PM TOOLS SESSION

Earned Value ManagementPresented By

Paul R. Aaron, PMP

October 19, 2004Washington DC Chapter

Project Management Institute

Overview

Background EIA-748 Criteria Analysis and Management Reports Cost Performance Report EVMS Validation Process Integrated Baseline Review Summary

Background

OMB EVM Policy

Unified guidance to support OMB reporting to Congress (inc. Info Technology)

Circular A-11 Policy Capital Programming Guide Agencies must establish

cost, schedule and performance goals for major acquisitions and then achieve, on average, 90% of those goals

Requires use of earned value “or similar performance based management system

Policy Guidance Purpose

OMB Circular A-11 Part 7Capital Programming Guide

EIA-748 Guidance

The information required by this section will be provided by your earned value management system (EVMS) and the EVMS software program you use that meets the ANSI/EIA Standard 748 (see section 300.4 (earned value management)). Information on earned value management systems is available at http://www.acq.osd.mil/pm.

OMB EVM PolicyExhibit 300 Reporting

EIA-748 Guidance Continued

Name the software program that meets ANSI/EIA Standard 748 that you will use, or are using, to monitor and manage contract and project performance. If the project is operational (steady state), define the operational analysis system that will be used. If this is a mixed life-cycle project with both operational and development/modernization/ enhancement (DME) system improvement aspects, EVMS must be used on the system improvement aspects of the contract and operational analysis on the operations aspects. Using information consistent with the work breakdown structure (WBS), provide the information requested in all parts of this section.

OMB EVM PolicyExhibit 300 Reporting

EIA-748 Criteria

EIA-748-A Criteria

Five Categories and 32 Guidelines 1. Organization (5) 2. Planning and Budgeting (10) 3. Accounting Considerations (6) 4. Analysis and Management Reports (6) 5.Revisions and Maintenance (5)

Electronic Industries Alliance

EIA-748-A Criteria

Analysis and Management Reports 1. Identify monthly, at the Control Account level,

variances among Budget, Earned Value and Actual Costs.

2. Identify monthly, differences between planned and actual schedule accomplishment.

3. Identify monthly, variances between budget and actual indirect costs.

4. Summarize all data by WBS and OBS. 5. Identify managerial actions taken to correct

problems. 6. Update the Estimate of Cost at Completion.

EIA-748-A Criteria

Earned Value Terminology

PV (Planned Value) - Approved cost estimate planned to be spent on the activity during a given period. (PV) a.k.a (BCWS)AC (Actual Cost) - Total costs incurred on the activity during a given period. (AC) a.k.a (ACWP)EV (Earned Value) - The value of the work actually completed. (EV) a.k.a (BCWP)

EIA-748-A Criteria

Earned Value TerminologyData Element Term Acronym AKA

Planned Value Budgeted Cost for Work Scheduled PV BCWSEarned Value Budgeted Cost for Work Performed EV BCWPActual Cost Actual Cost of Work Performed AC ACWPAuthorized Work Budget At Completion BACForecasted Cost Estimate At Completion EAC LRE

Work Variance Schedule Variance SVCost Variance Cost Variance CVCompletion Variance Variance At Completion VAC

EIA-748-A Criteria

Earned Value TerminologyData Element Term Acronym AKA

VariablesPlanned Value Budgeted Cost for Work Scheduled PV BCWSEarned Value Budgeted Cost for Work Performed EV BCWPActual Cost Actual Cost of Work Performed AC ACWPAuthorized Work Budget At Completion BACForecasted Cost Estimate At Completion EAC LRE

MetricsWork Variance Schedule Variance SVCost Variance Cost Variance CVCompletion Variance Variance At Completion VAC

EIA-748-A Criteria

EVM Terminology

Data Element Term AcronymTotal Project Cost The sum of all costs for a given project TPCNegotiated Contract Cost Contract Price less profit/fee (can equal CBB NCCContract Budget Base Sum of NCC and AUW CBBTotal Allocated Budget Sum of all contract budgets - ( includes MR ) TABPerf Measurement Baseline Contract time-phased, budgeted work plan ( excludes MR ) PMBManagement Reserve Contractor PM’s Contingency budget MRControl Account Contractor key management control point - CWBS Element CAControl Account Manager Manager of Control Account CAM Work Package Near-term, detail-planned activities within a CA WPPlanning Package Far-term CA activities not yet defined into detail WP PP

EIA-748-A Criteria

EV Terminology

PMB

Control Accounts

Contract Price

Work Packages Planning Packages

Profit / Fee CBB (TAB)

Total Project Cost (TPC)

Undistributed Portion of TPC

Undistributed Budget

Management Reserve

Decision Support System

Action

Decision

Knowledge

Information

Data

Top Management(sponsor)

Control Account Manager

PM

Analysis and Management Reports

Analysis and Management Reports

1. Identify monthly, at the Control Account level, variances among Budget, Earned Value and Actual Costs. Management Value

Performance data allows reconciliation to the accounting system and provides management controls.

Project manager can focus on areas of need. Consequences and Implications

Without schedule and cost variance data, root causes are not visible early in the project, which could result in a negative impact to the project later.

Analysis and Management Reports

2. Identify monthly, differences between planned and actual schedule accomplishment. Management Value

All levels of management has the rapid and effective ability to implement corrective actions when both schedule and cost deviations are noted.

Cost Variance is predictive if the future performance does not change.

Consequences and Implications If schedule variance analysis are not address,

corrective actions are implemented in a time manner which could affect the completion of the project

Analysis and Management Reports

3. Identify monthly, variances between budget and actual indirect costs. Management Value

Indirect cost analysis provides the ability to implement corrective actions to prevent indirect cost overruns.

Consequences and Implications If indirect costs are not analyze then corrective

actions are implemented in a timely manner which could affect the cost of the project or profit to the performing organization.

Analysis and Management Reports

4. Summarize all data by WBS and OBS. Management Value

Allows project manager to allocate available resources to mitigate project risk.

Problem areas from all levels of organization can be identified from the same data.

Consequences and Implications Without the data for WBS and OBS internal and external

reports performance reports may have reporting discrepancies.

Analysis and Management Reports

5. Identify managerial actions taken to correct problems. Management Value

Allows management early insight into identifying problems.

Consequences and Implications Without the data being available on a timely basis,

effective management decisions would not be made to mitigate project impacts and correct problems in a timely manner.

Analysis and Management Reports

6. Update the Estimate of Cost at Completion. Management Value

Allows project manager to increase the probability that the project will be executed within the reported EAC..

Reduces the element of surprise. Consequences and Implications

Without the CAM evaluating the performance data a valid EAC would not be achieved.

Cost Performance Reports

Cost Performance Reports

Format 1 Format 2 Format 3 Format 4 Format 5

Cost Performance Reports

Format 1 Format 1 provides summary level data to measure cost and

schedule performance using a Work Breakdown Structure (WBS) layout.

Cost Performance Reports

Cost Performance ReportFormat 1

Schedule Variance

Cost Variance

Variance at Completion

Task1Task2Task3

Thresholds determines the color

Cost Performance Reports

Format 5 Format 5 is a narrative report used to explain significant cost and

schedule variances and other identified contract problems and topics. Below is print out of the type of data reported in a Format 5. Research has indicated that two thirds of the costs associated with EVMS can de attributed to variance analysis reporting

Quantitative or Qualitative Report?

EVMS Validation Process

EVMS Validation Process

The EVMS Certification Process Requirement in request for proposal Requirement in contract Progress Assistance Visit Validation and System Acceptance

Letter

Integrated Baseline Review

Integrated Baseline Review

The government program manager and technical staff conducts this review after the contract award to verify the technical content of the performance measurement baseline

To make sure that the scope, schedule and cost baselines are established.

Required by law

Summary

Background EIA-748 Criteria Analysis and Management Reports Cost Performance Report EVMS Validation Process Integrated Baseline Review

Works Cited

EIA-748-A ($60.00) Global Engineering Documents 15 Inverness Way East Englewood, CO 80112-5704 1-800-854-7179

National Defense Industrial Association NDIA ANSI EIA 748 Intent Guide

Kemps, Robert R., “Fundamentals of Project Performance Measurement”, Humphrey's and Associates, 2004

Discussion and Questions?