1. Knowing how our project is performing means knowing how our Cost,
Schedule, and Technical Performance is performing according to Plan.

2.  p
If the performance of our
project is like cycling, then
we plan to ride at a planned
pace – say 20 mph
say 20 mph.
 If our group maintains the
target pace of 20 mph they
can look at their watches to
l k t th i t h t
determine if we’re on pace
to complete our 40 mile ride
in 2 hours.
 30 minutes into the ride we’re still all riding as a group. Nice
sustainable pace, we ll make the 40 miles in our planned
sustainable pace we’ll make the 40 miles in our planned
time – no problems so far.

3.  But some of us are starting to get
tired. We’re falling to the back of
pace line.
 Instead of our planned 20 mph,
we’ve dropped to 19 mph, still
moving along pretty well, but a gap
is starting to open up.
 As time passes this gap is opening more – we’re falling off the
back of pace line – and we’re gonna get dropped if we don’t do
something soon.
something soon
 We’re Underperforming to our Plan
 For the invested effort (ACWP) we’re under delivering value (BCWP)
against our planned value (BCWS).
against our planned value (BCWS)

4.  If we keep riding at our 19 mph pace,
the gap will continue to open and
we’ll soon be all alone.
 Our planned performance (BCWS) has
fallen off the actual pace (BCWP) and
we need to do something about it,
and we need to do it fast.
 If we can get back on pace (BCWP) – go back to our planned 20
mph – this will be good, but the gap that opened up will
remain (SPI 1.0).
remain (SPI < 1.0).
 We’ll still have the gape between us and the peloton.
 Our riding group is now far ahead.
 We re not falling further behind, but we re still behind.
We’re not falling further behind, but we’re still behind.
 We’ll need to pick up the pace (SPI > 1.0).

5.  In order to close the gap,
In order to close the gap
riding at our planned 20
mph pace is not enough.
 We have to ride faster –
say a 22 mph to close the
gap to rejoin the peloton.
 Let’s assume we have the strength, skills, stamina, and
L t’ h th t th kill t i d
mental fortitude needed to pick up the pace and ride a 22 mph
pace to try to regain contact with the group.
 Exactly how to do this will require some thought:
E tl h t d thi ill i th ht
 Simply peddle faster – steady increase in effort.
 Sprint to close the gap on an uphill section.
 Ride faster down hill.
 Find someone to pull us to the Peloton in a draft.

6.  In order to close the gap, we
need to find the needed
actions to close the gap that
put us back on pace
put us back on pace – 20
mph.
 But no matter how we need
to ride faster – at 22mph.
to ride faster at 22mph
 Two things are actually needed:
 Close the gap ride at 22 mph to regain contact
Close the gap – ride at 22 mph to regain contact.
 Once reconnected with the group, keep on planned pace –
maintain 20 mph.
 Easy in concept – hard in the execution.
Easy in concept hard in the execution

7. The planned pace is BCWS.
The actual pace is BCWP.
p
The work effort needed to ride at the planed pace is ACWP.
The effort need to close the gap is TCPI.

8.  Budgeted Cost for Work Scheduled (BCWS)
d d f k h d l d
 The planned cost in hours and / or dollars.
 Budget Cost of Work Performed (BCWP)
B d t C t f W k P f d (BCWP)
 The planned value of the work delivered.
 Wh BCWS BCWP ’
When BCWS = BCWP we’re staying with the Peloton.
i i h h P l
 This is the “Earned Value” over the period of
performance.
performance
 Actual Cost of Work Performed (ACWP)
 The cost in dollars or hours to “earn” the Earned Value
The cost in dollars or hours to earn the Earned Value
(BCWP).

9. BCWS
BCWP
ACWP
The same work component is in all three Earned Value variables
p
† CPM–300: Principles of Earned Value Implementation, Lesson E: Developing the Performance Measurement
Baseline, Dennis W. White, IPMC 2002 Fall Conference, Professional Education Program.

10. Time
Now
COST
Planned Cost
Actual Costs
C
Measuring budget
p
performance is useful for the
financial staff.
But program managers need
TIME insight into the delivery of
g y
techncial value

11. Time
Now
COST
Planned Costs
Actual Costs
C
Earned Value
It’s the Earned Value
measurement we’re after.
’ f
The EV represents the
TIME delivered value to the
customer, not just the
t t j t th
consumption of resources

12. EAC: Estimate at Complete
TAB: Total Allocated Budget
Management Reserve
BAC: Budget at Complete
PMB
The Performance
Measurement Baseline
Schedule Variance (PMB) represents of the
Cost
$ Variance program “ b
“on baseline”
li ”
ACWP
C S
BCWS
BCWP
time Time Completion
Now Date

13. Schedule Variance
BC WS: Of the work scheduled to have done,
how much was it budget for it to cost?
BC WP: Of the work ac ua y performed,
O e o actually pe o ed,
how much was it budget for it to cost?
SCHEDULE VARIANCE is the difference between work scheduled
SCHEDULE VARIANCE is the difference between work scheduled
and work performed ((expressedin terms of budget dollars)
and workpperformed(expressed in terms of budget dollars)
p g )
formula:
formula: SV$ = BCWP – BCWS
SV$ = BCWP – BCWS
example:
example: SV = BCWP – BCWS = $1,800 – $2,000
SV = BCWP – BCWS = $1,800 – $2,000
SV= –$200 (negative = behind schedule))
SV= –$200 (negative = behind schedule)
( g
Convert SCHEDULE VARIANCE to a percentage
Convert SCHEDULE VARIANCE to a percentage
formula:
formula: SV% = BCWP – BCWS = SV$
SV% = BCWP – BCWS = SV$
BCWS
BCWS BCWS
BCWS
example:
example: SV% = – $200 = –10%
SV% = – $200 = –10%
$2,000
$2,000

14. Cost Variance
BC WP: Of the work actually performed,
how much was it budgeted to cost?
AC WP: Of the work actually performed,
how much did it actually cost?
COST VARIANCE is the difference between the budgeted cost and
COST VARIANCE is the difference between the budgeted cost and
the actual cost
the actual cost
act al
formula:
formula: CV$ = BCWP – ACWP
CV$ = BCWP – ACWP
example:
example: CV = BCWP – ACWP = $1,800 – $1,900
CV = BCWP – ACWP = $1,800 – $1,900
SV= –$100 (negative = cost overrun)
SV= –$100 (negative = cost overrun)
SV $100
Convert COST VARIANCE to a percentage:
Convert COST VARIANCE to a percentage:
formula:
formula: CV% = BCWP – ACWP = CV $
CV% = BCWP – ACWP = CV $
BCWP
BCWP BCWP
BCWP
example:
example: CV% = –$100 = –6%
CV% = –$100 = –6%
$1,800
$1,800

15.  When a gap opens in cost or schedule, it
Wh i h d l i
needs to be closed.
 Knowing the CPI and SPI is necessary but not
sufficient.
 We need to know how much better we must
perform to close the gap:
 Have much faster do we need to ride to get back
g
to the Peloton?
 How much more efficient do we need to be for
each dollar spent to get back on schedule?
h d ll b k h d l

16.  The To Complete Performance Index (TCPI)
Th T C l P f I d (TCPI)
index states how much better we need to
perform to close the gap:
BAC  BCWP
TCPI 
EAC  ACWP
 The TCPI is an indicator of how our
performance needs to improve to close the
g p
gap between the planned performance and
p p
the actual performance.

17.  If the TCPI is > 1.0 something has to change
f
to stay on schedule and budget:
 Reduce scope – do less work (BCWP) for the same
effort.
 Reduce rework – reduce breakage
 Increase efficiency – do more work (BCWP) with
the same (ACWP).
h

18.  When a gap opens …
 Getting back on the original plan
(pace) is necessary but not
sufficient.
sufficient
 We have to perform better (faster
than plan) in order to close any
gaps that opened while we were
falling behind.
 Knowing the level to which we need to perform to close
the gap is the To Complete Performance Index (TCPI) …
 Being able to perform at this level requires we understand what
went wrong and how to fix it.