The effect of Level of Effort EVT

The effect of Level of Effort EVT

introduction • LoE – This PMT is best used when it is impossible to determine progress for a task. • This only works in circumstances where the forecast dates are the same as the Baseline dates, and if you will never need to do work from a previous month which was not done

Earned Value Techniques • The CAM must allocate an appropriate Earned Value technique to the work being performed SOME EXAMPLE METHODS DESCRIPTION 50 / 50 0/100 Physical % complete Incremental Milestone Equivalent Units Level of Effort 50% is earned as soon as work starts & remaining 50% when work is complete Nothing is earned until the work is complete. A percentage method of assessment Weighted budget values assigned to milestones within a work package Places a given value on each unit completed EV is equal to BCWS at all times

50/50 – xx/yy When the work package begins in one period and completes in the next. No way of gaining credit between start and completion. Start and completion valued at 50% (or XX/YY). Completion should have criteria defined. Ideal when the plan consists of several short operations/activities. P1 P2 P3 P4 P5 50 50 Total Budget 100 30 70

0-100 No credit can be gained before completion. Strictly limited to work packages starting and completing in the same reporting period. P1 P2 P3 P4 P5 0 100

Incremental Milestones When work packages exceed 2 reporting periods. 1 milestone a month is ideal. Each milestone should have its own value defined discrete from others. This means that the milestones are not sequential. P1 P2 P3 P4 P5 Budget 10 Budget 25 Budget 45 Budget 20 Total Budget 100

Units Complete For physical counts of product or outputs. Each element is given a value for completion and then the units calculated. This is ideal for measuring items like drawings. P1 P2 P3 P4 P5 £10/unit 10 15 15 5 Budget Units 45 £100 £150 £150 £50 Total £450

Percent Complete For long work packages > 3 periods – no quantities to count and no definable milestones. Forecast % complete at end of each period and apply to BAC. Success criteria should be identified to justify the Percentage claimed. For example 25% can be claimed only when the first draft of a document has been completed. 10% 40% 80% 100% Total Budget 1000 100 400 800 1000

Apportioned Effort When activities are performed in support of other direct activities eg Assembly work and the associated material. The effort is estimated and planned as a % of the production effort. There must be a method of determining this %. 50% Assembly work £10,000 Material Draw down £500,000 50%

Level of Effort • Level of Effort When tasks are are difficult to quantify with respect to accomplishment. Supportive activities – no definable outputs – budget scheduled over the period of performance. EV based on passage of time – EV always equal to planned accomplishment. – There can be no schedule variance. Beware, where effort is not linear, may end up with cost variance if more hours booked than planned. • LoE – This PMT is best used when it is difficult to track the progress of an activity. • This only works in circumstances where the forecast dates are the same as the Baseline dates. • Remember – Earned Value should be credited in the same way it is planned.

Correctly profiled Time now BAC = 800 ACC BCWS = 400 ACC BCWP = 400 ACC ACWP = 400 Acc BCWS = 400 Acc BCWP = 400 Acc ACWP = 400 Acc SV = 0 Acc CV = 0

Incorrectly profiled • There may be circumstances where it may seem appropriate to re-forecast a LOE package before it starts. • For example an activity was baselined to start month 1 and then forecasted to start now in month 5. The following slides explain the effect of this on the EV data.

Incorrectly profiled Month 1 Time now ACC BCWS = 100 ACC BCWP = 0 Re-forecast start date Acc BCWS = 100 Acc BCWP = 0 Acc ACWP = 0 Acc SV = -100 Acc CV = 0 BAC = 800 EAC = 800 ACC ACWP = 0

Incorrectly profiled Month 2 Time now ACC BCWS = 200 ACC BCWP = 0 Acc BCWS = 200 Acc BCWP = 0 Acc ACWP = 0 Acc SV = -200 Acc CV = 0 BAC = 800 EAC = 800 ACC ACWP = 0

Incorrectly profiled Month 5 Time now ACC BCWS = 500 ACC BCWP = 500 Acc BCWS = 500 Acc BCWP = 500 Acc ACWP = 120 Acc SV = 0 Acc CV = 380 BAC = 800 EAC = 800 ACC ACWP = 120

WHY! • This is a strange effect of Earned Value and the PMT of LOE. Although the actual performance has not been worth 500, LOE means that the total performance will equal the value of the Baseline (BCWS) at time now.

What does these mean • Looking at the data as it stands now it tells us: • We have only one month of work left to do • We are on target to complete with no schedule variance • We have been very efficient we have done £700 for only £360 (positive CV of £340) • We should under spend on completion and therefore the EAC is to high • How real are these conclusions: • Because we know the work was started late, we know more than 1 months work is needed. • We also know the work is behind schedule, but not from the EV data • As the CAM we would know that only £100 of performance is being achieved for a cost of £120 per month so we are not efficient • This efficiency in fact means that the EAC is too low.

Graph data Cum Performance

Questions • At what month could you determine that an over spend was going to happen, and by how much did you expect it to be.

Cumulative variances

Other Effects • Where you are in a situation where more performance is being claimed than the spend incurred a positive Cost Performance Index (CPI) is created, meaning you are efficient than expected. Where the performance is due to the incorrect LOE re-forecast, an artificial variance has been created. Some Independent Estimates at completion (IEAC) formulas use the CPI, and if this is artificial then the IEAC will not be correct.

IEAC based on Cur/Cum CPI

The effect of Level of Effort EVT

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