200k

What do we know from the example?

• BAC = $290k

• PV = Through day 9 $200k

What else do we need to identify?

• EV • 80% of the PV was completed

• EV = 80% of $200k = $160k

• AC• Accounting identifies that we have spent $175k through Day 9

• AC = $175k

Why People Hate Earned Value

• The Math

• Who has had Calculus 3 or Differential Equations?

Time to create the formulas!

SV =

SPI =

CV =

CPI =

EV

EV

EV

EV

-

/

-

/

AC

AC

EV

PV

AC

PV

PV

EAC = BAC / CPI

= AC + (BAC - EV)

= AC +[BAC-EV) / (CPIXSPI)]

Time to create the formulas!

SV =

SPI =

CV =

CPI =

EV

EV

EV

EV

-

/

-

/

AC

AC

EV

PV

AC

PV

PV

EAC = BAC / CPI

What we know

• BAC = $290k

• PV = $200k

• EV = $160k

• AC = $175k

EV Calculation Time

• CV = EV - AC

• 160k-175k = -$15k (Over Budget)

• Rule of thumb = negative is BAD!

• CPI = EV / AC

• 160k/175k = $.91 or 91%

• How are we doing?

• It depends

• What was an acceptable variance?

• CFO says = + / - 15%

BAC = $290k

EV = $160k

PV = $200k

AC = $175k

EV Calculation Time

• SV = EV - PV

• 160k-200k = -$40k (Behind Schedule)

• SPI = EV / PV

• 160k/200k = $.80 or 80%

• How are we doing?

• It depends

• What was an acceptable variance?

• CFO says = + / - 15%

• How does this compare to CPI?

BAC = $290k

EV = $160k

PV = $200k

AC = $175k

We can forecast with EVM!

• CFO wants to know where will we end up?

• BAC = BAC / CPI$290,000 /.91 = $318k

1 3 5 7 9 11 13 15 17 19

BAC = $290k

EAC = $318k

We can forecast with EVM!

• EAC = BAC / CPI = $290k /.91 = $318k

• ETC = EAC – EV = $318k - $160k = $158K

• VAC = BAC – EAC = $290k - $318k = -$28k

• TCPI = (BAC – EV) / (BAC – AC) =

$290k - $160k / $290k - $175k

$130k / $115k = 1.13

What did you discover about EVM?

• What you need in order to use EVM

• Where the numbers come from

• What the numbers tell you

• EVM is not that hard but…….

• You need to follow sound project management practices!

EVM Leads to Better Project Management

LEVELUP!Taking your career to the next level

On Behalf of Bisk and Florida Tech

Thank You!

Q & A

Time for questions

Wayne R. Brantley, MS Ed, PMP, PMI-ACP, CSM, A-CSPO, CRM

Wayne R. Brantley, MS Ed., PMP, PMI-ACP, CSM, A-CSPO, CRP

Certified John C. Maxwell Speaker, Trainer, and Coach

Adjunct Faculty Florida Institute of Technology

[email protected]

levelup! · •content committee for the pmbok® guide 6th edition •co-author of “project...

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