Transcript
Page 1: Earning Value from Earned Value Management

EARNING VALUE FROM EARNED VALUE

USING EV TO IMPROVE THE PROBABILITY OF PROJECT SUCCESS

EVM WORLD 2009PMI-CPM 25TH ANNUAL INTERNATIONAL CONFERENCE

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Learning Outcomes

Cost and Schedule Indices (SPI, CPI, TCPI, and IEAC)

do not represent the underlying statistical nature of

projects.

Modeling this statistical behavior requires addition

activities build around Monte Carlo simulation and

stochastic modeling.

Creating value from the Earned Value requires both

bottom-up and a top-down work processes.

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Creating Value from EV is More Than Calculating SPI and CPI

LAUNCH ABORT SYSTEM FOR ORION CAPSULE

What are the technical requirements that fulfill the mission

capabilities?

How is the work partitioned for the producing the deliverables

that fulfill these requirements?

What are the Work Packages, Cost and Schedule elements

and programmatic risk elements to assure on-time, on-

budget performance?

CONSTELLATION MISSION TO THE MOON

What capabilities are needed to fulfill the mission?

How are these capabilities connected to the technical and

operational requirements?

What are the programmatic trade space decisions between

capabilities, requirements, cost and schedule?

BRICK LAYING PROJECT

What are the measures of scope, effort, and duration?

What are the measures of physical percent complete?

Can we forecast of final cost and completion date?

What Does Done Look Like?

How will we recognize done?

What is the unit of measure of Done?

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Questions Every Program Manager Needs to Ask and Answer

How much money will I need to complete this

program on time and on specification?

What is my confidence that we’ll complete on or

before the planned finish date?

Do I have enough management reserve to protect

this finish date?

What is the inherent risk built into my cost and

schedule baseline?

How can I tell if the program is making progress to

plan?

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GAINING COMPLIANCE WITH THE EARNED VALUE GUIDANCETHE BOTTOM UP APPROACH

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The Logical Starting Point Of

The Earned Value Journey

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This progress is

represented by physical,

tangible, measurably

quantifiable evidence.

How much did we

plan to get done on

this date, measured in

Dollars?

How much did we

actually get done on

this date, measured in

Dollars?

In This Standard Paradigm …

Earned Value = Physical Percent Complete of the Planned Value

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What About the Planned Technical Performance?

We’re On Schedule, On Budget

But We Had A Slight Technical Problem With Our Flying Machine

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From the NDIA Earned Value Intent Guide (EVIG)

Notice the inclusion of Technical along with

Cost and Schedule

That’s the next step is generating Value from Earned Value

EV MUST include the Technical Performance Measures

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Relate time-phased budgets to specific contract tasks and/or statements of

work (SOW)

Objectively measure work progress

Properly relate cost, schedule, and technical accomplishment

Allow for informed decision making and corrective action

Is valid, timely, and able to be audited

Allow for statistical estimation of future costs

Supply managers at all levels with status information at the appropriate

level, and

Is derived from the same EVM system used by the contractor to manage

the contract.

The First Set of Promises That Need Actionable Steps

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The EV numbers are just

numbers

They can show trends

They can be the basis of

forecasts

But they must be placed in a

context of an underlying

statistical model

They must be connected with

the relationship between time

and money11

Moving from reporting the past

performance to forecasting the

future is the first step in Earning

Value from Earned Value

Management

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Does Money

Equal Time?

This is How EV

Measures

Schedule

Variance

But What If It Is

Not Linear?

Time Is Not Money

Unless They Are

Linearly Related12

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The REAL ProblemModels Of Earned Value Are Inherently Probabilistic With Interdependent

Couplings Between Network Elements

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Using Static, Determinist ic , and

Decoupled Measures of Performance

(e.g. The Standard EV Model)

is at best…

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But Let’s Visit A High Level View of the Earned Value Activities

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The 32 Criteria for a ANSI/EIA-748B Compliant Earned Value Management System

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MANAGEMENT PROCESSES EXTRACTED FROM 748B

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Questions Every Program Manager Needs to Ask and Answer – Part 2

How much money will I need to complete this

program on time?

What is my confidence that we’ll complete on or

before the planned finish date?

Do I have enough management reserve?

What is the inherent risk built into my cost and

schedule baseline?

How can I tell if the program is making progress to

plan?

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CAN WE MEASURE THE BENEFITS OF EARNED VALUE MANAGEMENT?

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How Can We

Get A Return

On Our

Investment In

Earned Value?

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Some Straight Forward Benefits†

Better Visibility into Program Performance

Reduce Cycle Time to Deliver a Product

Foster Accountability

Reduce Risk

† From the DACS Gold Practices “Track Earned Value” Focus Area

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The Missing Piece Is “How” To Obtain

These Benefits How do we create better visibility into the program’s performance?

How do we reduce cycle time to deliver the product?

How do we foster accountability?

How do we reduce risk?

Deploying Earned Value Alone Will Not Get Us There

How Do We Get From Where We Are To Our Destination?

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Claimed Benefit The Reason The Method to Achieve

Better Visibility into Program Performance

The combination of advance planning, baseline maintenance, and earned value analysis yields earlier and better visibility into program performance than is provided by non-integrated methods of planning and control.

This requires a credible baseline.But this baseline must be more than just a list of work, it must represent the “Programmatic Architecture” of the system, matching the technical architecture.

This programmatic architecture formulates the flow of work that produces products with increasing maturity.

Step Action Details

Define theIntegrated Master Plan (IMP)

The IMP is the Strategy for the successful completion of the program. It is formed from Program Events, the Significant Accomplishments (SA), and their Accomplishment Criteria (AC).

Sequence the SAs The sequence of SAs for each single PE by the IPT’s is a diagram sufficiently detailed to show how the increasing maturity of the deliverables can be achieved.

Assign BudgetEstimates (BOE)

Collect the initial “basis of estimate” from the duration and sequence of these SAs

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Claimed Benefit The Reason The Method to Achieve

Reduces Cycle Time to Deliver a Product

Earned Value Management is premised on careful detailed planning – task decomposition, scheduling, and budgeting.

This planning often addresses or prevents problems from surfacing later in the effort that result in rework.

As rework is prevented cycle time may be reduced.

Again the carefully detailed plan must adequately represent a credible schedule, cost allocation, and resource assignments.

How can we know this is the case?

Step Action Details

Reduce cycle time by forecasting delay

Using TCPI and IEAC the macro level forecast (scalar) can be generated. What is needed is to locate the specific tasks that are the source of this delay. This is a network analysis process.

Identify alternative paths through the IMS

With the network process flow indentified, alternative paths can be assessed. These path have associated cost and down stream schedule impacts that need further analysis.

Probabilistic cost and schedule

The result is a probabilistic cost and schedule analysis coupled with a Monte Carlo simulation tool to construct the “probabilistic critical path?

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Claimed Benefit The Reason The Method to Achieve

Fosters Accountability

When the engineer understands how the pieces fit the overall project effort, they tend to focus on delivery of a quality product.

Over time they are better able to estimate the work required to complete a task, thereby improving the overall accuracy of the budget / estimating process for future efforts.

Defining the logical sequence of product or service flow is the starting point.

This “systems engineering” approach starts with a description of the “increasing maturity” of the product or service, and only then assigning the Earned Value elements

Step Action Details

Work Package budgets owned by producers of value

Once the Value Stream as been defined – this is the logical flow of the Significant Accomplishment – the ownership for producing this value is identified in the Work Package owners.

Dependencies between WPs is a Systems Engineering process

The Value Stream of the collection of Work Package must remove an impediments to maximizing this value. This is the role of the planning and controls staff in conjunction with the subject matter experts accountable for delivering the technical solution. As a collective they are accountable for the resulting value stream.

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Claimed Benefit The Reason The Method to Achieve

Reduces Risk Because earned value measures enable realistic estimates of completion to be derived early in the project, it is possible to make adjustments and take corrective action to mitigate the risk of cost overruns and schedule slippage.

Probabilistic risk analysis requires a credible baseline and an understanding of the underlying probabilistic process driving cost, schedule, and technical performance

If the probabilistic process is stationary, a Monte Carlo simulation can be used to analyze the behaviors of the system only as a stationary model.

Step Action Details

Probabilisticmodes expose risk

Only probabilistic models “enable realistic estimates.” No point estimate in the absence of a variance is credible.

Risk adjusted work in IMS

All risk mitigation and retirement activities need to be in the IMS, along with funding profiles and probabilistic assessment of their effectiveness. EV alone will not address the issues. An active Risk Management process is needed.

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STEPS NEEDED TO EARN THE VALUE FROM EARNED VALUETHE TOP DOWN APPROACH

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The Cost of These

Benefits Is Already Built

Into a Credible PMB

The BCWS spreads define visibility

into costs

The sequence of Significant

Accomplishments (SA) defines

visibility into deliverables

Risk mitigations, buy downs, and

retirements are embedded in the PMB

Small incremental measures of value

are defined by Work Packages

Visibility provided through measures

of physical percent complete

Reduced cycle is actually just

maintaining the planned completion

dates, on budget, that meet the

planned technical performance

measurements

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Five Core Processes of Successful Program Planning and Controls

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Program Success Process Areas Questions To Be Answered

Identify Needed System CapabilitiesWhat capabilities are needed to fulfill the ConOps and System Requirements?

Establish the Requirements BaselineWhat technical and operational requirements are needed to fulfill these capabilities?

Establish the Performance Measurement Baseline

What is the schedule that delivers product or services that meet the requirements?

Execute the Performance Measurement Baseline

What are the periodic measures of physical percent complete?

Perform Continuous Risk ManagementWhat are the impediments to success and what are the mitigations ?

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Partition system capabilities into classes of service within operational scenarios

Connect capabilities to system requirements using sysML

Define Measures of Effectiveness (MOE) and Measures of Performance (MOP)

Define in the delivery schedule the achievement of each Technical Performance Measure

Define

Operational

Concepts

Define scenarios for each system capability

Connect these scenarios to a Value Stream Map of the increasing maturity of the program

Assess value flow through the map for each needed capability

Identify capabilities mismatches and make corrections to improve overall value flow

Define

Capabilities

Needed To

Implement

Concepts

Assign costs to a system element using a value model process model

Assure risk, probabilistic cost and benefit performance attributes are defined

Use cost, schedule and technical performance probabilistic models to forecast

potential risks to program performance

Assess Needs,

Costs and Risks

Simultaneously

Make tradeoffs that connect cost, schedule, and technical performance in a single “trade

space” model

Measures of Effectiveness and Measures of Performance are the raw materials for

these tradeoffs

Define

Explicit,

Balanced, and

Feasible

Alternatives

Define the set of capabilities to be employed to achieve desired objectives or a particular end

state for a specific scenario. Take the ConOps and define the details of who, where, and how

it is to be accomplished, employed and executed.Identify Needed

System

CapabilitiesWhat capabilities are needed to fulfill the ConOps and System Requirements?

1.0

1.1

1.2

1.3

1.4

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Produce an overall statement of the problem in an operational context.

Develop the overall operational and technical objectives of the target system.

Defined the boundaries and interfaces of the target system.

Perform Fact

Finding

Gather required system capabilities, functional, nonfunctional and environmental

requirements, and design constraints.

Build a Top Down Capabilities and Functional decomposition of the requirements in a flow

down tree using a Requirements Management System.

Gather

and Classify

Requirements

Answer the question “why do I need this?” in terms of operational benefits.

Build a cost benefit / model using probabilistic assessment of all variables and

dependencies.

For technical requirements, perform a risk assessment to cost and schedule.

Evaluate

and Rationalize

Requirements

Determine criticality for the functions for the system mission.

Determine trade off relationships for all requirements to be used when option decisions

are made.

For technical items prioritize on cost and dependency.

Prioritize

Requirements

Address completeness of requirements by removing all “TBD” items. Validate the requirements agree and are traceable to system capabilities, goals, and

mission. Resolve any requirements inconsistencies and conflicts.

Integrate

and Validate

Requirements

Define the technical and operational requirements that must be in place for the system

capabilities to be fulfilled. Define these requirements in terms isolated from any

implementation.Establish the Requirements

Baseline

What Technical and Operational Requirements are Needed to Fulfill the Capabilities?

2.0

2.1

2.2

2.3

2.4

2.5

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Decompose the Project Scope into a product based Work Breakdown Structure (WBS), then

further into Work Packages describing the production of all deliverables traceable to the

requirements

Decompose

Scope into Work

Packages

Assign Responsibility to Work Packages (the groupings of deliverables) for the named

owner accountable for the management of resource allocation and cost baseline and

technical delivery

Assign

Responsibility

for Deliverables

Arrange the Work Packages in a well formed network with defined deliverables,

milestones, internal and external dependencies, appropriate schedule and cost

margin.

Arrange

Work Packages

in Logical Order

Develop a Time–Phased Budgeted Cost for Work Scheduled (BCWS) from labor and

material costs in each Work Package and the Project as a whole. Assure proper resource

allocations can be met and budget profiles match expectations of the project sponsor

Develop

BCWS for Work

Packages

Assign object Measure of Performance (MOP) and Measures of Effectiveness (MOE) for each Work Package and summarize these for the Project as a whole

Assign WP

Measures of

Performance

Build a time–phased network of schedule activities describing the work to be performed, the

budgeted cost for this work, the organizational elements that produce the deliverables, and

the performance measures showing this work is proceeding according to plan.

Establish

the Performance

Measurement

Baseline A Baselined Schedule that Creates the Services or Products to Meet The Requirements

3.0

3.1

3.2

3.3

3.4

3.5

Establish a Performance Measurement Baseline (PMB) used to forecast Work Package and Project ongoing and completion cost and schedule metrics

Set

Performance

Measurement

Baseline

3.6

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Deliverables Based Planning Handbook for A&D, Copyright © 2008, 2009, Lewis & Fowler

Using the Work Package sequencing, release work to be performed as planned

With the RACI based RAM, the Accountable delivery manager guides the development of

the products or services for each Work Package

Perform

the Authorized

Work

Using Physical Percent Complete or Apportioned Milestones capture measures of

progress to plan for each Work Package

Report this Physical Percent Complete in a centralized database for each Work Package

and the project as a whole

Accumulate and Report Work

Package Performance

Compare the Physical Percent Complete against the Planned Percent Complete for each

period of performance

Construct cost and schedule performance indices from this information and the Physical

Percent complete measures

Analyze

Work Package

Performance

With the Cost and Schedule performance indices, construct a forecast of future

performance of cost, schedule, and technical performance compliance efforts

Take management actions for any Work Packages not performing as planned

Take

Corrective

Management

Action

Record past performance based on Work Package completion criteria

Record past future forecast performance estimates in a historical database

Forecast next future performance against the Performance Measurements Baseline

Report this next future performance estimate to the project stakeholders

Maintain

the Performance

Baseline

Execute work packages, while assuring all performance assessment are 0%/100%

complete before proceeding. No rework, no forward transfer of activities or features.

Assure every requirement is traceable to work and all work is traceable to requirements.

Execute the

Performance

Measurement

Baseline Weekly, Bi–monthly, or Monthly Measures of Physical Percent Complete

4.0

4.1

4.2

4.3

4.4

4.5

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5 Practice Areas of Successful Program Controls

How

Where

When

Who

Why

What

Identify Business

Needs

Establish a

Performance

Measurement

Baseline

Execute the

Performance

Measurement

Baseline

Capabilities Based Plan

Operational Needs

Earned Value Performance

0% /100%

Technical Performance

Measures

System Value Stream

TechnicalRequirements

Identify

Requirements

Baseline

1

2

3

4

Technical Performance

Measures

PMB

Continuous Risk Management Process

Changes to

business strategy

Changes to

requirements

Changes to

project plan

1

2

3

4

5

6

7

8

9

10

10

Org

an

izin

g P

rin

cip

les o

f D

eliv

era

ble

s B

ase

d P

lan

nin

gsm

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The 10 Organizing Principles That

Drive The 5 Practice Areas

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Capabilities Drive

Requirements

Requirements are

Fulfilled by Work

Packages

Work Packages

Define Deliverables

Measure Physical

Percent Complete of

Each WP

Perform Only

Authorized Work

Earned Value

Defines Progress

Adjust EV for Technical

Performance

Measure

Use Past

Performance to

Forecast Future

Performance

1

2

3

5

6

7

8

9

10

PMB Describes

Work Sequence

4

9

Assess the capabilities being provided through the deliverables

Fulfill the requirements through effort held in the Work Packages

Produce deliverables

from Work Packages

Planned BCWS

Physical % Complete

WP’s contain

deliverables that fulfill

requirements

Capabilities

topology

defines

requirements

flow down

WP flow must describe

the increasing maturity of

the product or service

Producing the deliverables in the

planned sequence maintains the

value stream to the customer

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Business Management Is the Purpose of 748B

½ of the Criteria are NOT About Dollars

The Units of Measure in Earned Value

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Connecting Principles With Earned

Value Processes

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ANSI/EIA-748B Areas

10 Principles Driving Program

Controls SuccessOrganization

Planning and

BudgetingAccounting Analysis Revisions

Capabilities Drive Requirements WBS

Requirements Identify Deliverables WBS

Work Packages Describe

Production of DeliverablesWBS

CWBS

IPTsBCWS

Master Schedule Sequences

Deliverables through WPsIMS IMS

Progress Must Be Measured As

Physical Percent Complete

Perf Measure

0/100 or APTPM

Work Authorization Assures Proper

Sequencing of Work PackagesOBS WAD

Late Starts

Late FinishesCCB

Earned Value Identifies Current

Deliverables Performance

Physical %

CompleteBCWP Monte Carlo

Technical Performance Measures

Adjust Earned ValueTPM Measure TPM Monte Carlo

Performance Feedback Adjusts

Work Package Sequencing

Upper Lower

BoundsCAM Review CCB

Future Performance Using TCPI,

IEAC & Adjusted Work SequenceIEAC New BL

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What Did We Learned?

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What Did We Learned?

CPI/SPI are necessary but not sufficient for success

program management.

All EV variables have probabilistic foundations.

The sunk cost of successful Earned Value is already

absorbed in a credible PMB and the process used

to build it

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The Light at the End of the Tunnel

Start with the Top Down approach and define the

needed capabilities to drive the requirements.

Use these capabilities and requirements to

establish the “business value,” and related Value

Stream Map of the Master Plan.

Partition the allocated work into Work Packages

that deliver the business value in a credible

sequence meaningful to the customer.

Use the Bottom Up approach to construct the

details.

Consider all variables as random variables.

Use the 32 Criteria as guidance for “business

processes,” not just EV.

Remember EV’s Unit of Measure of Dollars not

Time. Time ≠ Money on any real program.