CMU-CS 462:

Software Measurement and

Analysis

Lecture-14 Spring 2021-2022

Earned Value Management

Dr. Anand Nayyar

[email protected]
 Contents
1. Earned Value Management
2. How to Estimate Schedule/Cost/Effort
3. How to control the project
4. Exercise
Earned Value Analysis

What Is It ?

Why Do I Need It ?

How Do I Do It?

3
 Today’s Situation

Need for accurate and consistent status information

Numerous complex (and interrelated) projects
Projects with many WBS activities
Virtual offices
Diverse technology platforms

4
 There’s Room For Improvement

70% of projects are:

•Over budget
•Behind schedule

52% of all projects finish at

189% of their initial budget

And some, after huge investments

of time and money, are simply
never comple

Source:The Standish Group 5

 How to answer the question: “Have we
done what we said we’d do?”

% complete estimating
% of Budget spent % of
work done % of time
elapsed
subjective, incomplete
draws false conclusions

6
 Enter Earned Value Analysis
“Earned Value Analysis” is:
• an industry standard way to:
• measure a project’s progress,
• forecast its completion date and final cost, and
• provide schedule and budget variances along the
way.

By integrating three measurements, it provides

consistent, numerical indicators with which you can
evaluate and compare projects.

7
What’s more Important?
Knowing where you are on
schedule?

Knowing where you are on

budget?

Knowing where you are on

work accomplished?

8
 EVA Integrates All Three

It compares the PLANNED amount of work with

what has actually been COMPLETED, to determine
if COST , SCHEDULE, and WORK
ACCOMPLISHED are progressing as planned.

Work is “Earned” or credited as it is completed.

9
 Earned Value needed because...

Different measures of progress for different

types of tasks

Need to “roll up” progress of many tasks into

an overall project status

Need for a uniform unit of measure (dollars or

work-hours).

10
 Earned Value needed because...
Provides an “Early Warning” signal for prompt
corrective action.

Bad news does not age well.

Still time to recover

Timely request for additional funds

11
And One More Reason
Why You Need EVA

?
12
 Because You Gotta !
These Set the Stage:
GPRA; 1993
FASA, Title V; 1994
Clinger-Cohen Act; 1996

And Then Along Came OMB! (Circular A-11, Part 7)

"Agencies must use a performance based acquisition
management system, based on ANSI/EIA Standard
748, to measure achievement of the cost, schedule,
and performance goals."

13
OK, So What Is This Stuff?

14
 So, Is This Stuff New ?
It’s been around since the sixties.

“Cost/Schedule Control Systems Criteria”

(C/SCSC)

15
Examples of informal Earned Value Analysis

It’s done informally without realizing it.

•30% time used,
•30% $$ spent
•So, if 30% of the work is done, I must be OK ??

•Shop floor estimates

•Cost comparisons
Budget vs. Actual

16
 How’s this project doing?

120000

100000

80000

Projected
60000
Actual

40000

20000

0
Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03

17
Let’s Take A Look Under The Hood

18
 But First! - We gotta get organized

EVA works best when work is ‘compartmentalized’.

Compartmentalization is best achieved with a well-

planned Work Breakdown Structure.

So, how do I create a WBS for a really complex

project?
19
 How am I gonna eat this elephant?

Obviously in small bites.

20
 Proper WBS Design
One WBS per program
• Deliverable-oriented
• Work not in the WBS is out-of-scope
• Each descending level represents more detail
Full (and accurate) definition is key
• Defined deliverable(s)
• Timeframe for delivery of product
• Total cost (direct and indirect) to deliver product

21
Let’s Look at an example:
 A sample Work Breakdown Structure
Serve Pizzas to Customers

Provide the Place Cook the Food Serve Customers (Others)

Make the Dough Cook the Sauce Build the Pizza

22
WBS Units are “Work Packages”

Lowest level WBS elements

Have an accompanying narrative

Have three measurable components

• Scope of work to be accomplished
• Total (direct and indirect) cost
• Timeframe for completion

23
 Control Account Plans

A CAP is essentially a Work Package with some added

features:
 Assignment of responsibility
• Organization
• Individual
 Division (if necessary) into lower-level Work Packages.
 Metrics for measuring EV performance
• Milestones
• % complete
• Other

 The sum of the CAPs constitutes the Performance

Measurement Baseline
24
 Enough With the WBS Stuff Already !

We came here to talk about Earned Value.

25
 Some New Terms
BCWS - Budgeted Cost of Work Scheduled

ACWP - Actual Cost of Work Performed

BCWP - Budgeted Cost of Work Performed

26
 Earned Value Definitions

BCWS: “Budgeted Cost of Work Scheduled”

Planned cost of the total amount of work scheduled

to be performed by the milestone date.

27
BCWS - Budgeted Cost of Work Scheduled

120000

100000

80000

60000 BCWS

40000

20000

Nov-03
Jan-03

Jun-03
Jul-03
Aug-03
Sep-03

Dec-03
Feb-03
Mar-03
Apr-03
May-03

Oct-03

28
 Earned Value Definitions (cont.)

ACWP: “Actual Cost of Work Performed”

Cost incurred to accomplish the work that has been

done to date.

29
 ACWP - Actual Cost of Work Performed

120000

100000

80000
56000 BCWP
60000
ACWP
49000
40000

20000

Nov-03
Jan-03

Jun-03

Jul-03

Aug-03
Sep-03

Dec-03
Feb-03
Mar-03

Apr-03

May-03

Oct-03

30
 Earned Value Definitions (cont.)

BCWP: Budgeted Cost of Work Performed

The planned (not actual) cost to complete the work that

has been done.

31
BCWP - Budgeted Cost of Work Performed

120000

100000

80000
55000 BCWP
60000
49000 BCWS
40000

20000

Nov-03
Jan-03

Jun-03
Jul-03

Aug-03
Sep-03

Dec-03
Feb-03
Mar-03

Apr-03
May-03

Oct-03

32
 The Whole Story

120000

100000

80000
56000 BCWS
60000 BCWP
55000
49000 ACWP
40000

20000

Nov-03
Jan-03

Jun-03
Jul-03
Feb-03
Mar-03
Apr-03
May-03

Aug-03
Sep-03
Oct-03

Dec-03 33
 Some Derived Metrics
SV: Schedule Variance (BCWP-BCWS)
A comparison of amount of work performed during a given
period of time to what was scheduled to be performed.
A negative variance means the project is behind schedule

CV: Cost Variance (BCWP-ACWP)

A comparison of the budgeted cost of work performed with
actual cost.
A negative variance means the project is over budget.

34
 Schedule Variance & Cost Variance
Schedule Variance = BCWP-BCWS
$49,000
- 55,000
SV = - $ 6,000

Cost Variance = BCWP-ACWP

$49,000
56,000
CV = - $7,000

35
 Some More Derived Metrics

SPI: Schedule Performance Index

SPI=BCWP/BCWS
SPI<1 means project is behind schedule
CPI: Cost Performance Index CPI=
BCWP/ACWP CPI<1
means project is over budget

CSI: Cost Schedule Index (CSI=CPI x SPI)

The further CSI is from 1.0, the less likely project recovery
becomes.

36
 Performance Metrics

SPI: BCWP/BCWS
49,000/55,000 = 0.891

CPI: BCWP/ACWP
49,000/56000 = 0.875

CSI: SPI x CPI

.891 x .875 = 0.780

37
 Making Projections
Once a project is 10% complete, the
overrun at completion will not be less
than the current overrun.

Once a project is 20% complete,

the CPI does not vary from its current
value by more
than 10%.

The CPI and SPI are statistically accurate indicators of

final cost results.

Source: Defense Acquisition University

38
 Making Projections
120000
103865
100000 102000
90882
80000
Today BCWS
60000 BCWP
ACWP
40000

20000

Nov-03
Jan-03

Jun-03
Jul-03
Feb-03
Mar-03
Apr-03
May-03

Aug-03
Sep-03
Oct-03

Dec-03 39
 Estimate to Complete

140000
120000 116,571
100000 102000
Today BCWS
80000
BCWP
60000
ACWP
40000
20000
0

-03 - 03
-03
-l 0
3
- 03 -03 -04 - 04
an ar ay
Ju ep o v an ar
J M M S N J M

40
 A New Criteria

Activities “earn value” as they are completed.

The value earned is the WBS budgeted cost of the
activity completed to date.

41
 Value of Earned Value

Schedule Status Reporting

Cost Status Reporting
Forecasting

42
 But How Do I Do All This Stuff ?

With an Earned Value Management System

43
A-11, Part 7 Requires an EVMS
“ . . . based on ANSI/EIA Standard 748”
And what does that mean?
ANSI/EIA 748 provides a list of guidelines
•Organization
•Planning, Scheduling, and Budgeting
•Accounting Considerations
•Analysis and Management Reports
•Revisions and Data Maintenance

But, ANSI/EIA 748 doesn’t identify ‘approved

systems’
44
 A-11, Part 7 Requires an EVMS

So where do I get one?

Buy a prepackaged one. (Lot of ‘em around)
Make your own.
•Microsoft Project
•Microsoft Excel

Or it could be as simple as this:

45
Requirements of Earned Value
Proper WBS Design
Baseline Budget Control Accounts
Baseline Schedule
Work measurement by Control Account
work-hours, dollars, units, etc.
Good Project Management Practices

46
 Discuss in group:
Shortcomings of Earned Value?
Quantifying/measuring work progress can be
difficult.

Time required for data measurement, input, and

manipulation can be considerable.

47
 Summary

EVA & EVMS will help reduce guesswork in:

Measuring performance
forecasting
Need to get beyond misleading measures of progress.
Reasons to use EVA and EVMS:
Good project management practice
OMB requirement
Incorporate into contracts

48
 Earned Value Resources

http://www.pmi.org/

http://www.acq.osd.mil/pm/

ANSI/EIA 748 is available from:

Global Engineering Documents
800-854-7179

49
 Some “Compliant” Systems
Welcom “Cobra” http://www.welcom.com/
Schedulemaker http://www.schedulemaker.com/
Planisware “OPX2” http://www.planisware.com/
RiskTrak http://www.risktrak.com/index.htm
Winsight http://www.cs-solutions.com
Primavera Systems http://www.primavera.com

https://www.youtube.com/watch?v=MO6EOMd-CkA

50
 Earned Value Analysis

Questions/Discussion

51