Earned Value Analysis - Revision history

Tkokotas at 09:35, 17 May 2019

2019-05-17T09:35:47Z

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	''Developed by Magnus Schulz''		''Developed by Magnus Schulz''

Tkokotas at 13:10, 10 November 2018

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			''Developed by Magnus Schulz''


	In order to measure performance in terms of cost, time and work progress, the '''Earned Value Analysis (EVA)''' is introduced as a suitable method, offering quantitative analysis techniques as well as objective performance indicators <ref name="Andrew">Baldwin, Andrew and Bordoli, David (2014) A Handbook for Construction Planning and Scheduling, Chapter 6, p.158, First Edition, Jonn Wiley & Sons</ref>.Besides giving an overview of the method itself and the steps, which must be followed in order to carry out an EVA, the requirements on both structural and methodological level are presented and the key benefits are outlined. In addition to its’ primary area of application as a tool within project controlling, the extended sphere of influence of the method across the entire organization is shown. All technical contents are being demonstrated based on illustrative examples.		In order to measure performance in terms of cost, time and work progress, the '''Earned Value Analysis (EVA)''' is introduced as a suitable method, offering quantitative analysis techniques as well as objective performance indicators <ref name="Andrew">Baldwin, Andrew and Bordoli, David (2014) A Handbook for Construction Planning and Scheduling, Chapter 6, p.158, First Edition, Jonn Wiley & Sons</ref>.Besides giving an overview of the method itself and the steps, which must be followed in order to carry out an EVA, the requirements on both structural and methodological level are presented and the key benefits are outlined. In addition to its’ primary area of application as a tool within project controlling, the extended sphere of influence of the method across the entire organization is shown. All technical contents are being demonstrated based on illustrative examples.

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	'''Hayes, Heather (2002) ''Using Earned-Value Analysis to Better Manage Projects'':''' A short introduction to the benefits of EVA, followed by a description of it's relevance for pharmaceutical sector according to a generic example.		'''Hayes, Heather (2002) ''Using Earned-Value Analysis to Better Manage Projects'':''' A short introduction to the benefits of EVA, followed by a description of it's relevance for pharmaceutical sector according to a generic example.

			[[Category:Project Management]][[Category:Resources]][[Category:Earned Value Analysis‏‎]][[Category:Finance]][[Category:Uncertainty‏‎]][[Category:Tool]]

MSchulz at 18:07, 26 September 2016

2016-09-26T18:07:23Z

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	== Requirements and ~~Process~~ of ~~Preparation~~==		== Requirements and process of preparation==

	In order to successfully execute an Earned Value Analysis, the following systematic preconditions and requirements must be fulfilled<ref name="Dua">Raf Dua (1999) Implementing Best Practice in Hospital Project Management Utilising EVPM methodology</ref>.		In order to successfully execute an Earned Value Analysis, the following systematic preconditions and requirements must be fulfilled<ref name="Dua">Raf Dua (1999) Implementing Best Practice in Hospital Project Management Utilising EVPM methodology</ref>.
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	=== Organizational ~~Level~~ - Earned ~~value management~~ System (EVMS) ===		=== Organizational level - Earned Value Management System (EVMS) ===

	Fulfilling the requirements for an EVA stated above represent a challenge for organizations, but at the same time, when executed systematically, it can lead to an overall growth of maturity and transparency throughout the entire value chain<ref name="Andrew" />. Therefore, these measures can be embedded in an '''Earned value management System (EVMS)''', using a dedicated process, procedures, tools and templates.		Fulfilling the requirements for an EVA stated above represent a challenge for organizations, but at the same time, when executed systematically, it can lead to an overall growth of maturity and transparency throughout the entire value chain<ref name="Andrew" />. Therefore, these measures can be embedded in an '''Earned value management System (EVMS)''', using a dedicated process, procedures, tools and templates.
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	----		----

	=== Project ~~Controlling~~ ===		=== Project controlling ===

	As pointed out earlier, the EVA method perfectly serves the purpose of controlling entire projects. Using the Work Breakdown Structure in order to monitor the elements of work at the required level of detail, the Earned Value (EV) can be assessed and measured against the Planned Value (PV). This can either be done by simply allocating a proportion of the total PV to each activity, or by predicting the time, materials and other cost factors related to it.		As pointed out earlier, the EVA method perfectly serves the purpose of controlling entire projects. Using the Work Breakdown Structure in order to monitor the elements of work at the required level of detail, the Earned Value (EV) can be assessed and measured against the Planned Value (PV). This can either be done by simply allocating a proportion of the total PV to each activity, or by predicting the time, materials and other cost factors related to it.
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	Afterwards, the TVAC can be calculated as the difference between originally planned finishing schedule and TEAC<ref name="Kedi" />.		Afterwards, the TVAC can be calculated as the difference between originally planned finishing schedule and TEAC<ref name="Kedi" />.

	== Key ~~Benefits~~ ==		== Key benefits ==

	As pointed out earlier, the EVA method requires a number of systematic characteristics within in organization in order to be applied successfully. Therefore, an overall benefit of the method is, that is provides a framework for organizations to improve their overall process quality and information provision structure<ref name="Lukas" />. Besides benefiting from the results of the EVA itself, the overall learning effect which necessarily takes place during the process of implementation includes		As pointed out earlier, the EVA method requires a number of systematic characteristics within in organization in order to be applied successfully. Therefore, an overall benefit of the method is, that is provides a framework for organizations to improve their overall process quality and information provision structure<ref name="Lukas" />. Besides benefiting from the results of the EVA itself, the overall learning effect which necessarily takes place during the process of implementation includes
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	<references />		<references />

	== ~~Bibliography~~ ==		== Annotated bibliography ==

	'''Baldwin, Andrew and Bordoli, David (2014) ''A Handbook for Construction Planning and Scheduling'':''' This chapter of the handbook explains the basis of the technique and the EVA methodology. It outlines what is needed for an EVA system and how to use it successfully, identifying common pitfalls and how to overcome them in the context of construction activities, providing very helpful examples and graphs.		'''Baldwin, Andrew and Bordoli, David (2014) ''A Handbook for Construction Planning and Scheduling'':''' This chapter of the handbook explains the basis of the technique and the EVA methodology. It outlines what is needed for an EVA system and how to use it successfully, identifying common pitfalls and how to overcome them in the context of construction activities, providing very helpful examples and graphs.

MSchulz: /* Organizational Level - Earned value management System (EVMS) */

2016-09-26T11:59:27Z

Organizational Level - Earned value management System (EVMS)

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	Fulfilling the requirements for an EVA stated above represent a challenge for organizations, but at the same time, when executed systematically, it can lead to an overall growth of maturity and transparency throughout the entire value chain<ref name="Andrew" />. Therefore, these measures can be embedded in an '''Earned value management System (EVMS)''', using a dedicated process, procedures, tools and templates.		Fulfilling the requirements for an EVA stated above represent a challenge for organizations, but at the same time, when executed systematically, it can lead to an overall growth of maturity and transparency throughout the entire value chain<ref name="Andrew" />. Therefore, these measures can be embedded in an '''Earned value management System (EVMS)''', using a dedicated process, procedures, tools and templates.

	The Electronic Industries Alliance (EIA) has release a standard regarding EVMS which contains a set of 32 Guidelines, defines the requirements that an Earned Value Management System (EVMS) must meet. These guidelines represent a management approach on organizational level, that once incorporated on any type of program, whether research and development, construction, production, etc. provides all levels of management with ~~early visibility~~ into cost and ~~schedule problems~~. It addresses EVMS in 5 different dimensions<ref name="EIA">National Defense Industrial Association, Integrated Program Management Division (2014), ''EIA-748-EVMS Standard, Revision C Intent Guide'', p. 4-51</ref><ref name="Hunter">Howard Hunter, Richard Fitzgerald, Dewey Barlow (2014), ''Improved cost monitoring and control through the Earned Value Management System'', Acta Astronautica 93, p. 497-500</ref>:		The Electronic Industries Alliance (EIA) has release a standard regarding EVMS which contains a set of 32 Guidelines, defines the requirements that an Earned Value Management System (EVMS) must meet. These guidelines represent a management approach on organizational level, that once incorporated on any type of program, whether research and development, construction, production, etc. provides all levels of management with an insight into cost, schedule and scoping issues. It addresses EVMS in 5 different dimensions<ref name="EIA">National Defense Industrial Association, Integrated Program Management Division (2014), ''EIA-748-EVMS Standard, Revision C Intent Guide'', p. 4-51</ref><ref name="Hunter">Howard Hunter, Richard Fitzgerald, Dewey Barlow (2014), ''Improved cost monitoring and control through the Earned Value Management System'', Acta Astronautica 93, p. 497-500</ref>:

	*'''Organization'''		*'''Organization'''

MSchulz: /* Terms and definitions */

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Terms and definitions

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	<br clear=all>		<br clear=all>

	The '''Budget at Completetion (BAC)''' describes the total planned budget of a project or work package, and thus the total value which is to be created when completed. When re-estimations or re-scheduling is taking place, the resulting new value is called Estimate at Completion (EAC), which will be specified in detail later on in the chapter ''Forecasting''		The '''Budget at Completetion (BAC)''' describes the total planned budget of a project or work package, and thus the total value which is to be created when completed. When re-estimations or re-scheduling is taking place, the resulting new value is called '''Estimate at Completion (EAC)''', which will be specified in detail later on in the chapter ''Forecasting''.

	The '''Schedule Performance Index (SPI)''' is the ratio of the EV divided by the PV, usually expressed as a percentage. It therefore expresses the relation between planned and actually achieved work, or in other words answers the question "How are we doing against the plan?".		The '''Schedule Performance Index (SPI)''' is the ratio of the EV divided by the PV, usually expressed as a percentage. It therefore expresses the relation between planned and actually achieved work, or in other words answers the question "How are we doing against the plan?".

MSchulz: /* Limitations and pitfalls */

2016-09-26T07:57:46Z

Limitations and pitfalls

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	== Limitations and pitfalls==		== Limitations and pitfalls==

	With reference to the benefits stated above, the point "organizational readiness" can at the same time represent the main obstacle for companies to implement Earned Value Analysis as a tool. The major requirement to establish a complete and detailed WBS and underpin the resulting plan with cost- and budget data on a regular basis, which is hard to achieve in an organization which doesn't have in place the required information infrastructure<ref name="Howes" />. This means the ability to gather and process schedule, cost and budget metrics, e.g. the effort it takes to determine the actual cost of a project, including those cost that have been ~~accrued~~ but for which no invoice has been received <ref name="Kedi" />.		With reference to the benefits stated above, the point "organizational readiness" can at the same time represent the main obstacle for companies to implement Earned Value Analysis as a tool. The major requirement to establish a complete and detailed WBS and underpin the resulting plan with cost- and budget data on a regular basis, which is hard to achieve in an organization which doesn't have in place the required information infrastructure<ref name="Howes" />. This means the ability to gather and process schedule, cost and budget metrics, e.g. the effort it takes to determine and quantify the real progress made or the actual cost of a project, including those cost that have been caused but for which no invoice has been received <ref name="Kedi" />.

	Additionally, Lukas (2008) points out several reasons which in reality lead to failure of EVA<ref name="Lukas" />:		Additionally, Lukas (2008) points out several reasons which in reality lead to failure of EVA<ref name="Lukas" />:

MSchulz: /* Limitations and pitfalls */

2016-09-26T07:53:40Z

Limitations and pitfalls

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	With reference to the benefits stated above, the point "organizational readiness" can at the same time represent the main obstacle for companies to implement Earned Value Analysis as a tool. The major requirement to establish a complete and detailed WBS and underpin the resulting plan with cost- and budget data on a regular basis, which is hard to achieve in an organization which doesn't have in place the required information infrastructure<ref name="Howes" />. This means the ability to gather and process schedule, cost and budget metrics, e.g. the effort it takes to determine the actual cost of a project, including those cost that have been accrued but for which no invoice has been received <ref name="Kedi" />.		With reference to the benefits stated above, the point "organizational readiness" can at the same time represent the main obstacle for companies to implement Earned Value Analysis as a tool. The major requirement to establish a complete and detailed WBS and underpin the resulting plan with cost- and budget data on a regular basis, which is hard to achieve in an organization which doesn't have in place the required information infrastructure<ref name="Howes" />. This means the ability to gather and process schedule, cost and budget metrics, e.g. the effort it takes to determine the actual cost of a project, including those cost that have been accrued but for which no invoice has been received <ref name="Kedi" />.

	Lukas (2008) points out several reasons which in reality lead to failure of EVA<ref name="Lukas" />:		Additionally, Lukas (2008) points out several reasons which in reality lead to failure of EVA<ref name="Lukas" />:

	* the requirements are not defined or incomplete;		* the requirements are not defined or incomplete;

MSchulz: /* Limitations and pitfalls */

2016-09-26T07:52:55Z

Limitations and pitfalls

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	== Limitations and pitfalls==		== Limitations and pitfalls==

	With reference to the benefits stated above, the organizational readiness can represent the main obstacle for companies to implement Earned Value Analysis as a tool. The major requirement to establish a complete and detailed WBS and underpin the resulting plan with cost- and budget data on a regular basis, which is hard to achieve in an organization which doesn't have in place the required information infrastructure<ref name="Howes" />. This means the ability to gather and process schedule, cost and budget metrics, e.g. the effort it takes to determine the actual cost of a project, including those cost that have been accrued but for which no invoice has been received <ref name="Kedi" />.		With reference to the benefits stated above, the point "organizational readiness" can at the same time represent the main obstacle for companies to implement Earned Value Analysis as a tool. The major requirement to establish a complete and detailed WBS and underpin the resulting plan with cost- and budget data on a regular basis, which is hard to achieve in an organization which doesn't have in place the required information infrastructure<ref name="Howes" />. This means the ability to gather and process schedule, cost and budget metrics, e.g. the effort it takes to determine the actual cost of a project, including those cost that have been accrued but for which no invoice has been received <ref name="Kedi" />.

	Lukas (2008) points out several reasons which in reality lead to failure of EVA<ref name="Lukas" />:		Lukas (2008) points out several reasons which in reality lead to failure of EVA<ref name="Lukas" />:

MSchulz at 07:42, 26 September 2016

2016-09-26T07:42:24Z

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	In order to measure performance in terms of cost, time and work progress, the '''Earned Value Analysis (EVA)''' is introduced as a suitable method, offering quantitative analysis techniques as well as objective performance indicators <ref name="Andrew">Baldwin, Andrew and Bordoli, David (2014) A Handbook for Construction Planning and Scheduling, Chapter 6, p.158, First Edition, Jonn Wiley & Sons</ref>.Besides giving an overview of the method itself and the steps, which must be followed in order to carry out an EVA, the requirements on both structural and methodological level are presented and the key benefits are outlined. In addition to its’ primary area of application as a tool within project controlling, the extended ~~usability~~ of the method across the entire organization is shown. All technical contents are being demonstrated based on illustrative examples.		In order to measure performance in terms of cost, time and work progress, the '''Earned Value Analysis (EVA)''' is introduced as a suitable method, offering quantitative analysis techniques as well as objective performance indicators <ref name="Andrew">Baldwin, Andrew and Bordoli, David (2014) A Handbook for Construction Planning and Scheduling, Chapter 6, p.158, First Edition, Jonn Wiley & Sons</ref>.Besides giving an overview of the method itself and the steps, which must be followed in order to carry out an EVA, the requirements on both structural and methodological level are presented and the key benefits are outlined. In addition to its’ primary area of application as a tool within project controlling, the extended sphere of influence of the method across the entire organization is shown. All technical contents are being demonstrated based on illustrative examples.

	----		----

MSchulz: /* Forecasting */

2016-09-26T07:36:47Z

Forecasting

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	= 660€ - 693,16€		= 660€ - 693,16€

	= '''- 33,16'€'',		= '''- 33,16'€'''

	indicating that the total cost at the end of activity 6 will probably be 33,16€ higher than originally planned.		indicating that the total cost at the end of activity 6 will probably be 33,16€ higher than originally planned.