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Software Project Management: Measurement - Earned Value

The document discusses earned value management (EVM), including its requirements, terminology, use for forecasting, and strengths and weaknesses. EVM objectively measures project progress by comparing planned cost, earned value, and actual cost. Key terms include budgeted cost of work scheduled, actual cost of work performed, budgeted cost of work performed, cost variance, schedule variance, cost performance index, and schedule performance index. EVM allows forecasting of estimated cost and schedule at completion if current productivity is maintained.

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Quang Đạt
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63 views

Software Project Management: Measurement - Earned Value

The document discusses earned value management (EVM), including its requirements, terminology, use for forecasting, and strengths and weaknesses. EVM objectively measures project progress by comparing planned cost, earned value, and actual cost. Key terms include budgeted cost of work scheduled, actual cost of work performed, budgeted cost of work performed, cost variance, schedule variance, cost performance index, and schedule performance index. EVM allows forecasting of estimated cost and schedule at completion if current productivity is maintained.

Uploaded by

Quang Đạt
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Software Project

Management
Measurement – Earned value
Today’s Agenda
• Do you really want to know …
• EVM
• EVM requirements
• When do we use EVM
• EVM terminology
• EVM example
• EVM forecasting
• EVM strengths and weaknesses
• Summary
Do You Really Want to Know …
Is the project on schedule?
Is the project on budget?
When will the project complete?
How much work have we actually completed?
Would you like your information to be:
 Accurate
 Correct
 Objective
 Reasonable
 Reviewable
Earned Value Management (EVM)
Traditional project management confuses actual
costs with project progress, which isn’t valid.
Definition: Earned Value is an objective
measurement of how much “valuable work” has been
completed on a project.
Using EVM, a project manager can track project
progress accurately and objectively by comparing how
much work has actually been completed against the
amount of work planned.
Enables prediction of project completion.
Parametric Estimating Models
COCOMO (COnstructive COst MOdel) II
 Used to compute effort and calendar time based on
size and project/product characteristics.
 Three different estimation models based on project
types.
Putnam Estimation Model (SLIM tool)
 Used for effort estimation.
 Based on Norden-Rayleigh curves.
Many others …
EVM Requirements
A plan of record decomposed via a work breakdown structure
into discrete ‘work packages’ that:
 Are deliverable based.
 Provide a specific timeframe and effort for delivery.
 Provide a specific cost (direct and indirect) for delivery.
 Are level-oriented from high to low with each
descending level representing more detail.
The scope of the entire project must be defined
in order to measure performance.
 This is a problem for Agile methods as scope evolves as
the project evolves.
EVM Requirements (2)
A baselined schedule containing all of the work
packages.
A baselined budget for each work package.
A time accounting system so you can track:
 Which resources
 Spent how many hours
 On each task
 In each work package
WBS and EVM
The WBS needs to be decomposed to a level
that facilitates EVM reporting.
 Too low level: Overload of data.
 Too high level: Masking of key information.
 Most projects: 3 - 4 levels. Larger projects
may need to go to 5 - 6 levels.
Organize work packages (and therefore WBS) around
deliverables, and be sure to define done for each
deliverable/work package.
 E.g.: When is a software deliverable ‘done’?
When Do We Use Earned Value?
EVM Terminology
In order to apply EVM the project manager
must:
 Have a plan of record that can accurately
measure the planned costs.
 Budgeted Cost of Work Scheduled (BCWS)
 Be able to track the cost of completed work.
 Actual Cost of Work Performed (ACWP)
 Be able to establish how much “value” was
“earned” by the work performed.
 Budgeted Cost of Work Performed (BCWP)
EVM Terminology (2)
Cost Variance (CV) = BCWP - ACWP
 Negative CV is “bad”
Schedule Variance (SV) = BCWP - BCWS
 Negative SV is “bad”
Cost Performance Index (CPI)
 CPI = BCWP / ACWP
Schedule Performance Index (SPI)
 SPI = BCWP / BCWS
Budget at Completion (BAC)
 BAC = Final BCWS
Variance at Completion (VAC)
 VAC = BAC - EAC
EVM Terminology (3)
Estimate at Completion (EAC)
 EAC = ACWP + estimated additional costs required to
complete the project.
 When trying to predict outcomes, fixing this value at an
amount you know you will have available, can help show
how well you must perform to meet that goal.
Independent Estimate at Completion (IEAC)
 IEAC = ACWP + (BAC - BCWP)/ CPI
 Projected final project cost based on current performance.
Independent Schedule at Completion (ISAC)
 ISAC = Schedule / SPI
 Estimated amount of time the project will take given
current schedule performance.
Earned Value Terminology (4)
Example: Plan to Paint 6 Rooms
Example: Where Are We?
Example: Where Are We? (2)
Example: Where Are We? (3)
Example: Where Are We? (4)
Example: Where Are We? (5)
Example: Where Are We? (6)
Example: Where Are We? (7)
Example: The Plan = BCWS
Budgeted Cost of Work Scheduled (BCWS)
Example: At the end of Week 2
Actual Cost of Work Performed (ACWP)
Budgeted Cost of Work Performed (BCWP)
Cost Variance (CV)
Schedule Variance (SV)
Cost Performance Index (CPI)
How much it really costs to earn the reported
value:
 Cost Performance Index = Earned Value/Actual Cost
 CPI = BCWP/ACWP
The ratio indicates project performance:
< 1, the project is underachieving
> 1, the project is overachieving
= 1, the project is on plan
Schedule Performance Index (SPI)
How much of the originally scheduled work has
been accomplished:
 Schedule Performance Index = Earned
Value/Planned Cost
 SPI = BCWP/BCWS
The ratio indicates project performance:
< 1, the project is underachieving
> 1, the project is overachieving
= 1, the project is on plan
Example Variances & Indices as of Week 2

Cost Variance (CV) = BCWP-ACWP


 $3,900 - $4,000 = -$100
Schedule Variance (SV) = BCWP-BCWS
 $3,900 - $4,650 = -$750
Cost Performance Index (CPI) = BCWP/ACWP
 $3,900/$4,000 = 97.5%
Schedule Performance Index (SPI) = BCWP/BCWS
 $3,800/$4,650 = 83.87%
Plotting CPI and SPI
Plotting CPI and SPI Trend
Using EVM for Cost & Schedule
Forecasts
Can statistically forecast final cost (aka Estimate at
Completion (EAC)) after ~ 20% of schedule
completed?
 IEAC = ACWP+(BAC-BCWP)/CPI
 = $10,256
 VAC = BAC - IEAC = $10,000 - $10,256
 = -$256 ($256 over)
 ISAC = Project Duration/SPI = 4 weeks/.8387
 = 4.77 weeks
It will take 4.77 weeks and $10,256 to complete
this project if current productivity continues.
Forecast using IEAC
Earned Value Strengths
Objective status information. (where you are in the
project?)
Access to cost data. (Are you getting “Value for your
Money?”)
The ability to identify new problems and trace the source
of them. (Where it is going right and where it is going
wrong?)
An ability to accurately predict project cost and schedule.
(Should you continue or terminate the project?)
A more disciplined approach to the measurement and
achievement of milestones. (Greater confidence that
milestones have been achieved.)
Earned Value Strengths (2)
Improved risk management - more disciplined planning
identifies and drives out more risks; accurate real time
progress information leads to a better informed risk
management system.
 A quantitative measure of the cost of any slippage.
(How much is it really going to cost you to continue ?)
Consistent Schedule and Budget Progress Measurement
Approach Across Projects and Programs.
Clear Identification of Schedule and Budget Trends.
Enables Prediction of Schedule and Cost Estimation at
Complete.
Makes “Cooking the Books” Harder and More Obvious.
Earned Value Weaknesses
Earned Value is overhead, and requires time and resources to
organize and run.
Some Earned Value implementations have been complicated
and tedious, giving EV a bad reputation.
Doesn’t work with Agile projects, although burn-down charts
are similar.
“Cooking the Books” is still possible.
Summary
EVM is not perfect, but is the best schedule and
cost tracking mechanism available.
EVM terminology takes a while to get used to.
To implement EVM you need to have a:
 Proper WBS set up
 Baselined budget control accounts
 Baselined schedule
 Time accounting system to track work
performed against tasks

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