Using Earned Value to measure project performance

1. 1
THE SIMPLE PROBLEM OF
SCHEDULE PERFORMANCE
INDICES
Glen B. Alleman Knowing how our project is performing means knowing how our
Lewis & Fowler Cost, Schedule and Technical Performance is performing

2. Keeping on Pace
2
 If the performance of  30 minutes into the ride
our project is like we’re still all riding as a
cycling, then we plan to group. Nice sustainable
ride at a known pace – pace, we’ll make the 40
say 20 mph miles in our planned
 If our group maintains time – no problems so
the target pace of 20 far
mph they can look at
their watches to
determine if we’re on
pace to complete our 40
mile ride in 2 hours

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

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

5. Time to Pick Up the Pace
5
 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 pace to close the
gap
 Let’s assume we have the strength, skills, stamina, and mental
fortitude to pick up the pace and ride a 22 mph pace to try to
reconnect with the Peloton
 Exactly how to do this will require some thought
 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. Closing the Gap
6
 In order to close the gap,
we need to find the
needed actions to close the
gap that put us back on
pace – 20 mph
 But first we need to ride
faster – at 22mph
 Both are needed
 Close the gap – ride at 22 mph
 Once reconnected with the group, keep on planned pace
– maintain 20 mph
 Easy in concept – hard in the execution

7. 7
RIDING IN A PELOTON IS LIKE
MANAGING A PROJECT WITH
EARNED VALUE
The planned pace is BCWS
Glen B. Alleman The actual pace is BCWP
Lewis & Fowler The effort need to close the gap is TCPI

8. Earned Value Components
8
 Budgeted Cost of Work Scheduled
 The planned spend rate in hours and / or dollars
 Budget Cost of Work Performed
 Theplanned value of the work delivered
 When BCWS = BCWP we’re staying with the Peloton
 We’re staying on Plan
 Actual Cost of Work Performed
 Thecost in dollars or hours to produce the value
(BCWP)

9. Simple Cost Performance
9
Time
Now
Planned Cost
COST
Actual Costs
Measuring budget performance is
useful for the financial staff.
But program managers need
TIME insight into the delivery of
techncial value

10. Earning the Value for the Project
10
Time
Now
Planned Costs
COST
Actual Costs
Earned Value
It’s the Earned Value
measurement we’re after.
The EV represents the delivered
TIME value to the customer, not just
the consumption of resources

11. Measuring Schedule Performance
11
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 actually performed,
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 (expressed in terms of budget dollars)
and work performed (expressed in terms of budget dollars)
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= –$200 (negative = behind schedule)
Convert SCHEDULE VARIANCE to a percentage
Convert SCHEDULE VARIANCE to a percentage
formula:
formula: SV% = BCWP – BCWS = SV$
SV% = BCWP – BCWS = SV$
BCWS
BCWS BCWS
BCWS
example:
example: SV% = – $200 = –10%
SV% = – $200 = –10%
$2,000
$2,000

12. Measuring Cost Performance
12
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
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)
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

13. Closing the Gap
13
 When a gap opens in cost or schedule, it 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 to
the Peloton?
 How much more efficient do we need to be for each
dollar spent to get back on schedule?

14. To Complete Performance Index (TCPI)
14
 The To Complete Performance Index (TCPI) is an
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 gap between the
planned performance and the actual performance

15. Closing the Gap
15
 If the TCPI is > 1.0 something has to change 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)

16. In the End It’s About Staying on Pace
16
 When a gap opens
 Getting back on the original
plan (pace) is necessary but
not 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)
 Beingable to perform at this level requires we understand
what went wrong and how to fix it