Earned Value Project
Management
Colonel John Keesee
1
Objective
„
To introduce and discuss the fundamentals
of earned value project management
‹ Work Breakdown Structures
‹ Program plans and schedules
‹ Earned value management systems
‹ Cost and schedule variances
‹ Estimates at completion
2
Scenario
„
You have been tasked to be the project
manager for an important project
‹ You have been directed to use an earned
value management system
‹ Time to market is critical for this
development
3
Work Breakdown Structure
Identifies 100 % of the work to be
accomplished
„ WBS dictionary breaks the scope into
measurable tasks
‹ Each with an estimated value
‹ Responsibility for each task assigned to
individuals or work teams
„
4
Work Breakdown Structure
Space System
Space Vehicle
Launch Vehicle
Payload
Spacecraft
Ground Command,
Control, Communications
and Mission Equipment
Reentry vehicle
Integration, Assembly,
Test and Checkout
5
Project Master Schedule
Detailed plan and schedule
„ Identified dependencies between tasks
‹ 18 months
„ Estimated resources for each task
‹ 10 units at $150K each
„
6
Project Master Schedule
Task/Event
Award
Design
Buy specifications
Vendor quotes
Purchase orders
Receive materials
Factory plans
Tool design
Tool fabrication
Parts fabrication
Assembly: sub and final
Test & checkout
Jan - Jun
^
^
^
^
Jul - Dec
Jan - Jun
^
^
^
^
^
^
^
^
7
Project Performance Display
1600000
1400000
1200000
1000000
BCWS
BCWP
ACWP
800000
600000
400000
200000
Ju
ly
il
Ap
r
nu
ar
y
Ja
er
ob
O
ct
Ju
ly
il
Ap
r
Ja
n
0
8
Plan Review Before Go-Ahead
„
CEO:
‹ “Time to market is critical. You have 12
months.”
‹ “This looks gold-plated at $1.5M. You
have $1.0M.”
‹ “Go ahead, but come back to me with
your progress in three months.”
9
The Three Month Review
Three units scheduled for completion
„ Two units actually completed
„ $300,000 budgeted at this point
„ $300,000 actually spent
„ Optimist PM: “A little behind schedule but
right on the cost plan.”
„
10
Earned Value System
Requires a detailed, bottoms-up
performance plan
„ Performance measured against the plan
„ Provides forecast of final expected results
based on data
„
11
Earned Value Measurements
1.
2.
3.
4.
5.
6.
7.
Work scheduled
Budgeted cost of work scheduled (BCWS)
Work performed
Budgeted cost of work performed (BCWP)
Actual cost of work performed (ACWP)
Schedule variance (SV) = BCWP - BCWS
Cost Variance (CV) = BCWP - ACWP
12
New Project Performance
Display
1200000
1000000
800000
BCWS
BCWP
ACWP
600000
400000
200000
De
ce
m
be
r
ct
ob
er
O
Ju
ly
Ap
ril
Ja
nu
ar
y
0
13
Estimate at Completion
Cost efficiency CPI = BCWP/ACWP
„ Schedule efficiency SPI = BCWP/BCWS
„ Estimate at completion
BAC
EAC1 =
CPI
„
BAC − BCWP
EAC 2 = ACWP +
CPI * SPI
14
Management Reserve
Budgeted to provide the ability to adjust for
uncertainty
„ Always accounted at the total project level
„ Normally retained and controlled at the total
project level
„ Must not be eliminated by negotiations
„
15
Summary
Earned value management system provides
a key link between the cost, schedule, and
technical aspects of a project
„ Provides an early and reliable prediction of
future performance
„
16
References
Fleming, Quentin W. and Joel M.
Koppelman, Earned Value Project
Management, PMI, Newtown Square, PA
2000
„ Lewis, James P., Fundamentals of Project
Management, AMACOM, NY 2002
„
17