1. 2012 NASA PM Challenge:
Low Cost Earned Value Management System (EVMS)
Implementation
Presented by:
Zakir Mahmood CGFM, PMP
Andrew Porter PMP, SSGB
Presented on:
February 22-23, 2012
2. Agenda
Introduction to Earned Value Management (EVM)
• Concepts
• Business case
Case Study: Earned Value Management System (EVMS)
Implementation at a Federal Agency
• Background
• Alternative Analysis
• Requirements
• Approach
• Recession Proof EVM Solution
• Results
EVM with Agile
Conclusion
Questions & Answer
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3. Introduction to EVM
Concepts
How well is this project performing?
$1,400
$1,200
Plan $ Actual $
$1,000
Costs
$800
$600
$400
$200
$0
Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10
Time
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4. Introduction to EVM
Concepts
What is Earned Value Management (EVM)?
EVM is a project management tool, which effectively integrates the scope of
work with the schedule and cost elements for optimum investment planning
and control.
Why is EVM important right now?
Investment capital is scarce
Greater emphasis on project success and value
Increased demand for improved efficiency and ROI
Increased demand for accountability and transparency
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5. Introduction to EVM
Concepts
Estimate At Completion
Budget At Completion
Variance at
Planned Value (PV) Completion
Projected
Schedule Delay Estimate To
Costs
at Completion Complete
Schedule Projected Costs
Variance
(SV) Cost Variance (CV)
Actual
Costs
Status Date
Earned Value (EV)
Time
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6. Introduction to EVM
Business Case
Benefits Drawbacks
Integrates project’s scope, schedule, Time required for data measurement
& cost can be considerable
Schedule variances do not address
Improves organizational effectiveness
the critical path
Allows for performance analysis Value earned without respect to
quality
Provides early warning signals of
schedule slippages & cost overruns Root cause of performance issues
are not revealed
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7. Case Study: EVMS Implementation
Background
Economic Correction of 2008
Businesses
• Slashed budgets & projects
• Abandoned or delayed applications
Fee-Funded Federal Agency
• Revenues drop by 50% +
• Discretionary budgets cut by similar rate
Office of Chief Information Officer (OCIO)
• Virtually all projects reevaluated or halted
• Delivering successful projects became top priority
Our task: Develop a mechanism, process, artifacts to convey state of IT Investments
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8. Case Study: EVMS Implementation
Background
Start of 2008; significant issues within organization
Culture Reactive, low morale, high turnover
Policies SDLC was not adhered
Project Scheduling Approach varied
Project Budgeting Processes not standardized
Integration Little internal coordination
Reporting Ad-hoc
Analysis Rarely performed
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9. Case Study: EVMS Implementation
Alternative Analysis
Recession-Proof
Criteria COTS
EVM
Duration of implementation
< 1 year > 1 year
process
2-4% of project
Implementation cost 1-2 FTE
portfolio
Change management requirement Low Moderate
Personnel training requirement Low Moderate
PMO maturity requirement Low High
Forecasting accuracy Moderate High
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10. Case Study: EVMS Implementation
Approach
Issue
• Limited investment capital available
• Little leverage from existing systems & artifacts
Requirements
• Develop a project budget process
• Improve project schedule process
• Link schedule & budget processes
• Develop project reporting & analysis processes
Approach
• Recession-Proof EVM
• Leverage existing systems and artifacts
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11. Case Study: EVMS Implementation
Recession-Proof EVM Solution
Analyze existing processes for EVM capabilities
• Identify process to improve
• Identify opportunities for automation
Design EVMS solution
• Improve existing project scheduling process
• Design new project budget process
• Identify ways to link schedule & budget: “Four-way Match”
Implement EVMS
• Build EVM tools to standardize and automate processes
• Integrate schedule and budget processes
• Standardize reporting & analysis procedures
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12. Case Study: EVMS Implementation
Recession-Proof EVM Solution
EVMS Elements
Activity Statusing Actual Costs Activity Costing
Actual Schedule
Planned Schedule Planned Costs
Activity Sequencing
Activity Resourcing
“Four-Way Match” 12
13. Recession Proof EVM Solution
Planned Schedule
EVMS Requirement Solution
Standardize project planning Use SDLC phases to proxy activities
Summarize planned start & end dates
Estimate duration at activity level
at SDLC phase level
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14. Recession-Proof EVM Solution
Planned Costs
EVMS Requirement Solution
Develop cost estimates at activity Require costs to be planned at SDLC
level phase level
Link resource rates to planned hours Upload blended government and
contractor rates
Assign all procurement costs to an Require PM to select a SDLC phase
activity for all procurements
Provide time phased estimates by Require PM to select a SDLC phase
activity level for all procurements
Map control accounts to activities Links Budget Organizations with
Project Codes
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15. Recession-Proof EVM Solution
Planned Costs (cont.)
Project Resource Estimation Worksheet (PREW):
Excel based model - derives planned costs from planned schedule
Feature Previous Tool Implemented Tool
Costs linked to phase Labor only Both labor & material
Time to cost project Two days Two hours
Excel lines 1,000 150
Rate table linkage Manual Macro-enabled
Time phased Yes; generic dates Yes; precise dates
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16. Recession-Proof EVM Solution
Actual Schedule
EVMS Requirement Solution
Project activity start & end dates are
PM updates project schedule weekly
routinely updated
All project activity % physical
PM updates physical percent complete
complete amounts are updated
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17. Recession-Proof EVM Solution
Actual Costs
EVMS Requirement Solution
Enter internal labor time into T&A Leverage cost accounting system,
system by project activity provide training to ensure accuracy
Provide PM resource usage data for
Provide PM resource usage reporting
validation
Link internal labor costs to project Leverage Time & Attendance system,
activity level General Ledger
Link actual procurement cost to project
Leverage General Ledger
activity level
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18. Recession-Proof EVM Solution
Actual Costs (cont.)
General Ledger, Time & Attendance System:
Queries actual costs by project activity; links to project budget
Previous Implemented
Feature
Method Tool
Leverage of Cost accounting Weak Substantial
Reporting level Project Activity
Data source for procurement costs Cuff records General ledger
Data source for internal labor Not used T&A system
Internal labor reporting Not Available Bi-weekly
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19. Recession-Proof EVM Solution
Integrate Schedule and Cost
EVM Model:
Leverages “Four-Way Match” to calculate EVM scores; generate reports
Previous Implemented
Feature
Method Tool
Integrity of EVM Calculations Non-credible Highly credible
Reporting process Ad-hoc Mostly automated
Cost & Schedule reporting level Project level Activity level
Variance reporting $ variance at % and $ variance at
project level activity level
Forecasting level Not Available Activity level
Forecasting accuracy Not Available Moderately
dependable
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20. Recession-Proof EVM Solution
Integrate Schedule and Cost
Analysis Tool:
Provides analyst with overview of key metrics
Evaluates EVMS elements
• Planned costs vs. actual costs
• Planned schedule vs. actual schedule
Examines key trends & variances of EVM scores
Values outside tolerances are flagged
Large variances are researched for root cause
• Programmatic
• Accounting
• Reporting
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21. Recession-Proof EVM Solution
Process Map
Integrated Process Project Management Office Finance Division
Managerial Financial
Analyze Analysis Analysis
Performance Trend & Variance
EVM
Monitor &
Reporting
Control Status Reports
Project Actual Actual Costs
Execution Schedule General Ledger,
Status Updates Time & Attendance System
Project Planned
Planning Planned Costs
Schedule Budget Tool
Project Plan
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22. Case Study: EVMS Implementation
Results
EVM reports generated for 30 reports (>$100+M)
• Standard reporting performed
• Forecast reliability increased
• Executive reporting for strategic decision making
EVM analysis is routinely performed
• EVM dashboards to draw focus to key EVM metrics
• Client staff trained to analyze metrics
Accountability & transparency have increased
• Project Manager
• Project performance
Project success rate has improved
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23. Conclusion
Implementing Recession-Proof EVM
Requires:
• Smaller capital investment (~2 FTE for 1 year)
• Lower personnel impact
Succeeds by leveraging existing:
• Systems - General Ledger & Time and Attendance
• Tools - Project formulation & execution
• Policies & procedures – SDLC
Yields:
• Majority of EVMS benefits
• Foundation for transitioning to a COTS EVMS
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24. EVM Schedule Information
for Agile Investments
• Graphical comparison of scheduled Budget vs. Actual
(using percentages over time)
– Time phased line graph comparing:
• Linear burn rate of planned execution for investment
• Planned Burn rate (if non-linear and known)
– Requires a tool that captures this data; update
and refine throughout the project life
• Actual execution
– Are we on ahead or behind schedule and why?
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25. EVM Cost Information for Agile Investments
• Compare percentages over time for the following:
– Total Cost vs. Planned Cost
– Labor Category Breakout Cost vs. Planned Cost
• Separate Labor, SW/HW, Indirect Costs,
project contingency funds, etc.
– Labor only vs. Planned Labor Cost
• More predictable than HW/SW purchases
• Timing and amount of non-labor purchases
are known and under control
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26. Lessons Learned
• EVM is a management tool
– Requires leadership sponsorship
• Update policies and procedures to drive success
– Metrics should drive decision making
• Budget at Completion (BAC) is critical
– Tied to every EVM metric except actual cost
– Evaluate and improve budgeting tools
• EVM is only as good as the data used to report
• Consider Materiality of Investments
– How significant are non-labor costs?
– What is the probability that they will be different than the plan?
• Leverage best practices, but allow flexibility to make a tailored solution
that works for your investment(s)
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29. EVM Metrics
Foundation
Metric Definition Analytical question
Budget At What is the budget for this
BAC Total baseline cost
Completion project?
What is the estimated value
Planned Estimated cost of all work
PV of the work planned to be
Value scheduled to be completed
done?
What is the actual cost
Cost incurred to accomplish
Actual Cost AC incurred for the work
the work
accomplished?
What is the estimated value
Earned Budgeted cost of actual
EV of the work actually
Value work completed
accomplished?
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30. EVM Metrics
Variance
Metric Formula Analytical question
Schedule How is the project progressing against
SV SV=EV-PV the planned schedule?
Variance
Cost How is the project progressing against
CV CV=EV-AC the budget?
Variance
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31. EVM Metrics
Efficiency
Metric Formula Analytical question
How are we progressing vs. the
Schedule original plan?
SPI SPI=EV/PV
Performance Index
Cost Performance What is the value earned per
CPI CPI=EV/AC dollar spent ratio?
Index
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32. EVM Metrics
Forecasting
Metric Formula Analytical question
Estimate at What is the new projected total
EAC EAC = BAC/CPI estimate based on CPI?
Completion
Estimate to
How much more will the
Complete ETC ETC = EAC - AC project cost?
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