EVMS
Basics of Earned Value
Management
Part I
Eleanor Haupt
Earned Value Associates LLC
ehaupt@earnedvalue.biz
937-572-2586
1

EVMS
What is EVM?
EVM is the primary project
management tool...
that integrates the
technical, schedule, and cost
parameters of the contract.
All work is planned, scheduled, and budgeted in timephased ''planned value'' increments. As work is
performed, it is measured and controlled against the
baseline.
2

EVM Defined
EVMS
• EVM is:
– performance measurement
• how am I doing against my baseline plan?
– performance management
• what do I need to do to bring the project in on cost
and schedule?
3

EVMS
Where can EVM be Applied?
• EVM suitable for projects that have:
– Clear definition of work scope
– Project schedule range from a few months to many years
– Small to very large cost
• EVM not suitable for:
– Projects without a clear work definition or deliverable
products
• Example: research projects
4

EVMS
EVM Guidelines
• EVM has a recognized set of guidelines
– A company’s business planning system should meet these
guidelines = Earned Value Management System
• Most are existing project management practices
• Relatively few practices unique to EVMS
– Guidelines do not specify a particular process or business
system, but only set an expectation
• Some countries have national standards
– U.S., Australia, Canada, U.K.
– Guidelines may be mandatory in some cases
• Can be tailored or scaled for smaller projects
5

EVMS
•
Primary Steps in Performance
Management
Plan all project work
– Create an integrated performance management baseline
•
Objectively assess work progress at the level of performance
– Compare to the plan and to actual costs
•
•
•
•
•
Analyze significant deviations from the plan
Forecast impacts to cost and schedule
Take corrective actions as needed
Summarize data for progressively higher levels of
management
Maintain performance management baseline
– Update for contract changes (work scope)
– Maintain realistic baseline for remaining work
6

Why use EVM?
EVMS
Life without EVM
•
•
•
•
Given:
– total budget of $100,000
– 12 month effort
– produce 20 units
Status:
– spent to date: $64,000
– time elapsed: 6 months
– units produced: 8 complete, 2 partial
How are you doing, and how do you know how you are
doing?
How far along are you?
– 64% spent (cost)
– 50% spent (time)
7

EVM is Project Management with the Lights On

Why use EVM?
EVMS
Life with EVM
•
•
•
Given:
– total budget of $100,000
– 12 month effort
– produce 20 units
Status:
– spent to date: $64,000
– time elapsed: 6 months
– units produced: 8 complete, 2 partial
Real Status:
– You should have completed 50% of the work
• You’ve completed 42% of the work
– A major vendor was late in delivering certain parts
• You’ve spent 64% of your budget
– You’ve isolated the main cost variance to aluminum prices
• You’re forecasting additional cost overruns for the remaining work
– You now know what the drivers are
– You can now take the appropriate actions
9

EVMS
Earned Value Gives Insight
TIME NOW
Planned Expenditures
Expenditures
$
“Earned Value”
TIME
10

EVMS
Benefits of EVM
• Requires development of integrated baseline
– Results in better project definition and planning
• Early identification of trends and problems
• Accurate picture of project status
– Cost, schedule, and technical
– Segregation of schedule and cost variances
• Projection of final costs
• Project control by the team
– Enables project manager to make informed decisions based on facts
• Results in successful projects
– On time, on cost
11

EVMS
How does EVM differ from Project
Management?
Project
Management
EVM
WBS
Team organization
Integrated Schedule
Budget
Integrated Baseline
Earned Value measurement
Work authorization
Variance analysis
Trend projection
12

EVMS
Basic EVMS Terms
13

EVMS
EVMS measures progress
Progress = Movement Forward
to measure progress,
there must be a standard
against which the forward
movement may be compared
EVMS establishes a baseline
to measure progress
14

EVMS
Five Basic Elements
BCWS
Budgeted Cost for Work Scheduled
“Planned Value”
BCWP
Budgeted Cost for Work Performed
“Earned Value”
ACWP
Actual Cost of Work Performed
“Actual Cost”
BAC
Budget at Completion
EAC
Estimate at Completion
15

EVMS
It’s my pleasure
to award you
this contract for
a new railroad
track
Total Performance Budget
hmm...5 miles of
track, 5 months to do
it all....$5000
budget....This
is going to be tough!
What is the total job
What is the total job
supposed to cost?
supposed to cost?
What is the value of the
What is the value of the
contract at cost?
contract at cost?
= Performance Budget
= Performance Budget
16

EVMS
Planning is a 3 Step Process
Planning is a 3 Step Process
1. DEFINE THE WORK AND ORGANIZE TEAMS
CONTRACT BUDGET BASE
BA
SE
LI
NE
2. SCHEDULE THE WORK
PM
$
3. ALLOCATE BUDGETS
100
40
60
15
25
TIME
30
30
17

EVMS
•
•
•
•
The Integrated Baseline
Preliminary planning during proposal phase
Finalized as soon as possible after award
– PM approves the baseline
Integrated baseline
– Work scope
– Integrated master schedule
– Time phased budget
Tenets for managing the baseline
– Control
– Maintain realism
– Reviews
18

Budgeted Cost for Work Scheduled (BCWS)
I’ve broken my work plan into 5 sections of track.
I plan to lay 1 section of track each month.
I estimated the cost of each section at $1,000.
I’m establishing the BCWS for each section at $1,000.
BCWS = performance budget
Month 1
BCWS = $1,000
Month 2
BCWS = $1,000
Month 3
BCWS = $1,000
Month 4
BCWS = $1,000
Month 5
BCWS = $1,000
each dollar of BCWS represents a specific dollar of work scope
each dollar of BCWS represents a specific dollar of work scope

EVMS
Budgeted Cost for Work Scheduled
(BCWS)
Month 1
BCWS
cumulative
Month 3
Month 4
Month 5
$ 1,000
BCWS
Month 2
$ 1,000
$ 1,000
$ 1,000
$ 1,000
$ 1,000
$ 2,000
$ 3,000
4
$ 4,000
$ 5,000
20

EVMS
Budget at Completion (BAC)
$
m
su
S
CW
ll B
fa
o
BAC
$5,000
$5,000
The baseline is
composed
of many lower level
elements. These
sum up to the total
value of the contract.
$
$
$
=
$
$
$
$
time
•• when all work has been phased, cumulative BCWS = BAC
when all work has been phased, cumulative BCWS = BAC
e.g., $5,000 = $5,000
e.g., $5,000 = $5,000
21

EVMS
Budgeted Cost for Work Performed
(BCWP)
the EARNED
VALUE concept
We’re at the end of the second month, but
only 1 section of track is complete.
Earned value of work completed = $1,000
••Assess progress on recurring basis
Assess progress on recurring basis
••There are different methods of
There are different methods of
earning value (described in 300B)
earning value (described in 300B)
••You earn value the same way as it
You earn value the same way as it
was budgeted in baseline
was budgeted in baseline
22

EVMS
•
Measuring Performance
BCWP
General Principles
– Establish valid metrics as you establish the time phased baseline
• Metrics should be objective and quantifiable
• Relate true work status
– Should be a quantitative and discrete way to measure the work
– May tie in with success criteria or technical measure
• e.g., successful completion of a specific test
•
Must be consistent in following established metric as work
progresses
23

Budgeted Cost for Work Performed
(BCWP)
EVMS
Month 1
Month 2
Month 3
Month 4
Month 5
cumulative data
BCWS
Planned
Value
BCWP
Earned Value
$
1,000
$
2,000
$
$
3,000
$
4,000
$
5,000
1,000
time now
24

BUDGET BASED
EVMS
Schedule Variance
BC WS
BC WP
of the work I scheduled to have done,
how much did I budget for it to cost?
of the work I actually performed,
how much did I 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 = $1,000 --$2,000
SV = BCWP BCWS = $1,000 $2,000
SV= -$1,000 (negative = behind schedule)
SV= -$1,000 (negative = behind schedule)
25

EVMS
Schedule Variance
Month 1
Month 2
Month 3
Month 4
Month 5
cumulative data
BCWS
Planned
Value
BCWP
Earned Value
SV (cum)
Schedule
Variance
$
1,000
$
2,000
0
$
1,000
-$1,000
$
3,000
$
4,000
$
5,000
-$1,000
26

EVMS
Actual Cost of Work Performed
(ACWP)
Labor came to $1,300,
and materials cost
$1,100. We’ve spent
$2,400 to date.
Value of ACWP comes from
Value of ACWP comes from
actual accounting records
actual accounting records
27

EVMS
BC WP
AC WP
PERFORMANCE BASED
Cost Variance
of the work I actually performed,
how much did I budget for it to cost?
of the work I actually performed,
how much did it actually cost?
COST VARIANCE is the difference between budgeted cost
COST VARIANCE is the difference between budgeted cost
and actual cost
and actual cost
formula:
formula:
CV $ = BCWP --ACWP
CV $ = BCWP ACWP
example:
example:
CV = BCWP --ACWP = $1,000 --$2,400
CV = BCWP ACWP = $1,000 $2,400
CV= -$1,400 (negative = cost overrun)
CV= -$1,400 (negative = cost overrun)
28

EVMS
Cost Variance
Month 1 Month 2 Month 3 Month 4 Month 5
cumulative data
BCWS
Planned
Value
$ 1,000
$ 2,000
BCWP
Earned
Value
0
$ 1,000
SV (cum)
ACWP
CV (cum)
Schedule
Variance
Actual Costs
Cost
Variance
-$1,000
$
800
-$800
$ 3,000
$ 4,000
$ 5,000
-$1,000
$ 2,400
-$1,400
29

EVMS
BCWP Allows Isolation of
Schedule and Cost Variances
TIME NOW
5,000
$
CV
SV
BCWP
TIME
schedule variance = BCWP - BCWS = negative number
cost variance
= BCWP - ACWP = negative number
5 months
behind schedule,
behind schedule,
over cost
over cost
30

EVMS
Estimate at Completion
(EAC)
Just a few little glitches….
We should be able to do
the complete job….ack…
let’s see, for about $7,500
31

EVMS
Variance at Completion (VAC)
B AC
what the total job was budgeted for
E AC
what the total job is projected to cost
VARIANCE AT COMPLETION is the difference between what the total
VARIANCE AT COMPLETION is the difference between what the total
job is supposed to cost and what the total job is now expected to cost.
job is supposed to cost and what the total job is now expected to cost.
FORMULA:
FORMULA:
VAC = BAC --EAC
VAC = BAC EAC
Example:
Example:
VAC = $5,000 --$7,500
VAC = $5,000 $7,500
VAC = --$2,500 (negative = overrun)
VAC = $2,500 (negative = overrun)
32

EVMS
Variance at Completion (VAC)
EAC
VAC
5,000
BAC
$
TIME
5 months
33

EVMS
EVM Variances
Positive
Negative
SV
Ahead of Schedule
Behind Schedule
CV
Under running costs
Over running costs
VAC
Projected underrun
Projected overrun
34

EVMS
Planning
35

EVMS
The Organizing Process
• Process
– Step 1: define the authorized work using a work breakdown
structure (WBS)
• break the work down into manageable pieces
• provides a framework for
– program and technical planning
– cost estimating and resource allocation
– performance measurements and status reporting
– Step 2: define the organizational structure
• Organizational Breakdown Structure (OBS)
– Step 3: assign a single element of work to a single manager
• control account manager (CAM)
36

EVMS
Assigning Work
WBS
Assignment of a
single work element
to a single team allows
you to roll up the costs
up either direction
ORGANIZATION
control
account
control
account
control
account
control
account
control
account
control
account
control
account
37

EVMS
The Control Account
• Fundamental building block for EVM
• Established at lowest WBS level
• Properties
– Assigned to Control Account Manager
– “Mini Project”
work
schedule
budget
38

What is in a Control Account?
EVMS
SCHEDULE
SOW
BUDGET
Labor
1,000 hrs
Labor $
75,000
Material $ 25,000
TIER 1
1.3.4.1
Build ejection seat
TIER 2
CONTROL ACCOUNT PLAN
CAM name: ______
Work
Work
WBS: _______ Total Budget: _________
$
$
$
$
$
$
$
$
$
Work
39

EVMS
•
Work Package
Development of Control Account Plans
– MAY break down the control account budget into
smaller work packages
•
Work Packages
–
–
–
–
–
–
subset of control account
Work Pkg #1
reasonably short in duration
Work Pkg #2
single element of cost (e.g., labor)
Work Pkg #3
single technique for earning value
consistent with detail schedules
has same characteristics as control account
•
•
•
•
CONTROL ACCOUNT PLAN
$
$
$
$
$
$
$
$
$
scope of work
milestone completion criteria
single performing organization
start and end dates
– A group of activities on the schedule
40

EVMS
A Fun Example…
41

EVMS
•
•
Contract Award
You are the program manager, I. M. Taz
You just won a contract to eliminate varmints within the state of Arizona
– birds (tweetie and road runner types)
– small animals
•
You have an organization of highly trained specialists
–
–
–
–
•
L. M. Fudd
Sil Vester the cat
Wile E. Coyote
Daffie Duck (your deputy and the CAM for management)
You have allocated the following budgets from your $50,000 contract
award
–
–
–
–
–
wascally rabbits ($5,000)
squirrels ($5,000)
tweetie birds ($20,000)
road runners ($10,000)
program management ($10,000)
42

Organize the work
EVMS
•
Build a simple work breakdown structure
Varmint Control
1.1
Small
Animals
1.3
Program Mgt
1.2
Birds
1.1.1
wascally
wabbits
1.2.1
tweetie
1.1.1
1.1.2
wascally
squirrels
wabbits
1.2.2
road runner
43

Organize the workers
EVMS
•
Build a simple organization breakdown structure
I.M. Taz
Program Manager
L. M. Fudd,
small animals
Sil Vester
tweetie birds
Wile E. Coyote
road runners
Daffie Duck
Program Mgt
44

EVMS
Build a RAM and allocate work
Sil
Vester
L. M.
Fudd
Wile E.
Coyote
Daffie
Duck
1.1.1
wascally
wabbits
1.1.2
squirrels
1.2.1
tweetie birds
1.2.2
road runner
RAM is a listing of the control
RAM is a listing of the control
accounts, the responsible
accounts, the responsible
manager (control account
manager (control account
managers), and assigned budget
managers), and assigned budget
1.3
program
management
45

EVMS
Build a RAM and allocate work
Sil
Vester
1.1.1
wascally
wabbits
1.1.2
squirrels
1.2.1
tweetie birds
1.2.2
road runner
1.3
program
management
L. M.
Fudd
Wile E.
Coyote
Daffie
Duck
$5,000
$5,000
$20,000
control
account
$10,000
$10,000
46

EV Techniques
CONTROL ACCT. TITLE: Roadrunner
0/100, 50/50, Units Complete,
% Complete, Milestones
CONTROL ACCOUNT MANAGER: Wile E. Coyote
BUDGET: $10,000
TIER I MILESTONE
WP# WORK DESCRIPTION
AWARD
EV METHOD
BCWS
1
Anvil
END
MONTH 1 MONTH 2 MONTH 3 MONTH 4 MONTH 5 MONTH 6 TOTAL BAC
1,500
1,500
0/100
v
BCWP
BCWS
2
Paint Fake Tunnel
BCWP
BCWS
3
Build Road
units complete
BCWP
BCWS
4
Build Anvil Support
Mechanism
500
50/50
500
v
600
v
1,000
v
milestone
v
600
v
600
600
5
600
3,000
v
v
v
1,000
1,000
v
3,000
v
BCWP
BCWS
Install Anvil Support
Mechanism
1,000
500
500
v
500
1,500
v
% complete
BCWP
TOTAL CONTROL ACCOUNT PLAN
BCWS
BCWP
Schedule Variance
month
cumulative
Actual Costs
Cost Variance
month
cumulative
600
1,600
2,100
2,600
2,600
500
10,000

EVMS
Summary
• Should now understand
– Basic EVM terms
– Basic concepts of an integrated baseline
• Work, phased over time, with time phased budget
– Basics of planning
– Control account concepts and example
Please stay tuned for Part 2!!
48