How Not To Do Earned Value

The LinkedIn forum The Project Manager Network - #1 Group for Project Managers which I sometimes wonder if that is actually the case, has a conversation going on around project failure. A Master's student asked about project failure modes. That led to the use of Earned Value. One participants made some pretty boneheaded statement around EV:

1. (EV) It's a tool and anyone who thinks it is an actual depiction of real progress is fooling themselves.
2. Percent complete, unless 100%, is at best an educated guess.
3. I've heard of the 0/100 and the 0/50/100 methodologies. I disagree with the 0/100. If you are trying to accurately portray progress, it is best to develop a set of standard credits, for example when doing drawings or, actual measurement such as in construction. Each activity has a value from which percent complete can be derived. 
4. An equipment general arrangement drawing is a good example (percentages shown are individual contributions) - using 40 hrs/drawing as the allowance (we get)...

5% (2 hrs)for applying the border and title
20% (8 hrs) for defining the area - boundaries and overall dimensions
30% (12 hrs) for showing all the equipment
5% (2 hrs) for the drawing being checked
10% (4 hrs) for it being Issued for Approval
15% (6 hrs) for it being Issued for Bid
15% (6 hrs) for it being Issued for Construction.
100% = 40 hrs. 

So, silly me, I responded that determining physical percent complete was a straight forward process once you have Quantifiable Backup Data or measures of Physical Percent Complete, or even better, Technical Performance Measures. Let's look at each concept

1. EV, when percent complete is measured in tangible units of physical percent complete is a depiction of real progress. Why because the progress is physical percent complete. It's a tautology.
2. Percent complete is NOT an educated guess, it is tangible proof. This is call Quantifiable Backup Data. Bring the number of drawings to the table you said you were going to do on the day you said you were going to do them, and you'll get the prorated share of the earned value for the total drawing package. Bring 8 of the planned 10 on the day you planned to produce 8 and you'll get 80% of the total work package for producing 10 drawings.
3. 0/100 is best, all others skew the performance. The last piece of that concept is actually correct. For a 10 drawing package, with each drawing weighted the same, that is 10%, 5 drawings, completed on the planned day, gets you 50% physical percent complete.
4. No we go straight into the ditch. Progress is NEVER measured with the passage of time except in Level of Effort work. The actual costs (ACWP) is interesting to cost accounting, but it tells us nothing about the progress of the project except how much money we have spent compared to our budget. If the assigned (apportioned) value were all there was, then OK. But the conversation included the number of hours, and there where the problem starts.

Then the final come back from the OP.

If you're doing a drawing and it takes 40 hours to do the drawing and no two drawings are alike, how do you determine what percentage complete you are? When estimates of the work to be completed are put together, they will estimate X drawings at 40 hrs/drawing. They will have different standards by discipline. Will a person ever report 41% complete on a drawing? Most likely not. It will be shown as 40%. Collectively all the drawings may be 41%, but not individual. No matter how you look at it, it is still an estimate.

First measuring progress to plan by the number of hours consumed is called Level of Effort. Second LOE is a very poor measure of anything other than the passage of time and consumption of resources.

In the end the poster was insistent that ANSI-748-B is just a guide, and doing EV was a local issue. No doubt that is true in his domain. But as a practitioner of EVM using ANSI-748-B for programs subject to DCMA Validation, as well as engagements with the DOD office that own the Earned Value Management processes for the DOD, I'd be laughed out of the room with an approach like that.

For a summary Earned Value in a Nutshell using a similar drawing example.

So Here's The Way TO Do Earned Value

1. Using the WBS define the Work Packages that produce the deliverables for the program
2. Assign an Earned Value Technique to each of these Work Packages - 0/100 for the individual tasks inside the Work Package is the absolute best. You're either done with the task or you are not. Weight the tasks if you want, but sum up the "done ones" and compare that to the total work and compute a percent complete.
3. Sequence these Work Packages in an Integrated Master Schedule
4. Assign budget (BCWS) to each of the Work Packages
5. Collect the actual costs to perform the work (ACWP)
6. Compute the Earned Value (BCWP) using a simple formula BCWP = BCWS x Physical Percent Complete.
7. Compute Cost and Schedule variance. Make management decisions based on these and take corrective actions to get back to GREEN.
8. Repeat step 5, 6, and 7 every month at a minimum, more often if possible.

That's all there is - essentially - for doing Earned Value Management. Of course if you read ANSI-748-B, the NDIA Earned Value Management Intent Guide, and the DCMA Intent Guide, there is a lot more.

You Can't Make Stuff Up

OK, you can. But if you do, it makes having a conversation about EV much harder. 

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