Earned Value Management made Simple Keith Lee, SAP Systems Integration America Jay Wilson, SAP Labs Session 3802 Monday May 19, :20 AM to 12:50 PM Content Area: Project Systems

Objectives Understand Basics of Earned Value Management Systems (EVMS) Understand SAP/R3 approach to EVMS Learn Simple steps to configure EVMS in SAP/R3 Become Aware of Options to approaching EVMS in SAP/R3

Earned Value Management is the analysis of work completed compared compared to the amount of work planned and the cost of the work. Simple example: The task is creating a 10 foot Wall and takes $1000 (material and labor) 1. Prepare Ground – 10% 2. Pour Concrete Base – 20% 3. Every foot of wall – 7% In this example, when completed with the first 2 steps and 3 feet of wall the amount of work complete is 30% + 21% = $510. What is Earned Value?

There are lots of ways to measure Earned Value. The wall example uses a combination of milestones (first 2 steps) and counts (feet of wall) The simplest approach is to use “estimate”. I am 70% complete because I say so.

Why use EVMS? Given: –total budget of $1000 –5 months effort –produce 10’ brick wall Status: –spent to date: $700 –time elapsed: 4 months –Wall in process How are you doing, and how do you know how you are doing? How far along are you? (75%, 50%, >40%) Life without EVMS

Why use EVMS? Early and accurate identification of trends and problems Accurate picture of contract status –cost, schedule, and technical Basis for course correction Supports mutual goals of contractor and customer –bring project in on schedule and cost

Five Basic Elements

A Spectrum of Implementation Where When Core EV Principles ANSI/EIA (32 criteria) Tailored Applications Small Companies Larger Companies Major Defense Contractors as desired Government Organic Reports Foreign Countries streamlined, no paper? corporate policy, “enterprise wide” DoD Non-Major Contracts (>12 months) <$6M*>$6M DoD Major Contracts >$70M RDT&E >$300M Prod tailored to needs C/SSR CPR FFP contracts? Commercial or Defense

SAP Approach to EVMS Integrated with all financials and schedule.

SAP Approach to EVMS Calculate both BCWS and BCWP based on a “Baseline” cost Plan using an Earned Value Method.

SAP Approach to EVMS Calculate ALL elements of cost for an object using the same percentage

CONFIGURATION Statistical Key Figures (SKF’s) –Use SKF’s to store the planned and actual percent complete Versions – Baseline, Progress, EAC, … EV Methods –Methods can be tailored and named to suite the client EV Cost Elements –Create cost elements that summarize the planned cost elements into groups (ex: Engineering labor, Manufacturing Labor, Materials, G&A, …) Value Categories –Make Value categories consistent with the EV cost elements for ease of reporting

3 different SKF’s are required Aggrigated – Summary of all percents up the structure based on weighting Non-Aggrigated – the individual object’s percent complete Results Analysis – Percent complete used in results analysis (revenue recognition based on EV) SKF Configuration

Version Configuration

EV Methods Configuration

EV Cost Elements

Value Categories Cost Element group should contain All normal cost elements AND The earned value cost element This is the same cost element group as associated with the EV cost element

A Simple Example With these few basic configuration settings it is now possible to do Earned Value. Now let’s see a simple example –A project with 1 network activity that is 40% complete –Run EV using CNE1 (Calculate Progress) –See the results

Project Example

Calculate Earned Value

Report

40% of BCWS Report What is the good news? What is the bad news?

Questions

Thank you for attending! Please remember to complete and return your evaluation form following this session. Session Code: 3802 Keith Lee – Jay Wilson –