The key beneficial outcomes of a well implemented Earned Value Management system is:
- The planned performance of the work is defined in the Budgeted Cost for Work Scheduled (BCWS). This is the planned time phased budget for the work, sometimes at the Task Level, but always at the Work Package level.
- The "earned" performance of the work is defined using the Physical Percent Complete to compute the Budgeted Cost for Work Performed (BCWP).
- The Physical Percent Complete approach is THE best method. All other methods are open to interpretation.
- The Physical Percent Complete is assessed through tangible evidence brought the table.
Here's an Example
- You planned to have 10 drawings done in the Work Package.
- The Work Package BCWS is $100.
- Each drawing is budgeted to cost $10
- You planned to do one drawing a week for 10 weeks. Every Friday afternoon, you put the finished drawing on a stick file and hung it in the document control room.
It's Friday afternoon of the 6th week
- Five drawings have been done to date, all completed by Friday afternoon.
- On the 6th week, the engineer comes and say "I'm not done."
- You compute the "earned value" for the Work Package as 5/10's complete, instead of 6/10's
- You've "earned" 5/10 of the $100 for the Work Package.
- You planned to "earn" 6/10's, so you 1/10 behind - which is blazingly obvious since you were doing 1 drawing are week.
It's that simple. And it's that complicated, when there work is nonlinear, more complex than simple drawings per week and worth a non-linear amount per deliverable.
Now for the Real Part
If you measure progress by the passage of time or consumption of money (we didn't talk about how much it costs to produce each drawing in man-hours on a time card), then you are only measuring just that...
The passage of Time and the consumption of Money
You are not measuring actual progress. Only the production of drawing is progress. Progress against the planned progress. On the Friday afternoon of the 6th week, you planned to have 6 drawings, you only have 5. You're late, we know that. But you're late in an Earned Value way as well. You Schedule Variance and Schedule Performance Index (from the previous post) shows this in a number.
No other performance measurement system does this.
Agile does it sorta, with story points, or features. But story points and features are not monetized. If we change the example to 100's of drawings, each with different individual BCWS plans and each with individual delivery planned dates (all days of the week, for multi-week durations) - story points will get muddled in the math.
To work, physical percent complete needs to monetize each individual drawing. Then the Actual Cost of Work Performed (ACWP) is used to show the "Cost" Variance (CV) and Cost Performance Index (CPI).
For guidance to all this Earned Value stuff see the Defense Acquisition University Gold Card. Every "program controls" person has this "card" printed, folded, and placed in her notebook. Many places we work has this card reduced a bit, laminated, and hanging on the security badge lanyard for reference.
A Gentle Introduction to Earned Value
This example is actually Too Simple, since the "lateness" and the budget issues are obvious. Here's a Gentle Introduction to Earned Value, with a bit more complexity.