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RPM Earned Value Management

RPM Earned Value Management. Rational Portfolio Manager. Farshad Shadpey Steven Milstein. Overview. Introduction Why Earned Value Management EV Prerequisites EV Measuring Methods EV in RPM Gap Analysis References. Introduction.

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RPM Earned Value Management

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  1. RPM Earned Value Management Rational Portfolio Manager Farshad Shadpey Steven Milstein

  2. Overview • Introduction • Why Earned Value Management • EV Prerequisites • EV Measuring Methods • EV in RPM • Gap Analysis • References

  3. Introduction RPM supports Earned Value Management (EVM). However, the RPM EV feature does not fully comply with all industry standards. The following slides: • Summarize the essential prerequisites and methods for EV calculation, based on the PMI and ANSI standards • Describe the fundamental parts in the RPM EV feature • Identify the gaps between those standards and RPM

  4. Why Earned Value Management? • EVM is valuable to project managers because it allows them to compare where they are on a project with where they ought to be by: • Evaluating project performance in terms of cost (or effort or other relevant metric) and time by analyzing the Cost and Schedule Variances • Forecasting required cost (or effort or other relevant metric) and time to complete the project

  5. An Example of EV Analysis (RPM EV Pivot)

  6. EV Prerequisites Certain data must be collected in order to calculate Earned Value – generally, this means: • Planned Values - Earned Value requires a detailed bottom-up baseline plan. This information captures the approved project cost (or effort or other relevant metric) at any point during the project. • Actual Costs - This information shows actual cost (or effort or other relevant metric) for the work completed at any point during the project.

  7. EV Prerequisites (Cont.) And more specifically, Earned Value calculations require the following data, at any point in the project: [1] • The work scheduled to be completed • The approved budget for the work scheduled • The work actually completed • The approved budget corresponding to the completed work • The actual costs These prerequisites are used later in this presentation in the gap analysis

  8. A challenging question – what is completed work? • Identifying completed work is easy • Identifying the level of completeness of work in progress is difficult

  9. Measuring Completeness with EV Measuring Methods • The following EV measuring methods are based upon widely accepted PMI & ANSI standards: • Milestones With Weighted Values • Fixed (Start/Finish) Formula by Task • Percent Complete Estimates • A Combination of Weighted Milestones with Percent Complete Estimates • Equivalent Completed Units • Earned Standards • Complementary methods: • Apportioned Relationships to Other Discrete Work Packages • Level of Effort • For more information on these methods, please see the backup slides

  10. Earned Value in RPM • RPM EV calculation is only based on the WBS labor cost (effort cost) rolled up from the task level. • The planned value (approved budget of the scheduled work) is defined by the Baseline WBS labor cost. • Completeness of tasks is measured by the actual hours and the earned value is calculated based on percent work (%W) where %W = Actual / (Actual + Remaining) and the planned values of assignments1. 1- %W as defined above complies with percent complete definition in IBM’s World Wide Project Management Method for the work units tracked by effort, refer to the page 18 of TC, Tracking a control document. Using %W is also similar to Standard Hours method defined in the ANSI/EIA-748-A-1998 standard for Earned Value Management Systems, refer to the page 24 of the standard [3].

  11. Gaps Analysis

  12. Backup Rational Portfolio Manager

  13. EV Measuring Methods • Milestones With Weighted Values1: • In this method, each work package has a specific budget value associated with specific milestones. This budget is determined based on the total budget of the work package and the weights of the milestones. After reaching a milestone, the budget value is considered as earned if the defined goals of the work package for that milestone are achieved. Otherwise, no earned value is considered for the work package [1,2]. 1- ANSI/EIA-748-A-1998 standard for Earned Value Management Systems describes a method as “Valued Milestones” [3], which is the same as the “Milestones with Weighted Values” method.

  14. EV Measuring Methods (Example of EV calculation in Milestones M1 and M2, Using Milestones With Weighted Method)

  15. EV Measuring Methods (Milestones With Weighted Values, Example of Performance Graph)

  16. EV Measuring Methods (Cont.) • Fixed (Start/Finish) Formula by Task: 25/75; 50/50; 75/25: • The first number multiplied by the budget of the activity divided by 100 is the assumed earned value after the activity starts. The remaining of the budget of the activity is considered as earned, when the activity is finished [1, 2].

  17. EV Measuring Methods (Cont.) • Percent Complete Estimates: • In this method, the completeness of each activity is assessed for measuring periods. This method is the easiest, but could be the most subjective method [2, 3].

  18. EV Measuring Methods (Cont.) • A Combination of Weighted Milestones with Percent Complete Estimates: • In this method, the percentage complete should be smaller or equal to the milestone percent [2].

  19. EV Measuring Methods (Cont.) • Equivalent Completed Units: • In this method, the work for producing each unit of the product is broken down to various activities/work packages that are associated to some percent of the full unit. The earned value is calculated based on the budget of units and the percent of completed activities [1].

  20. EV Measuring Methods (Cont.) • Earned Standards: • In this method the standards, developed for recurring work and are used to define the budget and measure the performance [1].

  21. EV Measuring Methods (Cont.) • Apportioned Relationships to Other Discrete Work Packages (used as a complement of other measuring methods): • Activities like inspection are dependent on other activities/work packages, which have specific earned value. In this method, the planned value and subsequently the earned value of an apportioned activity is considered as a portion of the planned and earned values of the main activity/work package [1].

  22. EV Measuring Methods (Cont.) • Level of Effort (used as a complement of other measuring methods): • The performance of activities like project management or variant types of administrative jobs cannot be assessed independently. These activities are known as Level of Effort (LOE). The corresponding budget of an LOE activity in each measurement period is considered as its earned value [2].

  23. References [1] Quentin W Fleming and Joel M. Koppelman. “Earned Value Project Management - An Introduction" (3rd edition). Project Management Institute, Inc, 2005. [2] Project Management Institute. “Practice Standards for Earned Value Management”. Project Management Institute, Inc, Newtown Square, Pennsylvania, 2004. [3] GEIA Standard. “ANSI/EIA-748-A-1998, Earned Value Management Systems”. Reaffirmed: August 28, 2002.

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