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PROJECT HEALTH MONITORING BY EARNED VALUE ANALYSIS

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Earned Value Analysis
Earned Value Analysis
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PROJECT HEALTH MONITORING BY EARNED VALUE ANALYSIS

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Abstract— Execution of engineering projects are tracked against critical metrics such as safety, quality,
delivery cost and inventory. Earned value is a key parameter that helps in assessing delivery (schedule) and cost.
Static shows that 70% of projects are over budget behind schedule, 52% of all projects finish at 189% of their
initial budget and some, after huge investments of time and money, are simply never completed. The rest of this
paper gives a perspective on monitoring project health by Earned value analysis.

Abstract— Execution of engineering projects are tracked against critical metrics such as safety, quality,
delivery cost and inventory. Earned value is a key parameter that helps in assessing delivery (schedule) and cost.
Static shows that 70% of projects are over budget behind schedule, 52% of all projects finish at 189% of their
initial budget and some, after huge investments of time and money, are simply never completed. The rest of this
paper gives a perspective on monitoring project health by Earned value analysis.

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PROJECT HEALTH MONITORING BY EARNED VALUE ANALYSIS

  1. 1. Author PROJECT HEALTH MONITORING BY EARNED VALUE ANALYSIS 1
  2. 2. 2 Index i. Abstract ii. Introduction iii. History iv. Terminologies v. More Derived Metrics vi. an Example to illustrate the EV vii. Best Practices followed to get EV viii. what do do with EVM Data ix. Main RESULTS x. Pros xi. Pre measures to be considered for EVA xii. CONCLUSIONS xiii. ACKNOWLEDGMENT xiv. REFERENCES
  3. 3. Abstract — An Execution of engineering projects are tracked against critical metrics such as safety, quality, delivery cost and inventory. Earned value is a key parameter that helps in assessing delivery (schedule) and cost. Static shows that 70% of projects are over budget behind schedule, 52% of all projects finish at 189% of their initial budget and some, after huge investments of time and money, are simply never completed. 3
  4. 4. INTRODUCTION Earned Value (EV) technique is an industry standard way to measure a project’s progress, forecast its completion date and final cost, and to provide schedule and budget variances along the way. By integrating three measurements, it provides consistent, numerical indicators with which you can evaluate and compare projects EV. EV is primarily a schedule tracking tool, determining schedule from cost and earned value of individual Work Breakdown Structure (WBS) tasks performed in time. History Earned Value Management (EVM) emerged as a financial analysis specialty in United States Government programs in the 1960s [1], but it has since become a significant branch of project management and cost engineering. 4
  5. 5. Terminologies Figure 1: Earned Value example (ACWP) (BCWP) (BCWS) 5
  6. 6. Schedule and Cost Variances 6
  7. 7. SV: Schedule Variance (EV-PV) 49,000hr - 55,000hr SV = - 6,000hr A negative variance means the project is behind schedule. CV: Cost Variance (EV-AC) 49,000hr- 56,000hr CV = - 7,000hr A negative variance means the project is over budget. CPI: Cost Performance Index CPI=EV/AC 49,000/56000 = 0.875 If CPI is lesser than 1, means project is over budget. CSI: Cost Schedule Index (CSI=CPI x SPI) .891 x .875 = 0.780 When CSI is greater than 1, the less likely project recovery becomes. SPI: Schedule Performance Index SPI=EV/PV 49,000/55,000 = 0.891 If SPI is lesser than 1, means project is behind schedule. More Derived Metrics 7
  8. 8. An Example to illustrate the EV: 1 complete cycle of Test task By Referring the Figure , A set of module test is divided based on function calls. To test each function call complete cycle of Test task need to be done. For initial module it will take more than base line hours. For all models base line hour will be assumed as 16 hours. From Task Gather Data to Structural coverage, total 70% of test task completed. Once it is sent for review, then only Manger will notice the EV and can take credit for the module and till then based on Tester and manger trust, work will be done. 8
  9. 9. 9 Consider a project where the work has to be completed in two months in Rs 20,000. Cost breakdown is Rs.10,000 for each month. The work scheduled in each month is half of the total work to be completed. 1st month 25% completed but cost utilised is that of 50% of the total work. actual cost(AC) incurred =50% of total budgeted cost =10,000 The planned value(PV) for the work to be completed by the end of the first month =50% of total =50% of 20,000 =10,000 The Earned value(EV) or the value of the work actually completed in monetary terms Rate of Performance * Planned Value =50% * 10000 =5000 This implies that we have utilized Rs.10,000(AC) for the work which should have utilized Rs. 5,000(EV) according to our budget.
  10. 10. Best practices followed to get EV A) Operating system element is called Visual Management (VM). 10
  11. 11. B) Activity based management (ABM) It is a method of identifying and evaluating activities that a business performs. In XLS sheet it will have Tabs called Life cycle, Data, PCT Chart, EV chart, RFS state. In Data tab, Task is assigned with responsible person, base line hours, actual start, Percentage complete these data’s are filled daily/weekly/every 15days by Leads. This ABM xls will be maintained in secured share drive. 11
  12. 12. C) Minority Report Tool/JIRA Tool 12
  13. 13. What to Do With EVM Data EV indicators provides an early warning about the project performance and also gives an unambiguous lead to the project manager on what is the most appropriate action. Because of that the utitative value of EV indicators is very important. 13
  14. 14. MAIN RESULTS By applying EVA technique, Project will be delivered at the maximum percentage on time Considering the example below: Suppose we are calculating EV for 6 employees for a week. 14
  15. 15. 15
  16. 16. 16
  17. 17. Pros: I. EVA is a flexible and easy to learn tool adaptable to projects of any size, able to control them all with minimal effort. II. Since all the process activities (artifacts, license, ctp/hilite queues, CM21, analysis time, etc) required for project execution are in place, the outcome of deliverables will be on-time. III. EV analysis/calculation process can asses in real time true project schedule and cost performance. IV. With EV analysis, a project manager will be allowed to only study and manage cost in time, leaving the performance metric of technical variable to technical discipline leads. This burden release emphasizes the benefit of 20% effort for 80% results. V. EVA is very objective and robust when many owners contribute its data in calculating. VI. SPI and CPI these are an early warning signals 17
  18. 18. Pre measures to be considered for EVA: I. While doing earned value analysis, we don't take quality into consideration. It may be possible that our project is scoring high on earned value performance scale, but the quality of work is below par. Quality is an important criteria in any project, and unfortunately it is not considered in EVA. II. If the Project schedule is very large (around x000 hours), 70% of the work schedule is based on the trust on the team members. If there is any deviation in the plan, the effort considered will not holds good. To recover the same, a project manager has to think on the alternative way to achieve. III. If updating the EVA tool with cost and percentage of completed work is not done on regular basis, hides early problem identification. IV. When the percentage of work assessments is not discussed with team members, the EVA report is often slanted, leading to increased subjectivity. The one doing the work has the best assessment of its status. 18
  19. 19. CONCLUSIONS After analyzing through all the scenarios and data, we can come to conclusion: Earned Value is needed because different measures of progress for different type of tasks need to “roll up” progress of many tasks into an overall project status. Need for a uniform unit of measure (dollars or work-hours). 19 ACKNOWLEDGMENT I would like to acknowledge my gratitude for presenting this paper and thank all my colleagues: Laveen, Pavan, Mukund, Arunkumar and other managers for their support.
  20. 20. REFERENCES [1] Booz, Allen and Hamilton Handbook Tutorial “Earned Value Management Tutorial” [2] Quentin W. Fleming & Joel M. Koppleman, Handbook of” Earned Value”. [3]Quentin W. Fleming Handbook of” Cost/Schedule Control Systems Criteria” Robert R. Kemps Handbook of “Project Performance Measurement” [4] Kevin Forsberg, Ph.D., Hal Mooz and Howard Cotterman Handbook of “Visualizing Project Management” [5] Kevin Bury, President & CEO, Quick Arrow Paper on 'Earned Value Management' Websites http://www.pmi.org/ http://www.acq.osd.mil/pm/ 20
  21. 21. Thank You 21

Notas del editor

  • The rest of this paper gives a perspective on monitoring project health by Earned value analysis.  My personal experiences to the best of my knowledge.
  • The rest of this paper gives a perspective on monitoring project health by Earned value analysis.  My personal experiences to the best of my knowledge.
  • 1970s-80s – The DOD continued the use of Earned Value in response to bearing cost and schedule risk in cost-plus contracting.
    1990s – Policy moved Earned Value into all Federal agencies
    OMB Circular A-11
    NASA Policy Directive 9501.3
    DOE Order 413.3
    2003 – OMB began enforcement in all civilian agencies
  • PV - Planned Value or Budgeted Cost of Work Scheduled (BCWS)
    It is the amount of work (person-hours) planned to accomplish at a given point of time (this is from the Work Breakdown Structure in plan) .
    AC - Actual Cost or Actual Cost of Work Performed (ACWP)
    It is the amount of work (person-hours) which have been actually spent at a given point of time.
    EV - Earned Value or Budgeted Cost of Work Performed (BCWP)3
    It is the value (person-hours) in terms of base budget of what you have accomplished at a given point of time (or, % complete X Planned Value).
  • If baseline hour is more i.e. 100hr. considering above example, 70% means 70 hours of credit is taken for completion of Test task. If work is not done properly again project manger may need to take alternate way to compensate these 70 hours.

    Remaining 30 hours are for review, moderation, re work +closer. If we break 100 hours work in smaller tasks, then 16 hour will be the baseline.
    So that each task activity will be traced and efforts can be updated and manger can do better delivery.


  • Total Cost : 20,000
    Cost to be spent in each month : 10,000
    =PV of each month

    Work to be done in ach month : 1/2 of total work to be done

    Work completed till end of 1st month : 1/4 of total work
    AC (50% of total cost) : 10,000

    PV : 10,000
    EV =% *PV : 5000
    CV =EV-AC = -5000
    CPI=EV/AC = 0.5

    SV= EV-PV = -5000
    SPI=EV/PV = 0.5

    Estimate at completion(EAC) =PV of whole project/CPI = 40,000
    Estimate time to complete=Original time/SPI = 4months
  • Following are the list of VM.
    -VM will be able to understand the project status within 3 Seconds and from 3 meters by anybody.
    -To clearly and concisely identify the current status of a process management (VM process).
    -Brings problems to the surface on an everyday basis.
    -Easy maintenance.
    We are following person vice daily updates in VM board with user itself. Lead will collect the updates every week end and communicates the same to team (if it is good or bad).
  • For one TEST SLTP/CTP, total estimation will be pre-defined based on scope. Each person has to fill completion of his task and actual hours taken to complete the task in the tool.
    In Test Development, User will update the status states defined with % in the MR tool. Status will be given for the following states.

    Not started, Gather Data, Analysis, Test Analysis, Test Development, Hand Code Test development, Trace Development, Test Execution, Structural coverage, Test Review/Moderation, Test Re work, Set for Oversight review.

    Once updating the required fields in the tool, Planned EV and actual EV will be calculated and auto populated.
  • Analogy: If your cholesterol is high, it is an early warning that you have to do something. However, what you have to do depends principally on the cholesterol level. If it’s not too high, you can consider changing your lifestyle, doing more exercise, etc. On the other hand, if the cholesterol level is too high, your doctor will probably recommend more drastic measures, like medication, etc

    It’s the same with a project. But, as your doctor, before prescribing a treatment, will probably perform additional exams, so the project manager has to analyze other factors to decide what the most appropriate action is. One of the important factors he has to take into account is schedule compression. If the schedule is already compressed, it could be very dangerous to try to recover the lost time by adding new resources. The best way may be to reschedule the project and to establish a new baseline. On the contrary, if the project schedule is comfortable (planned duration is much longer than the critical path), adding people could solve the problem.
  • . Each day’s project status, how it is preceding and Project analysis will also be done. (i.e., to know if it is over budget, behind schedule).
  • . Each day’s project status, how it is preceding and Project analysis will also be done. (i.e., to know if it is over budget, behind schedule).
  • . Each day’s project status, how it is preceding and Project analysis will also be done. (i.e., to know if it is over budget, behind schedule).
  • 1. A single management control system providing reliable data
    2. The integration of work, schedule, and cost using a Work Breakdown Structure
    3. A database of completed projects useful for comparative analysis
    4. The cumulative Cost Performance Index as an early warning signal
    5. The Schedule Performance Index as an early warning signal
    6. The Cost Performance Index as a predictor for the final cost of the project
    7. An index-based method to forecast the final cost of the project
    8. The To-complete performance index to evaluate the forecasted final cost
    9. The periodic (e.g., weekly or monthly) Cost Performance Index as a benchmark
    10. The management by exception principle can reduce information overload

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