Project Management Blog

Microsoft Project on Steroids II

2009-03-29T14:06:00.012+01:00

4. CV (EVM) is EV (EVM) – AC (EVM) (You can use CV if you used BCWP in point 3). For summary tasks, we use the formula (but you could do a rollup-sum):

5. SV (EVM) is EV (EVM) – PV (EVM) (You can use SV if you used BCWP in point 3). For summary tasks, we use the formula (but you could do a rollup-sum):

6. CPI (EVM):

The thresholds used here are only an example. These values can be changed to reflect what you consider good, average, warning, and bad values.

7. SPI (EVM):

The thresholds used here are only an example. These values could be changed to reflect what you consider good, average, warning, and bad values.

Microsoft Project on Steroids

2008-10-03T11:25:00.007+01:00

Microsoft Project is a great tool to track project performance using Earned Value, but you must adapt it a little bit to have more knowledge inserted. Therefore, the following section will describe modifications made to the Microsoft Project Template and the rationale behind each one.

These are the fields that were customized in the template:

1. AC (EVM) is simply ACWP. For summary tasks, we do a rollup-sum:

2. PV (EVM) is BCWS:

3. EV (EVM) is [Baseline Cost]*[Physical % Complete]/100 (You can use BCWP if you are careful enough to change Tools->Options->Calculation->Earned Value->Default Task Earned Value Method to Physical % Complete and then create all your project tasks, or for each task change the Earned Value method to Physical % Complete). For summary tasks, we do a rollup-sum:

Next week we will continue with this subject.

Regards,

Earned Value and Microsoft Project

2008-08-25T14:37:00.003+01:00

Microsoft Project help describes Earned Value analysis as “a method for measuring project performance.” It indicates how much of the budget should have been spent in relation to the amount of work done so far and the baseline costs for the tasks, assignments, or resources.

At the root of Earned Value analysis are three key values:

The budgeted cost of individual tasks as they are scheduled in the project plan based on the costs of resources assigned to those tasks plus any fixed costs associated with the tasks. This is the budgeted cost of work scheduled (BCWS). BCWS is the baseline cost up to the status date you choose. Budgeted cost values are stored in the baseline fields, or, if you've saved multiple baselines, in Baseline1 through Baseline10 fields.
The actual cost required to complete all or some portion of the tasks up to the status date. This is the actual cost of work performed (ACWP). Normally, Microsoft Project correlates actual costs with actual work. Only if you enter actual costs independent of actual work or change resource pay rates will the actual cost be out of step with the scheduled cost.
The value of the work performed by the status date measured in currency. This is literally the value earned by the work performed, and is called the budgeted cost of work performed (BCWP). This value is calculated for each individual task, but is analyzed at an aggregate level (typically at the project level).

Earned Value analysis is always specific to a status date you choose. This may be the current date or any date before the current date.

Microsoft Project gives us out-of-the-box AC, PV, EV, CV, SV, SPI, and CPI, among others. However, the key to using Earned Value is the way we interpret the values. So when EV>0 and PV=0 what should be the result of SPI? For anomalous situations, SPI calculated by Microsoft Project is always 0. This will difficult the analyses of eventual insertion errors.

If PV>EV>0 and PV=Task Baseline Cost (this means that the task in the initial plan should be finished but due to a delay is still progressing), what should be the result of SPI? For Microsoft Project, it’s EV/PV, but in this case we have a task that is recovering and PV will stay constant with an increasing EV, so SPI is going to improve until the task is finished. This will present us with some misinterpretations since at this time it is better to have SPI with a value that enables us to identify recovering tasks.

Next week we'll talk about customizing Microsoft Project to provide more valuable information.

I'm back

2008-08-25T00:54:00.001+01:00

Well one year after my previous post and I'm back with more ideas to share with everybody. Keep tuned for this week post.

Regards,
J

Introduction to EVM - The Cherry on Top of the Cake

2006-08-04T15:54:00.000+01:00

As an added bonus, Earned Value enables us to predict future project performance based on the CPI and SPI.

To predict future project cost we can calculate two indicators:

Estimated Cost At Completion Optimistic (ECAC Optimistic): Planned Cost/CPI. This assumes that the resources productivity will be constant.
Estimated Cost At Completion Likely (ECAC Likely): AC+(Planned Cost-EV)/(CPI*SPI) if SPI between 0 and 1. This assumes that if a task is late than the productivity will be affected and is equal to CPI*SPI for the remaining work (Planned Cost-EV). Otherwise ECAC Likely=ECAC Optimistic.

To predict future project duration the indicator is Estimated Duration At Completion (EDAC) and is equal to Planned Duration/SPI.

As a rule of thumb, you should only use the predictions if the task progress is at least 15% or 20%.

Because SPI and CPI at the leaf task level, don’t present much information due to short duration and different resources assigned to different tasks predictions should be done at an intermediary level, usually at the phase level. It’s not common to use prediction at the project level since the CPI and SPI vary from phase to phase (the productivity of a test phase usually is not related the productivity of a envisioning phase).

See you all next week.

Introduction to EVM - The Toppings

2006-04-11T18:01:00.000+01:00

Until now, we have been talking about the key values related to a task. But what about work packages? Let us assume the following example:

Since no resources are assigned to the Work Package, we can’t calculate AC, EV and PV directly. You can think of it this way, since the work performed on a work package is the same as the sum of all the work performed so far on the leaf tasks, AC, EV and PV is the sum of all the AC, EV and PV of the tasks that are contained by the work package.

In the case of CV and SV we can either calculate it by using the rollup sum of AC, EV and PV or we can rollup sum CV and SV of the leaf tasks of the work package.

For CPI and SPI we have to calculate it by using AC, EV and PV of the work package. We cannot rollup sum the task indexes.

Until now, we have assumed that the work actually done (EV) is the same as planned. But in some cases it might be different. The way EV is calculated is the planned budget of the task times the physical percent complete. The physical percent complete is an estimation of the resources working on a task and must be given when inserting the work hours in the timesheet.

Introduction to EVM - The Frosting

2005-11-20T15:26:00.000+00:00

The example of last week presents us with some good and bad news. But how much more productive were we and how much behind schedule are we? The EV technique presents us with the results by calculating:

Cost Variance (CV): CV=EV-AC;
Schedule Variance (SV): SV=EV-PV;

So in our case we saved 440€ in work (CV) and we are 880€ behind schedule (SV; and since we are one day late this actually is correct since it represents the value of a day work of the two resources). If we calculate only the Accounting Variance (AV) we would report 1360€ (PV-AC). What is the meaning of this value regarding project performance? Would it be better if we where less productive therefore decreasing AV? If you know please e-mail me because I don’t.

Therefore, we can draw the following conclusions:

CV greater than 0; This means EV greater then AC representing a better productivity than planned (if you prefer it can be interpreted as greater speed of work);
CV=0; This means EV=AC representing the planned productivity;
CV lesser then 0; This means EV lesser than AC representing a worst productivity than planned (if you prefer it can be interpreted as lesser speed of work);
SV greater than 0; This means EV greater than PV representing more work done than initial planned;
SV=0; This means EV=PV representing that same work done as initially planned;
SV lesser than 0;This means EV lesser than PV representing less work done than initial planned.

The Earned Value technique calculates also two indexes:

CPI (Cost Performance Index)=EV/AC; Represents the level of productivity or speed of the work;
SPI (Schedule Performance Index)=EV/PV; Represents the speed of evolution of the schedule;

From the usage of these indexes, we can draw the following conclusion:

CPI greater than 1; productivity is greater than expected;
CPI=1; productivity is the same as expected;
CPI lesser than 1; productivity is lesser than expected;
SPI greater than 1; schedule speed is greater than expected (ahead of schedule);
SPI=1; schedule speed is equal to what was expected (on schedule);
SPI lesser than 1; schedule speed is lesser than expected (behind of schedule).

Next week: Introduction to EVM - The Toppings

Introduction to EVM - The Cake

2005-11-13T17:36:00.000+00:00

Financial Pitfalls

Never wonder why each week the project is always on budget but the project always finishes costing more or finishing latter?

Imagine that you have a three-day project with one task done by one resource. You plan accordingly and at day 1 you plan 8 hours, at day 2 you plan another 8 and at day 3 another 8.

On day 1 the resource reports 10 hours. That’s great you are ahead of schedule! The other day it reports another 10 hours. At this time you are ecstatic you have done the project and saved half a day (life could not be better). At day 3 the resource reports another 10 hours. Wow… What happened? You go talk to your team member and he tells you that the project was sub estimated and the work instead of taking 8 hours to finish each day it took 10. This is bad news. How could you have seen this coming? Always busy with so many projects and the accounting numbers never reflect what’s happening on the field.

This happens when analysing only the accounting variance (work planned minus work performed). However, there is a better way.

What is the Earned Value Technique?

The Cake

The Earned Value technique is broadly used as a performance measurement method for projects of any size. It enables a project manager to assess if there are variances from the base project plan that require some sort of corrective action.

This method presents an overview of the health of the schedule, cost and scope of a project and reflects the actual performance of the project. This is accomplished by calculating three main values for each task on the project plan:

1. Planned Value (PV): also known as Budgeted Cost of Work Scheduled (BCWS) is the value of the cost (calculated at the initial planned cost) of the work planned to have been done so far;

2. Actual Cost (AC): also known as Actual Cost of Work Performed (ACWP) is the value of the cost (calculated at the actual cost) of the work done so far;

3. Earned Value (EV): also known as Budgeted Cost of Work Performed (BCWP) is the value of the cost (calculated at the initial planned cost) of the work actually done so far. Some people like to think of it as the “physical progress of the work”.

The following figure illustrates the concepts based on our three days project:

Let us assume that our resource costs 100/h. The grey bar represents the initial plan. The key values are:

1. PV at day 1 is 100*8; at day 2 it’s equal to PV at day 1 plus 100*8; at day 3 it’s equal to PV at day 3 plus 100*8;

2. AC at day 1 is 100*10; at day 2 it’s equal to AC at day 1 plus 100*10; at day 3 it’s equal to AC at day 2 plus 100*10;

3. EV at day 1 is 100*8; at day 2 it’s equal at EV at day 1 plus 100*8; at day 3 it’s equal to EV at day 2 plus 100*8.

The figure bellow displays in a graph the three key EV values:

So lets see what would be our conclusions each day. Since AC is greater than EV this would tell us that our resource is doing more work to get the same results. At day 2 that situation maintains and at day 3 the same result. So you could have act since day 1 to try to solve the situation. Another curious conclusion is that if we look closer at the results EV and PV are always the same. This tell us that we are actually on schedule and the project is going to finish at the planned date since the work actually done is always the same as the work planned. Great, now we can get a clear picture of the current project status instead of just hopping for the best.

Lets look at one more example.

Resource 1 costs 100€/h while Resource 2 costs 10€/h. As we can see, we are currently one day late and the current date is Day 3. Instead of starting working at Day 1 the resources only started at Day 2 and reported only 4 hours each instead of 8. The figure bellow displays in a graph the three key EV values:

So PV at day 1 is equal 100*8+10*8. PV at day 2 is equal to PV at day 1 plus 100*8+10*8. EV for day 1 is zero since no work was done. At day 2 EV is EV at day 1 plus 100*8+10*8. AC at day 1 is zero, at day 2 is AC at day 1 plus 100*4+10*4.

These values represent two things:

1. Since the work actually done (EV) is greater at day 2 than the work reported (AC) then we are more productive than expected;Since the work planned (PV) at day 2 is greater than the work reported as finished (EV) then we are behind schedule.

2. Since the work planned (PV) at day 2 is greater than the work reported as finished (EV) then we are behind schedule.

Next week article: Introduction to EVM - The Frosting.

Earned Value Management Applied to Small Projects Case Study

2005-11-04T22:34:00.000+00:00

The project where the previously described EVM model was applied was in a IT project with the goal of deploying a business supporting infra-structure for a company in the financial market. The project FTE is 1.4 (FTE Max 3.5) with a total of 1135 hours.Illustrated bellow is the project lice-cycle and main deliverables.

The project plan consisted of a total of 34 tasks and 4 people composed the team.

Each Friday the timesheets were submitted so the project progress could be assessed using EVM at Monday morning. The indexes were analyzed at the phase level and predictions were generated.

For illustration only purposes we present bellow the progress of the EVM indexes at the top project level and the main responses.

The actual analysis was done at the phase level but this figure is a good example on how to act based on the CPI and SPI thresholds.

In this project the most important variable to control was cost and the project predictions were mainly cost estimates. The estimates were calculated at the phase level and added to get the total cost estimate. The evolution of the cost estimates are depicted in the graph bellow.

From the graph I would like to emphasize the following facts:

After 50% of the work the predictions were within a 10% interval;
The highlighted section of the graph depicts a zone that predicted a big cost overrun if we didn't do anything. Due to the actions undertaken by close risk monitoring and control the final cost was well on target.

Next we will analyze the error rate of the predictions by looking at the accumulated frequency. The green line represents the frequency of the predictions with a specific error, and the red line the accumulated frequency of the predictions with an error inferior to a specific value.

The graph shows that 80% of the predictions had and error inferior to 10% when compared with the final cost.

Conclusion

The usage of EVM in small projects is most valuable since, was we could see in our case study, the oscillations in cost and schedule in small projects can happen very quickly, demanding very close monitoring and control.

EVM provides powerful early warnings that used in conjunction with a good risk management process enables project managers to detect deviations from the targets and act accordingly.

Based on the concepts of EVM the project manager can calculate predictions of cost and schedule that can be very accurate.

EVM can be applied to small projects by using methods that with little effort can provide the full power of EVM. These methods are:

Top-level EVM analysis done at the project life-cycle phases;50/50 rule or similar for progress report;
Using index thresholds triggers linked with a risk management process;
Use adjusted SPI instead of SPI.

Earned Value Management Applied to Small Projects Basic Model (Part 2)

2005-10-30T13:24:00.000+00:00

When a task is recovering (a task is recovering when it was supposed to have finished but it is still being executed) EV is going to progress towards PV and PV is always the same causing the progression of SPI towards 1 (the baseline is extending until the task finishes). The following figure illustrates the idea:

The SPI value is expressed in percentage in the right Y axe.

This example illustrates one of the biggest concerns in EVM since SPI in this cases moves way from the real trend of the schedule and if we want to predict future performance based on the classic SPI the predictions will each time be better since SPI is always approaching 1 (that is perfect schedule performance).

In this case we propose that SPI is calculated using the classical way for all the cases except this one. During the recovery period we want to calculate an “Adjusted SPI” that provides a correct prediction therefore: EDAC=Baseline Duration/Adjustedt SPI

Considering that the SPI for a task that is finished is:SPI=Baseline Duration/Actual Duration

In the case of a recovering task our best estimate for the Actual Duration is EDAC and instead of using Baseline Duration we must use (Actual Date-Baseline Start) so SPI does not maintain the same behaviour of approaching 1. Therefore: SPI=(Actual Date-Baseline Start)/EDAC

Replacing EDAC we get: Adjusted SPI=(Baseline Duration/(Actual Date-Baseline Start))*SPI

The next graph compares the evolution of SPI with adjusted SPI.

With the Adjusted SPI we can now calculate with confidence the future project performance and get a clear view of the status of the project. This approach has the advantage of being very easy to calculate using any of the project management software packages or the simplest spreadsheet.

J

Earned Value Management Applied to Small Projects Basic Model (Part 1)

2005-10-23T16:14:00.000+01:00

Commonly EVM has seen a very good acceptance in projects of very big dimension (usually called multi-million dollar projects) and unfortunately it’s also been a general practice to disregard the use of EVM in small projects (up to 4 Full Time Equivalent in a 6 to 12 month period) due to the benefit perceived of using it doesn’t compensate the effort/cost associated. This is particularly true in the IT area.

The aim of this article is to demonstrate that the usage of EVM for small projects is feasible and the benefit provided by EVM largely compensates the effort/cost of applying it when using a practical approach. This paper will describe the usage of EVM in those situations and will finish with a case study.

Proposed Approach

Project Life-Cycle

The project life-cycle for small project is of great importance, since it enables the analysis of the EVM values at a higher level providing more meaningful information and more stable indicators. Because the project life-cycle phases groups’ tasks of the same nature, this provides a very good basis for considering each phase the best level in the WBS to perform analysis of the indicators and generating cost and schedule predictions.

Progress Report

To track progress I use the 50/50 rule. This is a fast and easy way of tracking progress if the tasks don’t exceed a reporting period (usually one week). The advantage of this method is that team members only have to report hours and task closure (the start of the task is implied by entering the first set of ours) not interfering in the quick pace of small projects.

If the task does exceed several reporting periods than I recommend using an apportioned relationship to other discrete work packages or a combination of percent-complete estimates with milestones used as gates.

Decision Making

For small projects or big ones one of the main issues is that when looking only at the accounting variance (PV-AC) this doesn’t reflect the health of the project and problems are not identified early, forcing the project team to develop workaround plans to handle situations that could have been avoided.

So the main question is how to identify potential problems and when to act.

When analyzing the EVM indexes one might acknowledge degradation on the performance of the project or maybe a trend that could lead to a decrease of the performance of the project. But the main question remains: is it time to act? If so what to do?

The model that I use associates activation limits to the EVM indexes. For example if CPI or SPI:

For better control graphical markers were assigned to the specific index thresholds (bright green, green, yellow and red).

In each review period (usually one week) the indexes at the phase level must be analyzed and eventual problems should be looked at following a couple of rules:

If this deviation is a risk trigger or expected as part of a response to a risk activate the proper response (could be do nothing)
If the deviation is not explained by the identified risks than search for the cause (In small teams this is usually done quite fast due to the reduced number of communication channels therefore lower complexity – analysing CV and SV of the lower level tasks) and identify the risks that could happen due to the identified cause. Next plan for a proper response.

Risk Identification and Response

As much as possible during risk identification the risk thresholds should use the EVM indexes to enable association of actions to specific values of the indexes.

Predicting Future Project Outcome

To predict future project performance Estimated Cost At Completion was calculated in it’s optimistic form, ECAC Likely and EDAC were also used (If the progress is bigger than 15% otherwise the previsions should be equal to the baseline):

Estimated Cost At Completion Optimistic (ECAC Optimistic): Planned Cost/CPI. This assumes that the resources productivity will be constant.
Estimated Cost At Completion Likely (ECAC Likely): AC+(Total Planned Cost - EV)/(CPIxSPI). If SPI between 0 and 1. This assumes that if a task is late than the productivity will be affected and is equal to CPI x SPI for the remaining work (Planned Cost-EV). Otherwise ECAC Likely=ECAC Optimistic.
To predict future project duration Estimated Duration At Completion (EDAC) as used and is equal to Planned Duration/SPI.

SOX and EVM

2005-10-22T13:55:00.000+01:00

Hi,

Want to know what is the relationship between the Sarbanes-Oxley Act of 2002 (SOX) and Earned Value? There is a great article about it at http://www.line56.com/articles/default.asp?articleID=6099&TopicID=3

Now that more and more European companies worry about SOX implementation this should provide a good understanding about the usage of EVM to increase transparency of the organization results.

J

Human Resources Management

2005-10-12T21:08:00.000+01:00

Hi,

The art/science of managing people on a project environment is one of the most important aspects of project management. The project team quality is as good as the quality of the actions of the individual team members, in the sense that if you have low quality team members you'll never accomplish a high performance team but if you have it than it's easier to build a good team (but not guaranteed).

This leads me to the topic of individual motivation and behaviour. The individual behaviour of each team member is crucial for having good team dynamics. A thing that I call work ethics is central to the concept of individual improvement and team building.

I define work ethics as the basic behaviours that you are counting on that each individual will use to help him to produce the results that are expected. I'll count behaviours like "if you can do it now don't leave it for later" (proactive), "if you can't comply warn the appropriate team members", "ask for clarification whenever you feel you needed", “if you have something in your mind tell it”…

These behaviours are not trained in schools (at least not in Portugal) and usually only more senior personal is capable of presenting this kind of behaviour consistently.

In this environments the project team but especial the organization must play a key role in shaping and helping to adapt the team members to the organizations work ethics to sustain a good work environment while increasing its efficiency.

What is your opinion? Post your comments.

J

Pragmatic view of Project management

2005-09-24T14:36:00.000+01:00

Does a project charter need to be constructed for every project that is small and usually executed by the organization?

Although a project is a unique endeavour there are in some organizations certain project types that are always executed (for example in a telecommunication industry the expansion of capacity of communication nodes is always seen as a good business opportunity and the proposal work is always done).

The charter in this case is a pretty standard document stating the business opportunity and the usual constraints that the project must take into consideration. Only a certain level of review needs to be done by the sponsor to acknowledge that the unique characteristics of this project are stated in the charter. This is a very quick task but with a very high return since at this phase the sponsor can alert the project manager for risks that must be accounted for during the planning phase.

As we all know as soon as a potential problem is uncovered more likely is that the cost of treating it will be lower. In the software industry the cost at the early phases can be from 10 to 5 times less the cost of handling a problem when it is too late.

J

Process oriented project team

2005-06-11T16:13:00.000+01:00

This week I was discussing the need for milestone visibility. Strange topic to be discussing, but it happened! The conversation begun as I was making a point to allow the PM tool (in this case MS Project) to calculate the milestone date based on the tasks dependencies and how easy it was to have this information available and updated. My audience questioned why should the project team need milestones!

Better to have questioned why do we need to breath.

Milestone visibility to the project team was view as a side issue. The team needs to focus on the technical work and not on the management issues like budget and dates!!!

This out-dated view of the world is still alive.

Currently not to have any kind of process (like milestone updates) on a project so the project team can have as much time as possible to make the technical work can lead only to one outcome. Soon or later the time spend on the correction of error/quality problems is going to increase due to errors made early on the project making the project end-date to be missed.

Imagine this, only the project end-date is set. The team starts to work and it actually releases the product on time but with many problems due to low quality control so the end date can be reached. Because no intermediate control points where established no prediction of this situation was made.

As we all know errors are easier and cheaper to correct early on the project than later, for this reason processes as milestone control can help visualize schedule variances and make the team more accountable for there performance early on the project.

Compare the no process approach with a team that early in the project establishes a set of milestones and control it early. The team will follow up any variances and take any corrective action so the target dates are accomplished not only the end date. This will in the long run increase quality and project visibility to the outside stakeholders.

J

PMBOK Third Edition Released

2004-11-02T23:17:00.000+00:00

The Project Management Body of Knowledge - Third Edition was released. Go get it!

J

Ford cancels Everest

2004-11-02T08:27:00.000+00:00

Ford canceled the $200 million Everest project (Web purchasing project).

The article of ADMag lists several causes for the failure including end-user expectations, integration issues. In the project management side several questions arise. Was there any early warning indicators that could have helped Ford detect the slippage and cancel or correct the project? Did the strategic decision to implement the system made sense now that the old one is considered to go on.

Great article!

J

Irish Government with Project Management in mind

2004-10-29T20:55:00.000+01:00

This week the Irish Minister for Transport acknowledged that project management is essencial for improving the productivity of the state.

J

Project Management Pitfalls

2004-10-24T16:06:00.001+01:00

Project Magazine published a PCI study that tries to assess project success and failure rates both within corporations and across Project Management Institute chapters.

The main focus of the study is on "Do Senior Managers and Corporate Culture Support, Obstruct or Ignore Project Work?"
J

Agile Software Development

2004-10-22T15:44:00.000+01:00

AgileAlliance published in 2001 a manifesto with the principles that all software development projects should use.

In the meantime a current is emerging that states that PMI principles and the agile Project Management are in some way incompatible.

What the author doesn't seem to understand is that the PMBOK presents the tools and techniques that a PM can use for his/her project but ultimately is up to the PM to decide how to do the work (communicate with the team verbally or written, build iteratively or in one big bang approach).

There is also a miss conception of what is the project management process and the project life cycle. The last is the set of specific phases that constitute a project to improve management and this is dictated by the specific application area (in this case software dev). The first one must adapt to help attain the project goals.

J

Project Management

2004-10-16T22:47:00.000+01:00

Hi all,

This is the first post of a blog with the goal of discussing and exchange ideas about this very broad topic.

Hope you enjoy,
J