wayne bag get t 112105

7/31/2019 Wayne Bag Get t 112105

1/26

GSET Technical Seminar SeriesSpace Telescope

Science Institute

November 21, 2005 1

Earned Value Management:An Introduction and Short

Tutorial

Wayne Baggett

7/31/2019 Wayne Bag Get t 112105

2/26


Science Institute

November 21, 2005 2

Outline

What is Earned Value?

Government Requirements

Small Project Usage

Why Use Earned Value?

Earned Value in a NutshellConclusions

7/31/2019 Wayne Bag Get t 112105

3/26


Science Institute

November 21, 2005 3


How does

Dilbert knowthis?

7/31/2019 Wayne Bag Get t 112105

4/26


Science Institute

November 21, 2005 4


Project Management Technique Integrates technical performance requirements,

resource planning, and cost accounting withschedule

Provides insight into project status

Provides early warning signals for problems

Provides a disciplined means ofmanaging the project

7/31/2019 Wayne Bag Get t 112105

5/26


Science Institute

November 21, 2005 5

Government Requirements

OMB Circular A-11, Exhibit 300 (2004)

Requires EVMS for allmajor acquisitions

Agencies must have ANSI-compliant EVMS in placeby December 31, 2005

EVMS data must be used to identify problems and

provide realistic final cost estimates as a part of

decision packages Federal Acquisition Regulations (2005) amended

to require contractor-maintained EVMS

7/31/2019 Wayne Bag Get t 112105

6/26


Science Institute

November 21, 2005 6

Government RequirementsThese requirements apply to large projects or

programs; DOD requires

Contract Value $50M: validated ANSI-compliant

EVMS, structured reports and reviews, ongoing

surveillance

$50M > Contract Value $20M: ANSI-compliant

EVMS (validation not required), tailored reports and

reviews, ongoing surveillance

Contract Value < $20M: EVMS optional, ongoing

surveillance

Very rigid, heavily constrained system at this level

7/31/2019 Wayne Bag Get t 112105

7/26


Science Institute

November 21, 2005 7

Small Project Usage

Small projects provide the bestopportunities for earned-value employment Consider its use for all in-house funded

developmental projects where a firmcommitment is made to management.

Software projects can especially benefit fromthe employment of a simple earned-valueapproach.

(Fleming and Koppelman, Earned Value Project Management: APowerful Tool for Software Projects, Crosstalk, July, 1998, p.19.)

7/31/2019 Wayne Bag Get t 112105

8/26


Science Institute

November 21, 2005 8

Small Project Usage

The Personal Software Process (PSPSM) and TeamSoftware Process (TSPSM) use EVM PSP has practitioners estimate task efforts and track

their actual effortsTasks estimated are very smallabout 10 hours each

Data are used to improve future estimates

TSP expands the use of EVM to the project level

Use of PSP and TSP helps projects meet theircommitments (Tuma, D. and Webb, D., Personal Earned Value:Why Projects Using the Team Software Process Consistently MeetSchedule Commitments, Crosstalk, March 2005, p. 17.)

PSP and TSP are registered service marks of Carnegie Mellon University

7/31/2019 Wayne Bag Get t 112105

9/26


Science Institute

November 21, 2005 9

Small Project Usage

Several projects at STScI have used EVM:

Most used a tailored version of EVM

JWST S&OC development

FOS, PPS, PRDS

JWST FITS Writer development

INS Master Schedule development DMS Automated Test System development

7/31/2019 Wayne Bag Get t 112105

10/26


Science Institute

November 21, 2005 10

Why Use Earned Value?

Obligates planning to the level of taskmanagement

Less likely to overlook workProvidesobjective measures of progress

Allows early detection of budget and

schedule problemsAllows anobjective projection of eventual

project cost and schedule

7/31/2019 Wayne Bag Get t 112105

11/26


Science Institute


Key to Earned Value

Determine the value for every taskprior to starting work!

7/31/2019 Wayne Bag Get t 112105

12/26


Science Institute


Guidelines for Setting/Earning Value

Use a consistent unit of measurement that makes

sense for the project

Dollarsrequired for large govt projects

Hoursuseful on small projects; PSPSM

Arbitrary numbernot recommended, but still used

Consider task duration

Select Earned Value Methods that are as objectiveas possible

7/31/2019 Wayne Bag Get t 112105

13/26


Science Institute


Earned Value MethodsMethod Usage Examples

Equivalent

Units

Value based on completed portion of a large number

of completed activities

S/W Implementation, H/W

Production

0-100 Value earned upon completing work that starts and

ends within one status period

Outlines, Document Preparation,

Formal Reviews

50-50 Part of value earned when work starts and remainder

when it ends, usually when work straddles tworeporting periods; percentages are determined by the

manager

Short Engineering Analyses,

System Design, Build andAcceptance Tests

Interim

Milestones

Value earned at the completion of objective

milestones; usually for work that straddles several

consecutive status periods

Long-Term Analyses, System

Design, Requirements Definition

Apportioned

Effort

Value earned is prorated based on a portion earned for

another unit of work

QA, Configuration Management,

Database Management

Percent

Complete

Value earned based on subjective estimate; usually

for work that has no objective measure of

completeness

Long-Term Studies, Maintenance

and Operations

Level of

Effort

Value based on passage of time; usually for work that

cannot be defined or measured

Project Management,

Receptionist, Help Desk

Objectivity

7/31/2019 Wayne Bag Get t 112105

14/26


Science Institute


$-

$50

$100

$150

$200

$250

10/1/2005

11/26/2005

1/21/2006

3/18/2006

5/13/2006

7/8/2006

9/2/2006

10/28/2006

12/23/2006

2/17/2007

4/14/2007

6/9/2007

8/4/2007

9/29/2007

11/24/2007

1/19/2008

3/15/2008

5/10/2008

Date

Value($1000s)

Planned

Actual

Example: Planned vs. Actuals

$13,000 under budget!

Current Date

7/31/2019 Wayne Bag Get t 112105

15/26


Science Institute


$-

$50

$100

$150

$200

$250

10/1/2005

11/26/2005

1/21/2006

3/18/2006

5/13/2006

7/8/2006

9/2/2006

10/28/2006

12/23/2006

2/17/2007

4/14/2007

6/9/2007

8/4/2007

9/29/2007

11/24/2007

1/19/2008

3/15/2008

5/10/2008

Date

Value($1

000s)

PV

EV

AC

Example: Earned ValueBAC=$200

SV=EV-PV=($30) CV=EV-AC=($17)

PMB

PV

EVAC

7/31/2019 Wayne Bag Get t 112105

16/26


Science Institute


Earned Value Concepts

Planned Value (PV)planned cost of doingthe scheduled work(formerly BCWS)

Earned Value (EV)plannedcost of the

work completed (formerly BCWP)

Actual Cost (AC)actual cost of the work

completed (formerly ACWP)

Performance Measurement Baseline (PMB)the time-phased budget plan against

which performance is measured

7/31/2019 Wayne Bag Get t 112105

17/26


Science Institute


Earned Value Concepts (cont.)

Schedule Variance (SV)measures how

project is doing relative to the schedule

SV = EVPVPositive Ahead of Sched., Negative Behind Sched.

Cost Variance (CV)measures how project

is performing; productivity measureCV = EVAC

PositiveEfficient, Negative Inefficient

7/31/2019 Wayne Bag Get t 112105

18/26


Science Institute



Budget Variance (BV)measures how

project is doing against the budget

BV = PVACPositive Under Budget, Negative Over Budget

Budget At Completion (BAC)sum of the

planned value plus the UndistributedBudget

7/31/2019 Wayne Bag Get t 112105

19/26


Science Institute


$-

$50

$100

$150

$200

$250

10/1/2005

11/26/2005

1/21/2006

3/18/2006

5/13/2006

7/8/2006

9/2/2006

10/28/2006

12/23/2006

2/17/2007

4/14/2007

6/9/2007

8/4/2007

9/29/2007

11/24/2007

1/19/2008

3/15/2008

5/10/2008

Date

Value($1

000s)

PV

EVAC

ETC

Example: Earned Value

VAC=BAC-EAC=($33)

EAC=AC + ETC=$233

ETC=(BAC-EV)/CPI=$146

SPI=EV/PV=0.70

CPI=EV/AC=0.81

7/31/2019 Wayne Bag Get t 112105

20/26


Science Institute


Earned Value Concepts (cont.)Schedule Performance Index (SPI)

measure of schedule compliance: is workbeing done at the planned rate?

SPI = EV/PV1 Faster than planned

Cost Performance Index (CPI)productivity measure: is the work costing

what was expected?

CPI = EV/AC< 1Inefficient, > 1 Efficient

7/31/2019 Wayne Bag Get t 112105

21/26


Science Institute



Estimate To Complete (ETC)estimate of

the effort required to complete the project

from the current dateETC = (BACEV)/CPI

Estimate At Completion (EAC)the

estimated total cost of the project

EAC = AC + ETC

7/31/2019 Wayne Bag Get t 112105

22/26


Science Institute


Earned Value Concept SummaryAcronym Definition Equation Interpretation

PV Budgeted cost of task (none)

EV Earned value for task (none)

AC Actual cost of task (none)

SV Schedule Variance SV=EV - PV>0 = Ahead, 0 = Under, 0 = Productive, 1 = Faster, 1 = Efficient, < 1 = Inefficient

ETC Estimate to Complete ETC=(BAC-EV) /CPI

EAC Estimate At Completion EAC=AC+ETC

VAC Variance at Completion VAC = BAC - EAC >0 = Under,

7/31/2019 Wayne Bag Get t 112105

23/26


Science Institute


Costs of EVMS

Marginal cost of using EVMS is estimated at lessthan 1% to a few% of total contract cost Based mainly on large DOD contracts with

experienced EVMS users

Some costs are unnecessary according to EVMScriteria, but effort is put into those activities anyway

Expect costs to be higher at STScI due toinexperience in using EVM and our culture Mitigated by our implementation

Christensen, David S., The Costs and Benefits of the Earned Value ManagementProcess, Acquisition review Quarterly, Fall, 1998, p. 373.

7/31/2019 Wayne Bag Get t 112105

24/26


Science Institute


Benefits of Earned Value

It is a single management control system thatprovides reliable data.

It integrates work, schedule, and cost using a workbreakdown structure.

The associated database of completed projects isuseful for comparative analysis.

The cumulative cost performance index (CPI)provides an early warning signal.

The schedule performance index provides an earlywarning signal.

Christensen, David S., The Costs and Benefits of the Earned Value ManagementProcess, Acquisition review Quarterly, Fall, 1998, p. 373.

7/31/2019 Wayne Bag Get t 112105

25/26


Science Institute


Benefits of Earned Value

The CPI is a predictor for the final cost of theproject.

It uses an index-based method to forecast the finalcost of the project.

The to-complete performance index allowsevaluation of the forecasted final cost.

The periodic (e.g., weekly or monthly) CPI is abenchmark.

The management by exception principle canreduce information overload.

Christensen, David S., The Costs and Benefits of the Earned Value ManagementProcess, Acquisition Review Quarterly, Fall, 1998, p. 373.

7/31/2019 Wayne Bag Get t 112105

26/26


Science Institute


The most common problem product teams face is

unreasonable schedule pressure. When teams areforced to work to unreasonable schedules, they areunable to make useful plans. Every plan they

produce misses managements edicted schedule and

is therefore unacceptable. As a result, they mustwork without the guidance of an orderly plan. Underthese conditions, the team will generally take muchlonger to complete the project than they otherwisewould.

Watts Humphrey, Pathways to Process Maturity: The Personal Software Processand Team Software Process, SEI Interactive, June 1999.

wayne bag get t 112105

Documents