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    Earned Value Management - Earned Value Management Experience

Project Masters facilitates development of success criteria and metrics, and track results to ensure those criteria are met through use of Earned Value Management. The main steps used in carrying out an Earned Value Analysis are:

1. Defining the work: Defining the work consists of examining at what has to be done on the project/program (i.e., developing a detailed WBS)
2. Scheduling and resource the work: Consists of plotting the discrete work-packages defined by the WBS across a timeline and assigning resources to the activities, which comprise the work-packages
3. Monitoring and determining the status of the work: Involves tracking the actual work accomplished on the activity in the WBS and comparing actual work accomplished to the planned work (up to a specific point in time)
4. Re-planning the work: Involves modifying the WBS (and associated costs and schedules) in response to major scope changes or unknown risks

The benefits your organization will achieve from using Earned Value Methodology are:

1. It allows for continuous, detailed planning.
2. It gives an objective measure of cost, schedule, and technical scope.
3. It provides the ability to design, monitor, and modify Risk Mitigation Plans for a project.
4. It increases the effectiveness of status reporting.
5. Earned Value provides a tool to help manage the project’s performance.

The goal of the Earned Value Management System is to provide your organization with valid, timely, and auditable contract-performance information on which to base management decisions.

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The Key to the Earned value is the WBS

The Work Breakdown Structure (WBS) plays a critical role in the Earned Value Management System. It is essential that the project’s WBS be correctly set up in order to capture costs. (The WBS is a product-oriented family tree that defines project work through successively lower levels of detail.)

We extend the WBS structure to the cost-account and work-package levels. Because it is at these levels that organizational elements are actually assigned for accomplishing the work of the project. The work-packages must have discrete start and stop dates that are compatible with upper-level schedules.

Listed below are the terms PMInc. will be using when tracking the progress of each project:

Earned Value (Budgeted Cost for Work Performed)

EV - The sum of the budgets for completed work packages and completed portions of open work packages. Moreover, the appropriate portion of the budgets for level of effort and apportioned effort completed as of a particular time.

Planned Value (Budgeted Cost for Work Performed)

PV - The Sum of the Budgets for all Work (packages, planning packages, etc,) scheduled to be accomplished (up to a given point in time), including in-process work packages.  Also includes level of effort and apportioned effort scheduled to be done within a given time period

Actual Costs (Actual Cost for Work Performed)

AC - Costs actually incurred and recorded in accomplishing the work that has been performed within a given time period.

Budget at Completion (BAC)

The total budget amount planned for the contract and/or each smaller specific activity or element of the work breakdown structure (WBS).

Estimate at Completion (EAC)

The actual cost to date, plus the estimate for authorized work remaining to be completed. (…including direct and indirect costs).

The Schedule Variance (SV)

• Compares the amount of work accomplished (earned value) to the amount scheduled to have been accomplished (i.e., the difference from the plan expressed in budget ($) terms.)
• (Similarly, a comparison of earned value against the actual costs generated to do the work provides a measure of the cost variance; i.e., the amount of cost over-run or under-run from the plan for the work accomplished.)
• Planned or scheduled value of work, earned value, and actual cost provide objective measures of performance, enabling a performance trend analysis to be calculated and cost estimates at completion to be developed.
• In addition to emphasizing the concept of earned value, the C/SCSC requires thorough, integrated, contract planning. C/SCSC also requires establishment of realistic baselines, as well as careful, ongoing monitoring and control of the project.
• Performance information is segregated in terms of products-produced as well as by organization-performing-the-work. This allows for measurements of accomplishment at relatively low levels within the contract, which can be summarized and reported to upper management

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To use the Earned Value method, Project Manager will be required to report certain data to management. For each element (at the negotiated reporting level), the Project Manager will report the dollar value of:

• Work scheduled to be completed
• Work actually completed
• The actual cost of work completed

These measurements occur at the work-package level and are summarized up through the Work Breakdown Structure (WBS).

Variance Analysis and Earned Value Analysis are performed to ascertain schedule variance, cost variance, percentage over/under budget and performance indicatiors, such as Cost Performance Index(CPI) and Schedule Performance Index(SPI).

In simple terms, the variance equals the planned minus the actual.

Project Masters will be using Management by Exception, where the Project Manager focuses on activities whose variance lies outside acceptable ranges of performance. This is what Earned Value will help Project Masters look at – the exceptions on the project.

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Below is an example of an Earned Value Report, which Project Masters will be using, that includes:

• Reported Variances
• Budgeted Cost of Work Performed
• Budgeted Cost of Work Scheduled

  

Sample of Cumulative Performance Report: