M2845C 001

Earned Value Management
M2845C-001
July 2006
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Earned Value Management
M2845C-001
July 2006
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Copyright 2006 by Global Knowledge Training LLC
First published 2006.
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BRIAN EGAN Course Director
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KARIN GRODEN Project Manager, Content Development
KIRSTEN E. HALE, MS, PMP Worldwide Product Director, Project Management & Professional Skills
KIM HIGHLAND Worldwide Product Manager, Project Management & Professional Skills
9000 Regency Parkway

Cary, North Carolina 27511
Phone: 919-461-8600
1-800-COURSES
Fax: 919-461-8646
www.globalknowledge.com Printed in Canada
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About This Course
Course Objectives
Project managers are expected to know the progress of their project at all times. Are you meeting
expectations? Staying within budget? Staying on schedule? These can be tough questions to answer
without the use of EVM (earned value management). This course teaches you the fundamentals of
EVM so you can understand how to establish an effective project baseline and monitor project
progress against known expectations.
Learn how EVM is integrated throughout the project life cycle. Practice the activities you go
through to establish an effective baseline. Identify the critical data points that must be collected to
analyze project progress. Learn to conduct trend analysis, calculate actual cost, and accurately
project final cost, schedule, and performance variances. Understand how change impacts EVM and
how approved changes can impact your original baseline. Identify the stakeholders who would
benefit from EVM data and learn effective communication methods. Finally, review the differences
of EVM in a corporate and federal environment.
After completing this course, you will be able to:

- Describe why EVM is important
- Establish and manage scope, schedule, and budget
- Create a reasonable baseline
- Integrate project planning and EVM
- Monitor and control the baseline
- Monitor and control scope, schedule, and cost
- Collect and analyze data
- Forecast final variances
- Manage change and the impact to EVM
- Differentiate between EVM in corporations and in the federal environment
Earned Value Management v

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vi Earned Value Management

Table of Contents
1 Introduction to Earned Value Management
Section Topics ...................................................................................................1-1
Exercise .............................................................................................................1-1
Section Objectives .............................................................................................1-2
The Need for EVM ............................................................................................1-3
Project Dilemma ..........................................................................................1-3
The Role of EVM: Monitoring Projects ..............................................................1-4
Project Controls ..........................................................................................1-5
Management by Milestones ........................................................................1-6
Characteristics of EVM ......................................................................................1-7
Milestones .........................................................................................................1-8
Milestones as Measures .............................................................................1-9
EVM Project Planning ...............................................................................1-10
EVM Terminology ............................................................................................1-11
EVM Statistics ...........................................................................................1-12
EVM Data ..................................................................................................1-13
Basic EVM Terminology Illustrated ..........................................................1-13
Performance Statistics ..............................................................................1-14
Forecasting ...............................................................................................1-16
Management by Exception ..............................................................................1-18
The Value of Earned Value .............................................................................1-19
Section Review ................................................................................................1-20
2 History of EVM
Section Topics ...................................................................................................2-1
Exercise .............................................................................................................2-1
A Hundred Years of Evolution ...........................................................................2-3
Cost Control for Government .............................................................................2-4
Limited Adoption in Private Sector ..............................................................2-4
A Simpler Version: EVMS ...........................................................................2-5
Back to Basic Earned Value Principles .............................................................2-6
Section Review ..................................................................................................2-7
3 Ingredients Necessary for EVM

Section Topics ...................................................................................................3-1
Exercise .............................................................................................................3-1
EVM Planning Overview ....................................................................................3-3
Management Questions Answered by EVM ......................................................3-3
EVM Stages .......................................................................................................3-4
Earned Value Management TOC-1

Precision and Rigor ...........................................................................................3-9
Three-Dimensional View of a Project ..............................................................3-10
Section Review ................................................................................................3-11
4 Defining Scope
Section Topics ...................................................................................................4-1
Exercise .............................................................................................................4-1
Defining the Work to Be Done ...........................................................................4-3
Whats In and Whats Out ...........................................................................4-3
Work Breakdown Structure ................................................................................4-4
Decomposition to Work Packages ..............................................................4-5
Decomposition to Task and Activity ............................................................4-6
WBS Terminology .......................................................................................4-7
WBS Principles ..................................................................................................4-8
Section Review ..................................................................................................4-9
5 Scheduling the Project

Section Topics ...................................................................................................5-1
Exercise .............................................................................................................5-1
Scope and Then Schedule ................................................................................5-3
EVM Scheduling Requirements .........................................................................5-4
Master Schedule .........................................................................................5-4
Vertical Integration ......................................................................................5-5
Horizontal Integration ..................................................................................5-5
Example Schedule ......................................................................................5-6
Section Review ..................................................................................................5-7
6 Integrating Scope, Schedule, and Costs through CAPs

Section Topics ...................................................................................................6-1
Exercise .............................................................................................................6-1
Control Account Plans ......................................................................................6-3
The Role of CAPs ..............................................................................................6-3
CAP Ingredients ................................................................................................6-4
CAP Size and Number ................................................................................6-4
The CAP Rule .............................................................................................6-4
CAP Example ..............................................................................................6-5
What Is Left to Complete a Project Plan? ...................................................6-5
Section Review ..................................................................................................6-6
TOC-2 Earned Value Management

7 Establishing an EV Measurement Baseline
Section Topics ...................................................................................................7-1
Exercise .............................................................................................................7-1
EV Measurement Baseline ................................................................................7-3
Questions Answered by the Baseline ................................................................7-3
Planning and Measuring Earned Value .............................................................7-4
Establishing an EV Measurement System ........................................................7-5
Considerations for Choosing a Measurement Method ................................7-5
Methods Used to Plan and Measure EV .....................................................7-7
Example CAP with EV Measures ..............................................................7-19
Project Cost Baseline ................................................................................7-19
PMB Components ...........................................................................................7-20
Managing Change ...........................................................................................7-20
Section Review ................................................................................................7-21
8 Monitoring Performance against Baseline

Section Topics ...................................................................................................8-1
Exercise .............................................................................................................8-1
Monitoring Starts at the Task Level ...................................................................8-3
Trend Indicator ..................................................................................................8-3
Management by Exception ................................................................................8-4
Cost Performance Index ....................................................................................8-5
Using the CPI ..............................................................................................8-5
Schedule Performance Index ............................................................................8-6
Using the SPI ..............................................................................................8-6
Cumulative vs. Periodic Data ............................................................................8-7
Section Review ..................................................................................................8-8
9 Forecasting Final Cost and Schedule Results

Section Topics ...................................................................................................9-1
Exercise .............................................................................................................9-1
Management with the Headlights On ................................................................9-3
Factors Determining Project Results .................................................................9-3
Statistical Forecasts ..........................................................................................9-4
Estimate at Completion ...............................................................................9-4
To Complete Performance Index ................................................................9-6
Schedule Forecasting EACt .....................................................................9-6
Section Review ..................................................................................................9-7
Earned Value Management TOC-3

10 EVM Criteria Review
Section Topics .................................................................................................10-1
Exercise ...........................................................................................................10-1
Section Objectives ...........................................................................................10-2
EVM Overview .................................................................................................10-3
Implementing EVM ..........................................................................................10-4
Section Review ................................................................................................10-5
TOC-4 Earned Value Management

1
Introduction to Earned Value
Management
Section Topics
The Need for EVM
The Role of EVM: Monitoring Projects
Characteristics of EVM
Milestones
EVM Terminology
Management by Exception
The Value of Earned Value
Exercise
Identify Contract Negotiation Parameters
Create Milestones and a Performance Measurement Baseline
Measure Progress
Earned Value Management 1-1

Introduction to Earned Value Management
N Knowledge
Guide
W E
Section Objectives
After completing this section, you will be able to:

Outline the basic concepts of EVM
Explain the role of EVM and the motivation for the use of EVM in project
management
List the necessary components of EVM
Use milestones as planning tools
Explain basic EVM terminology
1-2 Earned Value Management

The Need for EVM

If every project went according to plan, there would be no need for EVM (earned value
management). What EVM does is illustrate the difference between what was planned and
what is actually happening. It is an early warning system that alerts management to the
realities of project performance.
EVM creates a performance contract for a project. It clarifies exactly what was expected
to happen before the project was launched (the plan) and then measures whether those
expectations are coming true during execution.
Treating all projects as if they are arms-length contracts provides senior management
with an objective measure of performance and success.
Project Dilemma
z Seller wants to be paid in advance

z Buyer wants to pay as work is completed
z Senior management within organizations are
buyers
Want fixed-price commitment rigid budget
z Project managers are sellers
Want cost-plus commitment open-ended
Figure 1: Project Dilemma
The problem with contracts is that sellers (project managers) do not want to commit to a
fixed price. They want to spend money as necessary in order to get the work done. They
prefer not to make a firm commitment.
On the other hand, the members of senior management (the buyers) want to know exactly
what their money will be purchasing. They want a firm price commitment from the project
manager. They want a fixed-price contract.
EVM is a tool that ties the competing interests of the project manager and senior
management together. It provides a firm estimate of performance to be developed in the
planning stage, but then generates interim measures of whether that estimate is being
realized during execution. If senior managements expectations are unrealistic, EVM will
quickly highlight the problem. EVM is an important control tool because it keeps
everyone honest.

The Role of EVM: Monitoring Projects
z Projects involve expenditure of resources over a

period of time
How does senior management know if a project is on
target?
z EVM breaks project down into many tiny projects
(tasks) that are individually managed
Each task is judged separately and on a cumulative
basis with all other completed tasks
Allows senior management to watch how their
money is being spent
Figure 2: The Role of EVM: Monitoring Projects
EVM (earned value management) helps to solve the conflict between the buyer (senior
management) and the seller (project manager). EVM determines how much of a project
has been completed at specific points in time, or milestones. Knowing how much has been
completed allows senior management to release funds in small increments. It allows them
to know if they are getting value for money. The shorter the time between milestones, the
lower the risk that the project will not deliver the value expected from it.
EVM allows senior management to monitor progress and to react to poor performance.
The senior management team is able to watch how its money is being spent.
For the project manager, EVM changes the emphasis from performance targets way off in
the distance to targets that are coming up constantly. The project manager knows how the
project is performing at any given time and whether or not the buyers will be or should be
pleased.

Project Controls
z Management oversight requires a method for

ensuring:
An accurate description of scope
Prudent use of resources (time and money)
Timely warning of performance problems
z EVM integrates scope, time, and money to create a
three-dimensional view of project performance.
Figure 3: Project Controls
EVM effectively converts a large project into tiny ones, which are more manageable. Each
tiny project, which is typically called a task, is separately managed with its own scope,
budget, and time frame. Performance is measured according to each task. Rewards
(payments and continued funding of a project) are related to a cumulative measure of
performance based on how well tasks are being completed as compared with planned
performance.
Measuring the performance of individual tasks rather than the project as a whole provides
the project manager, and senior management, with a steady stream of signals about the
health of the project.
Note
EVM provides what is called a three-dimensional view of project performance. The

dimensions are time, scope, and cost.

Management by Milestones
z Earned milestone management

Progress measured on the basis of milestones
Pre-established guideposts that generate
performance statistics
Alarm bells for management oversight
z Management by exception
A task not completed on time or on schedule is a
signal that something is wrong
Directs management energy toward problem areas
Figure 4: Management by Milestones
In EVM, the completion of each task or subtask is treated as a milestone, which is a

management control point at which actual cost and schedule are compared with what was
planned for the milestone.
Milestones are like alarm clocks. They tell management that something should have been
completed by a certain date and cost. If it has not been done, something is wrong; there has
been an exception to the plan.
EVM drives management by exception. The entire project is broken into tasks that have
individually planned expectations of performance. When those expectations are not met,
this is a message for management to investigate.

Characteristics of EVM
z The dismantling of project scope into measurable

tasks (milestones) that are individually budgeted,
scheduled, and managed
Bottom-up planning
z During execution, actual performance (completion
of tasks) is compared with planned performance
z Exceptions are investigated and reported
z Patterns and trends are used to forecast future
outcomes
Figure 5: Characteristics of EVM
EVM projects are planned the same way as any other project. First, every effort is made to
define the entire work of the project, or the scope, and then that work is broken down into
small, manageable chunks, which are called tasks or work packages. Individual tasks are
then estimated for time and resources to create a bottom-up budget.
What EVM requires in addition to a bottom-up budget is a resource-loaded schedule. That
is, EVM requires a schedule that relates the work (scope) and resources (money) to a
specific date range. This is not a requirement unique to EV project management; it is good
project management practice.
With a resource-loaded schedule, it is possible to compare actual performance to what was
planned for specific points in time. The difference between actual and planned is then used
to determine trends. Trends are used to forecast probable completion costs and schedule.
Note
EVM is referred to as project management with the lights on, because it shows
management where a project is and where it is headed.

Milestones
z Achievements that measure and mark progress

Not necessarily major events
Created in order to allow progress to be tracked
Figure 6: Milestones
Milestones are the key to EVM. They are a fundamental strategic tool used in the
subdivision of a projects work effort.
Milestones are established, or created, during planning. They are created with the express
purpose of indicating how much work should have been completed as of a given date.
Milestones are the backbone of how progress is measured in an EVM environment.
Milestones are not necessarily major events. EVM milestones are manufactured to meet
the reporting needs of a project. Some are logical, such as the end of a piece of work.
Others are created based on the need to measure progress as of a certain date or level of
expenditure.
An example milestone for a renovation project could be the following:
As of EOB (end of business) on Friday, May14, 20XX, two-thirds of the painting of the
main floor hallway should be complete, at a total cost of 17 hours labor.
The milestone described does not represent a natural division of the project. It has been
chosen to serve project needs. It happens that Fridays are the cutoff date for EVM
reporting to senior management. The milestone was defined so as to be able to measure
progress as of that date. It is not a big event in the life of the project; it is just a predeter-
mined expectation that is used to gauge how the project is progressing relative to what was
planned.
In EVM, milestones are progress points. You will learn to love them.

Milestones as Measures
z To serve as control tools, milestones must be

quantifiable in terms of:
Completeness (scope)
Cost (expense)
Time required (schedule)
z Definition cannot be vague
Must be able to measure completion
Figure 7: Milestones as Measures
In order to serve as tools for controlling projects, milestones must be defined in three
dimensions. The work involved must be clearly quantified; resources must be allocated;
and timing, or a completion date, must be specified.
In the milestone example for the renovation project, the milestones were defined as
follows:
Scope: Two-thirds of hallway painted
Cost: Seventeen hours of labor
Time: Friday, May 14
In order to serve as progress measures, milestones must be clearly defined. There can be
no confusion about whether or not a task has been completed. There must, therefore, be
some way to gauge the degree of completion.

EVM Project Planning
z EVM requires an understanding of:

Entire scope of a project
How project will be executed
How the steps and stages relate to time and costs
z Exactly the same ingredients as traditional project
management
z However, EVM depends on development of a
resource-loaded schedule
Basis of monitoring
Figure 8: EVM Project Planning
EVM project management is fundamentally the same as regular project management.

There are no additional steps involved. However, some steps must be more carefully
completed than those in projects not employing EVM.
Every project needs to clearly define the scope. Every project must have an execution
plan. Every project must be dismantled into subparts in order to facilitate scheduling and
budgeting.
What is unique about EVM is the care and effort that must be put into the dismantling
of scope into small, measurable tasks and how these tasks are then specifically scheduled
to form a resource-loaded schedule (that is, a schedule that relates expenditures to work
and time).
Note
A resource-loaded schedule is the basis of EVM monitoring.

EVM Terminology
z Milestones
Completion increments
z WBS
Complete analysis of project scope
z PMB
WBS, schedule, budget graph
Figure 9: EVM Terminology
The following are basic EVM terms that are used throughout this manual; it is important
that their role and definition be understood:
Milestones
Work breakdown structure
Performance measurement baseline
Milestones
A milestone is a progress point used to compare planned performance with actual perfor-
mance. Milestones can be natural (for example, the end of a contract) or artificial (for
example, every Friday). Their timing depends on the reporting needs of the project.
Work Breakdown Structure

The WBS (work breakdown structure) is a hierarchical dismantling of a project into its
component parts. The WBS allows the entire scope of a project to be illustrated for review
and discussion.
Performance Measurement Baseline

The PMB (performance measurement baseline) is the planning document that is created
for an EVM project. The PMB documents expectations for the project based on scope,
cost, and time. The structure and style will vary according to an organizations prefer-
ences. There are three key components that must be included in the PMB, as follows:
WBS: Either a WBS or an equivalent analysis of all project work must be
included in the PMB.
Resource-loaded schedule: This is typically a Gantt chart with horizontal bars
indicating when tasks are to be completed, with milestone markers illustrating
control points. Tasks on the Gantt chart will have budget allocations subdivided
into milestones.
Budget graph: The timing and magnitude of expenses is summarized in the
budget graph. At the beginning of a project, the only line on the graph is PV
(planned value). As the project progresses, AC (actual cost) and EV (earned
value) are included.

Notes EVM Statistics
z BAC
Total original (planned) budget
z PV
Original budget line
z AC
Actual performance during execution
z EV
Authorized budget for each task or milestone
Figure 10: EVM Statistics
There are four sets of data generated by EVM projects. This is all
the information that is required to manage EVM projects. From
these data, performance statistics are generated. The data are
described as follows:
BAC (budget at completion): Original completion
budget for project
PV (planned value): The budget line, or how much the
project was expected to cost at any given time
AC (actual cost): What the accountants say was
actually spent
EV (earned value): What the expected cost was for the
work that was completed (the planned value for work
completed)

EVM Data
z Data
BAC and PV available at start of project
AC and EV are result of project performance
z Variances
z Indices Calculated from data
z Forecasts
Data BAC AC EV PV
Variances VAC BAC-EAC CV EV-AC SV EV-PV
Indices TCPI (BAC-EV)/(BAC-AC) CPI EV/AC SPI EV/PV
Forecasts EAC BAC/CPI

Figure 11: EVM Data
Of the four project data, two are generated in the planning stages. BAC and PV are strictly
forecasted numbers. They represent the planned expectations for the project. BAC does
not change. PV is predicted for the entire duration of the project and ends with the BAC,
which is the PV, or cumulative total, at the end of a project.
Data for AC and EV are collected through project monitoring. They are then used to
calculate performance statistics. EV asks what has been completed. AC is the total of what
the accounting department says has been spent on the project.
The remaining parts of the table in Figure 11 will be discussed on subsequent pages.
Basic EVM Terminology Illustrated
Figure 12: Basic EVM Terminology Illustrated
EVM terminology is all interrelated. In Figure 12, the various terms are illustrated with
respect to three basic cost lines, planned, actual, and earned. Having a visual
understanding of the terminology is helpful for interpreting the meaning of EVM
statistics.

Performance Statistics
Data BAC AC EV PV

Figure 13: Performance Statistics
There are three variance statistics used in EVM performance measurement, as follows:
VAC (variance at completion): VAC is the difference between the original
planned completion cost (BAC) and the latest prediction of completion
cost (EAC).
CV (cost variance): CV is the difference between the expected cost to complete
what has been accomplished and what it actually cost.
SV (schedule variance): SV is the difference between what was planned to be
completed as of a given date and what was completed.
There are three index statistics that match up with the three variances, as follows:
TCPI (to complete performance index): TCPI is an indication of the
efficiency rate that would have to be achieved on all remaining work in order to
complete the project on budget. This index is basically a comparison of the
value of work remaining divided by the money remaining. A value of more than
1 implies that all remaining tasks will need to come in under budget (on
average) in order for the project to meet the BAC. The TCPI is compared with
CPI (project cost performance) to determine whether the necessary efficiency
level for the remainder of the project is likely to be achieved. If it is not likely,
there will be a cost overrun.
CPI (cost performance index): CPI indicates how well the project is meeting
its cost targets. A value of 1 indicates that actual costs are exactly the same as
planned (AC=EV) for the work that has been completed. A value over 1
indicates that costs are less than planned (for the work that has been completed).
A value of less than 1 implies that costs have been higher than planned.
SPI (schedule performance index): SPI indicates whether the project is
meeting schedule expectations. A value of 1 indicates that the work completed
to date is right on schedule. A value of over 1 indicates the project is ahead of
schedule. A value of less than 1 implies the project is behind schedule.

Notes
Figure 14: Performance Statistics Terminology

Forecasting
z Cost = BAC/CPI
z Time = BACt/SPI
Data BAC AC EV PV
Figure 15: Forecasting
Forecasts are based on performance indices. If the project has been doing really well up to
this point, what does that imply about the completion cost and schedule? If tasks are, on
average, taking half as long as planned, it suggests that the project overall will be
completed in half the time.
Note
Forecasts use performance-to-date indices to predict the future.
Figure 16: Forecasting Terminology

Dependability of Forecasts
z CPI is a good indicator of long-term results.

10 to 15 percent into project can predict outcomes
with reasonable precision
z SPI is a weak indicator of long-term results.
Must be combined with critical path analysis
Figure 17: Dependability of Forecasts
EVM techniques are better able to predict completion cost than schedule. However, both
completion cost and schedule forecasts remain useful tools.
Forty years of empirical evidence from government acquisition projects has shown that as
little as 10 to 15 percent into a project, the CPI provides a reasonable forecast of what a
project will achieve. What this means is that cost overruns early in a project will not fix
themselves by the end of the project. If anything, the overruns will get worse.
Using EVM, senior management can learn very early in the life of a project whether the
project is likely to meet its targets. Management can then decide whether to abandon the
project early, before a huge amount of money has been spent.
The SPI is a less precise tool than the CPI for forecasting the future. The principle reason
is that not all tasks which affect the SPI are necessarily on the critical path for a project,
and therefore, they do not all affect the completion date. If a large number of tasks that are
not on the critical path are completed ahead of schedule, they will make the SPI look
good, even though tasks that are on the critical path may be behind schedule.
! Caution
In order to use the SPI as a predictive tool, it is necessary to combine it with critical path
analysis. The SPI provides a high-level overview that, when combined with critical path
analysis, allows for an effective prediction of the completion schedule.

z Requires a baseline for comparison

z EVM provides a schedule of expectations
Exceptions to the plan are investigated
z Tells project managers what the best use of their
time is fixing the biggest problems first
Figure 18: Management by Exception
Management by exception requires that there be a plan. The plan is basically a prediction
of how a project should unfold. It creates a baseline of expectations. Exceptions that must
be managed are any performance results that do not match the expectations baseline.
Management by exception uses the guiding principle that managers should concentrate
their energies on fixing problems, the most serious problems first. In an EVM project,
problems are defined as performance results that are not the same as the planned results
(that is, over budget or behind schedule). An exception is any process that is not going
according to plan. The more severe the discrepancy, the higher is its priority for
management attention.
Management by exception is greatly simplified by EVM because exceptions are so clearly
highlighted by routine performance monitoring relative to a highly structured performance
baseline.

The Value of Earned Value
z Will the use of EVM techniques prevent cost

overruns?
No
z Overruns are generally caused by;
Lack of realistic planning
Poor execution
Scope creep
Figure 19: The Value of Earned Value
Is EVM a magic bullet for perfect project performance? No. It is just a tool for the
monitoring and reporting of performance. It will not fix poor planning or incompetence.
Cost overruns and late delivery are typically caused by the following three factors:
Lack of realistic planning: All too often, projects are launched with extremely
optimistic budgets for time and cost. Such projects begin with no chance of
coming in on target. EVM cannot fix them. What it can do is raise the alarm
early. EVM will alert senior management to the fact that the project has an
unrealistic plan. It is up to senior management to heed the message.
Poor execution: Even a brilliant project plan can be undermined by a lack of
skilled people, shortages of materials, and poor oversight. EVM will not fix
these things. It just reports on their effects.
Scope creep: A project plan includes a budget for a defined scope of work.
When additional work is arbitrarily added to the project, it should be no surprise
when cost overruns and delays follow. Again, EVM cannot stop scope creep; it
can only highlight it. Management must do the rest.

Knowledge
Check
Section Review
Summary
EVM is all about planning. EVM requires the creation of a project plan that has the work
divided up into many separately managed tasks and subtasks. Each task and subtask is
defined in terms of when the work will be completed and at what cost.
Completion points for tasks and subtasks create milestones that serve as control points. At
the control points, actual performance is compared with planned performance to measure
project health.
When a task or subtask is not completed on time or within budget, there is considered to be
an exception to the plan. These exceptions guide and direct management energy toward
putting the project back on track.
EVM does not require a unique approach to project planning and management. Rather, it
extracts useful information from planning work that is routinely being done.
Questions
1. What are the constituent parts of a PMB (performance measurement baseline)?
2. What are milestones used for?

3. Which of the following are available at the start of execution of a project?

a. BAC
b. PV
c. AC
d. EV
4. What is meant by the EV (earned value) statistic measured during project execution?
5. What is the EV of the entire project?

2
History of EVM
Section Topics
A Hundred Years of Evolution
Cost Control for Government
Back to Basic Earned Value Principles
Exercise
There are no exercises for this section.

History of EVM
N Knowledge
Guide
W E
Section Objectives

Describe the background of EVM
Explain how EVM evolved out of cost engineering and government
procurement requirements

History of EVM
A Hundred Years of Evolution
z Cost engineering has been around in various forms

for many years.
Started on factory floor relating time, cost, and
output
z In 1967, the U.S. Department of Defense formalized
EV techniques as part of procurement process for
major new systems.
Figure 20: A Hundred Years of Evolution
Earned value is basic cost accounting being applied to the one-time events we call
projects. The practices we now call EVM (earned value management) developed out of
cost management techniques used in large factories as early as the 1800s. Industrial
engineers of the time used a three-dimensional approach to the monitoring of costs. They
compared planned output, timing, and costs to actual output, timing, and costs to provide a
picture of performance relative to original expectations. Modern earned value is exactly
the same thing.
In the 1960s, the United States Air Force led in the creation of a formalized version of
earned value for use on projects. This effort standardized the procedures and practices so
that government contractors were all using the same terminology.

History of EVM
Cost Control for Government
z C/SCSC
35 standards of compliance for contractors
Required on all cost-plus contracts
Imposed consistency in reporting of performance
when government was at risk for cost overruns
Figure 21: Cost Control for Government
The C/SCSC (Cost/Schedule Control System Criteria) developed by the United States Air
Force defined 35 reporting criteria that were required by any private contractor hoping to
work for the government on major systems acquisitions.
An example of one of the 35 criteria is the following:
Define all authorized work and related resources to meet the requirements of the
contract, using the framework of the CWBS (contract work breakdown
structure).
The C/SCSC imposed reporting and documentation discipline on major procurement
projects where the government was at risk for cost overruns. It forced contractors to
organize project information in a consistent format that could be readily interpreted by
government representatives.
Limited Adoption in Private Sector
z The C/SCSC requirements started off well but

increased in complexity
z The cost and cryptic language of acronyms
alienated many project managers.
z The C/SCSC was suitable (desirable) only for major
system acquisitions.
Success was limited to governments
Figure 22: Limited Adoption in Private Sector
The C/SCSC was successful from the perspective of government but was not adopted by
the private sector. Over the 30 years of its life, the C/SCSC went through an evolution that
created ever more reporting hurdles and became a sort of bureaucracy of its own, with its
own language of acronyms.
The experience with C/SCSC did, however, convince some industry leaders that there was
value in the application of EV (earned value) to projects, just not in the way it was being
utilized by government.

History of EVM
A Simpler Version: EVMS
z New criteria (32) were adopted by government

in 1998
Called EVMS (Earned Value Management System)
Simplified terminology
Designed to be more user-friendly
Intended for adoption by private sector
Old Term New Term

BCWP EV
ACWP AC
BCWS PV
Figure 23: A Simpler Version: EVMS
A more user-friendly version of the C/SCSC was developed and adopted by both the
United States government and industry in the late 1990s. The new version has slightly
fewer criteria (32 instead of 35) and was fundamentally intended to be more user-friendly.
The creation of the new EVMS (earned value management system) led to a shift away
from government leadership in the development of EV and back to the private sector.
Important Terms
Important Terms: With the change from the C/SCSC to EVMS, there were changes to the
terminology. The changes are as follows:
BCWP (budgeted cost of work planned) became EV (earned value)
ACWP (actual cost of work planned) became AC (actual cost)
BCWS (budgeted cost of work scheduled) became PV (planned value)

History of EVM
Notes Back to Basic Earned Value Principles
z Since 1998, an even more simplified version has

developed.
EVM
A return to the basics of cost engineering
Figure 24: Back to Basic Earned Value Principles
The EVM techniques discussed in this course draw on lessons from

the past. EVM has both returned to its roots in cost accounting and
remained high tech regarding the use of computers and statistical
analysis.
The new EVM is efficient, effective, and easy to use. It is intended
for general use by project managers working on any type of project
where the buyers (senior management) want to be kept informed of
project progress, not just the final outcome.

History of EVM
Knowledge
Check
Section Review
Summary
EVM is cost accounting for projects. Its roots date back to industrial engineering practices
of the late 1800s when engineers managed production by relating cost, scope, and time to
what were called standards, or expected results.
The USDOD (United States Department of Defense) adopted a formalized version of
earned value in the 1960s. Over the next 30 years, the C/SCSC evolved into a highly
complex system of controls that many project managers thought were unnecessarily
bureaucratic.
In the late 1990s, a new set of EV criteria was developed. This marked the beginning of
the return of EV to fundamentals. The new EVMS was adopted by the government,
followed quickly by industry associations. Since then the development of EV has been led
by the private sector rather than by government agencies.
Questions
1. What did the C/SCSC (Cost/Schedule Control System Criteria) do for the government?
2. Why was there limited adoption of the C/SCSC by the private sector?
3. What is meant by simplified EVM?

3
Ingredients Necessary for EVM
Section Topics
EVM Planning Overview
Management Questions Answered by EVM
EVM Stages
Precision and Rigor
Three-Dimensional View of a Project
Exercise
End of Project Reporting with Scope Changes

N Knowledge
Guide
W E
Section Objectives

Describe the management steps necessary for effective EV project management
Outline the development stages of an EV management plan
Explain how the significance and uncertainty of a project determines the
EVM rigor

EVM Planning Overview
z What must be delivered? (scope)

z How will the work be done? (decomposition)
z Who is going to do the work? (responsibilities)
z When will the pieces of work be done? (schedule)
z What resources will each piece consume? (cost)
z Combine all of these into a PMB.
WBS, resource-loaded schedule, and performance
graph
Figure 25: EVM Planning Overview
EVM follows the same planning procedures as any other project. Planning for EVM
includes the following:
You must know what the project is expected to deliver.
You must decompose the objectives (deliverables) into component parts
necessary to accomplish the work.
The work must be assigned to responsible departments and individuals.
The work must be scheduled.
The work must be budgeted.
Finally, the outputs of the planning processes must be combined into a plan of
record that outlines expectations. In EVM, project expectations are summarized
in a PMB (performance measurement baseline).
Management Questions Answered by EVM
z Are we ahead or behind schedule?

z When is the project expected to be finished?
z Are we ahead or behind on budget?
z What is the project likely to cost?
z How much more will the project cost?
z How efficiently are we using time and money
relative to the original plan?
Figure 26: Management Questions Answered by EVM
EVM is a monitoring and control tool that allows management to ask and answer key
operational questions that would be impossible without EVM or some other cost
accounting system. EVM turns the project lights on.

EVM Stages
1. Scope definition
1.1 Deliverables (WBS)
1.2 Decomposition into tasks
2. Schedule and budget development
2.1 Dependency analysis
2.2 Network diagram
2.3 Resource estimating
2.4 Schedule
3. Integration of cost, scope, and schedule into control
account plans
3.1 Control account plans
4. Earned value baseline and PMB
5. Performance monitoring
6. Forecasting
Figure 27: EVM Stages
There are six stages to EVM planning and implementation. The stages are as follows:
1. Scope definition
2. Schedule and budget development
3. Control account plans
4. Earned value baseline and PMB
5. Performance monitoring
6. Forecasting

Scope Definition
z EVM planning begins with a complete description

of what the project will deliver.
What is in and what is out
z A complete description of scope is absolutely
necessary.
z Once defined, change control procedures must be
strictly enforced.
Scope creep undermines value of EVM results
Figure 28: Scope Definition
The first step in EVM, as in any project, is to ensure that the entire scope of the project is
clearly defined. With EVM, you cannot fire the gun and aim later. Planning must be
exhaustive and complete before work can begin.
Key to successful EVM project planning is an early emphasis on project boundaries. What
is in scope and what is out of scope? Only after scope definition is complete can the rest of
the planning process be tackled.
It follows that effective change controls are critical to successful EVM. Once the scope
has been defined, all changes must be integrated into the plan; otherwise performance
measurements will be distorted.
WBS and Decomposition
z The WBS outlines the deliverables.

z Deliverables must then be decomposed into work
packages and tasks.
z Decomposition continues until the work can be
budgeted, scheduled, and effectively managed.
z Milestones are created to mark and measure
progress.
Figure 29: WBS and Decomposition
Scope is formally defined in the form of a WBS (work breakdown structure). The WBS
provides a hierarchical display of project deliverables that is easily interpreted by project
stakeholders.
After the deliverables have been defined, it is necessary to decide how the work will be
completed. Decomposition is used to provide a breakdown of the work necessary to
produce the deliverables. Decomposition down to ever smaller work packages and tasks
continues until it is possible to individually budget, schedule, and manage each task.
During the decomposition process, it is customary to create milestones that will be used in
performance measurement.

Schedule and Budget Development
Scope
Tasks
Dependencies
Network
diagram
Resource
estimating
Schedule
Figure 30: Schedule and Budget Development
Schedule development follows from decomposition, and it starts with dependency

analysis, in which all of the tasks are analyzed in terms of their sequence. It is necessary to
know which activities must come first, second, and so on.
A task list in combination with the dependency analysis allows for the drawing of a
network diagram. The network diagram illustrates in broad terms how the project will be
executed, and it illustrates the dependencies between tasks.
Resource estimating involves determining how much time and money will be required to
complete each task. Cost estimates are used to compile a budget figure. Time estimates are
used in conjunction with the network diagram and critical path analysis to determine a
project schedule.
Control Account Plans
CAPs are groups of related tasks.

z Create monitoring control points for a project
Larger than a task, smaller than the project
z Simplify analysis and reporting
z Are effectively subprojects
Figure 31: Control Account Plans
CAPs (control account plans) summarize the previous planning effort into neat little
packages. CAPs integrate scope, schedule, and cost by tying the three together in a formal
document.
There is nothing exceptional about this. The planning efforts already completed have
provided all the necessary information; it is just organized within CAPs. Every task in a
CAP has defined work, a specific budget for that work, and a date range when the work is
supposed to be completed.

CAPs generally are made up of a number of related tasks, such as all the programming
activities or all the activities for which a particular department is responsible. CAPs,
therefore, serve as summation points for strategic management control. They are in effect
subprojects of the main project. They allow different departments or cost centers to be
monitored separately from the project as a whole.
Earned Value Baseline and PMB
z Scope, schedule, and budget are the key

ingredients of the EV baseline
Serve as points of reference or stakes in the ground
Basis of comparisons during execution
z PMB
Time-phased budget
WBS, resource-loaded schedule, and budget graph
Figure 32: Earned Value Baseline and PMB
EV (earned value) baseline is the term used to refer to the methods applied to specific
tasks to measure degree of completion. Each task has its own EV baseline. Collectively,
all the tasks in a project add up to an overall EV baseline. The EV baseline then becomes
an integral part of the PMB (performance measurement baseline), which is a subsection of
a project plan that focuses on the relationships among time, cost, and scope.
A performance measurement baseline documents specific expectations of spending and
work completion at intervals throughout the project. It serves as a point of reference.
During execution, the project is monitored for time, cost, and scope. Actual performance
is then compared with the performance measurement baseline.
The performance measurement baseline defines expectations for the project whereas the
EV baseline defines the expectations for specific tasks.

Notes Performance Monitoring
z Comparing actual performance with planned

z During execution only need to track:
Actual spending (resource consumption)
What has been accomplished
z Execution data is compared with planned
performance to determine cost and schedule
variances.
Figure 33: Performance Monitoring
The ability to effectively monitor projects is what has driven the

adoption of EVM by the private sector. Numerous milestones and
control points for a project mean that management can measure
whether the project is performing to plan.
The only data that need to be collected from the project are the
consumption of resources (actual spending) and what has been
accomplished (earned value). These data are then plugged into
EVM formulas to generate performance statistics that tell
management how the project is progressing relative to plan.
Forecasting
z Variances are used to predict completion cost and

schedule.
z Effective when only 10 to 15 percent of project has
been completed.
Figure 34: Forecasting
Forecasting is the final step. It is what really turns the lights on for
project managers.
Very early in a project, it is possible to use EVM to predict the
probable completion budget and schedule. This means that you do
not need to be 80 percent through a project before you see the
writing on the wall. EVM turns the lights on early enough for
management to do something about the problemwhich may be to
shut the project down.

Precision and Rigor
Frequency of reviews
Significance of project
Detail of analysis
gor
r i
M
EV
Uncertainty of success
Figure 35: Precision and Rigor
How much effort should be put into planning for EVM? Should milestones be created for
the end of every day, every week, or every month? How detailed should decomposition
be? What is a reasonable size of a task? Should it be one man day or two weeks?
The answers depend on two factors. How important is the project to the organization and
how uncertain is success? If the project is critical to the organizations very survival, you
should err on the side of frequent reviews and small tasks. If the project is something your
organization has never done before, then this, too, would suggest more frequent reviews
and detailed planning.
More frequent reviews and more detailed planning will result in tighter project controls.
Performance statistics will come more frequently, allowing management to react early and
often to exceptions.

Three-Dimensional View of a Project
z Management with the lights on

z A three-dimensional view
Integration of scope, cost, and time
Resource-loaded scheduling
z Tracking performance allows exceptions to be
highlighted and investigated
z Variances allows probable outcomes to be forecast
Figure 36: Three Dimensional View of a Project
EVM provides management with an integrated view of a project. Scope, time, and cost are
not treated as separate departments, but rather as interrelated variables that must be
managed in concert. Without EVM, project managers are forced to guess at project
statistics that EVM makes very clear.
EVM provides management with an early warning system. It highlights problems as they
occur and directs management energies to where they are most needed. EVM turns the
lights on.

Knowledge
Check
Section Review
Summary
EVM implementation is essentially the same as conventional project planning. The
difference is in the details. EVM requires clearly defined tasks with milestones that are
independently budgeted and scheduled.
The PMB (performance measurement baseline) represents the accumulation of data for
the project. It details expectations and allows performance data to be summarized in a
visual display of project results.
Questions
1. Define the term resource-loaded schedule.
2. How does a PMB (performance measurement baseline) serve as a stake in the ground, or
point of reference, for a project?

3. What are the three key ingredients of a PMB?
4. In what way does the significance of a project to an organization affect the way EVM is
applied?
5. What is the significance of having a three-dimensional view of a project?

4
Defining Scope
Section Topics
Defining the Work to Be Done
WBS Principles
Exercise
Scope Analysis: Prepare a Work Breakdown Structure

Defining Scope
N Knowledge
Guide
W E
Section Objectives
After completing this section you will be able to:

Define the meaning of scope
Establish what is in and what is out of a projects scope
Explain the principle functions of a work breakdown structure
Utilize decomposition in the analysis of project scope

Defining Scope
Defining the Work to Be Done
z The work to be done = scope.

z Scope is the hardest constraint to accurately
define.
z Inaccurate scope definition is the single greatest
source of project problems.
Symptoms are cost and schedule overruns
Figure 37: Defining the Work to Be Done
Defining scope is the first and trickiest part of project planning. It is not sufficient to have
just a good idea of what the project will include. For EVM, the complete body of work
must be clearly defined.
Scope definition is the most elusive of all project planning steps. Poorly defined scope
ultimately results in project changes that lead to cost and schedule overruns. Any project
that starts with a clear and complete definition of what is to be done will have a much
better chance of successful completion than those that do not.
PMBOK
Scope: The sum of the products, services, and results to be provided as a project.
Whats In and Whats Out
z EVM requires that all scope be planned.

No surprises, nothing vague
z EVM requires a distinct division between what is in
and what is out.
z Scope creep must be avoided by:
Thorough scope analysis during planning
Rigorous change management during execution
Figure 38: Whats In and Whats Out
The problem with scope definition is that customers dont know what they dont know.
When trying to clarify exactly what is to be included, many stakeholders are unable to
articulate their needs.
A useful practice is to create lists of both what is in and what is out of the scope of a
project. The lists are then reviewed with stakeholders to ensure they understand what the
project will not deliver, as well as what it will deliver.
After working so hard to define the scope, you should not be surprised that change
controls are very important. Unapproved or unplanned changes to the work, called scope
creep, will undermine the value of EVM measurements.
Defining Scope
z A tool for organizing and describing the scope of a

project.
z A deliverable-oriented hierarchy of components.
z Each descending level represents an increasingly
detailed description of the work.
z Includes both internal and external deliverables.
z A project is the sum of the elements of the WBS.
If it is not in the WBS, it is not in the project.
Figure 39: Work Breakdown Structure
The WBS (work breakdown structure) is used to document what the project will deliver.
Like an organization chart, it is a hierarchical analysis of what the project will do and how
it will be done. Each descending level in the hierarchy provides a more detailed analysis of
what will be accomplished.
The WBS represents the entire project. It is used for discussion and negotiation with
stakeholders. When negotiations are over, if it is not in the WBS, it is not in the project.
The WBS is, therefore, a definitive statement of what will be included in the project.
Example WBS
Online
Reservation Project
System
Major deliverables
Business Systems Internet Implementation Project
analysis design services management
Existing Existing Automated

logic system booking Subdeliverables
review logic
Systems
integration
Requirements Server-side
Branch analysis development
restruc.
Figure 40: Example WBS
Like an organization chart, the WBS illustrates the relationships between project
components in a graphical way. The WBS is a valuable communications tool for
explaining to stakeholders what the project will and will not entail.

Defining Scope
Decomposition to Work Packages
Business Analysis
Phase Major deliverable
Subdeliverables
Existing Bus. process Branch
logic review analysis restructuring
Data Est. success Assess future

management plan criteria workload
Meet key Work Build test Def. req.

sources packages plans skill sets
As-is Create test Def. branch

workshop data categories
Figure 41: Decomposition to Work Packages
The WBS illustrates how major deliverables are decomposed into subdeliverables, and
then into work packages.
The WBS is considered to be complete when the deliverables have been broken down into
work packages. According to the PMI (Project Management Institute), work packages are
the lowest level of the WBS.
Figure 41 illustrates a decomposition of the business analysis branch of the WBS shown in
Figure 40.

Defining Scope
Decomposition to Task and Activity
Data Work package

Management Plan
Activity analysis
Technical
Needs assessment Activities Specifications
Task Subtasks
Project
Meet with Analyse Compile
Major deliverable
stakeholders data report
Subdeliverable
Regulatory Legal Work package
review opinion Activity
Customer Market Competitive Task
Analysis analysis analysis Subtask
Figure 42: Decomposition to Task and Activity
In the example in Figure 42, the data management component from Figure 41 has been
broken down still further into activities and tasks.
Note
Decomposition of work packages into activities is not considered by the PMI to be officially
part of the WBS. Instead, the decomposition of work packages is referred to as activity
definition. Activity definition (decomposition) is typically the responsibility of someone
(other than the project manager) who has been charged with completion of a work
package. For the purposes of the discussion below, there is no distinction between the
WBS and activity definition. All details of scope breakdown are referred to as being part of
the WBS
Note
Planning and budgeting occurs at the activity or task level. Bottom-up budgeting is based
on the accumulation of all of the tasks of a project to create a total budget.

Defining Scope
WBS Terminology
The terminology used in the WBS varies between organizations. The hierarchy used in
this course includes the outputs of activity definition and will be as follows:
Project
Divisions
Internal versus external
Major deliverables
Subdeliverables
Work packages
Activities
Tasks
Subtasks
Not every level of the WBS will be necessary for every project. The levels employed will
reflect the unique nature of the project.
The divisions between the levels of a WBS are not necessarily rigid. What is the
difference between a major deliverable and a subdeliverable? The answer depends on
organizational rules and a project managers preferences.
For the purposes of this manual, the term work package will be used to refer to a
deliverable that requires further subdivision in order to be budgeted. The term task will be
used to refer to the basic building block of the fully decomposed WBS. It should be
understood that some projects may use the term activity to refer to the lowest level of a
decomposed WBS.

Defining Scope
WBS Principles
z WBS reflects the way a project is planned and will

be managed.
Provides a visual description of execution strategy
z Decomposition is complete when tasks can be
accurately estimated and effectively managed.
z Individually estimated tasks are the building blocks
of a resource-loaded schedule.
Figure 43: WBS Principles
The WBS is designed to illustrate not only the component parts of a project but also how
the component parts relate to each other. The divisions and branches are intended to show
logical connections and separations between departments or categories of effort. For
example, the portion of a project that is being contracted out will be on a separate branch
from the portions that are being completed in-house. By illustrating in broad terms the
divisions of effort, the WBS provides a visual illustration of execution strategy.
Decomposition of the WBS is complete when the analysis is granular enough to match the
risk and rigor requirements of the project. A very important project that involves
unfamiliar technology would be sliced up more finely into smaller task sizes than a trivial
project that involves familiar activities.
The smallest divisions of the WBS (tasks or activities) are then separately budgeted and
become the building blocks of a bottom-up budget.

Defining Scope
Knowledge
Check
Section Review
Summary
Complete and thorough scope definition is essential for EVM. The tool of choice for this
process is a WBS. The WBS provides a graphic illustration of the boundaries of a project
and allows all stakeholders to easily visualize what the project will accomplish.
Questions
1. What is the role of a WBS in EVM?
2. Why is it important to create a list of work that is out of scope?

Defining Scope
3. What is meant by the statement, If it is not in the WBS, it is not in the project?
4. When building a WBS for use in EVM, when is decomposition complete?

5
Scheduling the Project
Section Topics
Scope and Then Schedule
EVM Scheduling Requirements
Exercise
Create a Project Schedule

N Knowledge
Guide
W E
Section Objectives

Outline the schedule requirements for EVM
Explain the role of a master schedule
Vertically integrate tasks into a master schedule
Sequence tasks for creation of a timeline

Scope and Then Schedule Notes
z First, define the work.

z Next, plan and schedule the work into a fixed
time frame.
z The objective is a time-phased performance plan.
z A tightly controlled schedule is an absolute
necessity for EVM.
Timing must be important to management.
Figure 44: Scope and Then Schedule
After the scope is defined, the next step is schedule development.

The objective is the creation of a resource-loaded schedule that
specifies expectations of what will be completed and at what cost at
various times throughout the project.
EVM requires that the project be carefully scheduled and then
managed to that schedule. For EVM to be effective, timing must be
important to management. This means that the project schedule is
respected. Changes to the schedule are not discretionary. They
require a formal change order and revision to the performance
baseline.

EVM Scheduling Requirements
z Master schedule
z Vertical integration of tasks with master schedule
z Task dependencies built into schedule
Figure 45: EVM Scheduling Requirements
EVM scheduling is essentially the same as scheduling in any project. However, EVM
requires that the schedule include features that may not be a requirement in projects not
employing EVM. There must be a master schedule that all tasks are related to, and the
schedule must reflect dependencies.
Master Schedule
z A schedule to which all other schedules are

subordinate
z All departments must work toward same major
milestones (for example, the launch date)
Figure 46: Master Schedule
A master schedule is a big picture schedule. There may be hundreds of people and several
departments working on a project. Each department will have its own time frame for when
it expects to complete its work.
For EVM to be effective, every department and individual contributing to a project must
be working to the same major target dates. Everyone has to recognize the same launch
date. What this means is that the schedule of a particular department cannot be permitted
to drift in isolation. All the components of a project must be integrated into the same
timeline.

Vertical Integration
z Vertical integration of schedules

Each task must have a clear start and end date that
is related to the master schedule
z Everyone working on project must understand how
his or her task integrates into the project
Start and end dates relative to other tasks
Figure 47: Vertical Integration
Vertical integration follows from having a master schedule. Everyone working on a

project must understand how his or her piece of the puzzle integrates into the big picture,
both technically and in terms of timing.
Horizontal Integration
z Dependencies between tasks understood and built

into schedule
z Critical path method used in schedule development
Network diagram
Critical path analysis
Figure 48: Horizontal Integration
Horizontal integration relates to dependencies. EVM schedules must reflect the pattern of
execution of tasks in order to forecast performance as it is expected to occur. Horizontal
integration is achieved through the use of network diagrams and critical path analysis.

Example Schedule
z Overall time frame defined

z Clear relationship between timing of tasks
z Consideration given to task dependencies
Budget Week 1 Week 2 Week 3 Week 4
Task Dollars Days Su M T W T F Sa Su M T W T F Sa Su M T W T F Sa Su M T W T F Sa
Remove rocks+ trees $ 6,000 2
Remove sod $ 8,000 4
Level and top dress $ 5,000 2
Install sprinkler sys. $ 6,000 7
Replace sod $ 6,000 5
Administration $ 3,100
Total $34,100
Figure 49: Example Schedule
EVM schedules are not necessarily complex. Gantt charts are a common method used to
illustrate the various components of an EVM schedule.

Knowledge
Check
Section Review
Summary
EVM scheduling requires only common project management practices. The objective is to
put each separate project activity into a fixed time frame. The accumulation of the many
separate fixed time frames results in the overall project schedule.
EVM scheduling requires that all components of a project be integrated into one master
schedule, that the timing of individual tasks be clearly coordinated with other tasks, and
that the schedule include consideration of the sequence of task execution.
Questions
1. What is a time-phased performance plan?
2. What aspects of planning need to be completed before scheduling can be done?
3. Why is a master schedule a necessity for EVM?

4. What is meant by vertical integration?

6
Integrating Scope, Schedule, and
Costs through CAPs
Section Topics
The Role of CAPs
CAP Ingredients
Exercise
Create CAPs for the Project and Prepare a Budget Estimate

Integrating Scope, Schedule, and Costs through CAPs
N Knowledge
Guide
W E
Section Objectives

Utilize CAPs as a tool for the integration of scope, time, and cost
Define the ingredients necessary for the creation of CAPs
Explain what the rules are for managing CAPs

z CAPs are combinations of related tasks.

Combined to create mini projects within a project
z CAPs are used as control points for EVM
measurement.
z Each one has its own bottom-up performance
measurement baseline.
Figure 50: Control Account Plans
The CAP (control account plan) is a tool to help organize costs into reasonable groupings.
CAPs are combinations of related tasks, such as all of the software development efforts, or
all of the work being performed by a particular department.
CAPs are created at the discretion of the project manager to serve as control points. They
effectively create mini projects within the main project. The performance of each mini
project can then be judged separately.
During execution, performance measurement is done at the task level, but the results of
every task are not reported to senior management. Reports of project progress are based
on the combination of task results into statistics for CAPs, and then all of the CAPs are
combined to produce overall project statistics. In this way, management gets a stepped
view of project performance, but is not burdened by a mountain of details.
The Role of CAPs
z CAPs reduce reporting complexity within projects.

Summation points for reporting EVM stats by
department
z CAPS are building blocks for performance
measurement.
z The summation of CAPs is the total project value.
z The master schedule sets the time frame for
each CAP.
Figure 51: The Role of CAPs
The use of CAPs reduces the reporting complexity of projects. Without them, the only
statistics generated by a project are those for individual tasks and for the project as a
whole. CAPs introduce an intermediate level of reporting and allow a project to be
effectively analyzed along functional lines as well as by individual tasks.
A CAP has its own baseline that is a summation of the tasks within the CAP. The
summation of all the CAPs within a project creates the baseline for the entire project.

CAP Ingredients
z Discrete scope of work

One or more specific tasks
z Time frame for each task
z Authorized resources (budget) by task
z Responsible individual or department
z Performance measurement milestones
Method used to measure degree of completion
Figure 52: CAP Ingredients
CAPs are control documents that tie important elements of a project together. Each task
within a CAP is documented in terms of scope, time, and cost, as well as the department or
person responsible for the work. The ingredients in a CAP also include milestones that are
used to measure the degree of completion of the work at specified time intervals.
CAP Size and Number
z No set rules for determining size of CAPs

z Easier to manage projects with fewer CAPs
z Used as strategic control points
Number and size determined by project
Figure 53: CAP Size and Number
There are no set rules for determining the size of CAPs. The number of tasks within a CAP
should be determined by the structure of the project and by the reporting needs of
management.
It is easier to manage projects with fewer CAPs, but the tradeoff is a less granular analysis
of project results.
The CAP Rule

z There can be no shifting of resources.
Indiscriminate transfer of either budget or work
between CAPs will distort performance measures.
Budget and work must move together (if at all).
Figure 54: The CAP Rule
The one CAP management rule is that there can be no indiscriminate shifting of either
budget or work separate from each other. In other words, your team cannot arbitrarily
decide to combine tasks from different CAPs because they thought of a new way to get the
work done. Budget and work must move together, and then the baseline needs to be
revised to reflect the changes.
CAP Example
CAP name: Data preparation Responsible person: Bob Dovey

Tasks Week 1 2 3 4 5 6 7 8 9 BAC
1.1.3 PV $ 7,200
Prepare database EV
AC
Description Creating database of stores
EV measurement
Assumptions 15 man days (3 weeks), 8 hrs per day, $60/hr for administrative office staff
1.1.4 PV $ 75,000
Input sales data EV
AC
Description Entering sales data into oracle database
EV measurement
Assumptions 5 minutes per record, 15,000 records, $60/hr

Figure 55: CAP Example
The CAP illustrated in Figure 55 is incomplete. There are two tasks. Included for each
task is a description of the scope of the work involved and a defined budget. The respon-
sible person is indicated. However, there is no reference to timing or to an EV
measurement method. These will be added as the course progresses.
What Is Left to Complete a Project Plan?
z EVM requires:
Integration of scope, time, cost, and responsibility
Just good project management practices, but
especially important for EVM
z Completion of project management plan requires
only a few additional steps
Quality, communications, risk, and procurement
Figure 56: What Is Left to Complete a Project Plan?
Is a project plan complete by the time you have created tasks, CAPs, and ultimately a
PMB? No. The hardest parts of project planning are done, but there is still work to be done
in terms of quality management, communications, risk analysis, and procurement.

Knowledge
Check
Section Review
Summary
CAPs are summation points for related tasks. They document all the activities for a
department or for a subproject of a big project.
CAPs are control documents that summarize critical information about the tasks that they
include. The only management rule is that money and scope be shifted together, if at all.
Questions
1. What are the ingredients of a CAP?
2. What is the ideal size for CAPs?
3. What is the one CAP management rule?
4. How do CAPs serve as control points for a project?

7
Establishing an EV Measurement
Baseline
Section Topics
EV Measurement Baseline
Questions Answered by the Baseline
Planning and Measuring Earned Value
Establishing an EV Measurement System
PMB Components
Managing Change
Exercise
Complete an Earned Value Baseline

Establishing an EV Measurement Baseline
N Knowledge
Guide
W E
Section Objectives

Develop an EV measurement baseline
Outline the techniques that can be used to measure EV for specific tasks
Ask questions related to an EV baseline
List the components of a performance measurement baseline

EV Measurement Baseline
z A stake in the ground

Basis of comparison between actual and planned
performance
Point of reference
z A detailed description of performance expectations
by task
Expectations add up to create baseline for project
Figure 57: EV Measurement Baseline
The EV (earned value) baseline is the summation of expectations for the project. During
execution, the baseline serves as a reference point to remind everyone of what results were
anticipated at any given time in the project.
The EV baseline is made up of EV measurements for each individual task in a project.
They combine to create an overall baseline that becomes part of the PMB.
Questions Answered by the Baseline
z What measure will be used to determine at which

point the work is half done?
z How much work should be completed at the end of
each two-week period?
z What stages of completion will the work go
through?
z How can you gauge progress?
Figure 58: Questions Answered by the Baseline
Creating an EV baseline allows management to answer a wide range of questions about

progress. In effect, the EV baseline defines progress for individual tasks within a project.
Monitoring of project results determines whether actual results are matching progress as
defined in the baseline.

Planning and Measuring Earned Value
z Example project:
A contractor has been hired to paint the interior walls
of your office building.
There will be two painters at a total cost of $50/hr.
The work will be done at night to avoid disruptions.
(There will be no supervision.)
The project is expected to take six weeks and cost
between $22,000 and $24,000.
z After one, two, or three weeks of effort, how
will you determine whether or not the project is
on track?
Figure 59: Planning and Measuring Earned Value
The EV baseline requires that the progress of every task in the project be measurable.
For very short tasks, the only measure that might be necessary is completion. It is then
necessary to be able to determine whether all the work defined for the task is complete, at
what cost, and when.
For long tasks, the work needs to be divided into milestones, each with its own measure of
completion.
A hypothetical example project involving the painting of the interior walls of an office
building is described below. This example will be used in the discussions that follow about
the various methods for measuring the degree of completion of tasks.
Example Painting Project

For this project, there will be two painters at a total cost of $50 per hour. In order to avoid
disruptions to office staff, the painters will work at night, moving furnishings as necessary
to access the walls and then returning the furnishings to where they had been.
As the painters will work at night, there will be no supervision. You, as the project
manager, can only hope that they work hard and do not sleep through their shifts.
The owner of the painting company estimated that the project will cost between $22,000
and $24,000 and that it will take six weeks to complete. It is a cost-plus contract, so costs
are open-ended. Your company will have to pay for whatever hours the painters claim to
have worked.
If you were responsible for this project, how would you determine if the painters were
working hard?

Establishing an EV Measurement System
z Must choose a performance measurement system

for each task
z Choice is determined by nature of work
z First step is to research the work required
Must understand what you are trying to measure
Figure 60: Establishing an EV Measurement System
Measuring earned value means being able to determine the level of completion of tasks.
Establishing milestones, such as half done or 25 percent done, requires an understanding
of the activities involved. You must understand the nature of the work in order to be able
to subdivide it into logical components.
There is a variety of EV measurement systems. The choice of system is driven by the
project managers experience and preferences.
Considerations for Choosing a Measurement Method
z How many reporting periods will the work package

overlap with?
z Total cost of task
z Implications of risks
z Are the tasks non-recurring or recurring?
Non-recurring (one-time event)
Example: Hardware installation and testing
Recurring (continues throughout project)
Example: Project management
Hard to measure progress
Figure 61: Considerations for Choosing a Measurement Method
When selecting a measurement method, it is important to consider the nature of the task
involved.
Tasks that extend over a long period of time, and, therefore, several reporting periods,
must be measured differently from very short tasks. Long tasks must be subdivided into
milestones that match reporting cycles.
Is the task valuable? How much effort should be put into controlling and monitoring a task
of under $1000, or a task of under $10,000? The more valuable a task, the more control
effort is justified.
How risky is the task? How worried should you be about failure? A task that is on the
critical path of a project and that involves unfamiliar technology should be measured more
carefully than familiar tasks off the critical path.

Notes If a task is non-recurring, it is a one-time event, such as the writing

of product documentation. This does not mean that it is the only
time anyone has ever written documentation; it means that as far as
the project is concerned, the documentation task has a discrete life
span. Non-recurring tasks make up most project activities.
Recurring tasks are things like project management and security
services. They are project costs, but are not discrete. There may not
even be a measurable deliverable. If there is no deliverable, how do
you measure degree of completion? Recurring costs require special
treatment in an EV world.

Methods Used to Plan and Measure EV
z Weighted milestones
z Fixed formula by task
z Percentage complete
z Percentage complete plus milestones
z Equivalent completed units
z Earned standards
z Apportioned relationship (Recurring tasks)
to discrete tasks
z Level of effort
Figure 62: Methods Used to Plan and Measure EV
Broadly speaking, there are eight methods used to measure completion rates. Each method
will be discussed in turn.
Weighted Milestones
z Work package is divided into finite chunks (tasks)

with milestones as measures of completion.
z Each task (milestone) is assigned a portion of the
original budget from work package.
z 100 percent of budget has been earned when all
milestones (progress measures) have been met.
Figure 63: Weighted Milestones
The weighted milestone method is the easiest measurement method to grasp and the
hardest to implement. This method requires that the work be divided into chunks and that
each chunk have its own budget and schedule.
It sounds simple, but the problem is coming up with workable divisions of the labor. The
divisions must work not only in theory, but also in practice. In order to divide work into
weighted milestones, it is necessary to have a thorough understanding of the work
involved.

Weighted Milestones Example 1
z Reporting period? Office Painting Example

z 2 painters working
z Possible measurement methods: at night
z $50/hr total cost
Square footage of surface area z 6 weeks, $22,000 to
covered $24,000 estimate
z 5 floors, varying
Number of rooms completed number of rooms
Number of floors completed z 60 separate offices
(furniture to move)
Square footage of floor area with z 5 board rooms
finished walls z Large foyer
z 1200 ft. of hallway
z What estimating method did
z 14,000 sq. ft. of floor
painters use to come up with space
their budget figures?
Figure 64: Weighted Milestones Example 1
In order to use the weighted milestone method for the example painting project, you need
to know more about the work involved and how it can be subdivided. Understanding the
nature of the work allows you to generate possible measurement methods. It might be
simplest to use the same method that the painting contractor employed when creating the
original budget estimate.
Weighted Milestones Example 2
z Reporting period = two weeks Office Painting Example

z EV Milestones at night
z $50/hr total cost
1/3 of floor space (4,700 sq.ft.) of z 6 weeks, $22,000 to
building complete $24,000 estimate
z 5 floors, varying
EV = $8,000 number of rooms
z 60 separate offices
(furniture to move)
z 5 board rooms
z Large foyer
space
Figure 65: Weighted Milestones Example 2
Ultimately, a choice must be made, and then the work must be divided into discrete
milestones that reflect the reporting cycle.
In the example in Figure 65, a reporting period of two weeks has been chosen with an
earned value of $8,000, which represents one-third of the total budget cost. This means
that the project manager will let the painters work for two weeks before measuring their
effectiveness.

Weighted Milestones Problems
z A preferred method, but!

z It is a lot of work to set up
z Difficult to plan and administer
Requires detailed understanding of activities and
measurement tools
Requires cooperation between everyone involved
Figure 66: Weighted Milestones Problems
The weighted milestone method is arguably the best. However, it suffers from being a lot
of work to set up. The planners need to thoroughly understand the activities involved,
which generally requires the cooperation and coordination of team members.
Fixed Formula by Task
z Choosing a starting and ending proportion of

expense
z Examples: 10/90, 25/75, 50/50, 75/25
When the task begins, 10% EV is credited
When the task is complete, the remaining 90% of
EV is credited
z Simple to set up and administer
z Suitable only for tasks of short duration
Figure 67: Fixed Formula by Task
Fixed formula by task is quick and easy, but this method lacks precision.
The fixed formula method has two milestones, the beginning and the end of a task. The
budget is then divided between these two milestones based on a fixed formula, such as 25
percent at the beginning and 75 percent at the end. The formula chosen is determined by
preference or may be mandated by the organization.
A working example of fixed formula by task would be agreeing to a 25 percent down
payment when a renovator begins work on your bathroom and withholding the remaining
75 percent until the bathroom is complete.

Fixed Formula by Task Example
z Reporting period = 6 weeks Office Painting Example

z EV formula: 25/75 at night
z $50/hr total cost
25% credited when material z 6 weeks, $22,000 to
purchased and work begins $24,000 estimate
EV = $6,000 z 5 floors, varying
number of rooms
75% credited at completion z 60 separate offices
(furniture to move)
z 5 board rooms
z Large foyer
space
Figure 68: Fixed Formula by Task Example
In the painting example, the entire project could be treated as one task. Twenty-five
percent of the total cost is paid up front to cover the cost of materials that must be
purchased. There are no further payments until the project is complete.
Can you see a problem with managing the painting project using the fixed formula
method? There are no interim controls. The project manager will not learn for six weeks
whether or not the painters are being productive. After six weeks, when the project
manager expects the project to be complete, the painting could still be only half finished,
with costs much higher than planned.
The fixed formula method does not create any interim management signals. Therefore, it is
only suitable for tasks of short duration or for projects with a fixed-price contract.

Percentage Complete
z Subjective measure of completeness at milestone

points
z Being subjective means it is susceptible to error
and bias
z Easiest to set up and administer
z Suffers from inaccuracies of estimates
Figure 69: Percentage Complete
The percentage complete method is similar to weighted milestones. The difference is that
with weighted milestones, the criteria for measuring degree of completion is very explicit.
With the percentage complete method, the degree of completion is determined subjec-
tively, that is, by the opinion of the project manager.
The strength of percentage complete is that it is very simple. The weakness is in the
subjectivity of the measurements used to determine completion rates. Being subjective,
the measures are susceptible to blunders and bias.
Percentage Complete Example
z Reporting period = 3 weeks Office Painting Example

z EV measurement: at night
z $50/hr total cost
50% completed after 3 weeks z 6 weeks, $22,000 to
EV = $12,000 $24,000 estimate
z 5 floors, varying
number of rooms
z 60 separate offices
(furniture to move)
z 5 board rooms
z Large foyer
space
Figure 70: Percentage Complete Example
In the painting example, the percentage complete method could be used to assess progress
at the halfway point, which is three weeks. The project manager would walk through the
building and determine whether he or she thought the painting was half finished.
The problem with percentage complete is that it is not a very sensitive measurement
system. Can the project manager differentiate between a project that is 40 percent
complete and one that is 60 percent complete? Maybe.
The percentage complete method is only suitable when precise measurements of
completion are not required.

Percentage Complete plus Milestones
z This method combines ease of percentage

complete and restrictions of milestones measures.
z Subjective measures of performance are allowed
up to a certain preset value for each milestone.
z Subjective measures are, therefore, balanced by
imposing the occasional tangible performance
criteria (milestones).
Figure 71: Percentage Complete plus Milestones
The percentage complete plus milestones method combines the strength of milestones
with the ease of percentage complete. This method allows project managers to measure
tasks subjectively, but only up to a point. The errors associated with subjective measures
are then corrected by imposing the occasional tangible measure of completion.
Typically, subjective measures of completion are considered valid only up to a given
percentage of EV, for example 75 percent of EV. In order to be credited for the entire EV
of a task, a tangible measurement must be taken.
Percentage complete plus milestones requires less effort to establish but still imposes
checks and balances on the measurement system.
Percentage Complete plus Milestones Example
z Percentage complete reported weekly Office Painting Example

2300 sq. ft. to be completed each week
at night
EV = $4,000 z $50/hr total cost
Up to 80% of EV credit given on z 6 weeks, $22,000 to
subjective measures $24,000 estimate
z 5 floors, varying
Maximum subjective EV at
number of rooms
3 weeks = $9,600 z 60 separate offices
z Milestone measured after three weeks (furniture to move)
Balance of EV credited when 1/2 of z 5 board rooms
rooms and halls have been shown to z Large foyer
be complete z 1200 ft. of hallway
EV = $2,400 space
Figure 72: Percentage Complete plus Milestones Example
The percentage complete plus milestones method could be used on the painting project by
allowing the project manager to subjectively measure progress every week. Up to 80
percent of the EV for each week can be credited based on subjective measures of
completeness.

At the three-week mark, the degree of completion must be measured according to the
number of rooms and the length of hallways finished. Only after the tangible measure of
completion has been monitored will the project manager be able to credit the entire EV to
the tasks.
The advantage of this method is that it forces the project manager to investigate the project
on a weekly basis, but it does not require a rigorous planning process or elaborate
measurements each week. If, in the opinion of the project manager, the task is progressing
roughly as planned, no further investigation is required.
Equivalent Completed Units
z Typically used for repetitive tasks

z A given planned value for each full unit of work
completed
z Easy to administer
z Can be hard to agree on value of work units
Figure 73: Equivalent Completed Units
The equivalent completed units method is used for repetitive activities, such as installation
of work stations in an office building. With this method, there is a planned value for each
repetition of a known activity.
The equivalent completed units method is easy to administer in that it requires relatively
little planning. The problem with this method is that very few activities are uniform
enough to allow for a single measurement standard, and conflicts can arise as to whether
or not the standard is fair to everyone involved.

Equivalent Units Example
z Reporting period = 1 week Office Painting Example

z $50/hr total cost
Earned value per unit completed z 6 weeks, $22,000 to
Base unit is 100 linear feet of $24,000 estimate
z 5 floors, varying
wall (total of 100 units) number of rooms
$240 and 9.6 man hours z 60 separate offices
(furniture to move)
Offices = $240 each z 5 board rooms
200 ft. of hallway = $960 z Large foyer
Board rooms = $480
Foyer = $1440 space
Figure 74: Equivalent Units Example
In the painting example, equivalent completed units could be used based on a standard
amount of wall being painted. In the example, the standard is set at 100 linear feet of wall
at a cost of $240 and 9.6 man hours.
The standard is then applied to components of the building, such as offices and hallways,
to create an EV budget figure for each building component. The EV value of all
components totals to the project budget of $24,000.
When the project manager is monitoring the project for progress, he or she will simply
walk through the building counting off all the completed units based on the standards set
for each component of the building.
The problem with this method in this example is that the standards assume there is the
same amount of work in each completed unit, which is unlikely to be true. If the painters
started the project by concentrating on the easiest parts to paint, for example, where there
was little or no furniture to move, such as in the hallways and foyer, then performance
would be artificially good at the beginning of the project. Throughout the rest of the
project, the painters performance would decline as more complex portions of the work
were tackled.
The equivalent completed units method requires that relatively complex and easy activities
be mixed up throughout the life of the work package.

Earned Standards
z Use of planned standards based on historical data,

time, motion studies, and other metrics
z Most sophisticated to establish and employ
z Generally restricted to repetitive or production
type work
Figure 75: Earned Standards
The earned standards method is based on historical cost information. It is typically used
for production work.
An example might be the installation of carpeting in a new building. A carpeting
contractor knows exactly how much it should cost for his crews to install a given area of
carpeting. Budgeting is then based on the standard costs that have been developed over
years of experience.
Earned Standards Example
z Reporting period = ? Office Painting Example

z $50/hr total cost
$0.45 per square foot of painted z 6 weeks, $22,000 to
surface $24,000 estimate
z 5 floors, varying
z A version of this technique is number of rooms
likely how painting contractors z 60 separate offices
(furniture to move)
would develop original estimate z 5 board rooms
z Large foyer
space
Figure 76: Earned Standards Example
Earned standards could be used to monitor the example painting project by dividing the
total budget by the total area to be painted. During monitoring, the project manager would
simply measure exactly how much wall space had been painted and then calculate earned
value for comparison with the baseline.
The problems with using this method are the project manager must know exactly how
much square footage is involved and also must be able to accurately measure what has
been completed.
Earned standards, therefore, require a relatively experienced project management
environment to plan and administer. There needs to be historical records and well-
documented cost histories for the activities being performed.

Apportioned Relationship to Discrete Tasks
z For recurring activities that are directly related to

discrete tasks
Example, quality control related to a network expansion
z Discrete task is referred to as measurement base
Base can employ any one of the EV measurement
methods already discussed
z Recurring activity charged at a fixed rate relative to
measurement base
z Problem: Actual EV is always the same as planned, but
may not be correct in reality
For example, quality control costs are higher than
predicted
Figure 77: Apportioned Relationship to Discrete Tasks
The last two methods for measuring earned value are used for recurring activities, such as
quality control. The ARTDT (apportioned relationship to discreet tasks) method applies a
portion of the recurring cost to discretely measured tasks.
The discrete task is called the measurement base. In a network expansion project, the
measurement base might be the completion of networks within separate buildings. If there
are twelve buildings being networked, then the completion of each one represents a
milestone or progress measure. The total cost of quality controlling the network installa-
tions will be divided in twelve equal parts and applied to each of the building completion
milestones.
The problem here is that applying EV according to a formula means that it has not actually
been measured. What if the quality control effort for the first few buildings was far more
than predicted? Using the ARTDT method would not detect the overrun.

Apportioned Relationship to Discrete Tasks Example
z Reporting period = ? Office Painting Example

z EV measurement for quality at night
z $50/hr total cost
control:
z 6 weeks, $22,000 to
Measurement base: Equivalent $24,000 estimate
units of 100 ft. of wall area z Quality control
inspector
Apportioned relationship $25/hr
$20 of quality control budget per $2,000 budgeted
for entire
100 ft. of wall completed contract
Figure 78: Apportioned Relationship to Discrete Tasks Example
In the painting example, the ARTDT method could be used to assign quality control costs
to the project.
If the equivalent completed units method were being used as the discrete measurement
method of progress, then the cost of quality control could be applied according to each
equivalent unit completed. If $20 of quality control were apportioned to each of the 100
equivalent units, then the entire quality control budget of $2,000 would be fully assigned.

Level of Effort
z For time-sensitive rather than performance-

related tasks
Project management, procurement, budgeting,
contract administration, field engineering, security
services, helpdesks
z Indirect costs to project
z Generally no measurable output
z Should not be included in EV baseline
LOE reflects nothing but the passage of time
Quarantine into a separate overhead or LOE CAP
Do not bother to measure
Figure 79: Level of Effort
LOE (level of effort) is used for indirect or overhead costs where there is no measurable
output. LOE costs are assigned to a project based on the passing of time. There is no EV to
measure.
LOE costs should not be included in the performance baseline. It is not worth the trouble.
They should be isolated into a separate overhead CAP where they will not skew results for
EV measurements.

Example CAP with EV Measures
CAP Name: Data Preparation Responsible person: Bob Dovey

Tasks Week 1 2 3 4 5 6 7 8 9 BAC
1.1.3 PV 2,400 2,400 2,400 $ 7,200
Prepare database EV
AC
Description Creating database of stores
EV Measurement Percentage complete estimates - 1/3 of total to be completed each week
Assumptions 15 man days (3 weeks), 8 hrs per day, $60/hr for administrative office staff
1.1.4 PV 15,000 15,000 15,000 15000 15000 $ 75,000
Input sales data. EV
AC
Description Entering sales data into oracle database
EV Measurement Equivalent completed units - $5/record completed. Average of 400/day = 37.5 man days duration
Completion in 5 weeks requires 7.5 technicians to complete 3000 records per week
Assumptions 5 minutes/record, 15,000 records, $60/hr
Figure 80: Example CAP with EV Measures
The table in Figure 80 illustrates a CAP with all the components necessary for a PMB. For
each task, the budget has been divided up into weekly subtasks to match the reporting
cycle of the project. An EV measurement method has been chosen and can be applied to
the weekly milestones measure that has been created.
Project Cost Baseline
z Cost components depends on what senior

management expects project manager to control
What is project being held accountable for?
Overhead, profits, general and administrative, travel?
z Overall project cost baseline must include all costs
that will be used to gauge performance
z EV measurement baseline does not include LOE
expenses
Figure 81: Project Cost Baseline
What costs must a baseline include? It must include everything management makes the
project responsible for, which may include profit and overhead.
LOE costs (that is, overhead) do not form part of the EV measurement baseline but must
be included in the overall project cost baseline. Therefore, there will be two cost baselines,
one that includes all costs and one that reports on costs related to measurable performance
activities.

PMB Components
z WBS or equivalent
All the work broken down into work packages and
tasks
z Resource-loaded schedule
Gantt chart with timed budget allocations
Tasks grouped into CAPs (subprojects)
EV measures for all tasks
z Performance graph
Line graph illustrating time versus PV
Figure 82: PMB Components
The PMB is a detailed prediction of how a project will unfold. It incorporates the EV
baseline for individual tasks, CAPs, and the project as a whole, as well as other
components. Typically, a PMB includes a breakdown of the work (WBS), a resource-
loaded schedule (Gantt chart), EV baseline details documented in CAPs, and a perfor-
mance graph that charts PV, EV, and AC.
Managing Change
z PMB is only as good as the plan it represents.

Arbitrary changes can render results useless.
z Change control procedures must be in place
and in use.
Changes should not happen just because no one
stopped them.
Figure 83: Managing Change
Change control is an important issue in EVM projects. A lot of work goes into the
planning and scheduling of effort. Any change to the timing or quantity of work involved
in the project will distort the EV statistics. Strict change controls must be in place and in
use, or a lot of planning time will have been wasted.

Knowledge
Check
Section Review
Summary
The EV measurement baseline is a forecast of project results. It is a record of what the
project planners believed to be true when the project was launched. It documents time and
cost expectations for the project.
During execution, the project is monitored. Actual performance is compared to what was
predicted.
In order to monitor progress, it is necessary to have pre-established guidelines for
measuring progress. The methods used to measure completion rates depend on the type of
task involved. Issues to consider are the duration of the task, risk and uncertainty, and the
magnitude of costs involved. There is no single measurement system that is appropriate in
every situation.
When completed, the PMB will include a WBS, a resource-loaded schedule, and a perfor-
mance graph, all of which are necessary for comparing planned to actual performance.
Questions
1. Describe the weighted milestone system of EV measurement.
2. What is the weakness of the percentage complete measurement of EV?

3. Should LOE tasks be included in the EV baseline?
4. The budget for a work package with five milestones is $300,000. If it takes $500,000 to
complete the work package, what is the EV at completion?

8
Monitoring Performance against
Baseline
Section Topics
Monitoring Starts at the Task Level
Trend Indicator
Cost Performance Index
Schedule Performance Index
Cumulative vs. Periodic Data
Exercise
Monitor Project Performance

Monitoring Performance against Baseline
N Knowledge
Guide
W E
Section Objectives

Initiate an EV performance measurement program
Manage EV projects by concentrating on exceptions to the plan
Measure cost performance using the CPI
Track schedule performance with the SPI

Monitoring Starts at the Task Level
z Measurement is at the task level.

z Tasks are rolled up into CAPs.
Each CAP is monitored and reported separately.
Each CAP is treated as a subproject.
z Results from CAPs may be combined into
divisions.
z CAPs or divisions are combined into project
statistics.
z Progress at each level is monitored against
the PMB.
Figure 84: Monitoring Starts at the Task Level
Measurements are made at the task level. Results from tasks are then combined into CAPs
for reporting purposes. CAPs may be further combined into organizational divisions, such
as marketing or product development. All of the divisions are then combined to generate
overall project statistics.
At each level of monitoring, actual results are compared with planned results as
documented in the PMB (performance measurement baseline).
Trend Indicator
z EVM predicts long-term performance

z Provides forecasts of completion cost and
schedule
z Forecasts are wake-up call to senior management
Early warning system
Figure 85: Trend Indicator
EVM serves as a trend indicator for projects. Short-term performance is used to forecast
long-term results. If the project is 10 percent over budget when the work is only 15
percent complete, what is the probable completion budget?
Forecasts serve as an early warning system for management. Management may choose not
to react to a forecasted cost overrun, but they will have been warned.

z Management energy is directed at those CAPs, and

tasks within the CAPs, that are not performing
according to plan.
z Variance thresholds (tolerances) are
pre-determined.
When exceptions are detected:

z First: Investigate the cause
z Second: Evaluate alternative solutions
z Third: Take corrective action
z Fourth: Ensure corrective action worked
Figure 86: Management by Exception
Management by exception means investigating when project results are not the same as
planned. Exceptions will be highlighted at every level of monitoring, for example, at the
task, CAP, division, and project levels. The project manager drills down into the project
reports to determine the root cause of exceptions to the plan and then works to fix the
problem.
Not every variance from the plan is investigated. If a $100,000 milestone is over budget by
$9, no one is going to investigate. The question is at what level of error must investigation
begin?
To answer that question, variance thresholds are established for the project before
execution begins. There may be more than one threshold. A 5 percent variance might
require management investigation. Anything over a 10 percent variance might initiate an
emergency investigation. A variance of over 30 percent may call for a strategy meeting
with stakeholders.
When exceptions are detected, there is a protocol that the project manager must follow.
First, the exception is investigated for its root cause. Second, it is analyzed for possible
solutions. Third, corrective action is taken. Fourth, it is necessary to make sure that the fix
worked. If the fix was unsuccessful, another solution needs to be attempted.

Cost Performance Index
z CPI = EV AC
CPI = 1 means performance is exactly as planned
CPI < 1 means bad news
CPI > 1 means good news
z If CPI = .91, project is 9% over budget
Project is earning only $.91 of EV for every dollar
spent
Figure 87: Cost Performance Index
Cost performance is measured by the CPI (cost performance index). A CPI of 1 means
the project is right on target. A CPI of less than 1 is bad news; a CPI greater than 1 is
good news.
A CPI of .87 implies that the project is 13 percent over budget. It means that every dollar
that is being spent is earning only 87 percent of what the project had originally expected a
dollar to earn.
Using the CPI
z A negative (cumulative) CPI is not likely to be

recovered.
z Historical evidence suggests that cost problems
get worse with time.
Early stages of a project are better planned than later
stages. Results are likely to get worse, not better.
z Only aggressive management reaction can improve
CPI position.
Figure 88: Using the CPI
CPI is probably the most dependable of EVM statistics. As early as 10 percent into a
project, the CPI can be used to predict the probable completion budget of the project,
which, of course, is always higher than planned.
But you might be wondering, when you are only 10 percent into a project, why should you
bother predicting the completion budget when there is so much that could change to fix it?
The reason is that 30 years of EV experience has proven that an early cost overrun will not
correct itself. It is likely to get worse, since the best planning is done for the early parts of
a project.
The only hope for correcting a poor cost performance is aggressive management action.
Even then, the odds are against you. It is better to tell senior management the bad
news early.

Schedule Performance Index
z SPI = proportion of original scheduled work that

has been accomplished at a given point in time
z SPI = EV PV
SPI = 1 means performance is exactly as planned
SPI < 1 means bad news
SPI > 1 means good news
z If SPI = .93, project is 7% behind budget
Project is completing only 93% of a days planned
work for every day that passes
Figure 89: Schedule Performance Index
Schedule performance is measured by the SPI (schedule performance index). A value of 1

implies the project is right on schedule. A value of less than 1 is bad, while a value higher
than 1 is good.
An SPI of .8 implies that the project is 20 percent behind budget. It means that project staff
members are completing only 80 percent of the work that was scheduled for each day.
Using the SPI
z A useful indicator early in project

Moves toward 1 at end of project when all project
tasks have been completed
But
z Must be combined with critical path analysis to
determine true schedule position
It is possible for tasks off the critical path to
affect index
Figure 90: Using the SPI
The SPI is a useful indicator of schedule performance early in a project. The limitation is
that SPI is determined by the value of actual work completed, or EV, as compared to
planned work completions, or PV. As the project nears completion, the SPI moves toward
a value of 1 because EV approaches PV. When the project is complete, EV equals PV and
the SPI equals 1 even though the project could be way behind schedule.
Another factor that undermines the precision of SPI is that it is determined by all tasks in
the project, not just those on the critical path. Since only tasks on the critical path
determine the project completion date, it is possible that the SPI can be distorted by
irrelevant schedule performance on noncritical tasks.

Cumulative vs. Periodic Data Notes
z Cumulative data is best for trend analysis.

Entire project, all time periods
z Short-term and divisional data is more likely to be
distorted by accounting errors.
Figure 91: Cumulative vs. Periodic Data
Cumulative data is data from the entire project and all time periods.
Periodic data is data from one reporting period, or from just one
division, or from a portion of the CAPs.
Periodic data should not be used in trend analysis. It is too
commonly distorted by accounting issues, such as the timing of
expense allocations.
Note
The most useful trend analysis comes from using cumulative data;
the more data there is, the better the projections.

Knowledge
Check
Section Review
Summary
Project monitoring highlights exceptions to the performance baseline. Exceptions are
investigated and, hopefully, rectified.
During execution, progress is measured at the task level. Task performance is summarized
at the CAP level for reporting to senior management. CAPs may be further summarized by
division before the entire project is summarized to create overall performance statistics.
CPI is a dependable indicator of project outcomes. It generally reports bad news, that costs
are higher than planned. When it does, dont ignore it. History has shown that early
problems will not fix themselves. Only exceptional management effort can reverse a trend.
SPI must be interpreted with caution. It is not a perfect indicator of schedule performance,
and it must be combined with critical path analysis when developing schedule forecasts.
Questions
1. Explain the role of variance thresholds in EVM.
2. After an exception has been detected, what must the project manager do?

3. Why is negative CPI performance (CPI<1) early in a project unlikely to be recovered?
4. What is the SPI at the end of a project in which each of the ten tasks involved took twice
as long as planned?

9
Forecasting Final Cost and
Schedule Results
Section Topics
Management with the Headlights On
Factors Determining Project Results
Statistical Forecasts
Exercise
Prepare a Status Report for Senior Management

Forecasting Final Cost and Schedule Results
N Knowledge
Guide
W E
Section Objectives

Outline the factors that determine project performance
Use three techniques for calculating EAC
List the limitations of forecasting schedule completion dates using EVM
statistics alone
Calculate the TCPI

Management with the Headlights On
z Ability to statistically forecast probable outcomes.

Early warning system as early as 15 percent
completion
Driving force behind adoption of EVM
z Projects operating without EVM are blind.
By the time problems are recognized, it is too late to
correct them.
Figure 92: Management with the Headlights On
Being able to reliably forecast outcomes early in project execution is what has motivated
the adoption of EVM methodologies. Effective forecasting means that the project lights
are on. You can see not only where you are, but also where you are headed. Once you have
started to use EVM, it is hard to imagine project management without it.
Factors Determining Project Results
z Quality of baseline
Realistic versus optimistic
Incomplete scope, underbudgeted, unrealistic
schedule
z Actual performance
Competence and commitment
z Managements determination to influence results
Early detection and aggressive reactions
Figure 93: Factors Determining Project Results
EVM does not control project results; it just reports on them. There are three major factors
that determine how successful a project will be. These factors are as follows:
The plan: If a project starts out with an unrealistic set of expectations, there is
no hope of it being successful. EVM certainly wont fix it.
The people: Shortages of skilled staff or staff members who are not dedicated
to the project are also success killers.
Management: A management team that is indifferent to warning signs or
unresponsive to signals will be a certain cause of failure. EVM doesnt do any
of the work required to fix problems, it just highlights them. Management must
do the rest.

Statistical Forecasts
z Provide a range of possible outcomes, not a single

estimate
z Not a means for calculating a revised budget figure
Used to assess whether there is a cost problem that
requires action
Figure 94: Statistical Forecasts
It is important to understand that EVM forecasting is intended as a warning sign, not as a

precision tool. EVM generates statistical forecasts that show a range of possible outcomes.
These forecasts should not be construed as a means for calculating a revised budget figure,
but rather as a warning that a cost problem exists.
Estimate at Completion
z Mathematical overrun-to-date: Wildly optimistic

z Cumulative CPI: Best-case scenario (minimum)
z Cumulative CPI SPI: Worst-case scenario
(maximum)
Figure 95: Estimate at Completion
There are three methods for calculating the budgets EAC (estimate at completion). They
each represent differing degrees of optimism as to how the project is likely to come out.
Mathematical Overrun-to-Date
z EACopt = AC + (BAC-EV)
= money already spent plus remaining portion of
original budget
z Assumes all future costs will be exactly as
originally planned
Budget overrun already experienced will not
continue (is not a trend but an anomaly)
z Wildly optimistic unless there was a natural
disaster that caused overrun
Figure 96: Mathematical Overrun-to-Date
The most optimistic outlook is created by the mathematical overrun-to-date method. This
method basically assumes that the overruns to date are an anomaly and that the rest of the
project will be completed exactly as planned.

Unless there was some kind of one-off disaster that caused cost overruns at the beginning
of the project, it is generally considered to be very optimistic to assume that a poor cost
performance will abruptly end.
Cumulative CPI
z EACmin = BAC CPI

= original budget divided by error seen to date
(based on cumulative project data)
z Provides minimum estimate for EAC
Because problems get worse, not better
z Most dependable of EV forecasts
Figure 97: Cumulative CPI
The cumulative CPI method generates what is generally considered to be the minimum
EAC estimate, or the best-case scenario. It uses the current cost trend (CPI) to extrapolate
to the end of the project. Even though it is a simple statistic, the cumulative CPI is the
most dependable of EV forecasting tools.
Cumulative CPI SPI
z EACmax = BAC (CPI SPI)

= original budget divided by cost error times
schedule error
z Recognizes compounding effect of being both over
budget and behind schedule
Extra expensive to get back on schedule
z Considered to be worst-case scenario
High-end range of EAC forecast
Figure 98: Cumulative CPI SPI
The cumulative CPI SPI method provides a worst-case scenario, or maximum EAC.
This forecast combines both the cost trend (CPI) and the schedule trend (SPI) to extrap-
olate to the end of the project. It assumes that schedule overruns are likely to make cost
overruns even worse as management tries to bring the project back on schedule.

To Complete Performance Index
z TCPI = (B-EV) (BAC-AC)

Performance that must be achieved on remaining
work in order to reach financial targets
Remaining work divided by remaining funds
Example
You are halfway through a project and have a CPI of
0.5. What must your TCPI be on the remaining tasks
in order to meet the original budget targets? (How
much more efficient than planned must you be on the
remaining tasks? 2 times more efficient.)
Figure 99: To Complete Performance index
The TCPI (to complete performance index) is a very useful index. It tells management
how efficiently the remaining tasks on a project would need to be completed in order for
the project to come in on budget.
A TCPI of 1 means all remaining tasks merely have to come in on budget (on average). A
TCPI of less than 1 implies that there is some slack in the system, and all remaining tasks
do not have to come in as planned and the project would still come in on budget. A TCPI
of more than 1 implies that all remaining tasks will need to come in under budget (on
average) if the project is to complete as forecasted.
For example, a TCPI of 1.1 implies that all remaining tasks will need to be performed at
110 percent efficiency in order for the project to meet its budget targets. Is that a
reasonable expectation? The answer depends on how the project has been performing up
until now. Typically, a high TCPI ratio is caused by cost overruns early in the project, and,
therefore, it is optimistic to assume that cost savings will be experienced during the
remainder of the project.
Schedule Forecasting EACt
z EACt = BACt SPI

z Provides a rough estimate of how many time units
a project will take to complete
z Must be interpreted in combination with critical
path analysis
z Becomes increasingly ineffective toward end of
project when SPI approaches 1 (EV=PV at end)
Figure 100: Schedule Forecasting EACt
Forecasts of schedule completion are imprecise. The results must be interpreted with
caution and analyzed alongside the critical path.

Knowledge
Check
Section Review
Summary
The ability to forecast outcomes is what makes EVM so appealing to project managers.
The forecasts are not precise, but they are useful indicators of trends that should be heeded
by management if the project is to succeed.
Factors that affect project results are the quality of the plan, the quality of the people doing
the work, and the quality of management oversight.
EAC can be calculated in three ways. Each one implies a different degree of optimism. In
combination, they provide a range of possible outcomes for interpretation by senior
management.
The TCPI is a very useful indicator of how rough the path ahead will be. It says how
efficiently the remaining tasks will need to be performed in order for the project to come
in on budget.
The EAC for time is a crude measure but remains useful toward the beginning of a project.
Questions
1. Why is it recommended that project managers report a range of EACs?
2. Why is the mathematical overrun-to-date calculation of EAC an optimistic prediction of

project performance?

3. Why are cumulative statistics used to forecast EAC?
4. What is the limitation to forecasting EACt using BACtSPI?

10
EVM Criteria Review
Section Topics
EVM Overview
Implementing EVM
Exercise

EVM Criteria Review
N Knowledge
Guide
W E
Section Objectives

Explain the evolution of EVM
Outline the steps involved in planning and managing a project using EVM

EVM Criteria Review
EVM Overview Notes
z Developed out of basic cost accounting principles

z Formalized by U.S. government in 1960s
z Reinvented by industry in 1990s
Simplified version scalable to fit project size
Efficient and effective risk management tool
Figure 101: EVM Overview
Modern EVM has a long history. It grew out of industrial efforts to

manage costs in manufacturing operations and eventually evolved
into a procurement tool for government.
The new EVM is a return to cost accounting basics. It is designed to
give the maximum information with the least effort.

EVM Criteria Review
Implementing EVM
1. Definition of 100 percent of required work scope

2. Execution planning and schedule development
vertical and horizontal traceability
3. Resource estimation by task bottom-up
budgeting
4. Organization into CAPs integration of time,
scope, and cost
5. Creation of performance measurement baseline
(PMB) sum of CAPs
6. Periodic monitoring of results against baseline
management by exception
7. Periodic forecasts of cost and time - EAC
8. Informing stakeholders early and often take
corrective action
9. Preventing transfer of work or resources between
CAPs process controls
10. Strictly managing scope changes change
controls
Figure 102: Implementing EVM
Employing EVM methodologies does not require a great deal of additional effort relative
to conventional project planning and management. It does, however, offer many benefits.
During execution, EVM provides the opportunity to see how actual performance compares
with planned performance and to forecast where the project is headed. It provides an early
warning system that gives EVM projects a huge strategic advantage over projects using
less sophisticated control methods.

EVM Criteria Review
Knowledge
Check
Section Review
1. If you were the project manager on an EVM project, how would you calculate EAC for
senior management?
2. The project manager has estimated EAC at $120,000. According to the original plan, there
is still $60,000 of work remaining to be completed. Actual cost is $75,000. What TCPI
must be achieved for the remainder of the project in order for the project managers EAC
to be proven correct?
3. Consider the project in question 2. The projects BAC is $115,000. You know that EV
equals $55,000 (BAC less remaining work). AC equals $75,000. Is it reasonable to expect
a TCPI of 1.33 for the remainder of the project?

Earned Value Management Workbook
Copyright Information
Copyright 2006 by Global Knowledge Training LLC
First published 2006.
The following publication, Earned Value Management Workbook, was developed by Vaddac Consulting in cooperation with
Global Knowledge Training LLC All rights reserved. No part of this publication may be reproduced or distributed in any form or
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Products and company names are the trademarks, registered trademarks, and service marks of their respective owners. Throughout
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the capitalization styles used by the manufacturer.
Project Team
BRIAN EGAN Course Director
NANCY DUNHAM Project Director, Content Development
KARIN GRODEN Project Manager, Content Development
KIRSTEN E. HALE, MS, PMP Worldwide Product Director, Project Management & Professional Skills
KIM HIGHLAND Worldwide Product Manager, Project Management & Professional Skills
9000 Regency Parkway

Cary, North Carolina 27511
Phone: 919-461-8600
1-800-COURSES
Fax: 919-461-8646
www.globalknowledge.com Printed in Canada
Table of Contents
WB1 Introduction to Earned Value Management
Overview ...................................................................................................... WB1-2
Tasks ........................................................................................................... WB1-2
Task 1: Identify Contract Negotiation Parameters ....................................... WB1-3
Instructions ............................................................................................ WB1-3
Materials and Tools ............................................................................... WB1-3
Case Study: Landscape Contract ........................................................ WB1-4
Contract Negotiation Questions Worksheet .......................................... WB1-5
Task 2: Create Milestones and a Performance Measurement Baseline ..... WB1-6
Instructions ............................................................................................ WB1-6
Background Landscape Contract: MYO Gardening Proposed
Payment Schedule ................................................................................ WB1-7
PMB as Proposed by MYO Gardening ................................................. WB1-8
Landscape Contract PMB Worksheet: Counteroffer ............................. WB1-9
Task 3: Measure Progress ........................................................................ WB1-11
Instructions .......................................................................................... WB1-11
Materials and Tools ............................................................................. WB1-11
Background Landscape Contract: Completed Contract
Negotiations ........................................................................................ WB1-12
Landscape Contract PMB Worksheet: PMB after Two Weeks ........... WB1-13
Project Progress Questions Worksheet .............................................. WB1-15
WB2 History of EVM
WB3 Ingredients Necessary for EVM

Overview ...................................................................................................... WB3-2
Tasks ........................................................................................................... WB3-2
Task 1: End of Project Reporting with Scope Changes ............................... WB3-3
Instructions ............................................................................................ WB3-3
Background Landscape Contract: Scope Change ............................. WB3-4
Landscape Contract PMB Worksheet: End of Project with
Scope Changes .................................................................................... WB3-5
Scope Change Questions Worksheet ................................................... WB3-7
WB4 Defining Scope

Overview ...................................................................................................... WB4-2
Tasks ........................................................................................................... WB4-2
Task 1: Scope Analysis: Prepare a Work Breakdown Structure ................. WB4-3
Instructions ............................................................................................ WB4-3
Earned Value Management Workbook TOC-1

Case Study: Wukon School Board SAM Project ................................... WB4-4
WBS Worksheet .................................................................................... WB4-7
WB5 Scheduling the Project

Overview ...................................................................................................... WB5-2
Tasks ........................................................................................................... WB5-2
Task 1: Create a Project Schedule .............................................................. WB5-3
Instructions ............................................................................................ WB5-3
Background Wukon School Board: SAM Project Schedule ............... WB5-4
SAM Project: Dependency Analysis Worksheet .................................. WB5-6
SAM Project: Network Diagram and Critical Path Worksheet ............... WB5-7
SAM Project: Gantt Chart Schedule Worksheet ................................... WB5-8
Project Duration Report Questions Worksheet ..................................... WB5-9
WB6 Integrating Scope, Schedule, and Costs through CAPs

Overview ...................................................................................................... WB6-2
Tasks ........................................................................................................... WB6-2
Task 1: Create CAPs for the Project and Prepare a Budget Estimate ........ WB6-3
Instructions ............................................................................................ WB6-3
Background Wukon School Board: Project Budget ........................... WB6-4
SAM Project: WBS ................................................................................ WB6-6
SAM Project: Basic CAPs Worksheet ................................................... WB6-7
SAM Project: Gantt Chart and Related Budget Worksheet ................. WB6-12
WB7 Establishing an EV Measurement Baseline

Overview ..................................................................................................... WB7-2
Tasks ........................................................................................................... WB7-2
Task 1: Complete an Earned Value Baseline .............................................. WB7-3
Instructions ............................................................................................ WB7-3
SAM Project: Basic CAPs Example Worksheet 1 ................................. WB7-4
SAM Project: PMB ................................................................................ WB7-8
WB8 Monitoring Performance against Baseline

Overview ..................................................................................................... WB8-2
Tasks ........................................................................................................... WB8-2
Task 1: Monitor Project Performance .......................................................... WB8-3
Instructions ............................................................................................ WB8-3
TOC-2 Earned Value Management Workbook

Background Wukon School Board: SAM Project Work Performance WB8-4
SAM Project: Performance Reporting CAPs Worksheet 1 ................... WB8-5
SAM Project: PMB Reporting Worksheet (Eight Weeks) ...................... WB8-9
Project Performance Questions Worksheet ....................................... WB8-12
WB9 Forecasting Final Cost and Schedule Results

Overview ..................................................................................................... WB9-2
Tasks ........................................................................................................... WB9-2
Task 1: Prepare a Status Report for Senior Management ......................... WB9-3
Instructions ............................................................................................ WB9-3
SAM Project: Management Report Worksheet ..................................... WB9-4
SAM Project: Management Report Worksheet (continued) .................. WB9-6
Status Report Questions Worksheet ..................................................... WB9-7
WB10 EVM Criteria Review
Appendix A Landscape Contract: Case Study Examples

Table of Contents ............................................................................................. A-2
Appendix B Wukon School Board: Case Study Examples

Table of Contents ............................................................................................. B-2
Appendix C Section Review Answers

Section 1 .................................................................................................... C-2
Section 2 .................................................................................................... C-2
Section 3 .................................................................................................... C-3
Section 4 .................................................................................................... C-3
Section 5 .................................................................................................... C-4
Section 6 .................................................................................................... C-4
Section 7 .................................................................................................... C-5
Section 8 .................................................................................................... C-5
Section 9 .................................................................................................... C-6
Section 10 .................................................................................................. C-6
Earned Value Management Workbook TOC-3

TOC-4 Earned Value Management Workbook
WB1
Introduction to Earned Value
Management
Earned Value Management Workbook WB1-1

Introduction to EVM Terminology
Overview
There are three tasks in this workbook section. Before beginning each task, please wait for
your instructor to explain how to proceed.
All three tasks relate to a hypothetical case study involving a landscaping contract. The
background for the first task is added to by descriptions in the second and third tasks.
The exercises in this section of the workbook introduce the purpose and function of EVM
(Earned Value Management). EVM terminology is illustrated using a simple project
example. The same terminology is then used in subsequent workbook sections.
After working independently, or in groups, results from the assignments will be reviewed
as part of a general class discussion.
Tasks
Task 1: Identify Contract Negotiation Parameters
Task 2: Create Milestones and a Performance Measurement Baseline
Task 3: Measure Progress
WB1-2 Earned Value Management Workbook

Task 1: Identify Contract Negotiation Parameters
Instructions
Read the Landscape Contract case study. Answer the questions that appear on the Contract
Negotiation Questions Worksheet. Record your answers on the worksheet.
Be prepared to discuss a counteroffer to MYO Gardening. Be prepared to present your
results to the class.
Materials and Tools

Case Study: Landscape Contract
Contract Negotiation Questions Worksheet

Case Study: Landscape Contract

Background Information
Your company has just moved to a new office building that is surrounded by lawns and
gardens. Senior management does not want the expense of a full-time gardener. You have
been instructed to have the grounds altered so as to minimize maintenance costs and to
allow a landscaping company to take charge of maintenance.
A landscape architect has explained that in order to reduce maintenance costs, it will be
necessary to simplify the grounds. This involves reducing the number of gardens and
shrubs that pepper the lawn and installing an automated underground sprinkler system.
The landscape architect also suggests replacing all of the existing sod with a new variety
of grass that grows slowly, resists weeds, and requires less water.
Based on instructions from the landscape architect, you prepare a description of the work
and contact several yard and garden contractors asking for a quote and timetable.
Description of Landscapers Responsibilities

Remove existing rock gardens and shrubberies
Remove all existing sod
Supply and install sprinkler system
Level and top dress yard
Replace sod with Alabama Bluegrass
Contractor Responses
None of the contractors were willing to offer a fixed-price contract at what seemed like a
reasonable rate. They requested a cost-plus contract in which they would do the work and
bill for their costs plus a management fee.
The lowest rates were from MYO Gardening. They estimated the total cost at $30,000
with a maximum of $35,000.
MYO Gardening is a project management company. The company does not actually have
gardening staff and equipment of its own. It subcontracts laborers and trucking companies
to do the work while maintaining overall responsibility for the project.
The total cost for the contract will be the total of MYOs direct expenses (laborers time,
machine time, and purchases) plus a 10 percent overall management fee. MYO Gardening
says that the project will take up to four weeks. They requested a $30, 000 deposit before
getting started.
Your companys policies do not permit advance payments to unfamiliar contractors.
Negotiations
You are the project manager. You must negotiate a contract with MYO Gardening.
The dilemma that you are faced with is that the contractor wants to be paid in advance to
be sure of getting paid. On the other hand, you do not want to pay the contractor and not
get the work done. You want to pay after the work is complete.

Contract Negotiation Questions Worksheet

If you cannot pay MYO Gardening in advance, what would you offer instead? When
would you be willing to pay the contractor? What is a reasonable compromise between the
desires of the contractor and those of the buyer?
What are the alternatives to advance payments? What payment program is both fair and
secure for both parties?
What arguments would you use to convince MYO Gardening to agree to an alternative
payment schedule?
What is your counteroffer?

Task 2: Create Milestones and a Performance

Measurement Baseline
Instructions
Read the new information provided for the Landscape Contract case study.
The contract proposal from MYO Gardening, along with the new case study information,
has been converted into a PMB (performance measurement baseline). The PMB includes a
Gantt chart to illustrate the schedule and a PV (planned value) graph. Review the PMB as
proposed by MYO Gardening.
Develop your own PMB to serve as a counteroffer in negotiations with MYO Gardening.
Use the blank PMB counteroffer worksheet to record your work. To complete this task, do
the following:
1. Develop a list of milestones that will be used to measure progress on each of the
tasks. These milestones will then be used as performance criteria for making
payments.
2. Complete the Gantt chart to indicate schedule and milestones.
3. Translate milestones for each task into weekly payments. Complete the payment
table that appears below the Gantt chart.
4. Create a PV graph. Plot the cumulative total of weekly payments on the chart.
Be prepared to explain the fairness and accuracy of your PMB to MYO Gardening. Be
prepared to present your results to the class.
As part of the class discussion, the instructor will present example answers for the
case study.
Materials and Tools

Background Landscape Contract: MYO Gardening Proposed Payment
Schedule
PMB as Proposed by MYO Gardening
Landscape Contract PMB Worksheet: Counteroffer

Background Landscape Contract: MYO Gardening

Proposed Payment Schedule
Background
During negotiations for the landscaping contract, MYO Gardening suggests weekly
payments. They send a timetable and schedule of payments as outlined in the table in
Figure 1.
Week 1 Week 2 Week 3 Week 4
Activity
Remove rocks and trees $6,000
Remove sod $8,000
Level property/top dress $5,000
Install sprinklers $2,000 $2,000 $2,000
Replace sod $4,000 $2,000
Management fee (10%) $3,100
Proposed Payment $23,100 $5,000 $2,000 $4,000
Total for project $34,100
Figure 1: Schedule of Payments Proposal
Your Analysis
After reviewing the schedule of payments proposal, you feel that MYO Gardening is
charging too much too early in the project. For example, the total payment for the first
week includes the entire management fee as well as all planned purchases.
Rather than agree to MYO Gardenings payment schedule, you decide to develop your
own timetable and budgets.

WB1-8 Global Knowledge Training LLC

Remove rocks + trees $ 6,000 2
Install sprinkler system $ 6,000 7
Payment Schedule $ 23,100 $ 5,000 $ 2,000 $ 4,000

Cumulative Payments $ 23,100 $ 28,100 $ 30,100 $ 34,100
Planned Value Chart

35000
30000
25000
Dollars 20000
15000
10000
5000
$0
M T W T F Sa Su M T W T F Sa Su M T W T F Sa Su M T W T F Sa
Time
Table of Weekly Payments
Payment Schedule $ - $ - $ - $ -
Cumulative Payments $ - $ - $ - $ -

Planned Value Graph

35000
30000
25000
Dollars 20000
15000
10000
5000
$0
Time
Task 3: Measure Progress
Instructions
Read the new information provided for the Landscape Contract case study. After reading
the new case study information, determine whether or not the project is on budget and on
schedule.
Evaluate the progress of the project by completing the PMB worksheet for the perfor-
mance measurement baseline after two weeks. Complete the following steps:
1. Update the Gantt chart to indicate completed tasks. Draw horizontal bars onto
the graph to illustrate actual accomplishments.
2. Complete the table of planned and cumulative values.
3. Graph EV (earned value) and AC (actual cost) on the PMB graph.
4. Complete the table of EVM (earned value management) statistics.
Answer the questions that appear on the Project Progress Questions Worksheet. Record
your answers on the worksheet.
Be prepared to discuss your results with the class. As part of the class discussion, the
instructor will present example answers for the case study.
Materials and Tools

Background Landscape Contract: Completed Contract Negotiations
Landscape Contract PMB Worksheet: PMB after Two Weeks
Project Progress Questions Worksheet

Background Landscape Contract: Completed Contract

Negotiations
After tough negotiations, MYO Gardening has agreed to your PMB. (This is the class
results for task 2 and is reproduced as a worksheet for this task, the Landscape Contract
PMB Worksheet: PMB after Two Weeks.)
MYO will invoice at the end of each week based on what has been accomplished. Progress
will be measured in relationship to the agreed-upon milestones. All administrative fees
will be paid at the completion of the project.
Timing
It is the end of the second week of the project. The accounting department has just
received a second invoice from MYO Gardening.
An investigation of the job site resulted in the following report:
Removal of rocks and trees: Complete
Sod removal: Complete
Level property: Complete
Sprinkler installation: Not started; two days of trench digging should have
been completed already
Top dress: Not started
Replace sod: Not started
Details of Charges from MYO Gardening To Date

Invoice charges for the project after the first two weeks are as follows:
Week 1
- Remove rocks and trees = $7,000
Week 2
- Remove sod = $13,000
- Level property = $4,000

Landscape Contract PMB Worksheet: PMB after Two Weeks

Weeks
Total $ 34,100
Milestones
Remove rocks $ 6,000 $ 6,000
Remove sod $ 8,000 $ 8,000
Level and top dress $ 5,000 $ 5,000
Install sprinklers $ 6,000 $ 6,000
Replace sod $ 6,000 $ 6,000
Administration $ 3,100 $ 3,100
Landscape Contract PMB Worksheet: PMB after Two

PMB Graph 35000
30000
25000 PV
Dollars 20000
15000
10000
5000
$0
Time
Planned Value
Cumulative Planned Value
Earned Value
Cumulative Earned Value
Actual Cost
Cumulative Actual Cost
Earned Value Management Statistics

Data BAC $ - AC $ - EV $ - PV $ -
Variances VAC CV SV
Indices TCPI CPI SPI
Forecasts EAC
ETC
Project Progress Questions Worksheet

Based on performance to date, what are the completion budget and the schedule
likely to be?
Are you happy with the project performance? Is management action required? If so, what
action would you recommend?

WB2
History of EVM

WB3

Overview
There is one task in this workbook section. Before beginning, please wait for your
instructor to explain how to proceed.
The case study used in this section is a continuation of the Landscape Contract example
presented in section 1. Additional background information is provided that builds on the
case study.
For this exercise, the project is presumed to have been completed, and you are being asked
to evaluate its success.
This exercise illustrates the critical importance of maintaining EVM criteria.
Tasks
Task 1: End of Project Reporting with Scope Changes

Task 1: End of Project Reporting with Scope

Changes
Instructions
Read the new information for the Landscape Contract case study, and then complete the
following steps:
1. Complete the PMB worksheet for the end of the project. Update the following
items on the worksheet:
- Gantt chart
- Milestones table
- PMB graph
- EVM statistics table
2. Answer the questions located on the Scope Change Questions Worksheet
regarding the success of the project. Record your answers on the worksheet.
Be prepared to present your results to the class. As part of the class discussion, the
instructor will present example answers for the case study.
Materials and Tools

Background Landscape Contract: Scope Change
Landscape Contract PMB Worksheet: End of Project with Scope Changes
Scope Change Questions Worksheet

Background Landscape Contract: Scope Change

BACKGROUND
MYO Gardening reports that the project is complete. Work was finished two days early.
In order to save time and money, MYO Gardening planted grass seed instead of laying
sod. You were not informed of this change.
Invoices for the remaining milestones are as follows:
Install sprinkler system = $7,500
Replace sod = $1,500
Administration = $3,300

Landscape Contract PMB Worksheet: End of Project with Scope Change

Scope Changes
Total $ 34,100
Milestones
Remove rocks $ 6,000 $ 6,000
Remove sod $ 8,000 $ 8,000
Replace sod $ 6,000 $ 6,000
Landscape Contract PMB Worksheet: End of Project with

PMB Graph 35000
30000
25000 PV
Dollars 20000 AC
15000
10000 EV
5000
$0
Time
Planned Value $ 6,000 $ 13,000 $ 6,000 $ 9,100
Cumulative Planned Value $ 6,000 $ 19,000 $ 25,000 $ 34,100
Earned Value $ 6,000 $ 13,000 $ - $ -

Cumulative Earned Value $ 6,000 $ 19,000 $ -
Actual Cost $ 7,000 $ 17,000 $ - $ -

Cumulative Actual Cost $ 7,000 $ 24,000 $ -
Earned Value Management Statistics: After Two Weeks

Data BAC AC EV PV
Variances VAC CV $ - SV
Forecasts EAC
Scope Change Questions Worksheet

What effect does the scope change imposed by the contractor have on the performance of
the project?
Are you happy with the results of the project? How would you describe the projects
success to senior management?

Be prepared to discuss your answers with the class.

WB4
Defining Scope

Defining Scope
Overview
You will be asked to analyze a hypothetical case study and to develop a WBS (work
breakdown structure) that meets the criteria for EVM (earned value management).
Choices will need to be made that illustrate planning requirements for EVM.
The case study for this section is the Wukon School Board case study. The same case study
is used in workbook sections 4 through 9.
This exercise illustrates the importance of ensuring that the project plan includes a
definition of all elements of scope. Emphasis is on understanding the need for a detailed
requirements analysis that is translated into measurable deliverables that are depicted
in a WBS.
Tasks
Task 1: Scope Analysis: Prepare a Work Breakdown Structure

Defining Scope
Task 1: Scope Analysis: Prepare a Work

Breakdown Structure
Instructions
Read the background information for the Wukon School Board SAM Project case study.
Using the WBS Worksheets for your work, complete the following steps:
1. Create a list of deliverables for the project. Include the entire scope of the
project.
2. Prepare a list of items that are specifically being excluded from the project. This
list is meant to ensure that the school board understands what the project is not
going to do.
3. Draw a WBS for the project.
Be prepared to present your results to the class as if the class were the Wukon School
Board and you were the project manager seeking clarification of what the project is meant
to achieve.
The instructor will present and discuss a WBS example for the case study.
Materials and Tools

Case Study: Wukon School Board SAM Project
WBS Worksheets

Defining Scope
Case Study: Wukon School Board SAM Project

Project: The SAM Project
The SAM project is the Wukon School Districts introduction of electronic SAM (student
attendance management) software for use by teachers and school administrators.
Background
The federal government requires that attendance be taken in every class at the beginning of
every day. School districts are penalized financially for students that miss classes.
Regulations require that efforts be made to contact absentee students. At a minimum, a
students home must be contacted if he or she does not show up within one hour of the
start of each school day.
Current Status
At the present time, the Wukon School District is using a paper-based system. Attendance
is taken each morning and recorded on a chart. The charts are forwarded to the office for
further action. Office staff must then follow up on any missing students.
Many of the smaller schools in the Wukon School District are finding it impossible to
comply with the federal governments reporting requirements because of limited office
staff. Students are missing classes, and the school district is losing money as a
consequence.
The school board has authorized the purchase of an electronic alternative to the manual
system now in use.
Products Available
Several companies are offering SAM solutions to school boards. These solutions allow
individual teachers to complete attendance records through a Web site. Teachers simply
sign on using a secure password and then check the boxes beside the names of absent
students. The absentee list is then automatically forwarded to the schools administrative
office when the teacher signs off of the Web site.
Students who arrive late must go to the office to have their names taken off the absentee
list and, presumably, to explain their tardiness.
If a student has not arrived within the prescribed hour and has not had his or her name
taken off the absentee list, then an automated call is made to the students home with
notification of the students absence and a request that the school be contacted by the
students parent or guardian.
If there is no contact from the students home within another 30 minutes, then automated
calls are made to other contact numbers contained in the students records (such as a
parents work number, a cell phone number, or a neighbors telephone number).
The SAM software tracks students attendance records and their contact information, and
it provides a running total of the cost of absentee students to each school. The software can
even be configured to send invoices to parents for the costs of absentee students.

Defining Scope
Infrastructure Required
The Web-based technology solution requires that every school, and preferably every
classroom, have Internet access. This, in turn, requires that an ISP (Internet Service
Provider) and a personal computer of some sort be available to every teacher at the
beginning of the school day.
Every classroom in the district has a wireless high-speed network connection. Very few
classrooms have computers at this time. Many teachers are virtually illiterate when it
comes to using computers.
As a simple, one-size-fits-all solution to the hardware issue, the Wukon School Board has
decided to purchase PDAs (personal digital assistants) that are manufactured and supplied
by the same companies that offer SAM software.
A PDA will be given to every teacher. The PDAs are meant to remain with individual
teachers. They are small enough to be carried in a purse or a briefcase.
Web-Based Utilities
The PDAs use thin-client technology. All programs are Web-based. The PDAs do not
actually store data. If a PDA is damaged or lost, a teacher only needs to be given a new
one in order to be fully functional again in the SAM system.
A PDA is not necessary for access to the SAM software. If a PDA is not available, a
teacher can complete an attendance roster using any networked computer.
The PDAs are designed to easily allow teachers to input student information. As an added
feature, the PDAs offer e-mail services within the school districts LAN (local area
network), as long as the devices are being operated within range of the network.
In the future, the PDAs and SAM software can be configured to allow a broad range of
student information to be input and made available to parents and others. This data could
include report cards and exam scores.
School District Statistics

The Wukon School District includes:
Sixty schools
An average of 20 teachers per school (total 1200 teachers)
An average of 30 students per teacher (600 per school; 36,000 students total)
The schools are spread out over a large city.
The Contract
SAMifications Inc. has been chosen as the preferred vendor for the project because of low
price and an aggressive delivery schedule. SAMifications Inc. is a new entrant into the
industry, but the company claims to offer a seamless solution and top-quality service.
The school board has agreed to a cost-plus contract and has offered a $150,000 down
payment plus weekly payments based on an aggressive schedule that is still to be
determined.

Defining Scope
To save money, the school board will take responsibility for the following:
Preparing a database of teachers and their passwords for use by SAMifications
Inc. technicians
Inputting student data (names and contact information) into the SAM database
Training and Rollout

SAMifications will take responsibility for training the school districts technical staff. It
was estimated that two eight-hour training days are all that will be required.
SAMifications will also take responsibility for initial training of teachers and school
administrators. One-half day (four hours) per school is estimated to be necessary to ensure
that 90 percent of all teachers and administrators receive instruction. Teachers and
administrators who miss the training sessions will be forced to learn on their own or from
colleagues.
Hardware and Software Requirements

The hardware and software requirements are as follows:
PDAs (1200 required, one per teacher): PDAs arrive ready to use
SAM software: To be installed and configured by project technicians

Defining Scope
WBS Worksheet

Defining Scope
WBS Worksheet (continued)

Defining Scope

Defining Scope

WB5

Overview
The case study in this section is a continuation of the Wukon School Board case study that
was first introduced in workbook section 4.
You will be asked to create a schedule for the SAM project based on the WBS developed
in workbook section 4. There are a number of steps involved, including decomposition,
dependency analysis, network diagramming, critical path analysis, and schedule
development.
This exercise illustrates how the constraints of scope and time are related.
Tasks
Task 1: Create a Project Schedule

Task 1: Create a Project Schedule
Instructions
Read the background information regarding the project schedule for the Wukon School
Board SAM Project case study.
Create a schedule for the project by completing the following steps:
1. Decompose the WBS into tasks that can be estimated. (Decomposition may not
be necessary.)
2. Determine the order in which tasks must occur by completing a dependency
analysis.
3. Draw a network diagram.
4. Calculate the duration of tasks and activities.
5. Determine the critical path and the earliest completion time for the network.
6. Complete the Gantt chart to illustrate task durations and schedule. Each activity
or task will have a separate horizontal bar.
Use the SAM Project worksheets to help simplify your analysis and to structure your
results.
Note
To facilitate class discussions, it is important that all students be working on the same
basic project plan. Please work with the SAM Project: WBS Example discussed by the
class for workbook section 4. Do not use your own results from workbook section 4 unless
they happen to be the same.
After you have created the project schedule, answer the question located on the Project
Duration Report Questions Worksheet.
Be prepared to explain your results to the class as if the class were the Wukon School
Board. As part of the class discussion, the instructor will present and discuss case study
examples for the three worksheets completed in this task.
Materials and Tools

Background Wukon School Board: SAM Project Schedule
SAM Project: Dependency Analysis Worksheet
SAM Project: Network Diagram and Critical Path Worksheet
SAM Project: Gantt Chart Schedule Worksheet
Project Duration Report Questions Worksheet

Background Wukon School Board: SAM Project

Schedule
Background
The Wukon School Board wants the project completed as soon as possible.
The next few days will be dedicated to planning and to the signing of the contract.
Execution is expected to begin next week. That is when the project clock starts and
SAMifications Inc. is expected to start work.
Assumptions and Timing

The following assumptions and time estimates are to be used for planning purposes.
Networks are available in all schools.
SAM software is available immediately.
Six weeks lead time will be required for delivery of PDAs.
One-half day (four hours) of technician time is necessary to configure and test
each schools network. This includes an allowance for a system test after all
schools are configured.
Ten minutes technician time is required to set up an account for each user
(teacher).
Sixteen hours of training time will be required for technical staff and support
personnel. The system must be up and running before this can take place.
One-half day (four hours) of trainers time is required for each school to train
staff and administrators. The system must be up and running before training can
take place.
SAMifications Staffing
Two technicians and two trainers will be assigned to the project as necessary. They will
work five days per week, eight hours per day.
Training of School Board Staff by SAMifications Trainers

Training cannot begin until the system is operational. Configuration of schools and user
accounts must be complete, input of student data must be complete, and the PDAs need to
be available.
School Board Responsibilities - Database of Users

Preparing a database of users will require at least three weeks of the School Board
Administrators time. This will need to be completed before networks at the schools can
be configured with the SAM software.
School Board Responsibilities - Student Information

Schools need to have their networks configured with the SAM software before student
information can be input. After the networks are configured, the schools will require two
weeks to input student data.

Uncertainties Notes
SAMifications claims to have a pretty good idea of how long the

tasks they are responsible for should take. They consider their time
estimates to be on the generous side. SAMifications management
believes that their estimates are within +/-10 percent of actual.
The school board is completely unfamiliar with the tasks it has
been given. Time estimates were prepared with advice from
SAMifications. Budget figures are best guesses and are estimated to
be +/-25 percent.

Duration
Task ID Deliverable/WorkPackage Predecessors (weeks)
There are presumed to be five working

days per week. Two technicians or
trainers are working each day.
ft 2
Dra

SAM Project: Network Diagram and Critical Path Worksheet
SAM Project: Network Diagram and Critical Path
Worksheet


Budget
Ref Tasks Dollars Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ -
Total $ -
Project Duration Report Questions Worksheet

What project duration would you report to the school board? (Hint: Have you included a
contingency reserve?)

WB6
Integrating Scope, Schedule, and
Costs through CAPs

Overview
There is one task in this workbook section.
The case study is a continuation of the Wukon School Board case study that was first
introduced in workbook section 4 and continued in workbook section 5.
In this exercise, you will be asked to create CAPs (control account plans) for the project
and to then combine these into an overall budget.
CAPs integrate scope, time, and cost. They are the cornerstone of effective controls in an
EVM project.
This exercise illustrates how to create CAPs that include all the work in a project.
Emphasis is on understanding the need for detailed planning modules, or CAPs, that allow
for management by exception at an operational level as well as at a strategic level.
Tasks
Task 1: Create CAPs for the Project and Prepare a Budget Estimate

Task 1: Create CAPs for the Project and Prepare a

Budget Estimate
Instructions
Read the background information regarding the budget for the Wukon School Board
case study.
Prepare CAPs and calculate a total budget for the project by completing the
following steps:
1. Use the SAM Project WBS to group related tasks and activities into CAPs.
2. Complete a template for each CAP.
3. Ensure that scope, time, and cost are defined for each work package within
the CAPs.
4. Ensure that the entire scope of the project has been included in the CAPs.
5. Record the value for each CAP on the budget Gantt chart, and calculate a total
budget for the project.
Worksheets have been provided to help simplify your analysis. Use the worksheets to
record details of each of the CAPs, and then summarize the budget data on the Gantt Chart
worksheet.It is not necessary to calculate a week-by-week budget. That is part of the next
exercise.
Note
So that everyone in the class will be working on the same problem, it is necessary to base
your analysis on the results from workbook sections 4 and 5 that were provided by the
instructor. (In other words, do not use your own results from workbook sections 4 and 5.
Instead, use the results provided in the class discussion.) These results are incorporated
into the Gantt worksheet provided.
Be prepared to present your work to the class. As part of the class discussion, the
instructor will present and discuss case study examples for the worksheets completed in
this task.
Materials and Tools

Background Wukon School Board: Project Budget
SAM Project: WBS
SAM Project: Basic CAPs Worksheets (5)
SAM Project: Gantt Chart and Related Budget Worksheet

Background Wukon School Board: Project Budget

Background
Your schedule has been approved by the school board. Now the board wants to know what
the budget will be.
School District Size

The Wukon School District consists of the following:
60 schools
20 teachers per school
30 students per teacher
School District Participation

Administrative staff will take responsibility for creating the user database of teachers and
passwords. This will require approximately 15 eight-hour days, or three weeks. Labor
costs are estimated at $45 per hour.
Inputting of student data, including the collection of missing contact phone numbers, will
take an average of five minutes per student. Each school will be responsible for collecting
and inputting its own student data. Fifty hours of receptionists time at each school, at a
labor rate of $35 per hour, is budgeted for this process. A two-week window is being
blocked out to allow all schools to complete their student records.
Wages for the project manager are not a project cost.
SAMifications Contract
The contract with SAMifications is cost-plus based on rates as outlined below (SAMifica-
tions profits are built into the purchase price of software and PDAs and into charge-out
rates for technicians.):
SAM software: $120,000
PDAs: $222,000 (1200 PDAs at $185 each)
SAMifications technicians: $125/hr
SAMifications trainers: $75/hr
Down payment at start of project: $150,000
Balance of payments: Based on monthly invoices (every four weeks from start
of project) for work completed (earned value)
SAMifications Training Services

The training services provided by SAMifications are as follows:
Two eight-hour days to train technical and support staff
Four hours per school to train teachers and administrators

SAMifications Technician Services Notes

The time required of SAMifications technicians is as follows:
Ten minutes of technician time per teacher account that
must be created
Four hours per school to set up and configure the SAM
software
School Board Costs

School board administrators want to know what the full cost of the
project is. The project is, therefore, to be managed on a direct cost
basis. Project costs are to include direct labor rates for school board
staff employed by the project, even though there will be no direct
(cash) outlay for these expenses.
For the sake of simplicity, indirect costs of administration and
project management are not to be included in project totals.
For budgeting purposes, school board labor rates are presumed to
be as follows:
Administrative staff: $45/hr (for creating database
of users)
School receptionist: $35/hr (for inputting student data)

SAM Project: WBS

SAM Project: WBS
Internal Contracted
1 2 3 4
Data preparation Purchases Setup Training
1.1 2.1 3.1 4.1

Prepare database SAM software Configure schools Technicians and
of users support staff
2.2 3.2
1.2 PDAs Set up teacher 4.2
Input student accounts Teachers and
information admin. staff

SAM Project: Basic CAPs Worksheet
CAP name: Responsible person:
Tasks Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 BAC
PV
EV
AC
Description:
EV measurement:
Assumptions:
BAC
PV
EV
AC
Description:
EV measurement:
Assumptions:


Tasks Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 BAC
PV
EV
AC
Description:
EV measurement:
Assumptions:
BAC
PV
EV
AC
Description:
EV measurement:
Assumptions:
Tasks Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 BAC
PV
EV
AC
Description:
EV measurement:
Assumptions:
BAC
PV
EV
AC
Description:
EV measurement:
Assumptions:


Tasks Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 BAC
PV
EV
AC
Description:
EV measurement:
Assumptions:
BAC
PV
EV
AC
Description:
EV measurement:
Assumptions:
Tasks Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 BAC
PV
EV
AC
Description:
EV measurement:
Assumptions:
BAC
PV
EV
AC
Description:
EV measurement:
Assumptions:


Budget
Ref Tasks Dollars Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14
1.0 Data Preparation
1.1 User database 3
1.2 Input student data 2

2.0 Purchases
2.1 Purchase software 5
2.2 Purchase PDA's 6

3.0 Setup
3.1 Configure schools 3
3.2 Teacher accounts 2.5 xx

4.0 Training
4.1 Train support staff 0.2 xx
4.2 Train teachers 3
Total $ -
5.0 Reserve
5.1 Conting. Reserve $ - 2
Total Budget request $ -

WB7
Establishing an EV Measurement
Baseline

Overview
introduced in workbook section 4 and continued in sections 5 and 6.
You will be asked to convert CAP data into a PMB (performance measurement baseline)
by completing a PMB worksheet.
This exercise illustrates how PMBs serve as planning and control documents in an EVM
project. Emphasis is on the need for a simplified presentation of otherwise complex data.
Tasks
Task 1: Complete an Earned Value Baseline

Task 1: Complete an Earned Value Baseline
Instructions
Using the PMB Worksheet and the basic CAPs examples discussed in section 6,
prepare a performance measurement baseline for the SAM project by completing the
following steps:
1. Determine a performance measurement system and milestones for each task.
2. Add milestone markers to the Gantt chart.
3. Fill in the Planned Value Table of the PMB Worksheet with weekly PV
forecasts.
4. Sum the columns to determine cumulative totals for each week.
5. Determine the anticipated costs and planned payments for the school board and
SAMifications on a weekly basis.
6. Graph the weekly totals of PV.
Note
In order for everyone in the class to be working on the same problem, it is necessary to
base your work for this task on the results from workbook section 6 that were provided by
the instructor. (In other words, do not use your own results from workbook section 6.
Instead use the SAM Project: Basic CAPs Examples provided in the class discussion.)
Be prepared to present your work to the class. As part of the class discussion, the
this task.
Materials and Tools

SAM Project: Basic CAPs Example Worksheets (4)
SAM Project: PMB

SAM Project: Basic CAPs Example Worksheet 1

CAP Name: Data Preparation - school board Responsible person: Administrator - J. Ramsheed
Tasks Week 1 2 3 4 5 6 7 8 9 BAC
1.1 PV $ 5,400
Prepare database EV
of users AC
Description: Creating database of all user accounts (teachers) including passwords
Measurement:
Assumptions: 15 man days (3 weeks), 8 hrs per day, $45/hr for administrative office staff
1.2 PV $ 105,000
Input student data EV
AC
Description: Entering student data into SAM database: student name and contact numbers along
with associated teacher name and classroom reference number. Each school is independent.
Measurement:
Assumptions: 5 minutes/student, 600 students per school, 50 hrs per school at $35/hr, over 2 weeks
CAP Name: Purchases/Acquisitions Responsible person: SAMifications - R. Wilson
Tasks Week 1 2 3 4 5 6 7 8 9 BAC
2.1 PV $ 120,000
Purchase SAM EV
Software AC
Description: Purchase SAM software through SAMifications.
Measurement:
Assumptions: Purchased from SAMifications at agreed price. Price does not include configuration.
2.2 PV $ 222,000
Purchase PDA's EV
AC
Description: Purchase PDA's through SAMifications. $185 each x 1200
Measurement:
Assumptions: $185/PDA, one each for 1200 teachers. Price includes delivery


CAP Name: Set-up Network Services Responsible person: SAMifications - Edith Smith
Tasks Week 3 4 5 6 7 8 9 10 11 BAC
3.1 PV $ 30,000
Configure Schools EV
AC
Description: Configure SAM software for each school. Set up classroom registry and administrative
tools. Ensure that local network is supporting SAM utilities. Test overall network.
Measurement:
Assumptions: 4 hrs of technician time per school at $125/hr, 60 schools,

2 schools per day for each of 2 technicians
3.2 PV $ 25,000
Create teacher EV
accounts AC
Description: Convert database of teacher names and passwords into user accounts. Relate accounts
to classrooms and schools. Link classroom data to attendance registry.
Measurement:
Assumptions: Ten minutes of technician time per teacher account at $125/hr, 1200 teachers
200 hrs at $125/hr, 25 man days with two technicians - 2.5 weeks duration
CAP Name: Training Responsible person: SAMifications - Doug Pearl
Tasks Week 6 7 8 9 10 11 12 13 14 BAC
4.1 PV $ 1,200
Train technical EV
staff AC
Description: Train technical support staff at administrative offices. Emphasis on user account
management and the use of attendance tools.
Measurement:
Assumptions: 2 training days (16 hrs) at $75/hr, Two trainers available. Should be done in one day.
4.2 PV $ 18,000
Train teachers EV
and admin. AC
Description: Train teachers and administrative staff at schools on the use of the SAM software and PDA's
Measurement:
Assumptions: 4 hrs/school at $75/hr for trainers, 60 schools. Each trainer to complete 2 schools per day.
30 man days required, 15 days for each trainer, 3 weeks duration

SAM Project: PMB

Budget
1.1 User database $ 5,400 3
1.2 Input student data $ 105,000 2

2.0 Purchases
2.1 Purchase software $ 120,000 5
2.2 Purchase PDA's $ 222,000 6

SAM Project: PMB
3.0 Setup
3.1 Configure schools $ 30,000 3
3.2 Teacher accounts $ 25,000 2.5 xx

4.0 Training
4.1 Train support staff $ 1,200 0.2 xx
4.2 Train teachers $ 18,000 3

Total $ 526,600
5.0 Reserve
5.1 Conting. Reserve $ 52,660 2
Total Budget request $ 579,260
Planned Value Table

User database
Input Student Data
Purchase Software
Purchase PDA's
Configure Schools
Teacher Accounts
Train support staff
Train Teachers
Weekly Planned Value
Cum. Planned Value
Planned School Board Costs
Planned SAMifications Paymts $ - $ - $ - $ -
Cummulative EV Performance Measurement Baseline

550
525
500
475
450
425
400
375
350
325
Dollars 300
275
250
PV 225
AC 200
EV 175
150
125
100
75
50
25
0
Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14

WB8
Monitoring Performance against
Baseline

Overview
introduced in workbook section 4 and continued in workbook sections 5, 6, and 7.
You will be asked to introduce performance data into CAPs and then to complete a PMB
report.
This exercise illustrates how performance data is used to update CAPs and then PMBs in
order to compare actual with planned progress. Emphasis is on the need for summary
statistics that illustrate the health of individual CAPs and the project overall.
Tasks
Task 1: Monitor Project Performance

Task 1: Monitor Project Performance
Instructions
Read the new case study information provided for the Wukon School Board SAM Project.
Analyze the project in terms of EVM. Update the project CAPs using the baseline data
from the Performance Reporting CAPs Worksheets. Then prepare a PMB performance
report using the PMB Reporting Worksheet. To complete this task, do the following:
1. Fill in the CAPs worksheets to include performance results.
2. Calculate basic EVM statistics. (Do not complete forecasting statistics. That is
part of the next exercise.)
3. From the CAPs worksheets, transfer weekly EV and AC data to the tables on
the PMB Reporting Worksheet.
4. Calculate the weekly and cumulative values for both EV and AC.
5. Add bars to the Gantt Chart to indicate actual schedule performance.
6. Plot EV and AC on the graph.
7. Calculate the overall project EVM statistics by filling in the table of cumulative
statistics.
After completing the above steps, answer the questions located on the Project
Performance Questions Worksheet.
Be prepared to present your results to the class. As part of the class discussion, the
this task.
Materials and Tools

Background Wukon School Board: SAM Project Work Performance
SAM Project: Performance Reporting CAPs Worksheets (4)
SAM Project: PMB Reporting Worksheet (Eight Weeks)
Project Performance Questions Worksheet

Background Wukon School Board: SAM Project Work

Performance
Background
You are eight weeks into the project. Work performance results are provided below for
each of the tasks that have begun or are completed:
Prepare user database: The task took longer than expected by one full week.
The time required was 19 days (8 hours per day) of administrative assistants
time ($6,840).
Input student data: Start was delayed by one week because of predecessor
tasks. Progress is much slower than planned. At the end of the first week of
effort, the project manager placed phone calls to 10 of the schools to find out
how they were progressing. The schools reported that an average of only 270
students records was completed after 51 hours of effort.
Purchase SAM software: There are no problems with this task.
Purchase PDAs: There are no problems with this task.
Configure schools: This task started one week late due to predecessors. The
task was completed on time and on budget.
Create teacher accounts: This task started one week late due to predecessors.
At the end of the first week, one-half (600) user accounts have been created.

SAM Project: Performance Reporting CAPs Worksheet 1
CAP name: Data Preparation - school board Responsible person: Administrator - J. Ramsheed
Tasks Week 1 2 3 4 5 6 7 8 9
1.1 PV 1,800 1,800 1,800 PV BAC 5,400
Prepare database EV EV statistics
of users AC AC to date
Description: Creating database of all user accounts (teachers) including passwords CV CPI
SV SPI
Measurement: Milestones - One-third (400) of total number of accounts (1200) expected to be VAC TCPI
completed at end of each week EAC min
Assumptions: 15 man days (3 weeks), 8 hrs per day, $45/hr for administrative office staff EAC max
1.2 PV 52,500 52,500 PV BAC 105,000

Input student data EV EV statistics
AC AC to date
Description: Entering student data into SAM database - student name and contact numbers along CV CPI
with associated teacher name and classroom reference number. Each school is independent. SV SPI
Measurement: Percentage complete - one-half of students completed at each school (300 of 600) based on VAC TCPI
random sampling of ten schools EAC min
Assumptions: 5 minutes/student, 600 students per school, 50 hrs per school at $35/hr, over 2 weeks EAC max
CAP Cum. BAC 110,400 EV - CV 0 CPI #DIV/0! VAC #DIV/0! EAC #DIV/0! min
Statistics PV - AC 0 SV 0 SPI #DIV/0! TCPI 1.00 EAC #DIV/0! max


CAP name: Purchases/Acquisitions Responsible person: SAMifications - R. Wilson
Tasks Week 1 2 3 4 5 6 7 8 9
2.1 PV 120,000 PV BAC 120,000
Purchase SAM EV EV statistics
software AC AC to date
Description: Purchase SAM software through SAMifications CV CPI
SV SPI
Measurement: Percentage complete - delivery of software expected in first week VAC TCPI
EAC min
Assumptions: Purchased from SAMifications at agreed price; price does not include configuration EAC max
2.2 PV 0% 222,000 PV BAC 222,000

Purchase PDAs EV EV statistics
AC AC to date
Description: Purchase PDAs through SAMifications, $185 each x 1200 CV CPI
SV SPI
Measurement: Percentage complete estimate - status update required at three weeks VAC TCPI
Total delivery time is budgeted at 6 weeks. EAC min
Assumptions: $185/PDA, one each for 1200 teachers; price includes delivery EAC max
CAP Cum. BAC 342,000 EV 0 CV 0 CPI #DIV/0! VAC #DIV/0! EAC #DIV/0! min
CAP name: Set up network services Responsible person: SAMifications - Edith Smith
Tasks Week 3 4 5 6 7 8 9 10 11
3.1 PV 10,000 10,000 10,000 PV BAC 30,000
Configure schools EV EV statistics
AC AC to date
Description: Configure SAM software for each school; set up classroom registry and administrative CV CPI
tools; ensure that local network is supporting SAM utilities; test overall network SV SPI
Measurement: Milestones - one-third of schools (20 of 60) to be completed by end of each week VAC TCPI
EAC min
Assumptions: 4 hrs of technician time per school at $125/hr, 60 schools, EAC max
3.2 PV 10,000 10,000 5,000 PV BAC 25,000
Create teacher EV EV statistics
accounts AC AC to date
Description: Convert database of teacher names and passwords into user accounts; relate accounts CV CPI
to classrooms and schools; link classroom data to attendance registry. SV SPI
Measurement: Milestones - two-fifths of total in first and second weeks (480 out of 1200 in each week), VAC TCPI
one-fifth in first half of third week (280 of 1200) EAC min
Assumptions: 10 minutes of technician time per teacher account at $125/hr, 1200 teachers EAC max


CAP name: Training Responsible person: SAMifications - Doug Pearl
Tasks Week 6 7 8 9 10 11 12 13 14
4.1 PV 1,200 PV BAC 1,200
Train technical EV EV statistics
staff AC AC to date
Description: Train technical support staff at administrative offices; emphasis on user account CV CPI
management and the use of attendance tools SV SPI
Measurement: Milestone - expected to be completed in one day, using two trainers (16 hours) VAC TCPI
EAC min
Assumptions: 2 training days (16 hrs) at $75/hr, two trainers available. Should be done in one day. EAC max
4.2 PV 6,000 6,000 6,000 PV BAC 18,000

Train teachers EV EV statistics
and admin. AC AC to date
Description: Train teachers and administrative staff at schools on the use of the SAM software and PDAs CV CPI
SV SPI
Measurement: Milestones - one-third of schools (20 of 60) to be completed each week; assumes two VAC TCPI
trainers working at two schools per day each (4 total per day). EAC min
Assumptions: 4 hrs/school at $75/hr for trainers, 60 schools; each trainer to complete 2 schools per day EAC max
Budget
1.0 Data preparation

2.0 Purchases
2.2 Purchase PDAs $ 222,000 6

3.0 Setup

4.0 Training
Total $ 526,600
5.0 Reserve
5.1 Contingency reserve $ 52,660 2
Total budget request $ 579,260

Weekly planned value 122 1.8 1.8 10 10 232 60 65 6.2 6 6 6
Cum. planned value 122 124 126 136 146 378 438 503 509 515 521 527
Earned Value
User database
Input student data
Purchase software
Purchase PDA's
Configure schools
Teacher accounts
Train support staff
Train teachers
Weekly earned value
Cum. earned value


Actual Cost
User database
Input student data
Purchase software
Purchase PDAs
Configure schools
Teacher accounts
Train support staff
Train teachers
Weekly actual cost
Cum. actual cost
Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Planned school board costs $ 5.4 $ 105
Actual school board costs $ - $ -
Planned SAMifications payments $ 150 $ - $ 242 $ 24
Actual SAMifications owing
Cumulative EV Performance Measurement Baseline

575
550
525
500
475
450
425
400
375
350
325
Dollars 300
275
250
PV 225
AC 200
EV 175
150
125
100
0
Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14
EVM Formulas
Data BAC AC EV PV
Forecasts: Cost EAC BAC/CPI BAC/(CPI x SPI) max
Time EAC-t BACt/SPI
Cumulative Statistics
Data BAC AC EV PV
Variances VAC CV SV

Project Performance Questions Worksheet

How much is owed to SAMifications?
What internal costs has the School Board accumulated?

WB9
Forecasting Final Cost and
Schedule Results

Overview
In this workbook section, you will prepare a status report that updates senior management
on project progress and costs.
This is a continuation of the Wukon School Board case study that was first introduced in
workbook section 4 and then continued in workbook sections 5, 6, 7, and 8.
This exercise illustrates the structure and function of status reports. Emphasis is on the
need for summary statistics that quickly convey the health of the project and provide a
forecast of possible outcomes in terms of budget and completion date.
Tasks
Task 1: Prepare a Status Report for Senior Management

Task 1: Prepare a Status Report for Senior

Management
Instructions
It is eight weeks into the SAM project.
Use the worksheets from section 8 to prepare an EVM status report for the Wukon School
Board by completing the following steps:
1. Complete the CAPs Worksheets from section 8 by filling in the tables of EVM
statistics (forecasts) for individual tasks and for entire CAPs.
2. Use the SAM Project Management Report Worksheet to do the following:
2.1 Enter EVM statistics from the CAPs (that were started in exercise 8 and
completed in the previous step).
2.2 Complete the tables of statistics for the entire project, including forecast
statistics.
2.3 Complete the performance graph using cumulative results. Include a
projection to the end of the project for both time and cost. (This is a
summary report. It is not necessary to plot weekly data. Results as of four
and eight weeks have been provided.)
2.4 Complete exceptions reports for tasks that are not on target.
2.5 Provide an overview of project results, including an explanation of your
expectations for the project. (This is the first sentence on the status report
worksheet, but it is normally completed last, after the analysis is
complete.)
Complete the questions located on the Status Report Questions Worksheet.
Be prepared to discuss how the management reserve is being incorporated into perfor-
mance reporting. Also, be prepared to explain your forecasts to the class in terms of ranges
of estimates and degree of confidence.
As a part of the class discussion, the instructor will present and discuss case study
examples for the worksheets completed in this task.
Materials and Tools

SAM Project: Performance Reporting CAPs Worksheets (from section 8,
task 1)
SAM Project: Management Report Worksheet
Status Report Questions Worksheet


Status as of Eight Weeks:
Overview:
Budget
Status as of Eight Weeks

2.0 Purchases

3.0 Setup

4.0 Training
Total $ 526,600
5.0 Reserve

Cumulative EV Performance
575
550
525
500
475
450
425
400
375
350
325
Dollars 300
275
250
PV 225
AC 200
EV 175
150
125
100
0
Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14

SAM Project: Management Report Worksheet (continued)

weeks
CAP Statistics BAC PV EV AC CV CPI SV SPI VAC TCPI EACmi EACma BACt EACt Status
Data preparation 110,400 110,400
Purchases and acq. 342,000 342,000
Set up network serv. 55,000 50,000
(continued)
Training 19,200
Cumulative 526,600 502,400

Contingency reserve 52,660
Surplus/-Shortfall
Planned sch. board costs 110,400 Actual
Planned SAM payments 392,000 Actual Owing
EVM Formulas
Status as of Eight Weeks

Forecasts: Cost EAC BAC/CPI min BAC/(CPI x SPI) max
Time EAC-t BACt/SPI
Exceptions:

Status Report Questions Worksheet

How are you incorporating contingency reserves for time and money into your analysis? If
your forecasted EAC is within the allowed reserves, are you within budget?
Be prepared to explain your projections and expectations for the remainder of the project
to the class.

WB10
EVM Criteria Review

A
Landscape Contract: Case Study
Examples
Earned Value Management Workbook A-1

Landscape Contract: Case Study Examples
Table of Contents
Landscape Contract PMB Worksheet Example: Counteroffer........................................ A-3
Landscape Contract PMB Worksheet Example: PMB after Two Weeks ........................ A-5
Landscape Contract PMB Worksheet Example: End of Project with Scope Change ..... A-7
A-2 Earned Value Management Workbook

Landscape Contract PMB Worksheet Example: Counteroffer
Install sprinkler sys. $ 6,000 7
Total $ 34,100
Milestones
Remove rocks $ 6,000 $ 6,000
Remove sod $ 8,000 $ 8,000
Replace sod $ 6,000 $ 6,000
Payment Schedule $ 6,000 $ 13,000 $ 6,000 $ 9,100

Cumulative Payments $ 6,000 $ 19,000 $ 25,000 $ 34,100
Landscape Contract PMB Worksheet Example: Counteroffer
A-3 Global Knowledge Training LLC

Planned Value Graph

35000
30000
25000
Dollars 20000
15000
10000
5000
$0
Su M T W T F Sa Su M T W T F Sa Su M T W T F Sa Su M T W T F Sa
Time
Landscape Contract PMB Worksheet Example: PMB after Two Weeks

Weeks
Total $ 34,100
Milestones
Remove rocks $ 6,000 $ 6,000
Remove sod $ 8,000 $ 8,000
Replace sod $ 6,000 $ 6,000
Landscape Contract PMB Worksheet Example: PMB after Two

PMB Graph 35000
30000
25000 PV
Dollars 20000 AC
15000
10000 EV
5000
$0
Time
Planned Value $ 6,000 $ 13,000 $ 6,000 $ 9,100
$ 6,000 $ 13,000 $ - $ -
Earned Value
Cumulative Earned Value $ 6,000 $ 19,000 $ -
Actual Cost $ 7,000 $ 17,000 $ - $ -

Cumulative Actual Cost $ 7,000 $ 24,000 $ -
Earned Value Management Statistics: After Two Weeks

Data BAC $ 34,100 AC $ 17,000 EV $ 13,000 PV $ 13,000
Variances VAC $ (10,492) CV $ (4,000) SV $ -
Indices TCPI 1.23 CPI 0.76 SPI $ 1
Forecasts EAC $ 44,592

Landscape Contract PMB Worksheet Example: End of Project with Scope Change

with Scope Change
Total $ 34,100
Milestones
Remove rocks $ 6,000 $ 6,000
Remove sod $ 8,000 $ 8,000
Replace sod $ 6,000 $ 6,000
Landscape Contract PMB Worksheet Example: End of Project

PMB Graph 35000
30000
25000 PV
Dollars 20000 AC
15000
10000 EV
5000
$0
Time
Planned Value $ 6,000 $ 13,000 $ 6,000 $ 9,100
Earned Value $ 6,000 $ 13,000 $ 6,000 $ 3,100

Cumulative Earned Value $ 6,000 $ 19,000 $ 25,000 $ 28,100
Actual Cost $ 7,000 $ 17,000 $ 7,500 $ 4,800

Cumulative Actual Cost $ 7,000 $ 24,000 $ 31,500 $ 36,300
Earned Value Management Statistics: At End of Project

Data BAC $ 34,100 AC $ 36,300 EV $ 28,100 PV $ 34,100
Variances VAC $ (9,951) CV $ (8,200) SV $ (6,000)
Indices TCPI (2.73) CPI 0.77 SPI 0.82
Forecasts EAC $ 44,051

B
Wukon School Board: Case Study
Examples
Earned Value Management Workbook B-1

Wukon School Board: Case Study Examples
Table of Contents
SAM Project: WBS Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
SAM Project: Dependency Analysis Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
SAM Project: Network Diagram and Critical Path Example . . . . . . . . . . . . . . . . . . . . . B-5
SAM Project: Gantt Chart Schedule Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-6
SAM Project: Basic CAPs Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
SAM Project: Gantt Chart and Related Budget Example . . . . . . . . . . . . . . . . . . . . . . . B-11
SAM Project: Basic CAPs Examples with EV Data . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
SAM Project: PMB Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16
SAM Project: Performance Reporting CAPs Examples . . . . . . . . . . . . . . . . . . . . . . . . B-18
SAM Project: PMB Reporting Worksheets (Eight Weeks) Example . . . . . . . . . . . . . . B-22
SAM Project: Management Report Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
SAM Project: Management Report Example (continued). . . . . . . . . . . . . . . . . . . . . . . B-28
B-2 Earned Value Management Workbook

SAM Project:SAM
WBSProject:
ExampleWBS Example
Internal Contracted
1 2 3 4
Data preparation Purchases Setup Training
1.1 2.1 3.1 4.1

Prepare database SAM software Configure schools Technicians and
of users support staff
2.2 3.2
1.2 PDAs Set up teacher 4.2
Input student accounts Teachers and
information admin. staff

SAM Project: Dependency Analysis Example

SAM Project: Dependency Analysis Example
Duration
Task ID Deliverable/Work Package Predecessors (weeks)
1.1 Prepare database of users 2.1 3
1.2 Input student data 4.1, 3.1 2
2.0 Purchases
2.1 SAM software 2.1 0
2.2 PDAs 2.1 6
3.0 Setup of system
3.1 Configure schools 1.1 , 3.1 3
3.2 Set up teacher accounts 4.1 2.5
4.0 Training
4.1 Technical and support staff 4.2, 1.2, 3.2 1/5
4.2 Teachers and administrators 5.1 3
5.0 Contingency reserve
5.1 Contingency reserve 2
B-4 Earned Value Management Workbook

SAM
SAM Project:Network
Project: Network Diagram
Diagram and
and Critical
CriticalPath
PathExample
Example
1.1 3.1 3.2

User Configure Teacher
database schools accounts
3 weeks 3 weeks 2.5 weeks
2.1 1.2
Purchase Student
software data 4.1
0 weeks 2 weeks Support
training
2.2 0.2 weeks
Purchase
PDAs
6 weeks 4.2
Teacher
training
3 weeks

B-6 Global Knowledge Training LLC
SAM Project: Gantt Chart Schedule Example

Budget
1.1 User database 3
1.2 Input student data 2

2.0 Purchases
2.1 Purchase software 5
2.2 Purchase PDA's 6

3.0 Setup
3.1 Configure schools 3
3.2 Teacher accounts 2.5 xx

4.0 Training
4.1 Train support staff 0.2 xx
4.2 Train teachers 3
Total $ -
5.0 Reserve
5.1 Conting. Reserve $ - 2
SAM Project: Gantt Chart Schedule Example
Total Budget request $ -

SAM Project: Basic CAPs Examples
CAP name: Data preparation - school board Responsible person: Administrator - J. Ramsheed
Tasks Week 1 2 3 4 5 6 7 8 9 BAC
1.1 PV $ 5,400
Prepare database EV
of users AC
Description: Creating database of all user accounts (teachers), including passwords
EV measurement:
1.2 PV $ 105,000
AC
Description: Entering student data into SAM database - student name and contact numbers along
EV measurement:
SAM Project: Basic CAPs Examples

CAP name: Purchases/acquisitions Responsible person: SAMifications - R. Wilson

Tasks Week 1 2 3 4 5 6 7 8 9 BAC
2.1 PV $ 120,000
Purchase SAM EV
software AC
Description: Purchase SAM software through SAMifications
EV measurement:
Assumptions: Purchased from SAMifications at agreed price; price does not include configuration
2.2 PV $ 222,000
Purchase PDAs EV
AC
Description: Purchase PDAs through SAMifications; $185 each x 1200
EV measurement:
Assumptions: $185/PDA, one each for 1200 teachers; price includes delivery
Tasks Week 3 4 5 6 7 8 9 10 11 BAC
3.1 PV $ 30,000
Configure schools EV
AC
Description: Configure SAM software for each school; set up classroom registry and administrative
tools; ensure that local network is supporting SAM utilities; test overall network.
EV measurement:

3.2 PV $ 25,000
Create teacher EV
accounts AC
Description: Convert database of teacher names and passwords into user accounts; relate accounts
to classrooms and schools; link classroom data to attendance registry.
EV measurement:
Assumptions: 10 minutes of technician time per teacher account at $125/hr, 1200 teachers


Tasks Week 6 7 8 9 10 11 12 13 14 BAC
4.1 PV $ 1,200
Train technical EV
staff AC
Description: Train technical support staff at administrative offices; emphasis on user account
management and the use of attendance tools
EV measurement:
Assumptions: 2 training days (16 hrs) at $75/hr, two trainers available; should be done in one day
4.2 PV $ 18,000
Train teachers EV
and administrators AC
Description: Train teachers and administrative staff at schools on the use of the SAM software and PDAs.
EV measurement:
Assumptions: 4 hrs/school at $75/hr for trainers, 60 schools; each trainer to complete 2 schools per day
SAM Project: Gantt Chart and Related Budget Example
Budget

2.0 Purchases

3.0 Setup

4.0 Training
Total $ 526,600
5.0 Reserve

SAM Project: Gantt Chart and Related Budget Example

SAM Project: Basic CAPs Examples with EV Data

Tasks Week 1 2 3 4 5 6 7 8 9 BAC
1.1 PV 1,800 1,800 1,800 $ 5,400
Prepare database EV
of users AC
Description: Creating database of all user accounts (teachers), including passwords
Measurement: Milestones - One-third (400) of total number of accounts (1200) expected to be

completed at end of each week
1.2 PV 52,500 52,500 $ 105,000
AC
Description: Entering student data into SAM database - student name and contact numbers along
Measurement: Percentage complete - one-half of students completed at each school (300 of 600) based on
random sampling of ten schools
SAM Project: Basic CAPs Examples with EV Data

Tasks Week 1 2 3 4 5 6 7 8 9 BAC
2.1 PV 120,000 $ 120,000
Purchase SAM EV
software AC
Description: Purchase SAM software through SAMifications
Measurement: Percentage complete - delivery of software expected in first week
Assumptions: Purchased from SAMifications at agreed price; price does not include configuration
2.2 PV 0% 222,000 $ 222,000
Purchase PDA's EV
AC
Description: Purchase PDAs through SAMifications, $185 each x 1200
Measurement: Percentage complete estimate - status update required at three weeks

Total delivery time is budgeted at 6 weeks.
Assumptions: $185/PDA, one each for 1200 teachers; price includes delivery

Tasks Week 3 4 5 6 7 8 9 10 11 BAC
3.1 PV 10,000 10,000 10,000 $ 30,000
Configure schools EV
AC
Description: Configure SAM software for each school; set up classroom registry and administrative
tools; ensure that local network is supporting SAM utilities; test overall network
Measurement: Milestones - one-third of schools (20 of 60) to be completed by end of each week

3.2 PV 10,000 10,000 5,000 $ 25,000
Create teacher EV
accounts AC
Description: Convert database of teacher names and passwords into user accounts; relate accounts
to classrooms and schools; link classroom data to attendance registry
Measurement: Milestones - 2/5 of total in first and second weeks (480 out of 1200 in each week),
1/5 in first half of third week (280 of 1200)
Assumptions: 10 minutes of technician time per teacher account at $125/hr, 1200 teachers
Tasks Week 6 7 8 9 10 11 12 13 14 BAC
4.1 PV 1,200 $ 1,200
Train technical EV
staff AC
Description: Train technical support staff at administrative offices; emphasis on user account
management and the use of attendance tools
Measurement: Milestone - expected to be completed in one day, using two trainers (16 hours)
Assumptions: 2 training days (16 hrs) at $75/hr; two trainers available; should be done in one day
4.2 PV 6,000 6,000 6,000 $ 18,000
Train teachers EV
and admin. AC
Description: Train teachers and administrative staff at schools on the use of the SAM software and PDA's
Measurement: Milestones - one-third of schools (20 of 60) to be completed each week; assumes two
trainers working at two schools per day each (4 total per day)
Assumptions: 4 hrs/school at $75/hr for trainers, 60 schools; each trainer to complete 2 schools per day

SAM Project: PMB Example

WBS Budget Schedule

2.0 Purchases

3.0 Setup

4.0 Training
SAM Project: PMB Example
Total $ 526,600
5.0 Reserve
5.1 Conting. reserve $ 52,660 2
Planned Value Table Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14

User database 1.8 1.8 1.8
Input student data 50 55
Purchase software 120
Purchase PDAs 222
Configure schools 10 10 10
Teacher accounts 10 10 5
Train support staff 1.2
Train teachers 6 6 6
Weekly Planned Value 122 1.8 1.8 10 10 232 60 65 6.2 6 6 6
Cumulative Planned Value 122 124 125 135 145 377 437 502 509 515 521 527
Planned School Board Costs $ 5.4 $ 105
Planned SAMifications Paymts $ 150 $ - $ 242 $ 24

575
525
500
475
450
425
400
375
350
325
Dollars 300
275
250
PV 225
AC 200
EV 175
150
125
100
0
Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14

SAM Project: Performance Reporting CAPs Examples

Tasks Week 1 2 3 4 5 6 7 8 9
1.1 PV 1,800 1,800 1,800 PV $ 5,400 BAC 5,400
Prepare database EV 1,350 1,350 1,350 1,350 EV $ 5,400 statistics
of users AC 1,710 1,710 1,710 1,710 AC $ 6,840 to date
Description: Creating database of all user accounts (teachers), including passwords CV $ (1,440) CPI 0.79
SV $ - SPI 1.00
Measurement: Milestones - One-third (400) of total number of accounts (1200) expected to be VAC $ (1,440) TCPI -
completed at end of each week EAC $ 6,840 min
Assumptions: 15 man days (3 weeks), 8 hrs per day, $45/hr for administrative office staff EAC 6,840 max
1.2 PV 52,500 52,500 PV $ 105,000 BAC 105,000

Input student data EV 47,250 EV $ 47,250 statistics
AC 107,100 AC $ 107,100 to date
Description: Entering student data into SAM database - student name and contact numbers along CV $ (59,850) CPI 0.44
with associated teacher name and classroom reference number. Each school is independent. SV $ (57,750) SPI 0.45
Measurement: Percentage complete - one-half of students completed at each school (300 of 600) based on VAC $ (133,000) TCPI (27.5)
random sampling of ten schools EAC $ 238,000 min
Assumptions: 5 minutes/student, 600 students per school, 50 hrs per school at $35/hr, over 2 weeks EAC 528,889 max
CAP Cum. BAC 110,400 EV 52,650 CV -61,290 CPI 0.46 VAC -128,517 EAC 238,917 min
Statistics PV 110,400 AC 113,940 SV -57,750 SPI 0.48 TCPI (16.31) EAC 500,977 max
SAM Project: Performance Reporting CAPs Examples
Tasks Week 1 2 3 4 5 6 7 8 9
2.1 PV 120,000 PV $ 120,000 BAC 120,000
Purchase SAM EV 120,000 EV $ 120,000 statistics
software AC 120,000 AC $ 120,000 to date
Description: Purchase SAM software through SAMifications CV $ - CPI 1.00
SV $ - SPI 1.00
Measurement: Percentage complete - delivery of software expected in first week VAC $ - TCPI #DIV/0!
EAC $ 120,000 min
Assumptions: Purchased from SAMifications at agreed price; price does not include configuration EAC 120,000 max
2.2 PV 0% 222,000 PV $ 222,000 BAC 222,000

Purchase PDAs EV 222,000 EV $ 222,000 statistics
AC 222,000 AC $ 222,000 to date
Description: Purchase PDAs through SAMifications; $185 each x 1200 CV $ - CPI 1.00
SV $ - SPI 1.00
Measurement: Percentage complete estimate - status update required at three weeks VAC $ - TCPI #DIV/0!
Total delivery time is budgeted at 6 weeks. EAC $ 222,000 min
Assumptions: $185/PDA, one each for 1200 teachers; price includes delivery EAC 222,000 max
CAP Cum. BAC 342,000 EV 342,000 CV 0 CPI 1.00 VAC 0 EAC 342,000 min
Statistics PV 342,000 AC 342,000 SV 0 SPI 1.00 TCPI #DIV/0! EAC 342,000 max

Tasks Week 3 4 5 6 7 8 9 10 11
3.1 PV 10,000 10,000 10,000 PV $ 30,000 BAC 30,000
Configure schools EV 10,000 10,000 10,000 EV $ 30,000 statistics
AC 10,000 10,000 10,000 AC $ 30,000 to date
Description: Configure SAM software for each school; set up classroom registry and administrative CV $ - CPI 1.00
tools; ensure that local network is supporting SAM utilities; test overall network. SV $ - SPI 1.00
Measurement: Milestones - one-third of schools (20 of 60) to be completed by end of each week VAC $ - TCPI #DIV/0!
EAC $ 30,000 min
Assumptions: 4 hrs of technician time per school at $125/hr, 60 schools EAC 30,000 max
3.2 PV 10,000 10,000 5,000 PV $ 20,000 BAC 25,000
Create teacher EV 12,500 EV $ 12,500 statistics
accounts AC 10,000 AC $ 10,000 to date
Description: Convert database of teacher names and passwords into user accounts; relate accounts CV $ 2,500 CPI 1.25
to classrooms and schools; link classroom data to attendance registry. SV $ (7,500) SPI 0.63
Measurement: Milestones - two-fifths of total in first and second weeks (480 out of 1200 in each week), VAC $ 5,000 TCPI 0.8
one-fifth in first half of third week (280 of 1200) EAC $ 20,000 min
Assumptions: 10 minutes of technician time per teacher account at $125/hr, 1200 teachers EAC 32,000 max
CAP Cum. BAC 55,000 EV 42,500 CV 2,500 CPI 1.06 VAC 3,235.29 EAC 51,765 min
Statistics PV 50,000 AC 40,000 SV -7,500 SPI 0.85 TCPI 0.83 EAC 60,900 max
Tasks Week 6 7 8 9 10 11 12 13 14
4.1 PV 1,200 PV $ 1,200 BAC 1,200
Train technical EV EV $ - statistics
staff AC AC $ - to date
Description: Train technical support staff at administrative offices; emphasis on user account CV $ - CPI #DIV/0!
management and the use of attendance tools SV $ (1,200) SPI -
Measurement: Milestone - expected to be completed in one day using two trainers (16 hours) VAC #DIV/0! TCPI 1.0
EAC #DIV/0! min
Assumptions: 2 training days (16 hrs) at $75/hr, two trainers available; should be done in one day EAC #DIV/0! max
4.2 PV 6,000 6,000 6,000 PV $ 18,000 BAC 18,000

Train teachers EV EV $ - statistics
and admin. AC AC $ - to date
Description: Train teachers and administrative staff at schools on the use of the SAM software and PDAs CV $ - CPI #DIV/0!
SV $ (18,000) SPI -
Measurement: Milestones - one-third of schools (20 of 60) to be completed each week; assumes two VAC #DIV/0! TCPI 1.0
trainers working at two schools per day each (4 total per day) EAC #DIV/0! min
Assumptions: 4 hrs/school at $75/hr for trainers, 60 schools; each trainer to complete 2 schools per day EAC #DIV/0! max
Statistics PV 19,200 AC 0 SV -19,200 SPI - TCPI 1.00 EAC #DIV/0! max

SAM Project: PMB Reporting Worksheet (Eight Weeks) Example

Budget

Example
2.0 Purchases

3.0 Setup

4.0 Training

Total $ 526,600
5.0 Reserve
Weekly planned value 122 1.8 1.8 10 10 232 60 65 6.2 6 6 6

Cum. planned value 122 124 126 136 146 378 438 503 509 515 521 527
SAM Project: PMB Reporting Worksheets (Eight Weeks)
Earned Value
User database 1.35 1.35 1.35 1.4
Input student data 47.3
Purchase PDAs 222
Teacher accounts 12.5
Train support staff
Train teachers
Weekly earned value 121 1.35 1.35 1.4 10 232 10 59.8 0 0 0 0
Cum. earned value 121 123 124 125 135 367 377 437 437 437 437 437
Actual Cost
User database 1.71 1.71 1.71 1.71
Input student data 107
Purchase PDAs 222
Teacher accounts 10
Train support staff
Train teachers
Weekly actual cost 122 1.71 1.71 1.71 10 232 10 117 0 0 0 0
Cum. actual cost 122 123 125 127 137 369 379 496 496 496 496 496
Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Planned school board costs $ 5.4 $ 105
Actual school board costs $ 6.8 $ 107.1
Planned SAMifications payments $ 150 $ - $ 242 $ 24
Actual SAMifications owing $ 232


575
550
525
500
475
450
425
400
375
350
325
Dollars 300
275
250
PV 225
AC 200
EV 175
150
125
100
0
Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14
EVM Formulas
Data BAC AC EV PV
Forecasts: Cost EAC BAC/CPI BAC/(CPI x SPI) max
Time EAC-t BACt/SPI
Cumulative Statistics
Data BAC $ 527 AC $ 496 EV 437.2 PV 502.6
Variances VAC $ (71) CV $ (59) SV $ (65)
Indices TCPI 2.90 CPI 88% SPI 87%
Forecasts: Cost EAC $ 598 min $ 687 max
Time EAC-t $ 14 weeks

SAM Project: Management Report Example

Overview: As of eight weeks, the project is behind schedule and over budget. EAC is estimated at
$600,000 to $685,000. Best case is a funding shortfall of $20,000. Worst case is a $105,000 shortfall.
Delays and overruns have been caused by school board activities. (No cash resources will be required.)
Inputting data is 64% over budget. Overrun is expected to continue and accounts for majority of shortfall.
SAMifications is performing very well. Completion date is within reserve and is anticipated at 14 weeks.
Budget

2.0 Purchases

3.0 Setup

SAM Project: Management Report Example
4.0 Training
Total $ 526,600
5.0 Reserve

Cumulative EV Performance
575
550
525
500
475
450
425
400
375
350
325
Dollars 300
275
250
PV 225
AC 200
EV 175
150
125
100
0
Wks 1 2 3 4 5 6 7 8 9 10 11 12 13 14

SAM Project: Management Report Example (continued)

Status as of Eight Weeks: weeks
CAP statistics BAC PV EV AC CV CPI SV SPI VAC TCPI EACmi EACma BACt EACt Status
Data preparation 110,400 110,400 52,650 113,940 -61,290 46% -57,750 48% -128,517 -16.3 238,917 500,977 5 10.5 RED
Purchases and acq. 342,000 342,000 342,000 342,000 0 100% 0 100% 0 #DIV/0! 342,000 342,000 7 7 GREEN
Set up network serv. 55,000 50,000 42,500 40,000 2,500 106% -7,500 85% 3,235 0.8 51,765 60,900 6 7.1 GREEN
Training 19,200 0 #DIV/0! 0 #DIV/0! #DIV/0! 1.0 #DIV/0! #DIV/0! 4 #DIV/0! N/A
Cumulative 526,600 502,400 437,150 495,940 -58,790 88% -65,250 87% -70,820 2.9 597,420 686,592 12 13.8 RED
Contingency reserve 52,660 2
Surplus/-Shortfall -18,160 -107,332 0
Planned school board costs 110,400 Actual 113,900
Planned SAM payments 392,000 Actual 382,000 Owing 232,000
Exceptions:
1.1 Prepare database of user account
Task exceeded plan by 1 week. Delay has set back all subsequent critical path tasks by one week and reduced overall SPI.
Over budget by 21% ($1,440).
1.2 Input student data
Started one week late. Progress is also slower than planned. Without considering delayed start, task is 10% behind schedule (1 day). With delay, it is 55% behind.
Not on critical path. Timing will not affect delivery date.
Over budget by 64%. Overrun expected to continue. Anticipated completion cost of $238,000 to $264,000 (rather than $105,000).
Overrun is unlikely to be offset by savings in other areas. Funding shortfall (in excess of contingency) of $20,000 to $105,000 is predicted.
3.2 Create teacher accounts
Start delayed by one week. Otherwise progressing ahead of schedule by 25%. May result in savings of 2.5 days on critical path.
Under budget by 25%. Savings of up to $5,000 possible.
EVM Formulas
Forecasts: Cost EAC BAC/CPI min BAC/(CPI x SPI) max
Time EAC-t BACt/SPI
SAM Project: Management Report Example (continued)
C
Section Review Answers
Earned Value Management Workbook C-1

Section 1
1. What are the constituent parts of a PMB (performance measurement baseline)?
WBS (task list), resource-loaded schedule, performance graph
2. What are milestones used for?
Measures of progress in the completion of a project They serve as control points
where planned expectations are compared with actual performance to look for
exceptions.
3. Which of the following are available at the start of execution of a project?
a. BAC
b. PV
c. AC
d. EV
AC and EV are determined by monitoring project results.
4. What is meant by the EV (earned value) statistic measured during project execution?
EV is the accumulation of authorized (planned) budgets for work (tasks) that has
(have) been completed. It answers the question, What value of work have we
completed according to the original plan?
5. What is the EV of the entire project?
The earned value at the end of a project is the BAC. No matter how much money is
spent completing the project, the total EV that can be earned is the original budget
total.
Section 2
1. What did the C/SCSC (Cost/Schedule Control System Criteria) do for the government?
It standardized performance reporting on projects where the government was
responsible for cost overruns. This forced industry to honestly and consistently
report performance and to forecast outcomes.
2. Why was there limited adoption of the C/SCSC by the private sector?
The criteria were designed for large government acquisitions. The system was
expensive to implement and use. Terminology was difficult to understand. Overall,
the system was not practical for general project application.
3. What is meant by simplified EVM?
A return to basics of cost engineering. Terminology is practical and easily
understood. Techniques are sensible and logical. There is a minimum of formal
structure. The emphasis is on utility and ease of use.
C-2 Earned Value Management Workbook

Section 3
1. Define the term resource-loaded schedule.
A schedule in which tasks have been independently budgeted. Each task has its own
scope, budget, and schedule. Tasks are combined to produce a master schedule that
predicts the magnitude and timing of resource utilization for the entire project.
2. How does a PMB (performance measurement baseline) serve as a stake in the ground, or
point of reference, for a project?
Like all baselines, the PMB represents a starting point for the project. The PMB
incorporates the projects expectations with regard to time, scope, and cost. In effect,
it is the original budget for the key constraints. Performance is measured against the
EV baseline. The PMB is synonymous with EV baseline.
3. What are the three key ingredients of a PMB?
WBS (scope analysis broken into tasks)
Resource-loaded schedule (Gantt chart)
Budget graph (PV, EV, and AC)
4. In what way does the significance of a project to an organization affect the way EVM is
applied?
The more significant a project is, the more rigorous the application of EVM method-
ologies. Greater rigor means a more granular analysis of activities and more
frequent reporting periods.
5. What is the significance of having a three-dimensional view of a project?
The three dimensions being viewed are time, scope, and cost, which happen to be the
principal constraints of any project. EVM requires that all three constraints be
monitored together. This ensures that the analysis provides an integrated view of
project performance.
Section 4
1. What is the role of a WBS in EVM?
To define all project work down to discrete tasks that can be individually budgeted
and managed
To create a graphical presentation of what the project will accomplish and the
strategy for accomplishing that work
2. Why is it important to create a list of work that is out of scope?
To clearly define the boundaries between what the project will do and what it will not
do. The buyer (senior management) must understand and agree to the explicit
boundaries of project responsibilities.
3. What is meant by the statement, If it is not in the WBS, it is not in the project?
The WBS defines all the work in the project. Any task or activity that is not specifi-
cally included in the WBS is out of scope and would require a change order before
being undertaken.

4. When building a WBS for use in EVM, when is decomposition complete?

Decomposition is complete when work packages have been dismantled to the point
where the subdivisions (tasks and activities) can be effectively budgeted and
managed.
Section 5
1. What is a time-phased performance plan?
An execution plan that relates activities to a schedule. A time-phased performance
plan allows a project to be tracked in terms of actual completion progress relative to
planned.
2. What aspects of planning need to be completed before scheduling can be done?
Scope analysis. The boundaries of the work involved must be fully understood.
3. Why is a master schedule a necessity for EVM?
To ensure that all departments are working to the same baseline on major milestones.
To coordinate all aspects of a project. To ensure integration of all project
components.
4. What is meant by vertical integration?
Bottom-up scheduling that clarifies relationships of all lower level tasks with higher
level deliverables. Vertical integration ensures that tasks are done at the right time
and in the right order.
Section 6
1. What are the ingredients of a CAP?
Scope, time, cost, responsibility, and measurement system
2. What is the ideal size for CAPs?
There is no ideal size. The choice depends on the project and how it is being executed.
3. What is the one CAP management rule?
No transfer between CAPs of work or budget independent of each other
4. How do CAPs serve as control points for a project?
CAPs are collections of related tasks that serve as a logical subdivision of the main
project. Performance measurement begins at the task level and is summarized at the
CAP and then project level. Exceptions to the plan at the CAP level, therefore,
highlight problems within a subdivision of the project.

Section 7
1. Describe the weighted milestone system of EV measurement.
Work package is divided into finite chunks (tasks) with milestones as measures of
completion. Each task (milestone) is assigned a portion of the original budget from
work package. 100 percent of budget has been earned when all milestones (progress
measures) have been met.
2. What is the weakness of the percentage complete measurement of EV?
Percentage complete is based on a subjective analysis of what has been accomplished.
As a result, the EV reported is subject to bias and distortions.
3. Should LOE tasks be included in the EV baseline?
No. LOE tasks measure the passage of time only. They should be quarantined into
an isolated CAP.
4. The budget for a work package with five milestones is $300,000. If it takes $500,000 to
complete the work package, what is the EV at completion?
At completion of any task EV=PV. PV=$300,000. PV sets a ceiling that may be
claimed for the EV of any work package.
Section 8
1. Explain the role of variance thresholds in EVM.
Variance thresholds determine managements response to exceptions highlighted by
EV monitoring. They are predetermined levels at which an exception to the plan will
be investigated. For example, a CAP with a CPI within 3 percent of planned will not
be investigated, but any result with variation greater than 3% will be investigated.
2. After an exception has been detected, what must the project manager do?
Investigate cause
Evaluate alternatives
Take corrective action
Ensure corrective action worked
3. Why is negative CPI performance (CPI<1) early in a project unlikely to be recovered?
Project planning is most accurate for early stages rather than later stages. Later
stages are invariably less well planned. Experience has clearly indicated that cost
problems early in a project are not going to be corrected by better planning in later
stages of project. Performance is more likely to get even worse if management action
is not taken.
4. What is the SPI at the end of a project in which each of the ten tasks involved took twice
as long as planned?
SPI = EV PV = 1

Section 9
1. Why is it recommended that project managers report a range of EACs?
To reflect the fact that EVM forecasts are imprecise and subject to error. EACs are
statistical forecasts with underlying assumptions that make them approximations,
not precise calculations.
2. Why is the mathematical overrun-to-date calculation of EAC an optimistic prediction of
project performance?
The mathematical overrun-to-date calculation assumes that the cost overruns experi-
enced early in a project are unique occurrences. It presumes that the remainder of
the project will exactly meet original planning expectations.
3. Why are cumulative statistics used to forecast EAC?
Cumulative statistics are the best indicators of long-term trends in a project. Short-
term (one period) and individual CAP statistics are subject to wide fluctuations and
are not representative of the entire project.
4. What is the limitation to forecasting EACt using BACtSPI?
First, schedule forecasting cannot be done by EACt alone. It requires a parallel
analysis of the critical path. Second, SPI is only useful closer to the beginning of a
project because EV and PV approach a value of 1 as the project approaches
completion.
Section 10
1. If you were the project manager on an EVM project, how would you calculate EAC for
senior management?
If the SPI and CPI were exactly 1, use the BAC.
If the SPI and CPI are not = 1, use them to calculate a range of possible outcomes.
If time permits, recalculate the project with the best available information,
EAC = AC+(bottom-up ETC).
2. The project manager has estimated EAC at $120,000. According to the original plan, there
is still $60,000 of work remaining to be completed. Actual cost is $75,000. What TCPI
must be achieved for the remainder of the project in order for the project managers EAC
to be proven correct?
TCPI = remaining work remaining funds = 60 45 = 1.33
3. Consider the project in question 2. The projects BAC is $115,000. You know that EV
equals $55,000 (BAC less remaining work). AC equals $75,000. Is it reasonable to expect
a TCPI of 1.33 for the remainder of the project?
No. CPI = EV AC = 55 75 = .73.
If the project has been operating at a cost efficiency of .73 up to this point, what has
changed to reasonably expect a 1.33 cost efficiency for the remainder of the project?


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Earned Value Management

9000 Regency Parkway

Certification and Career Paths

About This Course

After completing this course, you will be able to:

Earned Value Management v

Font Item or task Example

ALL CAPS Key names CTRL+ALT+DELETE (Press the CTRL,

Courier New bold Code or commands not in text <h1>Global Knowledge</h1>

vi Earned Value Management

3 Ingredients Necessary for EVM

Earned Value Management TOC-1

5 Scheduling the Project

6 Integrating Scope, Schedule, and Costs through CAPs

TOC-2 Earned Value Management

8 Monitoring Performance against Baseline

9 Forecasting Final Cost and Schedule Results

Earned Value Management TOC-3

TOC-4 Earned Value Management

Earned Value Management 1-1

After completing this section, you will be able to:

1-2 Earned Value Management

The Need for EVM

z Seller wants to be paid in advance

Earned Value Management 1-3

The Role of EVM: Monitoring Projects

z Projects involve expenditure of resources over a

1-4 Earned Value Management

z Management oversight requires a method for

EVM provides what is called a three-dimensional view of project performance. The

Earned Value Management 1-5

z Earned milestone management

In EVM, the completion of each task or subtask is treated as a milestone, which is a

1-6 Earned Value Management

z The dismantling of project scope into measurable

Earned Value Management 1-7

z Achievements that measure and mark progress

1-8 Earned Value Management

z To serve as control tools, milestones must be

Earned Value Management 1-9

EVM Project Planning

z EVM requires an understanding of:

EVM project management is fundamentally the same as regular project management.

A resource-loaded schedule is the basis of EVM monitoring.

1-10 Earned Value Management

Work Breakdown Structure

Performance Measurement Baseline

Earned Value Management 1-11

Notes EVM Statistics

1-12 Earned Value Management

Variances VAC BAC-EAC CV EV-AC SV EV-PV

Indices TCPI (BAC-EV)/(BAC-AC) CPI EV/AC SPI EV/PV

Forecasts EAC BAC/CPI

Basic EVM Terminology Illustrated

Figure 12: Basic EVM Terminology Illustrated

Earned Value Management 1-13

Variances VAC BAC-EAC CV EV-AC SV EV-PV

Indices TCPI (BAC-EV)/(BAC-AC) CPI EV/AC SPI EV/PV

Forecasts EAC BAC/CPI

1-14 Earned Value Management

Figure 14: Performance Statistics Terminology

Earned Value Management 1-15

Variances VAC BAC-EAC CV EV-AC SV EV-PV