Ron Babich Hard Dollar Presentation

1. Streamlining Earned Value Management Proprietary & Confidential Ron Babich, VP Hard Dollar Ron.babich@harddollar.com 480-776-2934

2. Project COST Management 2 Proprietary & Confidential Design (Materials) Estimating (Budget) Scheduling (Time) Progress (Project Controls) Finance (Accounting)

3. Overview Building the Cost Model Developing EVM Measurements Case Study: Successful Process Readiness

4. Capital Planning Project Variance 4 Proprietary & Confidential Project Plan Costs 15% 50% Costs Plan

5. EVM Requirements Effort Required WBS Period of Time Schedule Progress Performance Measurement Baseline

6. Regulatory Requirements 6 Proprietary & Confidential Regulatory Requirements

7. 7 Proprietary & Confidential Regulatory Requirements

8. Characteristics of Credible Cost Estimates Clear Identification of Task Provision for Program Uncertainties Broad Participation in Preparation Recognition of Inflation Availability of Valid Data Recognition of Excluded Costs Standardized Structure For Estimate Independent Review Of Estimates

9. Budget/Cost Estimate Challenges 9 Proprietary & Confidential Typical Challenges

10. Auditors should… 10 Proprietary & Confidential Cost Element Valid and Applicable Labor Includes Time Phase Break Down Calculations on each element are correct Program is Accurate Total Of Sub-Elements Escalation was applied Over time

11. Case Study - NASA 0 of 10 Projects followed All Basic Steps 3 of 10 Projects included detailed WBS 2 of 10 Measure Cost/Performance Identify Risk

12. Case Study – US Customs $1.05 BilCommercial Environmental Life Cycle No Formal Cost Model Spreadsheet No Structured Documented Process for Determining Size/Reuse Size No Relevant, Measured, Normalized Historical Cost Data to Calibrate Models Measurement

13. What is Earned Value Management? Earned Value Management (EVM)… Project management process that combines schedule performance and cost performance Answers: What did we get for the money we spent? Used since the 1960’s by the Department of Defense Central part of CERT and C/SCSC (Cost/Schedule Control Systems Criteria) Was recently revised and adopted as ANSI/EIA 748 13 Proprietary & Confidential

14. Example: Rail Project 14 Proprietary & Confidential Scope 4 Miles Time 4 Weeks Cost $ 4 Mil Scope 4 Miles Time 4 Weeks Cost $ 4 Mil

15. What is Earned Value Management? The Essence of Earned Value Management (EVM)… 15 Proprietary & Confidential Budget X % Complete = Earned Value

17. Provides a true picture of a project’s value at any point in time

18. Ideal method of monitoring project status and likelihood of success16 Proprietary & Confidential

19. EVM Give us… 17 Proprietary & Confidential Operations Financial Gov Report Compliance Production Factors Predictive Profit/Loss Mitigate Risk Cash Flow Schedule Scope Cost

20. Driving Trends Affecting EVM Owner Budgets are Being Reduced Credit limitations Less capacity for risk …Leading to Greater Owner Scrutiny of Project Health Are we on track? Have we over-paid? What is the forecast? …Leading to Increased Adoption of EVM In traditional markets: Aerospace, Defense In new markets: Oil & Gas, Mining, Power, Civil, Commercial 18 Proprietary & Confidential

21. What are the Key Requirements of EVM? Step 1: Define the work 19 Proprietary & Confidential

22. What are the Key Requirements of EVM? Step 2: Assign budget (planned) values 20 Proprietary & Confidential

23. What are the Key Requirements of EVM? Step 3: Schedule the work 21 Proprietary & Confidential

24. What are the Key Requirements of EVM? Step 4: Cost-load the schedule 22 Proprietary & Confidential What does it tell the contractor? What are our expected costs over time What does it tell the owner? What is our expected spend level over time What do you need to track this value?  Estimate / budget Cost-loaded schedule Budgeted Cost of Work Scheduled (BCWS) $1,000,000 Cost $500,000 Time

25. What are the Key Requirements of EVM? Step 5: Track progress (% complete) 23 Proprietary & Confidential What does it tell the contractor? What should our costs have been based on the work we completed What does it tell the owner? What should our spend level have been based on the work completed What do you need to track this value?  Estimate / budget  Progress history (units completed) Budgeted Cost of Work Scheduled (BCWS) Budgeted Cost of Work Performed (BCWP) $1,000,000 Cost $500,000 $450,000 Earned Value Time

26. What are the Key Requirements of EVM? Step 6: Track actual costs (optional) 24 Proprietary & Confidential Budgeted Cost of Work Scheduled (BCWS) What does it tell the contractor? What have our costs actually been for the work we completed What does it tell the owner? What has our spend level actually been for the work completed What do you need to track this value?  Actual costs from accounting; or  “Accrued” costs Budgeted Cost of Work Performed (BCWP) Actual Cost of Work Performed (ACWP) $1,000,000 Cost $500,000 $450,000 $400,000 Earned Value Time

27. Where is EVM trackedby: Owners, PMO’s, CM’s, Contractors Spreadsheets Finance-focused systems ERP Accounting Project-focused systems HD + Primavera HD + MS Project 25 Proprietary & Confidential

28. System Process Keys 26 Proprietary & Confidential Scope Schedule Cost

30. Detail the work into small manageable steps

32. Based on activity progress

33. Information to forecast schedule and cost at completion

34. Evaluate Resource Needs and Deployment1 2 3

36. General Foremen

37. Project Controls Group

39. Earned Hours from Progress Budget Hours times % Complete = Earned Hours Progress from Field

41. Case Study: Cost Earned Hours Progress From Schedule Timesheet Hours From Payroll Actual Hours divided by Earned Hours Billed Cost Discuss Forecast Calculations

43. Sand bagging of progress

44. Remaining duration on activities

45. Rejections from Payroll

47. When monitoring work in the field, take the current schedule with you to verify

48. If you have a supervisor that struggles with any part of the schedule, get the Project Controls group to help

50. When PF’s are above 1.1 or below .80, go to the field, find out why and communicate that to management and project controls

51. Monitor & Manage Material Movement

52. Monitor & Manage Tools

53. Monitor & Manage Equipment Utilization

55. Continuous Communication with Management on Schedule Status

56. Make time at least once a day to verify accuracy of current schedule and communicate findings to Project Controls

58. Monitor and Manage Non-Working Times

59. Hold your supervisors accountable for assuring that their progress is accurate

61. What is affected by incorrect Progress?

62. Explain the flow process for calculating Productivity (draw flow on board)

64. Cost Forecast

65. Manage Resources

66. Enables the Owner to make sound Business Decisions (Minimize Unit Down Time)

68. Questions? 42 Proprietary & Confidential Thank You! Contact Ron Babich ron.babich@harddollar.com 480-776-2934