Earned Value Project

Management

Colonel John Keesee

1
Objective
„ To introduce and discuss the fundamentals
of earned value project management
‹ Work Breakdown Structures

‹ Program plans and schedules

‹ Earned value management systems

‹ Cost and schedule variances

‹ Estimates at completion

2
Scenario
„ You have been tasked to be the project
manager for an important project
‹ You have been directed to use an earned

value management system

‹ Time to market is critical for this

development

3
Work Breakdown Structure
„ Identifies 100 % of the work to be
accomplished
„ WBS dictionary breaks the scope into
measurable tasks
‹ Each with an estimated value

‹ Responsibility for each task assigned to

individuals or work teams

4
Work Breakdown Structure

Space System

Launch Vehicle Space Vehicle Ground Command,

Control, Communications
and Mission Equipment

Payload Spacecraft Reentry vehicle Integration, Assembly,

Test and Checkout

5
Project Master Schedule
„ Detailed plan and schedule
„ Identified dependencies between tasks
‹ 18 months

„ Estimated resources for each task

‹ 10 units at $150K each

6
Project Master Schedule
Task/Event Jan - Jun Jul - Dec Jan - Jun
Award ^
Design ^
Buy specifications ^
Vendor quotes ^
Purchase orders ^
Receive materials ^
Factory plans ^
Tool design ^
Tool fabrication ^
Parts fabrication ^
Assembly: sub and final ^
Test & checkout ^

7
Project Performance Display
1600000
1400000
1200000
1000000
BCWS
800000 BCWP
600000 ACWP

400000
200000
0
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8
Plan Review Before Go-Ahead
„ CEO:
‹ “Time to market is critical. You have 12

months.”
‹ “This looks gold-plated at $1.5M. You

have $1.0M.”
‹ “Go ahead, but come back to me with

your progress in three months.”

9
The Three Month Review
„ Three units scheduled for completion
„ Two units actually completed
„ $300,000 budgeted at this point
„ $300,000 actually spent
„ Optimist PM: “A little behind schedule but
right on the cost plan.”

10
Earned Value System
„ Requires a detailed, bottoms-up
performance plan
„ Performance measured against the plan
„ Provides forecast of final expected results
based on data

11
Earned Value Measurements
1. Work scheduled
2. Budgeted cost of work scheduled (BCWS)
3. Work performed
4. Budgeted cost of work performed (BCWP)
5. Actual cost of work performed (ACWP)
6. Schedule variance (SV) = BCWP - BCWS
7. Cost Variance (CV) = BCWP - ACWP

12
New Project Performance
Display
1200000

1000000

800000
BCWS
600000 BCWP
ACWP
400000

200000

0
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13
Estimate at Completion

„ Cost efficiency CPI = BCWP/ACWP

„ Schedule efficiency SPI = BCWP/BCWS
„ Estimate at completion
BAC
EAC1 =
CPI

BAC − BCWP
EAC 2 = ACWP +
CPI * SPI
14
Management Reserve
„ Budgeted to provide the ability to adjust for
uncertainty
„ Always accounted at the total project level
„ Normally retained and controlled at the total
project level
„ Must not be eliminated by negotiations

15
Summary
„ Earned value management system provides
a key link between the cost, schedule, and
technical aspects of a project
„ Provides an early and reliable prediction of
future performance

16
References
„ Fleming, Quentin W. and Joel M.
Koppelman, Earned Value Project
Management, PMI, Newtown Square, PA
2000
„ Lewis, James P., Fundamentals of Project
Management, AMACOM, NY 2002

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