Using Earned Value Management Concepts to Improve Commercial Project Performance R. Scott Brunton, PMP, PMI-RMP/SP, EVP Principal Solutions Consultant Lewis Fowler, LLC www.lewisfowler.com Welcome to the PMI Houston Conference & Expo and Annual Job Fair 2015 Please put your phone on silent mode Q&A will be taken at the close of this presentation There will be time at the end of this presentation for you to take a few moments to complete the session survey. We value your feedback which allows us to improve this annual event. 1
EV Within PMI Project Cost Management Knowledge Area Controlling and Monitoring Process Group Reference: PMI PMBOK and PMI 2
EV Within PM Methodology As an analytical technique for assessing progress of technical maturity through cost and schedule Performance Measurement Reference: PMI PMBOK 3
Capabilities of EV Management Objective, measurable metrics Informs the organization decision making process Supports project controls to enable successful project execution through Performance Measurement Relevant to internally driven business efficiency requirements for commercial programs 4
Why EV Was Developed Late 1800s Optimize performance of factories 1950s and 1960s Navy developed into PERT/Cost techniques Cost/Schedule Control Systems Criteria (C/SCSC) 1998 32 guidelines in ANSI/EIA-748 by NDIA Performance Measurement as a means to make better business decisions 5
What s In A Name Historically driven and mandated within the defense industry Perception of being operationally burdensome Uncomfortable Involves a priori planning and periodic reporting Requires root cause analysis and mitigation Drives accountability and active management Reference: Earning Value from Earned Value Glen Alleman, Aug 2013 6
What EV Isn t or Won t Do Performance Measurement Will not ensure project success by itself Is not a one size fits all strategy Does not make up for a bad plan, incomplete requirements, or poor project management Is not just a government reporting requirement Performance Measurement is not a solution as much as it is an efficiency enabling methodology 7
Here s The Value Success enabler Element of PM fundamentals Disciplined project controls and performance monitoring Performance Measurement enhances program management capability through insight Increase the probability of program success Equally applicable in commercial business 8
Cost of EVM Process Author (Year) Source of Estimate Cost Range Kouts (1978) MITRE Corp. (1982) DOD IG (1984) Decision Planning Corp. (c1992) Humphreys and Assoc. (c1992) Lampkin (1992) Survey of Industry 0.5% to 5% Survey of Industry 0.1% to 0.2% Survey of DoD Experts 5.0% Industry Cost Estimating Model 0.6% to 1.0% Consultant Experience 0.5% to 4.0% Average of Five Studies Above 0.4% to 1.63% Reference: The Costs and Benefits of the EVM Process D. Christensen, Fall 1998 9
Program Customer Satisfaction Best Worst Minimal Capability Qualified Performer Composite World Class Program Management Capability Reference: DCMC Conference, March 2000 10
When to Consider EV High value programs Long duration programs Progress payment programs Contract types: Firm Fixed, Cost Plus, T&M In support of broader corporate mission to drive efficiency and effectiveness in program execution and utility of organizational resources 11
Performance Measurement In support of objective technical maturity Objectively validated and measured timephased cost and schedule performance Alerts program to potential execution problems Absolute or trend measures Enables problem diagnosis by variance analysis that leads to active program risk management 12
Why Measure Performance? To further increase the probability of program success through: Risk and opportunity management Program governance and controls Answer the questions Is the program performing according to plan? Are there performance trends emerging? How does this program relate to corporate success? 13
Concepts Validate the technical scope Establish The Plan What scope, by when, for how much Measure performance and assess variance Analyze to reveal root cause Implement corrective actions Inform the organization Project and Portfolio levels 14
Concept as a System Scope Schedule Cost / Resources Program Funding Earned Value Management System Portfolio Dashboard Performance Analysis Root Cause Determination Corrective Action Planning Performance Measurement/Analysis Cost and Schedule Performance Data Collection 15
Performance Measures Cost Measures: CV = EV AC ; CPI = EV / AC Schedule Measures: SV = EV PV ; SPI = EV / PV Estimate-at-Complete (EAC): Various Estimate-to-Complete (ETC): ETC = EAC - AC Reference: PMI PMBOK, Table 7-1 16
Establish the Plan Plan what you know in objective terms Entire plan, Rolling Wave Don t create variances during planning Reference: 8-31-2013 Scott Adams, Inc 17
Measure Performance Collect cost and schedule data based on predefined, objective, measureable criteria Scope management through governance Reference: Jorge Cham 2014 18
Assess Variance Mechanical process of determining performance as compared to The Plan Provides visibility in objective terms Focus on primary drivers of plan variance Absolute and relative measures 19
Root Cause Meaningful level of detail Ask Why more than once Recommend and implement solutions Capture in risk action register Informs the program of risks and opportunities Reference: MindTools 20 http://www.mindtools.com/pages/article/newtmc_5w.htm
Implement Corrective Action Supports the program controls function Assess cost and schedule impacts Baseline program governance Log, track, and report Archive 21
Broader Context Risk and opportunity management Dashboard reporting Project portfolio management Projects Programs Portfolios Supportive of enterprise strategic objectives and Value Chain of the organization 22
Deploy Incrementally Reconcile objective sources of performance information for cost and/or schedule Measure performance period-over-period Allow the variance analysis to inform next steps in evolving measurement maturity Rigorous management of baseline plan Reveal need for scope management through governance 23
Tailored Solution ANSI/EIA 748: Compliant versus Certified Begin with cost or schedule performance Reference: Earning Value from Earned Value Glen Alleman, Aug 2013 24
Overhead Burdens Training and education Stakeholders, PMO Team, Project Managers Supporting IT infrastructure Cost and schedule information collection Excel spreadsheets to enterprise solutions Reporting and analysis time In comparison to value of improved performance and project delivery 25
Frame the Conversation Speak in terms of Performance Measures Recognize the value of performance insight Recognize performance data as a corporate asset Value of improved probability of program success outweighs organizational cost factors Improved internal/external customer satisfaction Align to corporate objectives 26
Prepare for Implementation Shared vision of what success looks like Stakeholder alignment and visible support Project identity and organizational brand Motivated, capable, and visionary team Integrated governance, change management Build open cross functional relationships 27
Company Return On Sales +15% +10% +5% 0% -5% -10% -15% Minimal Capability Qualified Performer Composite World Class Program Management Capability Reference: DCMC Conference, March 2000 28
Using Earned Value Management Concepts to Improve Commercial Project Performance R. Scott Brunton, PMP, PMI-RMP/SP, EVP Principal Solutions Consultant Lewis Fowler 383 Inverness Parkway, Suite 475 Englewood, CO 80112 www.lewisfowler.com Phone: 719.339.0748 E-mail: sbrunton@lewisfowler.com LinkedIn: www.linkedin.com/in/sbrunton 29
30
31
32