A simple introduction to the principles of Earned Value Management

1. Earned Value
in
Five
Easy Pieces
Not that Earned Value can be
made that easy, but this is
the start of getting our mind
around the concepts of
project performance
measurement
1

2. 1. Using a credible schedule, define the planned value of the work
2. Measure the Physical % Complete for each period of performance
3. Calculate Earned Value = Planned Value x Physical % Complete
4. Using the Earned Value variables ,calculate the performance indices
5. With the performance indices take corrective actions
2

3. 1
Using a credible
schedule, define
the planned
value of the work
3

4. 1
Create Work
Packages for the
activities that
produce physical
outcomes
I 4

5. 1
Define the planned
value (PV)(BCWS)
spreads for each
Work Package
I 5

6. Measure Physical Percent Complete of Work
Package Outcomes
2
6

7. Define 0/100 or
50/50 activities
within each Work
Package.
You’re either
done or not done.
There is no
“partial” done for
a Work Package.
2
7

8. 2
Define Apportioned
Milestones that
describe the
incremental
progress of the Work
Package in units
meaningful to the
customer
II 8

9. 2
Use evidentiary materials
for each measurement.
These are the only
measures of progress.
Not the passage of time
or the consumption of
resources.
“Show Me the
Outcomes”
II 9

10. Calculate the Earned Value 3
10

11. EV = PV  Physical Percent Complete
The Value that is Earned - the Earned Value
- is the percent of the Planned Value that
was delivered at the end of the period of
performance.
The percentage assessment is always
measured by some physical assessment,
some evidence that this percentage was
actually achieved
3
11

12. Using the Earned Value variables (BCWS, BCWP,
ACWP), calculate Performance Indices
4
12

13. The To Complete Performance Index (TCPI)
 BAC  BCWP 
TCPIEAC 
 EAC  ACWP 
4
13

14. The Independent Estimate At Completion (IEAC)
 Probably as Good
EAC1  BAC CPI as it Gets
EAC2  ACWPcum   BAC  BCWPcum  SPI
EAC3  ACWPcum   BAC  BCWPcum  SPI  CPI   Probably as Bad
as it Gets
EAC4  ACWPcum   BAC  BCWPcum  wt1  SPI  wt 2  CPI 
EAC5  ACWPcum   BAC  BCWPcum  CPI( period )
4
14

15. 5
With the
performance
indices‘, take
corrective action
for remaining
work
V 15

16. Earned Value must measure work
performance within a pre-defined
period of time – the period of
performance
At the end of a project, the Earned Value
always equals the Planned Value – since all
the work has been done.
What is different is how long it took and how
much money is cost.
Earned Value bounds the time period to the
Planned period
IV 16

17. Failing to us discipline and
rigor can put you on the
beach. So remember…
A ship on the beach is a
lighthouse to the sea
– Dutch Proverb
 Inattention to budgetary responsibilities  Progress not monitored in a regular and
 Work authorization not always followed consistent manner
 Budget and data reconciliation issues  Lack of vertical and horizontal traceability
 Lack of integrated management systems (critical path)
 Baseline fluctuations and frequent  Not capturing and using cost and schedule
replanting data for corrective action
 Current period and retroactive changes  Lack of predictive variance analysis
 Improper use of management reserve  Lack of internal surveillance and controls
 Earned Value techniques not reflecting  Managerial actions not demonstrated
actual accomplishments using Earned Value
 Untimely and unrealistic Latest Revised
Estimates (LRE)
17

18. Are You Doing
Earned Value?
 Do we know the value of
the planned work?
 Have we bounded the
period of performance for
each work element?
 Do we know how to
measure Physical Percent
Complete?
www.jack-nicholson.info
18

19. Earned Value is
fundamentally a
planning tool.
It will not “fix”
problems with
projects.
But it will make the
performance
problems visible in
analytical ways.
www.jack-nicholson.info
19

20. Glen B. Alleman
Niwot Ridge Consulting
4347 Pebble Beach Drive
Niwot, Colorado 80503
303.241.9633
glen.alleman@niwotridge.com
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Glen B. Alleman, Copyright © 2012 20/58