An introduction to an effective earned value management system (EVMS) webinar series part 2 Tuesday 3 November 2020 presented by Scot Butcher and Martin Eveleigh The link to the write up page and resources of this webinar: https://www.apm.org.uk/news/an-introduction-to-an-effective-earned-value-management-system-evms-webinar-series-part-2/

1. An Introduction to an
Effective Earned
Value Management
System
By Scot Butcher & Martin Eveleigh
1

2. Webinar 2 of 3
Earned Value
Building Blocks:
Objective.
To Understand the core elements of an
Earned Value Management System
(EVMS)
2

3. Introductions
• Scot Butcher
• 30 years working in defence
acquisition and support
• Started out life as a mechanical
engineer but quickly moved to
management of projects
• Last 18 years have been spent in
project controls
• First experience of EVM was in
2003
• Experienced IBR participant and
chair
• Martin Eveleigh
• 40+ years working in the Defence
Sector both in the UK and USA
• Mechanical/Electrical Engineer,
but moved to
Programme Management in 1993
• Author of a US
DoD Validated Earned
Value Management System
Description (EVMSD)
• Holds an MSc in Programme &
Project Management
• Experienced in enabling and leading
IBRs
3

4. Why these webinars?
• There is clear confusion between Project Controls, Earned Value Management
and Earned Value Analysis.
• There is an acknowledged and widespread obsession with Earned Value metrics
and its analysis without a firm understanding of the system required to underpin
it.
• There is a false belief that if you are planning discrete activities, that you can/are
performing EVM
• Therefore, these webinars are aimed at dispelling myths and advising what it
takes to establish an appropriate, pragmatic Earned Value Management System
4SB

5. Content of the 3 webinars
1. Basics and myth busting:
• Incessant ‘false focus’ - the Earned Value Management ‘Iceberg’.
• The relationship between Project Controls (PC), Earned Value Management System (EVMS) and Earned Value
Analysis (EVA).
• The understanding and importance of the Performance Measurement Baseline (PMB).
2. What’s needed……..and importantly what’s not!:
• Explain the attributes of an effective EVMS with/without compliance to EIA748.
• Discuss were Earned Value Analysis is beneficial and where not!
3. Assurance reviews:
• System Demonstration Review (SDR)
• Surveillance Review (SR)
• Integrated Baseline Review (IBR)
• Annual Estimate at Completion Review (AEAC)
5SB

6. EIA-748: Be Careful
What You Wish For!
6SB
• Explain the attributes of an effective EVMS
with/without compliance to EIA748.
• Discuss were Earned Value Analysis is beneficial and
where not!

7. EIA748: EVM 32 Criteria
1. Define authorised work
2. Identify Program Organisation Structure
3. Company integration of EVMS subsystems with Work Breakdown
Structure (WBS)
4. Identify organisation/function for overhead
5. Integrate WBS and Organisation Breakdown Structure (OBS), create
control accounts
6. Sequential scheduling of work
7. Identify interim measures of progress, i.e. milestones, products, etc.
8. Establish time-phased budget
9. Identify significant cost elements within authorised budgets
10. Identify discrete work packages
11. All work package budgets & planning packages sum to control acct
12. Identify and control LoE budgets
13. Establish overhead budgets by organization element
14. Identify management reserve and undistributed budget
15. Reconcile program target cost goal with sum of all internal budgets
16. Record direct costs from accounting system
17. Summarise direct costs into WBS without allocation
18. Summarise direct costs into OBS without allocation
19. Record indirect costs
20. Identify unit costs, equivalent units costs or lot costs
21. Accurate material cost accumulation by control accounts; EV
measurement at right time; full accountability of material
22. Control account monthly summary, identification of Cost Variance (C)
and Schedule Variance (SV)
23. Explain significant variances
24. Identify and explain indirect cost variances
25. Summarise data elements and variances thru WBS/OBS for mgmt.
26. Implement management actions as result of EVM analysis
27. Revise EAC based on performance data; calculate VAC
28. Incorporate authorised changes in timely manner
29. Reconcile budgets with prior budgets
30. Control retroactive changes
31. Prevent all but authorised budget changes
32. Document changes to Performance Measurement Baseline (PMB)
7SB
Project Control System (PCS)
Earned Value Management System (EVMS)
Earned Value Analysis (EVA)
People
Process
Data
Tools
Organisation
Planning,
Resourcing&
Budgeting
Change Control
Analysis
& Reporting
Assurance
Organisation
Planning &
Budgeting
Accounting
Analysis
Revisions
Material &
Subcontract Mngt
Surveillance
Substantiating &
Reporting Performance
to-date
Performance Prediction
& Focus on Estimate
to/at Complete
Meeting all 32 criteria to the fullest extent is about
as scary, time consuming and costly as it looks!
Full compliance should only ever be undertaken if
you are contracted to do so.
If EVM is warranted, then in most cases a pragmatic
approach will reap benefits without incurring
additional costs

8. An Easier Way of Looking at an EVMS
Stage 1:
Organisation
Stage 2:
Planning &
Budgeting
Stage 3:
Accounting
Stage 4:
Analysis
Stage 5:
Revisions
Remember
Webinar #1?
This is the tip of
the iceberg
8SB

9. Stage 1: Organisation
• Understand and Playback the ‘Ask’
• Set Preliminary Structures
• Gather Risks & Assumptions
• Estimate – Rate Decks (Budget), Resources and Time
• Substantiate the ‘Response’
• Gain acceptance to the above ‘baseline’
9ME

10. Stage 2: Planning & Budgeting
• Implement an IMS
• Understand the PMB
• Ensure Resource availability
• Final Review of Risks & Assumptions
• Select ‘Rules of Credit’ (Earned Value Techniques)
• Final Acceptance, Baseline and Authorise Work
10ME

11. Stage 3: Accounting
• Drumbeat
• Assure Baseline Funds to Budget match
• Rate Decks (Direct & Indirect)
• Collect Costs – usually at the Control Account level
• Use Estimated Actuals where needed
• Update Forecast and assure Time phased & Total matches affordability
11ME

12. Stage 4: Analysis
• Monthly Performance Review meeting
• Standard agenda, attendees, data packs, duration
• High level analysis using the IMS and drill-down where required
• Manage by Exception
• Risks and Management Reserve burn-down
• BAC & EAC approval decisions
12SB

13. Stage 5: Revisions (Baseline Changes)
• Risks, Opportunities and Issues
• Past, Present and Future Changes
• Formal Change submissions - approve, reject, defer the change
• Update the Baseline
• Enact Change Management
• Close completed Tasks and Control Accounts
13SB

14. Having said all of this…
• The implementation of EVM into an organisation that has yet to use it will be a
significant Transformation Programme…in other words, hearts and minds
• Implementation will typically take ~18 months
• As much as Process, Tools, Templates and Data, etc….. it’s about:
• Senior Leadership
• Communications
• Behaviours
• Capability and Capacity
• Training and Mentoring
• Assurance
14SB

15. Appropriate Earned
Value Analysis
15SB
• Explain the attributes of an effective EVMS
with/without compliance to EIA748.
• Discuss were Earned Value Analysis is beneficial and
where not!

16. Earned Value Types/Rules of Credit
16
Note: EVT’s are applied at the point of Baseline and at Work Package/Activity Level.
Planning Packages do not require an EVT until they are subject to ‘Rolling
Wave Planning’ (RWP).
Description Optimum Duration (Reporting Periods)
0 - 100 1 period
20 – 80
50 - 50
1-2 periods
Objective % complete <= 3 periods
Estimated (CAM) % complete <= 3 periods
Milestones > 3 periods
Apportioned > 3 Periods
Level of Effort (LoE) Minimise use
Supported by
Quantifiable
Backup
Data
(QBD)
5-15% of PMB
SB

17. Earned Value Types/Rules of Credit
17
Note: EVT’s are applied at the point of Baseline and at Work Package/Activity Level.
Planning Packages do not require an EVT until they are subject to ‘Rolling
Wave Planning’ (RWP).
Description Optimum Duration (Reporting Periods)
0 - 100 1 period
20 – 80
50 - 50
1-2 periods
Milestones > 3 periods
Objective % complete <= 3 periods
Apportioned > 3 Periods
Estimated (CAM) % complete <= 3 periods
Level of Effort (LoE) Minimise use5-15% of PMB
SB
Increasing
importance
of QBD
These are all
a form of
objective %
complete

18. Typical Appropriate EV Analysis
• Performance compared to the Baseline
• Cost and Schedule Variances - Current Period, Cumulative to Date
• Critical and Driving Path Analysis
• Risks & Opportunities
• Management Reserve ‘burn-down’
• Variance at Completion (VAC)
• Forward looking EVA – To-Complete Performance @EAC and Independent EACs (IEAC)
• Funding versus remaining Forecast
• Resource Issues
• Baseline Changes
• Formal EVA Cost Performance Reports – CPR1 (WBS), CPR3 (Budget), CPR5 (VAR) and CPR 6
(IMS)
18ME

19. Show Me The Magic!
£100K
£200K
£300K
£400K
BCWP
ACWP
EAC
Scenario:
• A Baselined 10
month Project
• At 40% through the
Project,
performance is not
good
• The EAC predicts
late delivery and a
cost overrun
SPI=0.44
CPI=0.27
SV=-£90K
CV=-£190K
Current schedule slip
circa: 2.25 months
BAC
BCWS
Estimated final
over run: 2 months
VAC=-£80k
TCPI(EAC)
(BAC-BCWP)/(EAC-ACWP)
1 2 3 4 5 6 7 8 9 10 11 12
ME
= 1.92
Independent EAC (IEACs)
Suggests £500k

20. Tailoring an EVMS
20ME
• Explain the attributes of an effective EVMS
with/without compliance to EIA748.
• Discuss were Earned Value Analysis is beneficial and
where not!

21. Tailoring – Project Life Cycle & SQEP
• Tailoring – not a science!
• SQEP growth path
• Tailored Project Controls/Earned Value Management
• Standardisation – Process, Roles, Data, Tools Training and
Assurance
• Functional Alignment – PM, Finance and Commercial
21ME

22. Questions?
22

23. Links to the final webinar
• You now know that a good EVMS is essential to underpin valid and
useful EVA
• You know the building blocks of what constitutes a good EVMS and
that it can be tailored to specific needs
• You know what good EVA should look like for a Project
• Webinar 3 will tie it all together to show how you demonstrate that
you have an appropriate and effective EVMS…that is actually adding
value to your Project………Assurance!
23SB