RESULTS IN ERRONEOUS CONCLUSIONS Charles F Lappenbusch Jr MBA CCP EVP PSP Presentation to Seattle Section AACE International March 9 2017 Over 30 years of financial and project ID: 593114
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MISUSE OF EARNED VALUE MANAGEMENT RESULTS IN ERRONEOUS CONCLUSIONS
Charles F. Lappenbusch, Jr. MBA, CCP, EVP, PSPPresentation to Seattle Section, AACE® InternationalMarch 9, 2017Slide2
Over 30 years of financial and project management Director of Development for a new town
Cost control processes, monitoring and integration with Critical Path Scheduling, Earned Value Management, and Risk Analysis.
What you don’t know about me.
BIOGRAPHY
Charles F. Lappenbusch, Jr.,
MBA,
CCP
, EVP, PSPSlide3
This is Earned Value!Slide4
PURPOSE:EVM within CONTEXT OF PROJECT CONTROLSCOMPLETION DATE? COMPLETION COST?INFORMATION FROM THE NOISE
INTRODUCTIONSlide5
PURPOSE:EVM IS INTEGRATION SCOPE, RESOURCE (COST),
SCHEDULE & RISKCOMMON TERMSEXTENSION OF PI
START THE CONVERSATION
CRITIQUE
INTRODUCTIONSlide6
ASSUMPTIONS:SCOPEBUDGET at COMPLETION (BAC)CRITICAL PATH METHOD (CPM)WORK BREAKDOWN STRUCTURE (WBS)
INTRODUCTIONSlide7
FOCUS:EVM KEY PERFORMANCE INDICATORS (KPI)COST PERFORMANCE INDICATOR (CPI)SCHEDULE PERFORMANCE INDICATOR (SPI)
TOTAL FLOAT (TF)INTRODUCTIONSlide8
FOCUS:EVM a PROJECT CONTROLEVM to CALCULATE EAC
EARNED VALUE (EV) vs EARNED PAYMENT (EP)
INTRODUCTIONSlide9
TAKE A-WAY:WBS - INTEGRATOREVM – PROJECT CONTROLEVM NOT FINANCIAL CONTROL
EVM KPIs DEPEND UPON ALIGNMENT OF DD, PV, EV, AC,
TFEV vs EP
INTRODUCTIONSlide10
INTEGRATES:SCOPERESOURCE(COST) SCHEDULERISK
EVM BENEFITSSlide11
COMPARE UNLIKE ACTIVITIES COMMON NUMBER LOOK AHEAD TOOL
ADDS DEPTH & INSIGHT EAC IN LIEU OF DETAIL ESTIMATEKPI
TRENDING ANALYSISEVM
BENEFITSSlide12
SUMMARYMEASURES PROGRESS OBJECTIVE MEASUREMENT COMPARES PROGRESS
TO THE SCOPE, RESOURCE (COST), SCHEDULE & RISK PLANS
EVM BENEFITSSlide13
EVM FOUNDATION WBS WBS WBS WBS
BAC
CPM
PMB
DATA DATES (DD)
PLANNED VALUES
(PV) Per DDsSlide14
EAC = AC + (BAC –EV)/CPIEAC = AC + [(BAC – EV) / (EV/AC)]
EAC = AC + [(BAC – (%C*BAC)/ (%C*BAC)/AC)]EVM EACSlide15
EAC = AC + (BAC –EV)/ (SPI*CPI)EAC = AC + {(BAC – EV) / [(EV/PV) * (EV/AC)]}
EAC = AC + {[(BAC – (%C*BAC)/ {[(%C*BAC)/PV)]* [(%
C*BAC)/AC)]}}
EVM
EACSlide16
DATA DATE (DD)PLANNED VALUE (PV)EARNED VALUE (EV)
ACTUAL COST (AC) TOTAL FLOAT (
TF)
ALIGNMENTSlide17
KPI ROLLED UP OR DRILLED DOWN BASIS FOR TRACEABILITY OF KPIsTHE
USE OF ADDITIONAL FILTERSOrganization Breakdown Structure (OBS)Resource/Cost Breakdown Structures (RBD/CBS)
WBS
INTEGRATIONSlide18
RECURRING RECORDING DATE1st DAY AFTER RECORDING PERIODSEPARATES ACTUAL (HISTORY) FROM SCHEDULED DATA
PV, EV, AC, TF MUST ALIGN WITH DDTHE BASIS OF KPI TRENDING
DATA DATE (DD)Slide19
PV PER BAC, CPM, PMBPV IS FIXED TO DDPV IS IN SAME UNITS OF MEASUREMENT AS EV
PLANNED VALUE (PV)Slide20
EV IS NOT FIXED TO DDEV IS ACCOMPLISHMENT OF PVEV IS IN SAME UNITS OF MEASUREMENT AS PV
EARNED VALUE (EV)Slide21
AC IS ACTUAL RESOURCE (COST)AC SAME DD AS EVINVOICE DELAY A DISTORTION OF AC
AC ACCRUALAC
vs. EPACTUAL COST (AC)Slide22
CRITICAL PATH (CP) SCHEDULE KPIMEASURES THE CP ACTIVITIES
TF MUST BE ALIGNED WITH THE DDTF
& SPI ARE NEEDED TO ANALYZE BOTH THE FLOAT AND CP ACTIVES
TOTAL FLOAT (
TF
)Slide23
COST PERFORMANCE INDEX (CPI) CPI =EV/ACCPI = <1 – OVER BUDGETCPI = 1 – ON BUDGETCPI = 1< - UNDER BUDGET
EVM KPIsSlide24
SCHEDULE PERFORMANCE INDEX (CPI)SPI = EV/PVSPI = <1 - BEHIND SCHEDULESPI = 1 – ON SCHEDULE
SPI = 1< AHEAD OF SCHEDULENOTE: WHEN EV = PV = SPI = 1
SCHEDULE VARIANCE = $0
REGARDLESS OF SCHEDULE
EVM
KPIsSlide25
CPI, SPI, TF = 27 KPI MATRIXEXAMPLES:
1 – CPI=1.00, SPI=1.00, TF=02 – CPI=1.00, SPI=0.85, TF=0
3 – CPI=1.00, SPI=1.25, TF
=-20
4 – CPI=1.00, SPI=0.85,
TF
=+20
OBSERVATIONS
5 – CPI=0.85, SPI=1.00,
TF
=+20
6 – CPI=0.85, SPI=0.85,
TF
=-20
27
EVM
KPIsSlide26
EP DETERMINISTICPER T& C OF THE CONTRACTPV FLOATS WITH EPDD FLOATS WITH EP
EV PROBABILISTICEAC
AND KPIs
PV FIXED PER
PMB
DD FIXED PER EV
AC IS FIXED TO EV
EARNED PAYMENT (EP)Slide27
EV vs EPEVM ELEMENT
Earned Value (EV)Earned Payment (EP)
EV & EP Functions
EV is a measurement of a Project's
progress
EP is used to
determine paymentSlide28
EV vs EPEVM ELEMENT
Earned Value (EV)Earned Payment (EP)
Progress
EV measures actual progress of a
project
EP measures progress of
paymentSlide29
EV vs EPEVM ELEMENT
Earned Value (EV)Earned Payment (EP)
Data Date (DD)
EV is measured for all activities prior to the DD
EP
of several activities will most likely
have different DDSlide30
EV vs EPEVM ELEMENT
Earned Value (EV)Earned Payment (EP)
Planned Value (PV)
PV
is fixed to a specific time
period
PV moves with the EPSlide31
EV vs EPEVM ELEMENT
Earned Value (EV)Earned Payment (EP)
Actual Cost (AC)
The cost (not cash flow) to achieve the
EV
EP is cash flow and not necessarily AC. Slide32
EV vs EPEVM ELEMENT
Earned Value (EV)Earned Payment (EP)
SUMMARY
EV measures project progress.
EP measures project
payment.Slide33
ONLY AS GOOD AS FOUNDATION SCOPE, RESOURCE (COST), SCHEDULE and RISK
EVM NEEDS WBS TO INTEGRATE
MUST ALIGN
DD
,
PV,
EV,
AC
,
TF
EP MEASURES
PAYMENT
EV MEASURES PROGRESS
SUMMARYSlide34
This is Earned Value!Slide35
QUESTIONS&CRITIQUE