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Earned Value Management - Leading & Misleading in Project Control

إدارة القيمة المكتسبة مفيدة ومخادعة في التحكم في المشروعات
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Earned Value Management - Leading & Misleading in Project Control

  1. 1. Earned Value Management Leading & misleading in Project Control Prepared by: Engr. Mohamed Maged, PMP Admin of: ‫المكتسبة‬ ‫القيمة‬ ‫إدارة‬–‫المشروعات‬ ‫في‬ ‫التحكم‬ ‫في‬ ‫ومخادعة‬ ‫مفيدة‬
  2. 2. Instructor: Mohamed Maged Senior Project Control Engineer, B.Sc. of Civil engineering – Ain Shams University, with experience in MENA region of (construction, infrastructure, and roads) Mega projects, in professions of Contract administration, Procurement, Tender estimating, Cost control, Planning & Claim analysis. Instructor of Planning & Project Management: - Construction Management Planning and Control (CMPC). - Delay, Claim and Dispute Resolution (DCDR) in PMBOK, FIDIC & SCL protocol. - Project Management Professional (PMP). - Free lectures with cooperation of Egyptian Engineers Association in Saudi: - Product oriented construction management - Top 10 planning fundamentals - Scope creep – cases and preventive actions - Claims and dispute resolution in FIDIC
  3. 3. Mohamed Maged (Prof. Planner) Admin of the biggest online community of Arab Planners (10,000+) (Facebook Page: to be prof. planner, related group: Best Advice for Planners – Public group) Achievements of 3 Years: P P&C Academy (recently launched): SlideShare: YouTube Channel: Arranged Two Annual Conferences of Planning and Project Management (Anniversary of Facebook Page: Prof.Planner)- American University in Cairo, August 2014 & 2015.
  4. 4. References: 1- A GUIDE TO THE PROJECT MANAGEMENT BODY OF KNOWLEDGE (PMBOK® Guide) – Fifth Edition. 2- Practice Standard for EARNED VALUE MANAGEMET – PMI Global STANDARD. 3- EARNED VALUE Project Management - QUENWT. FILEMNING and JOEL M. KOPPELMAN. 4- Skills & Knowledge of Cost Engineering – AACE International. 5- EARNED VALUE MANAGEMENT APM GUIDELINE FOR THE UK. 6- Earned Value Professional (EVP) Certification Study Guide– AACE International. 7- CMPC Course Material – Construction Management Planning & Control (Prof.Planner). 8- Construction Project Scheduling and Control - Saleh Mubarak. 9- Project Management, Planning, and Control - Albert Lester. 10- Other posts and slide-shares from internet.
  5. 5. Lecture Topics Project Control Performance M. Baseline WBS & Control Accounts Concept of Cost Control Why Earned Value? Earned Value Analysis Earned Value Forecasting Earned Schedule Finance & Cash flow Schedule Total Float Tricky or Misleading Study & Practice
  6. 6. September 21, 2016 6 Project control is the continuous practice of 1. monitoring work progress, 2. comparing it to baseline budget and schedule, 3. detecting any deviations and their causes, and 4. taking a corrective action wherever and whenever necessary. Also called Project tracking, Project monitoring & Follow up. Project Control
  7. 7. 7 Create WBS. subdividing project deliverables and project work (including management work) into smaller, more manageable components, can be used as communications tool. Tools & Techniques: Decomposition. A technique used for dividing and subdividing the project scope and project deliverables into smaller, more manageable parts (e.g. by phase or by major deliverables). Manageable Level of Control
  8. 8. 8 WBS Dividing – Scope Baseline - Lowest level in WBS called Work Package, then it can be decomposed to Schedule Activities.
  9. 9. 9 •‫ع‬ ‫ا‬‫ا‬ ‫امعمى‬‫ا‬‫م‬Baseline Programme‫؟ع‬‫ع‬ ‫ا‬‫ا‬‫م‬ ‫اتعبرمى‬‫ا‬ ‫م‬ ‫اممزعبر‬‫ا‬ ‫ااعبرنا‬‫ا‬‫ه‬accepted‫ااع‬‫ا‬‫ن‬ ‫ايى‬ ‫ييااعمامعيا‬ ‫ع‬ ‫مام‬ ‫يايعاااتعامراأعبع‬ ،‫ا‬ ‫اع‬ ‫معملمرناأع‬ ‫ابساأع‬ ‫ع‬ ‫ا‬ ‫معبراجاععبريهعع‬ ‫عي‬ ‫مس‬‫ع‬ ‫ثاععلا‬ ‫مععملع‬ ‫تعي‬ ‫م‬ ‫ممزعبر‬ ‫برنا‬revised baseline‫منىأ‬ ‫رلم‬. Baseline Schedule
  10. 10. 10 Cash Flow Cost Baseline. The approved version of the time-phased project budget, excluding any management reserves.
  11. 11. 11 Work Package - Control Account
  12. 12. 12 Cost Aggregation. Summing the lower-level cost estimates for a given cost control account. Planning Package. Control Account. A management control point to earned value. Reserve analysis. Budget reserve analysis can establish both the contingency reserves and the management reserves. Contingency Reserve. Allowance for identified risks that are accepted (known unknown). Management Reserve. for unforeseen work that is within scope (unknown unknown). Funding Limit Reconciliation. comparing the planned expenditure against any limits. Cost Rolling-up
  13. 13. 13 Control Account Responsibility There are three main types of organizational structures: functional, matrix, and project The above organizational process flow of work authorization is captured in Work Authorization Documents (WADs) that take many forms.
  14. 14. September 21, 2016 14 - Cost control is related to cash out of Contractor most probably. - It is the process of comparing the estimated to be spent for each (CA / activity / work package) and the actual. - Therefore, You are comparing apple to apple. Cost Control
  15. 15. 15 Scheduling and estimating are related and their relationships is probably one of the most important relationships in project management. These two areas intersected in many ways such as the following: 1) The estimator need to know how long the project will last in order to estimate certain cost , particularly overhead. 2) Scheduling and Estimating department collaborate to provide information to the procurement department. 3) Resource allocation and resource leveling may be cost related, although these are scheduling issues. Proper Estimating (planning) is Very Important for Control
  16. 16. September 21, 2016 16 What is an updated schedule? A living copy schedule reflecting project performance data at a given data date regarding completed activities, in progress activities, and change in the logic, cost, and resources and allocated at any level. What is data date? The data date is the date as of which all progress on a project is reported. It is also called as- of date, cut-off date and status date . Schedule Update
  17. 17. September 21, 2016 17 Output of Update Baseline Cash Flow: Time phased Budget Value of Planned Work Schedule Update: Up to date Actual Value of Performed Work & remaining
  18. 18. September 21, 2016 18  Earned Value Management (EVM), started in 1800’s as a method for integrated project cost and schedule control, then in the 1960’s, was designed by the U.S. Air Force and named the Cost/Schedule Planning and Control System. Earned Value History
  19. 19. September 21, 2016 19 Earned Value Terminology  Earned Value (EV) Analysis: Earned Value analysis is an integrated cost- schedule approach to monitor and analyze the progress in a project.
  20. 20. September 21, 2016 20 Earned Value Analysis  When EV is useless: If the WP = WS which happens for sure at the project completion if the scope is the same.
  21. 21. 21 Earned Value Management This’s Why Earned Value… EVM has been called “ ”
  22. 22. September 21, 2016 22 Earned Value Reporting - Costs ACWP BCWP CPI ACWPBCWPCV   CPI = 1, on budget CPI < 1, over budget CPI > 1, under budget  Budgeted Cost of Work Performed (BCWP) = earned value  Actual Cost of Work Performed (ACWP) = actual cost  Cost Variance (CV): Difference between earned and actual costs for the completed work  Cost Performance Index (CPI or CI): as following
  23. 23. September 21, 2016 23 Earned Value Reporting - Schedule  Budgeted Cost of Work Performed (BCWP): earned value  Budgeted Cost of Work Scheduled (BCWS): planned value  Schedule Variance (SV): Difference between the value of work that was planned to be accomplished and the value of the work that was actually completed  Schedule Performance Index (SPI or SI): as following BCWS BCWP SPI BCWSBCWPSV   SPI = 1, on schedule SPI < 1, behind schedule SPI > 1, ahead of schedule
  24. 24. 24 Earned Value - Forecasting 24 (earned) (actual) (budgeted) Forecasted cost variance (FCV) = CV ∕ % Complete = $400 ∕ 26.7% = $1, 500 Schedule variance in days (SV, days) = SV ($) ∕ Daily planned budget = $-1,067 ∕ $266.67 = - 4 days Forecasted schedule variance (FSV) = SV ∕ %Complete = -4 ∕ 26.7% = -15 days
  25. 25. September 21, 2016 25 A simple problem will help to illustrate the application of the principles of earned value . A project has been defined that consist of 12 activities for which the estimated cost and duration have been defined see figure . After three and a half month , the activates 1,2,4,5,7 are completed and (6) is half complete and (8) is three–fourth complete and (3) is half complete. The incurred cost to date are 152000$ . What is the status of this project in terms of the schedule and the budget? Example Activity cost m1 m2 m3 m4 m5 m6 1 $22000 2 $10000 3 $18000 4 $30000 5 $50000 6 $40000 7 $6000 8 $16000 9 $13000 10 $4000 11 $34000 12 $14000
  26. 26. 26 Solution ACWP =152000$ BCWS=22000+30000+50000+10000+18000+0.5(40000+ 6000+16000)=161000$ BCWP=22000+30000+50000+10000+6000+0,5(40000) +0.75(16000)+0.5(18000)= 159000$ SV= BCWP-BCWS= -2000$ its behind schedule CV=BCWP-ACWP= 7000$ under the budget EAC=ACWP+(BAC-BCWP)=152000+(257000-159000) = 250000$
  27. 27. September 21, 2016 27 Earned Value: Cost and Time Status Cost + CV Time SV III III IV - - +
  28. 28. 28 (Factors) Earned Value Summary
  29. 29. 29
  30. 30. 30 (Forecast & TCPI) -Magnify the cost variance. -Maintain the variance till end. -More accurate. -Time (SV) affect he cost as well as (CV). Budget value of remaining work / Value of cost to spend (up to Budget or to Estimate)
  31. 31. 31 (EV)
  32. 32. September 21, 2016 32 Time-Based Measures: Earned Schedule SPI(time) = PT / AT AT: Actual Time of Work Performed (till Data date) (actual time expended to date (ATE) for a particular earned value) PT: Planned Time of Work Performed (originally planned duration (OD) for that earned value)
  33. 33. September 21, 2016 33 Scope & Time Forecast Time: EAC(t) = BAC(t) / SPI Scope Control: Schedule factors based on cost. Time Control: Schedule factors based on time. Estimated Duration
  34. 34. September 21, 2016 34 - We can measure: Earned Quantity, Earned Workhours & Credit ($) WH of actual quantity as per budget unit rate, then Productivity Index (PI)= $ / unit. Physical Units - Resources - EVM requires the recording of resource utilization in resource units (i.e. labor, materials, and the like) for the work performed to compare with budget of resource units , and capture the actual costs. - Lump Sum Projects Measurements
  35. 35. 35 Cash flow: Cash-out vs Cash-in Turnover: Inflation & interest Economics, Estimating, Accounting & Finance (EFCC – course) Funding gap: budget overrun 0% 20% 40% 60% 80% 100% Month01 Month02 Month03 Month04 Month05 Month06 Month07 Month08 Month09 Month10 Month11 Month12 Month13 Month14 Month15 Month16 Month17 Month18 Month19 Month20 PAC FAC Cash in Received net advance added Cash out
  36. 36. September 21, 2016 36 Total Float Vs EVM Schedule Factors Misleading in Each: 1- Out of sequence can disturb the results of EVM schedule factors specially if the progress of critical path is different. 2- Availability of resources and resource usage in remaining works can affect the rationality of the total float specially if many paths overlapped in the remaining duration.
  37. 37. 37 Some amount of knowledge brings more…… Earned Value Management - Tricky or Misleading
  38. 38. 38 Soon more courses in the regard at: Economics, Estimating, Accounting, Finance & Cost Control Topics Cost Engineering Earned Value Basics - Arabic
  39. 39. Study & Practice Additional References: • • • Certificates: • EVP – AACE International • Control Account Manager (CAM) 39
  40. 40. Mohamed Maged (Related Available Videos)
  41. 41. Thank You Don’t Hesitate to contact…. M.Maged mobile : 00966-580264968