Predicting Project Completion Date Using Earned Value Management

Predicting Project Completion Date Predicting Project Completion Date Using Earned Value Management Using Earned Value
Management
NASA PM Challenge 2006 March 21-22 Galveston
Ray W. Stratton, PMP, EVP
714-318-2231 raystratton@ mgmt-technologies.com
MMVI, Management Technologies
Presentation Outline
Refresher on EVM concepts The Problem with SPI The Earned Schedule Concept Comprehensive Example Research Results Earned Schedule Maturity Conclusions References and Contact Information
What Could be New About EVM?

In the 1900s..... EVM used in DoD, NASA, DoE, DoT, elsewhere Provided Cost and Schedule Variances (CV, SV) Computed Cost and Schedule Performance Indices (CPI, SPI$) Produced Estimated Cost at Complete (EAC) 21st Century Improvements to EVM Provides SV in time units Computes SPIt based on time units Produces Estimated Date of Completion
3
Refresher on EVM concepts

The Problem with SPI The Earned Schedule Concept Comprehensive Example Research Results Earned Schedule Maturity Conclusions References and Contact Information
Refresher on Earned Value Concepts

How earned value management is different from cost reports and schedule updates.
Basic EVM Concepts

Relate the money spent to the work done Combines schedule status with cost information Requires common units of measure Fundamental concepts The work has value equal to its budget The project equity is the sum of the value of all work done to-date Building the equity (Earned Value) should equal the budget planned for the work done (spend
appropriately)
The equity should accumulate at the rate planned
(stay on schedule)
5
The Three Key Elements of EVM

Only three terms (two we already have) Planned Value (PV) Actual Cost (AC)
Earned Value (EV)
The Planned Value (PV)

The schedule (plan) to build project equity from zero to the total project value The expected gain in project equity as each piece of work is completed Previously budgeted cost of work scheduled (BCWS)
Value ($ or hours)
Planned Value
Performance Measurement Baseline (PMB)
Time
7
The Earned Value (EV)

The project equity gained, regardless of the cost to accomplish the work. The gain in project equity as a result of completed work Previously budgeted cost of work performed (BCWP)
Now
Value ($ or hours)
Planned Value Earned Value
Time
8
The Actual Cost (AC)

The total cost of the completed work Previously actual cost of work performed (ACWP)
Now
Value ($ or hours)
Planned Value
Actual Costs Earned Value
Time
9
Analyzing Variances From the Plan

Now
Value ($ or hours) Planned Value

Schedule Variance
Time
{}
Cost Variance
Actual Costs
Earned Value
10
Cost Performance Index (CPI)

Did the cost of adding equity equal the equity added? CPI = progress/cost CPI = EV/AC Greater than 1.0 is good, less than 1.0 is bad Example
CPI = EV WORK _ DONE 1000 hrs = = = 0.66 AC COST _ OF _ WORK _ DONE 1500 hrs
(this is not good)

11
Schedule Performance Index (SPI$)

Did a months of schedule produce a month of progress? SPI$ = progress/plan SPI$ = EV/PV Greater than 1.0 is good, less than 1.0 is bad Example
SPI $ = EV WORK _ DONE 1200 hrs = = = 1 .2 PV WORK _ PLANNED 1000 hrs
(this is good)
12
The Problem with SPI

Weve been using SPI for 30+ Years, What could be wrong with it?
13
Two Serious Problems with SPI$

SPI$ fails in the end SPI$ = EV/PV At project completion EV = PV SPI$ = EV/PV = PV/PV = 1.0 at project end Implications:
At project start SPI is reliable At some point SPI accuracy diminishes Toward the project end it is useless
SPI$ does not show weeks or months of schedule variance What most people want to know and understand
14
Graphing the Problem with SPI$

1.2 1.1
TIME Project schedule improvement or false indications due to SPI?
3 months
SPI$ 1.0
SPI$ .9 .8
Original Project Finish Actual Project Finish
15
Using CPI and SPI$ in Estimating the Final Cost

Simple extrapolation Final cost = cost of work done + (work left/past performance) Assumes future performance is same as past (generally true) EAC (CPI) = AC+(BAC-EV)/CPI = BAC/CPI EAC (CPI, SPI$) = AC+(BAC-EV)/(CPI*SPI$)
Toward the end of the project how accurate can this term be?
16
The Earned Schedule Concept

Creating a Schedule Performance Index that is accurate to the end of the project.
17
At What Point Did I Expect to Attain my Current Earned Value?

AC is not shown in this example since this is about Earned Schedule!
Budget or staff hours
When work was to be done (PV)! Work done (EV) 6 months 10 months Actual Time (AT) i.e., NOW Earned Schedule (ES) i.e., How much have you accomplished and when were supposed to?
Time
18
Some New Terms

AT = Actual Time (now, or data date) ES = Earned Schedule (Point in time when current progress was planned to occur) PD = Planned Duration (planned project duration) ED = Estimated Duration (estimated project duration) PCD = Planned Completion Date (Planned project end date) ECD = Estimated Completion Date (Estimated project end date)
19
Some New Formulas

SVt = ES - AT (Schedule Variance in time units, note subscript versus SV$) SVt = 6 months 10 months = -4 months SPIt = ES/AT (SPI in time units) SPIt = 6/10 = 0.6
20
The Traditional and the New

Planned Budget (BAC)
BAC
Planned work (PV) Funds spent (AC)
Budget Spent Cost Variance (CV) Work Done
Schedule Variance (SV$)
Work done (EV)
Planned Duration (PD) Actual Time (AT) Earned Schedule (ES)

Schedule Variance (SVt)
Planned Completion Date
21
Traditional and New EVM Analysis Tools

Traditional
EV SPI $ = PV EV CPI = AC EAC = BAC CPI
New
ES SPI t = AT
ED = PD SPI t
ECD = start _ date + ED

SVt = ES AT
SV$ = EV PV
CV = EV AC
22
Comprehensive Example
Putting all the pieces together.
23
Comprehensive Example
Planned Budget (BAC)
12 BAC
Planned work (PV) Funds spent (AC)

7 PV 5 AC 4 EV
Budget Spent Cost Variance (CV) Work Done
Work done (EV)

6 ES 10 AT 18 PD
Planned Duration (PD) Actual Time (AT) Earned Schedule (ES)

Schedule Variance (SVt)

24
Comparing EV and ES Schedule Analysis

Traditional
EV $4 SPI $ = = = 0.57 PV $7
SV$ = EV PV = $4 $7 = $3
New
ES 6months SPI t = = = 0.6 AT 10months
SVt = ES AT = 6months 10months SVt = 4months
ED = ?
PD 18months ED = = = 30months SPI t 0.6
25
New Analysis Products

Schedule performance index {SPI(t) or SPIt} Schedule Variance {SV(t) or SVt} Estimated Duration (ED) Estimated Completion Date (ECD)
26
Research Results
Does Earned Schedule really work?
27
Empirical Evidence (Henderson)

Findings derived from a small set of real life project data
Commercial IT Infrastructure Expansion Project Phase 1
Earned Schedule, Independent Estimate At Completion (time) - IEAC(t)
as at Project Completion: Week Starting 15th July xx
Planned Schedule Earned Schedule cum IEAC(t) PD/SPI(t)
40 35 30 Duration (Weeks) 25 20 15 10 5 0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34
Actual Time (Weeks)
Henderson, K., 2003, Earned schedule: a breakthrough extension to earned value theory? A retrospective MMVI, Management Technologiesanalysis of real project data, The Measurable News, Summer 2003, 21, 13-17
28
Academic Research
(Vanhoucke) Created 3,100 project activity networks Constructed a schedule for each network Simulated (executed) activity duration and cost in a controlled way (9 execution scenarios, each schedule subjected to each scenario 100 times) Monitored and forecasted at each reporting period Analysed the data (3.100 x 9 x 100 = 2.790.000 project data sets)
Vanhoucke M., Vandevoorde St., A Simulation and Evaluation of Earned Value Metrics to Forecast the Project Duration, Ghent University, Working Paper 2005/312, June 2005
29
The Nine Simulation Scenarios

Critical Path Activities Real Duration < Planned Duration Real Duration = Planned Duration Real Duration > Planned Duration Non-Critical Path Activities Real Duration < Planned Duration Real Duration = Planned Duration Real Duration > Planned Duration
30
Research Process
31
Academic Research Results
The results reveal that the Earned Schedule method outperforms, on the average, all other forecasting methods.
Vanhoucke M., Vandevoorde St., A Simulation and Evaluation of Earned Value Metrics to Forecast the Project Duration, Ghent University, Working Paper 2005/312, June 2005
32
Earned Schedule Maturity

Current state of Earned Schedule development and deployment
33
Earned Schedule Maturity

First paper: March 2003, PMI-CPM Measurable News Over twenty presentations and publications A growing trend and management expectation Yet to appear in commercial EVM software products Early Adopters USAF Lockheed Martin Boeing Belgium Management Technologies (education, processes)
34
USAF Planning
Air Force understands the potential of Earned Schedule Demonstrate Earned Schedule on a sample set of programs Build a body of evidence on a larger set of programs Validate the Earned Schedule as a value added program management tool Integrate Earned Schedule as a tool in Air Force Acquisition
35
Lockheed Martin, Program #1

PD IEAC(t) Linear (IEAC(t))
PD
IEAC(t)
Linear (IEAC(t))
IEAC(t) = (PD SPIt)

55
55
50
50
PD = 48
45
45 1 2 3 4 5 6 7 8
PD = 54
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
2 3
5 6
7 8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
36
Lockheed Martin, Program #2

IEAC(t) 50
IEAC(t) = (PD SPIt)
Linear (IEAC(t))
45
40
PD = 39 AD = 42
35 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41
37
The Good News!

Previously EVM was great at cost management EVM was ok at schedule management, sometimes Now EVM can address both cost and schedule well EVM can estimate
Cost at completion Completion date!
SPIt can record project outcome in lessons learned
38
Credit to Discoverers, Advocates, & Researchers

Henderson Kym, Earned Schedule: A Breakthrough Extension to Earned Value Theory? A Retrospective Analysis of Real Project Data,The Measurable News, Summer 2003 Robert Handshuh, New Concept in Earned Value - Earned Schedule, PMI Southeast Regional Conference USA, June 2005 Walt Lipke & Kym Henderson, Earned Schedule Status Update and Early Adaptor Applications Feedback, 17th IPMC November 2005 Vandevoorde St., Vanhoucke M., A Comparison of different project duration forecasting methods using earned value metrics, Ghent University, working paper 2005/312, June 2005
Approved for Publishing in International Journal of Project Management State of the Art Report on Forecasting Duration Methods
39
Conclusions
So What?
40
What We Know About Earned Schedule

Faithful to the projects end Provides a reliable means to calculate an estimated completion date Provides a useful schedule performance metric for project history and lessons learned May provide a better estimated completion date than critical path methods!
41
Why use ES?

More intuitive schedule information Schedule variance in time units (intuitive to most people) Cost variance in resource ($$) units SPIt retains utility to project end SPIt does not automatically creep toward 1.0 near project end SPIt captures the final project schedule performance data Can finally estimate Project Completion Date
42
Reference and Contact Information

Tell me more!
43
Seminal Documents
Lipke, Walter, Schedule is Different, The Measurable News, March and Summer 2003 Henderson, Kym, Further Development in Earned Schedule, The Measurable News, Spring 2003 Henderson, Kym, Earned Schedule: A Breakthrough Extension to Earned Value Theory? A Retrospective Analysis of Real Project Data, The Measurable News, Summer 2003
The Measurable news is a quarterly publication of the Project Management Institutes College of Performance Management www.pmi-cpm.org
44
Other References
Earned Schedule Status Update and Early Adopter Applications Feedback Presentation facilitated by Walt Lipke and Kym Henderson, 17th IPMC November 2005 Earned Schedule Leads to Improved Forecasting: Presentation by Walt Lipke, intended for 17th IPMC November 2005 Earned Schedule in Action:Paper by Kym Henderson, published PMI CPM Journal, The Measurable News "Spring" 2005 Forecasting Project Schedule Completion by Using Earned Value Metrics, Presentation by Ing. Stephan Vandevoorde, Senior Project Manager, Fabricom Airport Systems and Prof. Dr. Mario Vanhoucke, Ghent University, Belgium, Early Warning Signals Conference, V.U.B. Brussels, June 2005 Not Your Father's Earned Value: Earned Schedule overview paper by Ray Stratton, published on Projects@Work (http://www.projectsatwork.com) 24 Feb 2005 Connecting Earned Value to the Schedule:Paper by Walt Lipke, published PMI CPM Journal, The Measurable News, "Winter" 2004
45
One-Stop Shopping
Comprehensive Library of EVM and Earned Schedule Papers Presentations
http://sydney.pmichapters-australia.org.au/ Click Education, then Presentations and Papers for .pdf copies
46
In Closing
If you are not practicing Earned Schedule as part of your Earned Value Management System you are practicing 20th Century
Earned Value Management!
47
Discussion and Questions
Ray W. Stratton, EVP, PMP President, Management Techologies PMI CPM Vice President, Research and Standards 714-318-2231 raystratton@mgmt-technologies.com www.mgmt-technologies.com
48

Predicting Project Completion Date Using Earned Value Management

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Predicting Project Completion Date Using Earned Value Management

Uploaded by

Copyright:

Available Formats

Predicting Project Completion Date Predicting Project Completion Date Using Earned Value Management Using Earned Value

MMVI, Management Technologies

MMVI, Management Technologies

What Could be New About EVM?

Refresher on EVM concepts

Refresher on Earned Value Concepts

MMVI, Management Technologies

Basic EVM Concepts

The Three Key Elements of EVM

Earned Value (EV)

MMVI, Management Technologies

The Planned Value (PV)

Performance Measurement Baseline (PMB)

MMVI, Management Technologies

The Earned Value (EV)

Planned Value Earned Value

The Actual Cost (AC)

Actual Costs Earned Value

Analyzing Variances From the Plan

Value ($ or hours) Planned Value

MMVI, Management Technologies

Cost Performance Index (CPI)

(this is not good)

Schedule Performance Index (SPI$)

The Problem with SPI

MMVI, Management Technologies

Two Serious Problems with SPI$

Graphing the Problem with SPI$

MMVI, Management Technologies

Using CPI and SPI$ in Estimating the Final Cost

MMVI, Management Technologies

The Earned Schedule Concept

MMVI, Management Technologies

At What Point Did I Expect to Attain my Current Earned Value?

Budget or staff hours

MMVI, Management Technologies

Some New Terms

MMVI, Management Technologies

Some New Formulas

MMVI, Management Technologies

The Traditional and the New

Planned work (PV) Funds spent (AC)

Budget Spent Cost Variance (CV) Work Done

Schedule Variance (SV$)

Work done (EV)

Planned Duration (PD) Actual Time (AT) Earned Schedule (ES)

Schedule Variance (SVt)

Planned Completion Date

Traditional and New EVM Analysis Tools

ECD = start _ date + ED

MMVI, Management Technologies

MMVI, Management Technologies

Planned work (PV) Funds spent (AC)

Budget Spent Cost Variance (CV) Work Done

Work done (EV)

Planned Duration (PD) Actual Time (AT) Earned Schedule (ES)

Schedule Variance (SVt)

Comparing EV and ES Schedule Analysis

SVt = ES AT = 6months 10months SVt = 4months

PD 18months ED = = = 30months SPI t 0.6

New Analysis Products

MMVI, Management Technologies