2. 1 Understanding Earned Value in Under an Hour Breakout Session # A11 Name: Wayne Brantley, MS Ed, PMP, ITIL Senior Director of Professional Education Villanova University Online Date: July 30, 2012 Time: 11:15 – 12:30

3. Earned Value and The DaVinci Code 2 2

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7. Agenda 6 6 Establish the link between the requirements and the performance measurement baseline Understand what the Earned Value calculations are measuring Explain Earned Value as an easy to use tool for project performance measurement

8. Why Do We Need Earned Value? 7 7 Approximately 70% of projects are: Over budget Behind schedule 52% of all projects finish at 189% of their initial budget *Standish Group: Chaos Report

9. What is Earned Value Analysis? 8 8 “Earned Value Analysis” is: An industry standard way to: Measure a project’s progress Forecast it’s completion date and final cost Provide schedule and budget variances along the way

10. What is Earned Value Analysis? 9 9 EV compares: The PLANNED amount of work (PV) that has actually been COMPLETED (EV) and how much the work ACTUALLY COST (AC)

11. What EV Tells You 10 Where you are on schedule Where you are on budget Where you are on work accomplished

12. Reasons to Know Earned Value! 11 Legislation: GPRA; 1993 FASA, Title V; 1994 Clinger-Cohen Act; 1996 And Let’s Not Forget OMB! (Circular A-11, Part 7) "Agencies must use a performance based acquisition management system, based on ANSI/EIA Standard 748, to measure achievement of the cost, schedule, and performance goals."

13. 12 Earned Value Management Thresholds Federal Agency EVM Threshold EVMS Threshold DoD, NASA$20-$50 millionEVMS required DoD, NASAGreater than $50 million EVMS implementation & process must be verified GSAGreater than $20 million EVMS required; implementation & process must be verified DoEGreater than $20 million EVMS required EPAGreater than $5 millionEVMS required FAAGreater than $10 million EVMS required

14. Six Essential Elements to Implementing an Earned Value Management System 13 1.Good requirements 2.A detailed WBS 3.Good estimates for durations 4.Good estimates for budgets 5.A good schedule 6.A performance measurement baseline

15. How is learning Earned Value like eating an elephant? 14 One bite at a time

16. What You Need to Know 15  Scope, Requirements, and the WBS  Understand the link between requirements and the WBS  Scheduling  Understand the development of a schedule and time estimates  Budgeting  Understand how cost estimates are developed  Earned Value  Identify how earned value calculations are accomplished  Reporting  Know how earned value (EV) can be used to measure project progress

17. Understand the link between requirements and the WBS 16

18. Understanding the link between requirements and the WBS 17 Where do we start in order to gather requirements? Request for Proposal Statement of Work Contract Project Charter Any others?

19. The Project Charter 18 What should be in a Project Charter? 1.Sponsor authorization and signs-off 2.Project Manager assigned Other considerations? Requirements Business need Project purpose Milestones Stakeholder influences Functional organizations Assumptions and constraints Summary budget

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21. Obtaining Good Requirements 20 Why are good requirements essential? SCOPE

22. Obtaining Good Requirements 21 How do you obtain good requirements? Take time to do it Ask the right people the right questions Draw a picture Build a model Build a little Check and re-check

23. Dilbert Looks at Requirements 22

24. Understanding the link between requirements and the WBS 23  What is a WBS?  “A deliverable-oriented hierarchical decomposition of the work to be executed by the project team to accomplish the project objectives and create the required deliverables.”

25. Understanding the link between requirements and the WBS 24  Why is a WBS so important?  How low do you go?  Project (1.0)  Deliverables (1.1, 1.2, 1.3, …..)  Tasks (1.1.1, 1.1.2, 1.1.3, …….)  Activities (1.1.1.1, 1.1.1.2,…….)  Why an 80 - hour rule?

26. Scheduling - Understand the development of a schedule 25

27. Dilbert Looks at Scheduling 26

28. Scheduling 27 What do we have at this point? Requirements WBS Who would you go to determine what must be done and in what order? What tools are available for scheduling? What do scheduling and a game of chess have in common?

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30. Most Powerful Scheduling Tool 29

31. Scheduling 30 Critical scheduling questions What comes first? What comes second? Any restrictions? Any constraints?

32.  Get good estimates  Who would you ask?  Know how good  +/- some variance  +75/-25%  +25/-10%  +10/-5%  Think of optimistic, most likely, and pessimistic  PERT = O + 4 (ML) + P / 6 Optimistic Most Likely Pessimistic X = PERT Duration Estimating

33. STARTSTART FINISHFINISH 1.1.2 3 days ES 7 EF 9 LF 9 LS 7 1.1.1 6 days ES 1 EF 6 LF 6 LS 1 1.2 2 days ES 3 EF 4 LF 10 LS 9 2.1 2 days ES 1 EF 2 LF 8 LS 7 2.2.1 6 days ES 10 EF 15 LF 15 LS 10 2.2.2 5 days ES 5 EF 9 LF 15 LS 11 3.1 2 days ES 3 EF 4 LF 18 LS 17 3.2 3 days ES 16 EF 18 LF 18 LS 16 Blue denotes the critical path Early Schedule Late Schedule Project duration = 18 days Develop a Schedule

34. 33 The Gantt Chart View Task 1.1.1Days 1 - 6 2.1 Days 1 - 2 1.2 Days 3 - 4 3.1 Days 3 - 4 2.2.2Days 5 - 9 1.1.2Days 7 - 9 2.2.1Days 10 - 15 3.2Days 16 - End Days 123456789101112131415161718

35. Budgeting - Understand how cost estimates are developed 34

36. Dilbert Looks at Budgeting 35

37. Budgeting 36 What do you have at this point? Requirements WBS Schedule Where do your cost estimates come from? Where should they come from? What are the differences?

38. 37 The Gantt Chart View - Cost at $10,000/day per task Task 1.1.1Days 1 - 6 2.1 Days 1 - 2 1.2 Days 3 - 4 3.1 Days 3 - 4 2.2.2Days 5 - 9 1.1.2Days 7 - 9 2.2.1Days 10 - 15 3.2Days 16 - End Days 123456789101112131415161718

39. DaysTaskTotalCumulative Total 11.1.1 + 2.1 =$20,000 21.1.1 + 2.1 =$20,000$40,000 31.1.1 + 2.1 + 3.1 =$30,000$70,000 41.1.1 + 2.1 + 3.1 =$30,000$100,000 51.1.1 + 2.2.2 =$20,000$120,000 61.1.1 + 2.2.2 =$20,000$140,000 72.2.2 + 1.1.2 =$20,000$160,000 82.2.2 + 1.1.2 =$20,000$180,000 92.2.2 + 1.1.2 =$20,000$200,000 102.2.1 =$10,000$210,000 112.2.1 =$10,000$220,000 122.2.1 =$10,000$230,000 132.2.1 =$10,000$240,000 142.2.1 =$10,000$250,000 152.2.1 =$10,000$260,000 163.2 =$10,000$270,000 173.2 =$10,000$280,000 183.2 =$10,000 $290,000 Building the cumulative cost curve $10,000/day each task

40. Days 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 $200k = PV $290k $200k $100k $50k BAC = $290k PV The Cumulative Cost Curve

41. Earned Value – Identify how earned value calculations are accomplished 40

42.  Budget at completion is $290k  Why at day 9 (half of 18 days) are we at $200k and not $145k (half of $290k)?  Why is the cost curve not linear?  How does this correlate to EV? Spending Rates Spending Rates

43. Tying in the Cumulative Cost Curve and EV Planned Value (PV) = Planned costs for the planned work to be done at a particular time (BCWS) Earned Value (EV) = The percentage of the planned work that was accomplished (BCWP) Actual Costs (AC) = Amount spent on the work that was accomplished (ACWP) Budget At Completion (BAC) = Total of all planned costs

44.  BAC = The $290k that is the total costs of all work to be done  PV (BCWS) = The $200k is amount spent through Day 9  EV (BCWP) = The % assessed of the work done  AC (ACWP) = The actual costs spent on the work done Tying in the Cumulative Cost Curve and EV

45.  Variance Analysis  Cost Variance (CV) = Earned Value (EV) – Actual Costs (AC)  Schedule Variance (SV) = Earned Value – Planned Value (PV) Earned Value  Performance Indices  Cost Performance Index (CPI) = Earned Value / Actual Costs  Schedule Performance Index (SPI) = Earned Value / Planned Value

46.  SV = EV – PV or BCWP - BCWS  SPI = EV / PV or BCWP / BCWS  CV = EV – AC or BCWP - ACWP  CPI = EV / AC or BCWP / ACWP  EAC = BAC / CPI Earned Value

47. Reporting – Know how earned value (EV) can be used to measure project progress 46

48. Dilbert Looks at EV Meetings 47

49. Dilbert Looks at EV Meetings 48 Earned Value

50.  Notice all formulas are dependent on EV (BCWP)  Typical variance is planned – actual dollars spent  or in earned value language PV – AC  We are determining the percent of the work that was completed (= EV) based on what we planned to do (= PV)  EV shows you what you did versus what you said you would do Earned Value

51.  The Math!  We know the following: BAC = $290k Day 9 PV – what is it? Planned Value (PV) to spend is $200k  If at day 9 we have accomplished 80% of the scheduled work we can calculate the EV. What is it? Earned Value (EV) is $160k = 80% of PV ($200k)  Accounting tells us we have spent $175,000 – what does this tell us? The Actual Cost (AC) is $175k Earned Value

52.  You can now identify and calculate the following PV (BCWS), EV (BCWP), AC (ACWP) CV CPI SV SPI EAC Earned Value

53. Identify and calculate the following  PV, EV, AC =  PV = $200k, EV = $160k, and AC = $175k  CV = EV - AC 160k-175k = -$15k (Over Budget) Rule of thumb = negative is BAD!  CPI = EV / AC 160k/175k = $.91 or 91% Earned Value – Answers

54.  How are we doing?  It depends –  What was an acceptable variance? Earned Value – Answers

55. Identify and calculate the following  SV = EV - PV 160k - 200k = -$40k (Behind Schedule)  SPI = EV / PV 160k / 200k = $.80 or 80%  How are we doing?  How about as compared to CPI? Earned Value – Answers

56. PV = $200k, EV = $160k, AC = $175k, BAC = $290k EAC = BAC / CPI = 290k/.91 = $318k Earned Value – Answers

57. Days 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 $200k = PV $290k $200k $100k $50k BAC = $290k PV Forecasting EAC = $318k ETC VAC

58. EAC = BAC / CPI = $290k /.91 = $318k ETC = EAC – EV = $318k - $160k = $158K VAC = BAC – EAC = $290k - $318k = -$28k TCPI = (BAC – EV) / (BAC – AC) = $290k - $160k / $290k - $175k $130k / $115k = 1.13 Forecasting

59. Requirements WBS Schedule Time Estimates Forward and Backward Passes Budget Cumulative Cost Curve Earned Value

60. Contact Information Wayne Brantley, PMP, MS Ed 800-874-7877 Ext. 509 Wayne.Brantley@VillanovaU.com For information on Villanova University’s online offerings go to: www.VillanovaU.com or call 800 - 571 - 4953 Questions !

61. Thank You!