EVM in the Project Manager's Toolbox: Use It

Let's use project tools, such as earned value management, to assess our status, make immediate changes to adapt to the current conditions, and forecast our ability to deliver. ...

... "The outcome can then not only help identify at an early stage any issues and allow small changes to be made so that a project can be brought rapidly back on track, but will also give the capability to play the what-ifs that are necessary to make the decision as to whether a project should be stopped" ...

Via IT Director: Earned Value Management

Earned Value Lies and Truths

There was a great quote from Benjamin Disraeli in David Hillson's letter to the editor in the latest PM Network Magazine.

Disraeli allegedly* said, "There are three kinds of lies: lies, damn lies, and statistics."

* As an aside, there's apparently some debate over the actual origin of this phrase.

In any case, Hillson's interesting letter was cautioning those who frequently misapply statistics, and offered some clarification the terminology----specifically, the mean (average), mode (most frequently occuring item), and median (the middle item if all were lined up in order).

I find that many misuse Earned Value statistics the same way. The intent of EVM is to be an early indicator of a potential cost or schedule overrun (and I personally feel that it's better at predicting cost than schedule). However, much like the Ghost of Christmas Future, it's not set in stone. There are many things a project manager can do to get things back in order. More importantly, sometimes there are reasons for the apparent variance that indicate that the variance is explainable and not a concern at all.

The key with EVM (much like any metric) is to not take the statistics at face value, and to use them as a trigger to do further subjective examination. It's a tool, and organizations often overuse such tools (much like they do with Six Sigma). If all you have is a hammer, everything looks like a nail.

Earned Value Wikipedia: Your Chance to Contribute

Our friend Garry Booker of Project Frontier has revised the Wikipedia entry for Earned Value Management and is looking for feedback.

Feel free to check it out and update as needed. Also, here's Garry's introductory statements in the topic's discussion page.

His revisions have added some clarity, plus information on making EVM scalable to various size projects. There are some good diagrams and links as well.

Here's the link...

Earned value management - Wikipedia, the free encyclopedia

Earned Value EVM Adoption Growing?

Earned value management is seeing adoption outside of traditional user base, through mandates and associated success stories. ...

... "So EVM tells you — by planning and setting the milestones — whether you got the value for what you're paying for. I think people are starting to understand that. " ...

Earned Value EVM Adoption Growing?: Via FCW: Making EVM matter ...

Earned Value Management Trends, Best Practices, and Pitfalls

A few weeks ago, I commented on Part 1 of a three-part series on Earned Value Management on Projects@Work.

While Part 1 set the stage and illustrated some of the challenges of EVM, Part 2 of this excellent series offers some excellent case studies and learnings.

For instance, the US government agency, OPM (Office of Personnel Management) cites the following critical success factors:

- Continuous executive sponsorship (not just up front)
- Committment to funding for adequate tools and training
- Adequate allocation of project managers' time to manage using this system
- Piloting EVM in a small group of projects to illustrate success and fine tune the details
- Not underestimating the culture change management required, involving employees, managers, and timekeepers. Regularly maintained training and job aids are critical.

Another organization, Inter-Coastal Electronics, cites having shallow, simple WBS templates in their ERP system as a key success factor. They claim that a WBS that's too granular becomes too difficult to manage. I couldn't agree more.

I highly recommend this series to anyone attempting to introduce Earned Value Management in their organizations.

http://www.projectsatwork.com/content/Articles/230753.cfm

More Earned Value Woes for IT

I mentioned the other day that the IT industry has been struggling to adopt Earned Value Management. There's a three-part series on Projects@Work on Earned Value that illustrates the trials and tribulations thus far. This first part is based on a survey from Primavera that demonstrates just how far behind the IT industry is.

Ironically, this is especially so in the US government (the focus of the Primavera study), despite a mandate from the OMB (Office of Management and Budget) that any IT organization that wants to get their project approved must use Earned Value for tracking cost.

According to the article:

Respondents cite three big EVM challenges:

• 25 percent say they are unfamiliar with EVM;
• 24 percent say they lack personnel trained in EVM; and
• 21 percent say they lack senior management interest.

As the article points out, the latter is the most suprising, considering the OMB mandate. It just goes to show that these things must be driven from the top if they are to be effective.

I suspect part of the problem is that the concepts need to be made simpler for management to embrace it, or at least the focus should be directed at the ultimate EVM figures management would care about, such as "Estimate at Completion," as opposed to the more cryptic Cost Performance Indices (CPI) - although they're valuable as a project manager's tool.

If you really want to turn a senior manager off, just show them an Earned Value metrics chart. Better to sell them on the concepts first and give them the resulting target estimates and planned corrective actions rather than the nuts and bolts of EVM metrics.

http://www.projectsatwork.com/content/Articles/230677.cfm

Earned Value Management; Important for IT

There's a nice little writeup in Computerworld about Earned Value Management and its increasing use in IT.

The article offers the basics of EVM, along with the challenges in getting it widely used IT industry, particularly since EVM assumes that there's some sort of disciplined project management approach to begin with---which many IT organizations are still behind on.

It rightly positions EVM as a valuable tool for predicting budget overruns early in the project.

The article is below (there are a few good sidebars on EVM as well) ...

Earned Value Management - Computerworld

Earned Value Management Deadline Looms for U.S. IT Projects

The Office of Management and Budget (OMB) has given government agencies until December 31, 2005 to develop a a plan for implementing Earned Value Management (EVM) for all of its IT projects. The IT industry in general has been slow to adopt EVM, and this is especially true in government agencies.

To assist with this, the CIO Council released a framework earlier this month for organizations to use for implementing EVM.

As reported on Government Computer News, "The guidance comes after a recent report by EVM software developer Primavera Systems Inc. of Bala Cynwyd, Pa., found that many agencies will struggle to meet the upcoming milestone because many agency senior managers have not embraced the concept. "

I think that's true for many senior managers in general, not just in the government. With the deadline a day away, let's hope the template has been of assistance. Meanwhile, check out the information below about the CIO Council's framework for implementing EVM.

CIO Council releases guidance on EVM plans

Earned Value - why does it have to be so difficult?

This paper from the recent PMI-SAC conference describes how to apply a simple approach to Earned Value Management for IT Projects. It starts with the question 'why is EVM so little used?' and puts forward 4 of the more common reasons. The author goes on to describe what was originally used as a paper based method. It exploits the natural structure of IT projects, frequently formalised in some form of stage gate process. Industry norms for the relative breakdown of costs by stage and activity or phase within the stage are used to compare to actual costs.
This approach implies that you do not need a detailed bottom up cost and activity tracking in order to calculate the earned value. Of course, it would mean that you don't have much earned value information during phases and breaking the phases down into very small units may stretch the applicability of the statistics used at the outset.
Of course, the method still requires some work, project structure and some organisational discipline. This can be one of the most difficult of the original four reasons to address - Because sometimes management doesn't really want to know!
Earned Value Management for IT Projects

Project Management Innovations at Project Frontier; WBS "String Theory"

Our friend Garry Booker has been introducing some innovative ideas on his website. We've reported here about his Streamlined Earned Value Management (EVM), and reclassification of operational effort vs. LOE.

His latest innovation is the use of WBS Strings (not to be confused with the "String Theory" concepts in physics). The premise is that, instead of sequential numbering systems, a smart string of codes could be used, which allows for easier understanding when reporting (especially in organizations where the code itself is prominent in reporting).

This makes sense, and I can compare it to my old days as an IT manager, asking for intelligent naming conventions for files, data fields, and programs. This facilitated easier maintenance, better readibility, and quicker orientation for new employees, not to mention less errors due to having a wrong digit or a number out of sequence.

Check out the link below, which contains an interactive tutorial on WBS Strings, along with Garry's other innovations.

Welcome to Project Frontier

Earned Value Management: The Performance Baseline ...

NASA provides nice tutorial on the earned value program management technique, EVM. It emphasizes establishing the performance measurement baseline which becomes the reference to which progress is tracked. ...

Earned Value Management: The Performance Baseline: Via NASA: EVM Tutorial - EVM: Earned Value Management

... "Earned value provides an objective measurement of how much work has been accomplished on a project. Using the earned value process, the management team can readily compare how much work has actually been completed against the amount of work planned to be accomplished. All work is planned, budgeted, and scheduled in time-phased planned value increments constituting a Performance Measurement Baseline (PMB). " ...

Earned Value Management EVM Principles ...

The Earned Value Management methodology enables visibility into cost, schedule, and technical progress on projects to measure and manage performance. ...

Earned Value Management EVM Principles: Via DOE: EARNED VALUE MANAGEMENT APPLICATION GUIDE ...

... "Principles of Earned Value Management (EVM): All work is planned to completion; The work is broken down into finite product-oriented components that can be assigned to a responsible organization; The scope, schedule and cost objectives are integrated into a plan by which progress can be measured; Actual costs are recorded; Performance is objectively measured; Variances and deviations are analyzed, impacts are forecasted and estimates at completion are based on the actual performance to date; Changes to the performance measurement baseline are controlled; " ...

EVMS Earned Value Management: Federal Agencies Lag Behind

Primavera studies the adoption and implementation of earned value management processes and systems (EVMS) in federal information technology organizations. Current assessment shows that agencies lag behind on implementation versus their EVMS targets. ...

EVMS Earned Value Management: Federal Agencies Lag Behind: Via Primavera: Study Reveals Disconnect Between Perceived Merits of Earned Value Management and Federal Agencies Readiness to Implement ...

... "Specifically, the study indicates that the federal IT community agrees with OMB that EVM delivers improved project outcomes, with 60.6 percent of respondents reporting that EVM is very or somewhat important to achieving their capital investment goals. Despite this value perception, results do not demonstrate agencies movement from belief to action, with only 37 percent currently utilizing EVM and even fewer prepared to train or hire personnel skilled in EVM within the next 12 months. Respondents cited their top challenges to EVM implementation as unfamiliarity with EVM and lack of trained personnel. These findings indicate that agencies will not only have difficulty developing EVM implementation plans in time for the December 31 OMB deadline, but also will face challenges implementing documented plans. EVM processes, systems, and software enable the continuous assessment of project performance and status - providing a methodology that can help agencies effectively measure project alignment with resources and goals by comparing status to original plans and end goals. EVM can help agencies achieve green marks on the President's Management Agenda scorecard. To achieve and maintain this high score, agency projects must stay within a 10 percent variance from their cost, schedule, and performance goals. Further, OMB issued a memorandum in August 2005 requiring agencies to utilize EVM Systems (EVMS) on all new major IT projects. The memorandum requires development of written policies outlining agency-specific plans for EVM implementation by December 31, 2005. Agencies must also evaluate exiting, cost, schedule, and performance of ongoing IT projects and take any necessary corrective actions by March 31, 2006 and before devoting any FY06 funds to associated projects. In support of this effort, OMB is working with the Federal Chief Information Officers (CIO) Council to develop a model agency EVMS policy for IT projects ... " ...

Earned Value Major Event November 7-9

It's not too late to register for the 17th Annual International Integrated Program Management Conference, scheduled for November 7-9 in Virginia.

Earned Value enthusiasts rejoice! The topic of this year's seminar is: EVM is Everywhere - "Let's do it!"

Presenters will discuss EVM best practices and tools. Here's the info...

PMI College of Performance Management

Earned Schedule; Making up for Earned Value's Shortcomings

Back on August 12th, we posted a link to a great writeup on Earned Schedule by Walt Lipke, one of the creators of Earned Schedule.

The Sydney PMI chapter has a whole list of articles on Earned Schedule, which, if you're not familiar with it, introduces "duration" into the mix to give better schedule data and facilitate more accurate predictions than traditional EVM.

Here's another good writeup, from Ray Stratton, of Management Technologies (it's a PDF, so you'll need the Adobe reader, which is free from Adobe.com).

OMB EVM Rules: Software Supports Capital Project Oversight ...

Software enables compliance with OMB earned value management EVM rules, which supports better oversight of capital projects ....

OMB EVM Rules: Software Supports Capital Project Oversight: Via xpdoffice - A Division of SSSI - Offering Web-Based Timesheet and Project Management Software

... "xpdient, Inc., a division of Scientific Systems and Software International (SSSI), announced the release of a new module of its successful xpdoffice solution to address new Earned Value Management (EVM) rules propagated by the federal government's Office of Management and Budget (OMB) via circular A-11, Part 7, titled Planning, Budgeting, Acquisition, and Management of Capital Assets. The release occurs as OMB officials are becoming increasingly persistent in urging agencies and agency contractors to adopt EVM oversight of major capital projects.

Becoming effective in the near future, rule changes to the Federal Acquisition Regulations will standardize EVM execution and use for all major federal government acquisitions, including information technology services. Widely used in commercial markets, earned value management is a standard way to measure a project's progress, forecast its completion date and final cost, and provide schedule and budget variances along the way. By integrating these capabilities, xpdoffice provides consistent indicators enabling project evaluation and comparison. " ...

xpdoffice is a web based Business Automation Software (BAS) solution that streamlines enterprise management and delivers improved project financial reporting. xpdoffice modules include HR, Contracts Administration, Time Management, Document Management, Knowledge Management, Purchase and Inventory, Project Management, and Expense Management.

Project Risk-Based Cost Management; Is RACM The Next Big Thing?

The Defense industry brought us Earned Value and proved that Critical Chain could work. Now the DoD commissioned the Institute for Defense Analysis (IDA) to test a new cost control theory called RACM (Risk Analysis and Cost Management).

The results of the study showed that RACM can offer significant reduction in project costs and excellent cost performance management. RACM offers a method to determine and manage an appropriate risk reserve level (much like Critical Chain focuses on buffer management for schedule control). It also uses a risk multiplier (called Ps or "Probability of Success") for costs at the WBS element level.

But RACM is not being positioned as a replacement for Earned Value Management. Instead, it can be used to complement EVM.

For more info, see the website for RACM, Inc. They also offer a 60-day Evaluation Beta Model.

RACM Home Page

No Earned Value Acronyms for Management

There's a good post on the Defense Acquisition University's EVM (Earned Value Management) Forum suggesting a good format for management reporting.

The submitter, Mr. Roger Mandel, makes a good case for protecting management from the details and acronyms inherent in Earned Value and offering the basics in a report.

Check out his recommended format. Looks pretty good to me...

1. Summary Status: (Stated here are the major facts in bullet format. Statements shall be clear and concise.)

2. Major Achievements & Future Scheduled tasks: (List those major milestones that have been accomplished during this past performance period and those that are schedule for the current or near term performance periods.)

3. Trends: (Stated here are the major trends, as the data indicates. Emphasize the present major problem. Phrase the statements in the form of a question. In a few cases, there may be more than one problem. A good problem statement will be concise, usually only one sentence.) Graphic figures should also be used.

4. Projections: (List the possible projections to the major trends. Develop alternative ways to solve the problem, generally more than one possible solution. Briefly note the advantages and disadvantages of each possible solution. State the projected completion period and total final cost.)

5. Choice and Rationale: (State choice from among possible solutions and the detailed reasons for that choice. State why certain alternatives were not chosen.)

6. Areas of Concern: (List cost accounts of task items that are prominent schedule or cost drivers that could cause significant variances.) Some form of a Stop Light chart could be used for a quick overview.

7. Validity of Data: (Comment of noted discrepancies within the submitted report and any concerns for the validity of data presented.)

See below for the full posting...

ACC: Acquisition Community Connection

Implementing Earned Value; Training and Scalability Are Key

Here's a lesson from NASA's Public Lessons Learned System (PLLS) from their pilot project to implement Earned Value Management at the NASA Kennedy Space Center in 2004.

Two key points were raised:

• Make sure that sufficient training is provided to cover all facets and various scenarios
• Make sure your EVM system is implemented in a way that doesn't slow down small projects and work requests (either have a light version of EVM or don't require it for projects under a certain size).
  
  For the full details, go to the NASA PLLS System below and search for '1409' (which will bring up lesson #1409)...
  
  NASA Public Lessons Learned System (PLLS) Database

Earned Value Gone Wild; Exploring New "Frontiers" in Project Management

Project Frontier is a business that certainly would fall under the umbrella of "thought leadership." Their site offers ideas for "Streamlined Earned Value Management (EVM)" for personal weekly planning, and explores alternate ways of pictorially depicting Earned Value as "weather maps" (see their EV Maps section).

Check it out...

Welcome to Project Frontier

Earned Value at NASA

Here's a good presentation from NASA back from 2002 on scheduling and Earned Value. The report is focused on R&D projects, but it's a valuable overview nonetheless. Pay particular attention to the "backup" slides, as they offer various alternatives for tracking Earned Value.

As those who have struggled with EV know, problems can occur when a simple percent complete formula is used, as all milestones are treated equally. Weighted milestones is a good solution, but not all project management software easily supports it. Another option is to use percent complete, but add a manual adjustment factor (perhaps in MS/Excel) that is based on weighted milestones (also see my entry on "Earned Value Weighted Milestones with MS/Project" for another solution). The fact is, Earned Value is a great tool, but it must be combined with weighted deliverables to be totally effective.

The link below is to the HTML version. Once there, click on the link to bring up the PowerPoint version for best readibility.

Earned Value for R&D-Type Projects