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Earned Value Analysis

Budi Hartonohttp://boed.staff.ugm.ac.id

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Penjelasan Tugas #3

2

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What Is It ?

Why Do I Need It ?

How Do I Do It?

Earned Value Analysis

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Todays Situation

Need for accurate and consistent statusinformation

Numerous complex (and interrelated) projects

Projects with many WBS activities

Virtual Offices

Diverse technology platforms

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Theres Room For Improvement

70% of projects are:Over BudgetBehind Schedule

52% of all projects finish at189% of their initial budget

And some, after huge investments

of time and money, are simply nevercompleted

Source:The Standish Group

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How to answer the question:Have we done what we said wed do?

% complete estimating% of Budget spent% of work done% of time elapsed

subjective, incomplete

draws false conclusions

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It tells you how much youve spentand compares it to the budget.

Does it give an accurate picture ofwhere you are on the project? NO!It doesnt tell you if...

youre ahead or behind schedule

youre over or underspent

youve spent money on the rightthing

youre getting value for money

your problems are over or onlyjust begun

Whats missing?

time

Project Mgt in the dark

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Accomplishment is (planned)

work that has been carriedout successfully.

The budgeted cost of thatwork quantifies the

accomplishment. This is called earned value

time

Whats missing?

- knowing how much has been accomplished

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Enter Earned Value Analysis

Earned Value Analysis is: an industry standard way to:

measure a projects progress, forecast its completion date and final cost, and

provide schedule and budget variances along theway.

By integrating three measurements, it provides

consistent, numerical indicators with which you canevaluate and compare projects.

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Whats more Important?

Knowing where you areon Schedule?

Knowing where you areon Budget?

Knowing where you areon Work Accomplished?

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EVA Integrates All Three

It compares the PLANNED amount of workwith what has actually been COMPLETED, todetermine if COST, SCHEDULE, andWORK

ACCOMPLISHEDare progressing asplanned.

Work is Earned or credited as it is

completed.

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Earned Value needed because...

Different measures of progress fordifferent types of tasks

Need to roll up progress of manytasks into an overall project status

Need for a uniform unit of measure

(dollars or work-hours).

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Earned Value needed because...

Provides an Early Warning signal for prompt

corrective action.

Bad news does not age well.

Still time to recover

Timely request for additional funds

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And One More Reason

Why You Need EVA

?

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In the US, it is a must

These Set the Stage:

GPRA; 1993

FASA, Title V; 1994

Clinger-Cohen Act; 1996

And Then Along Came OMB! (Circular A-11, Part 7)

"Agencies must use a performance based acquisitionmanagement system, based on ANSI/EIA Standard748, to measure achievement of the cost, schedule,and performance goals."

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So, Is This Stuff New ?

Its been around since the sixties.

Cost/Schedule Control Systems Criteria

(C/SCSC)

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Examples of informal Earned Value Analysis

Its done informally without realizing it.30% time used,30% $$ spent

So, if 30% of the work is done, I must be OK ??

Shop floor estimates

Cost Comparisons

Budget vs. Actual

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But First! - We gotta get organized

EVA works best when work is compartmentalized.

Compartmentalization is best achieved with a well-planned Work Breakdown Structure.

So, how do I create a WBS for a really complexproject?

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Obviously in small bites.

How am I gonna eat this elephant?

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Proper WBS Design

One WBS Deliverable-oriented Work not in the WBS is out-of-scope Each descending level represents more detail

Full (and accurate) definition is key Defined deliverable(s) Timeframe for delivery of product

Total cost (direct and indirect) to deliver product

Lets Look at an example:

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A sample Work Breakdown Structure

Serve Pizzas to Customers

Provide the Place Cook the Food Serve Customers (Others)

Cook the SauceMake the Dough Build the Pizza

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WBS Units are Work Packages

Lowest level WBS elements

Have three measurable components

Scope of work to be accomplished Total (direct and indirect) cost Timeframe for completion

Too large and you have multiple people responsible for thework.

Too small and the program manager winds up micro-

managing everything.

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Some New Terms

BCWS - Budgeted Cost of Work Scheduled

ACWP - Actual Cost of Work Performed

BCWP - Budgeted Cost of Work Performed

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BCWS - Budgeted Cost of Work Scheduled

0

20000

40000

60000

80000

100000

120000

Jan-03

Feb-03

Mar-03

Apr-03

May-03

Jun-03

Jul-03

Aug-03

Sep-03

Oct-03

Nov-03

Dec-03

BCWS

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Earned Value Definitions (cont.)

ACWP: Actual Cost of Work Performed

Cost incurred to accomplish the work that has been

done to date.

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ACWP -Actual Cost of Work Performed

49000

56000

0

20000

40000

60000

80000

100000

120000

Jan-0

3

Feb-0

3

Mar-0

3

Apr-0

3

May-0

3

Jun-0

3

Jul-0

3

Aug-0

3

Sep-0

3

Oct-0

3

Nov-0

3

Dec-0

3

BCWP

ACWP

OK, were 7K over budget, is that bad

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Earned Value Definitions (cont.)

BCWP: Budgeted Cost of Work Performed

The planned (not actual) cost to complete the work that

has been done.

Note that this is the cost of the workperformed and,it is the budgeted amount, notthe actual amount.

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BCWP - Budgeted Cost of Work Performed

49000

55000

0

20000

40000

60000

80000

100000

120000

Jan-03

Feb-03

Mar-03

Apr-03

May-03

Jun-03

Jul-03

Aug-03

Sep-03

Oct-03

Nov-03

Dec-03

BCWP

BCWS

The project is behind schedule.

The Whole Story

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55000

49000

56000

0

20000

40000

60000

80000

100000

120000

Jan-03

Feb-03

Mar-03

Apr-03

May-03

Jun-03

Jul-03

Aug-03

Sep-03

Oct-03

Nov-03

Dec-03

BCWS

BCWP

ACWP

The Whole Story

And heres the full picture.

The project is over budget by 7k dollars.Weve only gotten 49 thousand dollars worth of work down.

And what does that mean? - - - (were behind schedule.)

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time

CV

SV

CV (Cost Variance)

BCWP - ACWP

earned value - actual cost SV (Schedule Variance)

BCWP - BCWS

earned value - planned

value 0 once all work completed

Variance

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Schedule Variance & Cost Variance

Schedule Variance = BCWP-BCWS

$49,000- 55,000

SV = - $ 6,000

Cost Variance = BCWP-ACWP

$49,00056,000

CV = - $7,000

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SPI: Schedule Performance Index

SPI=BCWP/BCWS

SPI

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CPI (Cost Performance

Index) BCWP/ACWP

earned/actual

the one to use

SPI (SchedulePerformance Index)

BCWP/BCWS

earned/planned

of diminishing value asproject progressestends to 1

1.1

0.9

0.8

1.0

1.1

0.9

0.8

1.0

CPI

SPI

Performance Indices

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Performance Metrics

SPI: BCWP/BCWS

49,000/55,000 = 0.891

CPI: BCWP/ACWP

49,000/56000 = 0.875

CSI: SPI x CPI

.891 x .875 = 0.780

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PMBOK

Estimate at Completion (EAC) =

1. AC+ETC (when original estimates areconsidered flawed)

2. AC+BAC-EV (when everything is OK andvariance will not occur in the future)

3. AC+((BAC-EV)/CPI) (when everything is

OK and variance will occur in the future)

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102000

90882

103865

0

20000

40000

60000

80000

100000

120000

Jan-03

Feb-03

Mar-03

Apr-03

May-03

Jun-03

Jul-03

Aug-03

Sep-03

Oct-03

Nov-03

Dec-03

BCWS

BCWP

ACWP

Making ProjectionsThe Situation at Year-End (Not Project Completion)

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Notes from previous slide

We can expect to finish the year having spent a bit more

than was budgeted.

But look at the ACWP curve: We have only delivered89% of the product

but weve spent everything we had, plus more.

Final line? Without a change in performance, we wouldhave to spend an additional 28% of our budget tocomplete the job.

Why 28% when were only 11% behind? Because our

Cost/Schedule Index says we will only be able to performto a 78% level, and well continue to fall behind.

E i C l

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Estimate to Complete

102000

116,571

0

20000

40000

60000

80000

100000

120000

140000

Jan-03

Mar

-03

May

-03

Jul-0

3

Sep-03

Nov-0

3

Jan-04

Mar

-04

BCWS

BCWP

ACWP