The last article concluded with the realization that the Schedule Performance Index (SPI) is a useful indicator for determining overall project duration but only at the earlier stages of the project. As the project progresses towards completion the SPI cannot be relied upon for determining total duration. The Earned Schedule approach is an extension to EVM and enables creating an index that is accurate not only at the early stages of the project but also towards the end of the project.

To understand Earned Schedule let’s re-examine the following table and focus, initially on the results reported at the end of week 5.

Accumulated Week 1 Week 2 Week 3 Week 4 Week 5
Actual Cost (AC)

$19,000

$38,000

$57,000

$76,000

$95,000

Planned Value (PV)

$20,000

$40,000

$60,000

$80,000

$100,000

Earned Value (EV)

$16,000

$32,000

$48,000

$64,000

$80,000

           
CPI = EV/AC

$0.84

$0.84

$0.84

$0.84

$0.84

SPI = EV/PV

0.80

0.80

0.80

0.80

0.80

           
EAC = BAC/CPI

$237,500

$237,500

$237,500

$237,500

$237,500

Estimated Duration

12.5

12.5

12.5

12.5

12.5

Analyzing the status of the project at the end of week 5 you are able to make the following conclusions:

  1. The value of project throughput (Earned Value) is lower than the planned output (Planned Value) and the project is behind schedule.
  2. The Earned Value achieved at the end of week 5 ($80,000) was planned to be accomplished at the end of week 4 (see Planned Value for Week 4).
  3. In Earned Schedule terminology, the Actual Time (AT) is 5 while the Earned Schedule (ES) is 4.

Armed with this information you can now construct a revised, time based, Schedule Performance Index, calculated as SPIt (i.e. SPI based on time as opposed to cost) = ES / AT =4 / 5 = 80%. With this revised SPI we can estimate the Expected Duration (ED) as the total Planned Duration (PD) divided by SPI. ED = PD/SPIt = 10 / 0.8 = 12.5 weeks.

Let’s compare the revised approach to the one we presented last week. With the old approach, based on the original SPI, we calculated the following:

Accumulated

Week 9

Week 10

Week 11

Week 12

Week 13

Actual Cost (AC)

$171,000

$190,000

$209,000

$228,000

$237,500

Planned Value (PV)

$180,000

$200,000

$200,000

$200,000

$200,000

Earned Value (EV)

$144,000

$160,000

$176,000

$192,000

$200,000

           
CPI = EV/AC

$0.84

$0.84

$0.84

$0.84

$0.84

SPI = EV/PV

0.80

0.80

0.88

0.96

1.00

           
EAC = BAC/CPI

$237,500

$237,500

$237,500

$237,500

$237,500

Estimated Duration

12.5

12.5

11.36

10.42

10

With the help of Earned Schedule we get a more accurate and continuously correct Estimated Duration, as presented below:

Accumulated

Week 9

Week 10

Week 11

Week 12

Week 13

Actual Cost (AC)

$171,000

$190,000

$209,000

$228,000

$237,500

Planned Value (PV)

$180,000

$200,000

$200,000

$200,000

$200,000

Earned Value (EV)

$144,000

$160,000

$176,000

$192,000

$200,000

           
Actual Time (AT)

9

10

11

12

12.5

Earned Schedule (ES)

7.2

8

8.8

9.6

10

           
SPI($) = EV/AC

0.80

0.80

0.88

0.96

1.00

SPI(t) = ES/AT

0.80

0.80

0.80

0.80

0.80

           
Expected Duration (ED)

12.5

12.5

12.5

12.5

12.5

It is clear from the above two tables that while the Estimated Duration in the first table (based on SPI$) gets progressively out of sync, the Expected Duration in the second table (based on SPIt) maintains its accuracy and correctly predicts the total project duration.

This concludes the fourth instalment in the Earned Value for Dummies series. If you wish to receive working copies of the tables provided above please drop me a line at blog@quantmleap.com and I will send you the relevant spreadsheets.

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image…In the beginning God created the Earned Value Methodology (EVM). And man was put upon the earth to utilize EVM and EVM was implemented widely and God was happy. And God said, let there be Actual Costs (AC), and Planned Value (PV) and Earned Value (EV). And man went forth and calculated Cost Variance (CV), and Schedule Variance (SV), and Cost Performance Index (CPI) and Schedule Performance Index (SPI) and God was satisfied that everything was as intended. So God rested. But the imagery of man’s heart is evil from his youth, and man ran projects with SPI < 1 and there was chaos…

This post is the third installment in the Earned Value for Dummies series and is the first dealing with the concept of Earned Schedule (ES).

Summary of the events so far (for the complete details see part 1 and part 2):

  • You have engaged a building contractor to renovate your 10 bedrooms house. You have received a quote of $20,000 per room (for a total of $200,000) and with a planned completion of 1 room per week.
  • After the 1st week you received a report advising you that costs to-date have been $19,000 with one room 80% complete.
  • Based on the above you calculated that:
    • Actual Cost (AC) = $19,000
    • Planned Value (PV) = $20,000
    • Earned Value (EV) = $16,000
    • Cost Performance Index (CPI) = EV / AC = $0.84
    • Schedule Performance Index (SPI) = EV/PV = 0.8
    • Estimate At Completion (EAC) = BAC/CPI = $237,500
  • You also concluded (utilising your interpretation of the SPI) that the total time taken to complete all work planned (Estimated Duration) will be 10 / 0.8 = 12.5 weeks (Planned Duration / SPI).

The reports you’re getting from your building contractor over the next 9 weeks are identical to the one you received at the end of week 1, and as time progresses you record the actual and calculated data in your diary. The data you’ve collected looks as follows:

Accumulated Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10
Actual Cost (AC)

$19,000

$38,000

$57,000

$76,000

$95,000

$114,000

$133,000

$152,000

$171,000

$190,000

Planned Value (PV)

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

Earned Value (EV)

$16,000

$32,000

$48,000

$64,000

$80,000

$96,000

$112,000

$128,000

$144,000

$160,000

                     
CPI = EV/AC

$0.84

$0.84

$0.84

$0.84

$0.84

$0.84

$0.84

$0.84

$0.84

$0.84

SPI = EV/PV

0.80

0.80

0.80

0.80

0.80

0.80

0.80

0.80

0.80

0.80

                     
EAC = BAC/CPI

$237,500

$237,500

$237,500

$237,500

$237,500

$237,500

$237,500

$237,500

$237,500

$237,500

Estimated Duration

12.5

12.5

12.5

12.5

12.5

12.5

12.5

12.5

12.5

12.5

Up to this point everything progresses pretty much along the projections you’ve made earlier on. Estimated Costs remain at $237,500 and the Estimated Duration is still 12.5 weeks for completing all projected work.

Week 11 goes by, and having recorded the results in your diary you find out that while your Earned Value is still growing, your Planned Value has now reached its peak, and as it remains constant at $200,000, your SPI has now changed as follows:

  • Earned Value = $176,000
  • Planned Value = $200,000
  • Schedule Performance Index = 0.88

If you were to use the SPI to estimated total project duration, the result will be 10/0.88 = 11.36 weeks and that is materially different than the estimates you’ve had over the past 10 weeks, and no changes were implemented in any of the other project indicators. If we were to record future weeks the discrepancy can be expected to increase, with the most ridiculous projection delivered at the end of the project (at the end of the 12.5 weeks), at which point the Earned Value and Planned Value will be identical, meaning that SPI will equal 1 and the Estimated Duration calculated as 10 weeks! (See fully populated table for weeks 9-13 below).

Accumulated Week 9 Week 10 Week 11 Week 12 Week 13
Actual Cost (AC)

$171,000

$190,000

$209,000

$228,000

$237,500

Planned Value (PV)

$180,000

$200,000

$200,000

$200,000

$200,000

Earned Value (EV)

$144,000

$160,000

$176,000

$192,000

$200,000

           
CPI = EV/AC

$0.84

$0.84

$0.84

$0.84

$0.84

SPI = EV/PV

0.80

0.80

0.88

0.96

1.00

           
EAC = BAC/CPI

$237,500

$237,500

$237,500

$237,500

$237,500

Estimated Duration

12.5

12.5

11.36

10.42

10

The above issue lies at the heart of an extension to the EVM methodology, called Earned Schedule. This approach is based on the realisation that SPI is a useful indicator for determining overall project duration but only at the earlier stages of the project. As the project progresses towards completion the SPI cannot be relied upon for determining total duration, and an alternative, more accurate approach had to be put in place.

The next article, “Earned Schedule for Dummies – Part 2“, will conclude this discussion and provide all the necessary tools to utilize Earned Schedule techniques as part of the overall Earned Value methodology. In the meantime, if you wish to receive working copies of the table provided above please drop me a line at blog@quantmleap.com and I will send you the relevant spreadsheets.

I value your comments, if you have any thoughts on the above please join in and share with others!

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imageIn the previous post (Earned Value Management for Dummies – Part 1) I outlined the details of a renovation project and your attempts to figure out whether or not the renovation work on your house is progressing well.

After one week of work you are presented with the following facts:

  • Actual Cost (AC) = $19,000
  • Planned Value (PV) = $20,000
  • Earned Value (EV) = $16,000
  • Cost Performance Index (CPI) = EV / AC = $0.84
  • Schedule Performance Index (SPI) = EV/PV = 0.8

As explained previously, the renovation work on your house is not only over budget (as the cost to deliver the work output is larger than the value of the output) but is also behind schedule (as the value of the work produced is below the value of the work planned).

You are now in an urgent need to understand the impact that these figures have on the project in its entirety. More specifically you would like to obtain a projection of:

  1. The total cost at completion, based on project performance to-date.
  2. Estimated completion date.

The budget you’ve assigned to this work is $200,000 (based on $20,000 per room x 10 rooms). In Earned Value ‘speak’ this value is called Budgeted At Completion (BAC) and it represents the originally planned cost for the project. From the CPI you know that each $1 invested produces a returned value of $0.84. Since the total value of the final renovation work hasn’t changed and is still $200,000, you figure out that the level of investment required for producing that value is $200,000 / $0.84 = $238,000. In Earned Value ‘speak’ this value is called Estimate at Completion (EAC) and in its simplest form is calculated as BAC/CPI.

Regarding your 2nd question: The Earned Value set of tools does not adequately address duration issues, as it primarily cost focused. I will deal with this issue, in greater detail, in one of my next posts, but at a simple level you can derive an indicative end date based on the following technique. From the SPI calculation you already know that the project is progressing at a pace that is 80% of that planned. Given that the project was initially planned to be finished in 10 weeks, and given the slower pace to-date, you estimate that the total time taken to complete all work planned will be 10 / 0.8 = 12.5. This means that the renovation will be complete after a total number of 12.5 weeks, or 2.5 weeks after the initial planned completion date. Further elaboration on this question will be available in my next post titled “Earned Schedule (ES) for Dummies”.

Armed with the above information you produce the following chart:

image

 

  • The blue line represents your projected accumulated costs to the end of the project.
  • The Red line represents your budgeted costs. Notice that as your project was planned to complete at the end of the 10th week, your accumulated planned cost remain static and do not change after that point in time.
  • The Green line represented the projected accumulated earned value. Given current performance, ‘planned’ earned value will only be achieved after 12.5 weeks of work, at which time the Earned Value will reach the planned value of $200,000.

To summarize:

At its core, Earned Value Management makes use of five variables:

  • Budgeted At Completion (BAC) – how much was the originally planned to cost
  • Planned Value (PV) – The value of the work that should have been complete during a period of time.
  • Earned Value (EV) – The value of the work that was actually complete during a period of time.
  • Actual Cost (AC) – The actual value of the cost incurred during a period of time.

Using these five variables you could derive the following parameters:

  • Cost Performance Index (CPI) – A Return on Investment (ROI) indicator, determining the actual value produced against each $1 of cost incurred. Calculated as EV/AC. CPI > 1 is good news, whereas CPI < 1 might require corrective actions.
  • Cost Schedule Index (SPI) – the project speedometer, indicating whether the rate of actual project production is faster or slower than the planned progress. Calculated as EV/PV. SPI > 1 is good news, whereas SPI < might require corrective actions.
  • Estimate At Completion (EAC) – Projection of the total cost at completion based on performance to-date. Calculated as BAC/CPI.

This concludes today’s post but there’s much more to EVM than outlined here. In the next post I will attempt to explain some issues with EVM and introduce the next item of discussion, which will be “Earned Schedule (ES) for Dummies:).

I value your comments, if you have any thoughts on the above please join in and share with others!

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imageYou are planning some major renovations around the house and having discussed your plans with a local building consultant you realize that renovating each of your 10(!) rooms house will cost you $20,000 and the work in its entirety will take 10 weeks to complete. Your friends warn you to be vigilant with your building contractors and so you request the renovation manager to report back to you, at the end of each week, with a report outlining the status of the project.

One week into the renovation your renovation manager provides you with a report advising you that costs to-date have reached $19,000 while the 1st room is 80% complete.

Armed with this information you ponder whether or not the renovation is progressing as planned. The good news is that total spend for the week has been lower than expected ($19,000 actual spend vs. $20,000 of planned spend). But there’s also bad news. According to the initial plans it was expected that by now work on the 1st room will be complete but according to the contractor’s report only 80% has actually been achieved. Having come from a fairly analytical project management background you contemplate the following points:

  • Prior to embarking on you building journey you’ve expected to complete 1 room each week, in which case the total value of the work planned (aka Planned Value (PV)) would have come up to 1 x $20,000 = $20,000.
  • According the builder’s report, they have only been able to complete 80% of one room, so the value of the work output, using as a calculation baseline the initial budgeted cost of each room, is only 80% x $20,000 = $16,000. In Earned Value ‘speak’ this value is called the Earned Value (EV) as it is a representation of the tangible value, to the end user (which is you) of the work performed.
  • The actual cost (Actual Cost (AC)) incurred was $19,000

Having realised the above you are now armed with the basic, yet necessary, information required to perform some further analysis:

  • You are looking for an indicator that will provide you with an efficiency indication to the level of return you’ve received for every dollar invested in your renovation so far. You know how much you’ve spend to-date (your Actual Costs) and you also know what was the value of the work produced so far (your Earned Value). If you divide the Earned Value by the Actual Cost you will get this measure, which in Earned Value ‘speak’ is called the Cost Performance Index (CPI) and is calculated as EV/AC = $16,000/$19,000 = $0.84. This figure tells you that each $1 of renovations investment has only earned you $0.84 of renovation value.

This is obviously disappointing and you are just about to pick up the phone and contact the building contractor when you realise that your anger might be a bit pre-mature. It is true that your return on the investment, to-date, has been negative, but perhaps work is progressing faster than expected, in which case, although the total cost of work might be higher than expected, the total time for completing the work will be shorter than the 10 weeks planned for this activity.

  • You are now looking for an indicator that will provide you with an efficiency indication to the pace in which work is progressing. You know how much was planned to be spent during each week ($20,000 per week, as per the original plan) and you also know the value of the work actually done. You figure out that if the value of the work actually done exceeds the value of the work planned then this could be used as an indication that work is performed faster than planned, in which case there is a good indication that the total work will finish earlier than planned. If however, the value of the work actually done is lower than the value of the work planned, that would be an indication that the total work is behind schedule and is likely to finish late. In Earned Value ‘speak’ this indicator is called the Schedule Performance Index (SPI) and is calculated as EV/PV = $16,000/$20,000 = 0.80. This figure tells you that work is progressing at a rate of 80% of its original plan.

In part 2 we will continue our story through the renovation work and explore some of the other Earned Value tools, more specifically the ability to utilize past performance and project future work parameters.

Until next time.

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Introduction

The purpose of this article is to illustrate the way in which the Earned Value Measurement (EVM) approach is introduced into an Agile development project. The reason I chose to write about this topic is because the majority of the literature dealing with Earned Value is focused on the implementation and utilization of Earned Value techniques in waterfall based implementations and not so much on the adaptability of this technique to other types of software development implementations, like Agile, Critical Chain etc.

Major concepts in EVM

The EVM is being heavily promoted as a key set of tools for determining cost and schedule variances in projects, based on work performed against pre-established project baselines. The Project Management Institute (PMI) through its Project Management Body of Knowledge (PMBOK©) is encouraging project managers to use Earned Value as a key Tool and Technique in a number of Knowledge Areas, and Earned Value related Outputs are used as key Performance Measurements used to validate the project’s performance against its plan.

At the heart of the EVM lies the concept that as the project progresses, value is being generated. This value, measured in $’s, normally called “Earned Value” or EV, can then be compared to the project’s actual costs (AC) and planned value (PV) and this comparison process can assist in forecasting future project performance.

Key parameters used as part of the EVM include:

Abbreviation

Name

Description

BAC

Budgeted at Completion

The original planned cost of the project

EV

Earned Value

The value of the project’s throughput.

AC

Actual Cost

The amount of money actually spent during a period of time

PV

Planned Value

The planned value of the project’s throughput.

CV

Cost Variance

The difference between the value of the throughput and the cost to produce it. This is calculated as CV = EV – AC.

SV

Schedule Variance

The difference between the value of the project’s throughput and the planned value of the project’s throughput. This is calculated as SV = EV – PV.

CPI

Cost Performance Index

An efficiency indicator for measuring the value of project’s throughput produced by each $1 of actual cost. This is calculated as CPI = EV / AC.

SPI

Schedule Performance Index

An efficiency indicator for measuring the rate at which the project’s throughput is meeting initial schedule expectations. This is calculated as SPI = EV / PV.

EAC

Estimate at Completion

Projection of the total project cost at completion. This can be calculated as EAC = BAC / CPI (although other methods also exist).

ETC

Estimate to Completion

Projection of the remaining funds required to complete the project. This is calculated as ETC = BAC – AC.

VAC

Variance at Completion

Projection of the difference between the budgeted cost and projected actual cost of the project. This is calculated as VAC = BAC – EAC.

Successful utilization of EVM is dependent on early determination of project baselines (such that BAC and PV are easily identified) as well as on the ability of the organization to record and retrieve actual progress made against the project and being able to report on actual costs incurred to make this progress happen.

Major concepts in Agile

The Agile development approach is in fact a collective name for a variety of agile based methodologies that got united under the banner of the Agile Manifesto. The core principle behind the agile movement was the realization that better, faster, more responsive and cheaper development can be achieved via the introduction and adoption of a number of principles, including iterative development, constant customer collaboration and faster adaptation to scope changes.

For the purpose of our discussion I would like to define the following terms:

Term

Description

Iteration

A short period of time (in our case limited to two weeks) where set amount of functionality is expected to be fully delivered.

Release

A collection of Iterations with a defined scope of delivery.

Points
(aka Story Points)

A relative measure for assessing the work required to deliver / complete the development effort associated with a single item/feature. For example, a two (2) points feature is being perceived as requiring double the effort to complete than a one (1) point feature.

Product Backlog

The list of all the items/features that need to be built, thus determining the total scope of work for the project/release. For the purpose of our discussion the Product Backlog is further enhanced such that each item (or group of items) is sized and quantified into a number of Story Points. Summing up the total number of Points for all features included in the Release/Project determine the project’s size.

Velocity

Indicating the ‘amount’ of functionality, a team can deliver within a single iteration, the Velocity is measured by the number of points a development team can complete, based on its actual past performance.

Burn Rate

The actual number of points completed in each iteration.

Incorporating Agile and EVM

As will be shown in the example below, applying EVM concepts in an Agile project requires three basic pieces of information:

  1. The Product Backlog in points – i.e. what is the total scope of development for this project, presented as a number of points.
  2. Baseline Velocity – i.e. a planned  value of the total number of points planned to be delivered / complete during each Iteration.
  3. Cost Per Point – An estimated cost for delivering a single Point. This would normally be based on past performance of the delivering organization.

Using the above parameters, two further planning measurements can be derived:

  1. The Budgeted At Completion (BAC) – this is the product of multiplying the Product Backlog by the Cost Per Point. So, for example, if the total scope of work for the project is estimated at 1,000 points, and the historical Cost Per Point is $1,000, then the total estimated cost of the project is 1,000 x $1,000 = $1M.
  2. Planned number of Iterations – this can be derived from dividing the Product Backlog by the Baseline Velocity. For example, if the total scope of work for the project is estimated at 1,000 points, and the Baseline Velocity is 40 points per Iteration, then the planned number of Iterations is 1,000 / 40 = 25 Iterations.

Traditionally most Agile organizations have a clear view of their Baseline Velocity. This performance measurement is an indicator that reflects their on-going and historical efficiency and as such it is a measure that is being kept up-to-date and gets monitored on a regular basis.

More problematic is the up-front quantification of the project’s scope. Determining total project scope does not go against the underlying principles of the Agile Software Development Methodology, but is often seen by hardcore ‘Agile’ists as contravening with one of Agile’s tenants which encourages flexible change management and constant adaptation to customer’s changing needs. Notwithstanding the above, some level of total scope quantification is required in order to integrate EVM measurements into the project delivery cycle. This can be done upfront, or, if not possible, can be done using the Rolling Wave Planning approach (a tool recognized by the PMBOK) where progressive elaboration over a period of time is used to further expand the level and detail of project planning.

Determining the Cost per Point is another area requiring attention before implementing EVM in an Agile development environment. Having access to this information requires the organization to track it’s development costs such that they include not just the direct development costs (i.e. direct development resources) but also the cost associated with all other supporting disciplines (e.g. Business Analysts, Testers, Project Managers, etc.). That, obviously, would be the ideal scenario but even if that wasn’t possible, because of internal organizational deficiencies, other options could also be used. For example, knowing only the direct development costs could be used to extrapolated the total costs, assuming that development consists of x% of the total project costs. But, to achieve best possible cost estimates it would be beneficial for the organization to utilize timesheet functionality such that past costs can be analyzed and a more realistic and accurate cost estimates can be derived.

Some explanation is required to clarify the method used to determine the Earned Value produced by the end of each Iteration. As detailed above, Earned Value is the value attached to the Project’s throughput. Since we are using Points to describe the level of complexity associated with the delivered functionality and since we are using the combination of total points (i.e. the Backlog) and the Cost Per Point to derive the total budgetary requirements for the project, we can safely say that the value of each delivered point is the proportion of that point off the total cost of the project. So, for instance, in a project with a total backlog of 1,000 points and a budget of $1.5m, a completion of 100 points (i.e. 10% of the total scope) will deliver value of 10% * $1.5m = $150k (i.e. EV = $150,000).

Agile / EVM – example

The following example is based on a real project but has been condensed and numbers simplified in order to illustrate the way EVM can be used to measure project performance in an Agile development environment:

Table 1Pre-Release Plan

As discussed above, the only inputs necessary to enable EVM performance monitoring for the project are the Product Backlog, the planned Velocity and the projected Cost per Point (all three are highlighted with a yellow background in the table above). In our example:

  1. the Backlog was  estimated at being 200 points,
  2. the Velocity is estimated at 25 points per Iteration and
  3. the Cost Per Point was estimated at $1,600.

Given the above parameters the BAC and # of Iterations were calculated as:

  1. BAC = $1,600 x 200 = $320,000.
  2. # of Iterations = 200 / 25 = 8

Also pre-calculated are the following parameters:

  1. Planned % Complete per Iteration = 200 / 25 = 12.5%
  2. Planned Value per Iteration = 12.5% x $320,000 = $40,000

The Iteration is marked as Iteration 0 as the planning stage for the project is done before actual development work commences.

With the above baseline established for the project and a project start date of Jan 5th 2009, the first Iteration has recorded the following results:

Table 2 – Iteration 1 results

Notice that the monitoring spreadsheet is programmed to calculate the baseline project end date. Given a commencement date of Monday, Jan 5th and an expected duration of 8 iterations (each with duration of 2 calendar weeks) it is expected that the project will be complete by Fri, May 8th.

The two parameters without which EVM calculations cannot proceed are the Actual Cost for the Iteration (AC) and the actual number of points complete. In our case AC = $30,000 and the number points complete = 20.

Given the above we are now in a position to fully exploit all other EVM parameters, as follows:

  1. The number of points actually complete during this iteration equate to 10% of the total backlog (20 out of 200). We can now use this figure to derive the Iteration’s Earned Value being 10% of the total project’s value, or $320,000 x 10% = $32,000.
  2. The remaining parameters are easily calculated as per the formulas on the left.
  3. The CPI is > 1 which implies that the value of the project’s throughput is higher than the cost of production.
  4. The SPI is < 1 which implies that the value of the project’s throughput is below the planned value.
  5. With current performance we’ll be under budget but will not be meeting the project’s scheduled completion date.

Estimated Total # of iterations at Completion is derived from dividing the total number of planned iterations (8) by the SPI (0.80). Planned completion date at this point, based on current performance, is Jun 5th.

As the 2nd Iteration was progressing is has become apparent that some key functionality has been incorrectly scoped. This has led to a re-estimation of the total project’s backlog and has resulted in the following:

Table 3 – scope change

The total scope (represented by the baseline backlog) has increased from 200 points to 250 points. This affected two of our basic baseline parameters:

  1. The total number of planned iterations has increased from 8 to 10, and
  2. The budget baseline has increased from $320,000 to $400,000.

No further planning adjustments have been made (i.e. Velocity and Cost Per Point have not been modified).

The 3rd Iteration, commencing Feb 2nd has taken into account the changes in the project’s scope and the actual results for the 3rd and 4th iterations were as follows:

Table 4 – Iterations 3 and 4

During the 3rd and 4th Iteration the team’s velocity increased by a factor of 50% (from 20 to 30 points per iteration). The increased throughput resulted in the following:

  1. Increasingly positive Cost Variance.
  2. Improvement in the Schedule Variance to the point where at the end of the 4th Iteration it equaled 0.
  3. With the above performance we could derive that all things being equal, the project will deliver on time and under budget.

Summary and Conclusions:

The above example represents a basic implementation of EVM and as such does not utilize some of the more advanced and esoteric variables available within the EVM world. Notwithstanding the above, the discussion above demonstrates how this simple approach can deliver an effective performance measurement solution in an Agile development environment without impacting the team’s velocity. Adding cost measurements to the traditional Agile burn rate can result in better acceptance of the Agile development philosophy in development environments that would traditionally shy away from such an approach due to it’s perceived lack of rigor and formality. Earned Value measurements are excellent communication indicators which can be shared with all project stakeholders including the development team, so they gain a better understanding and insight into the financial impact of their performance. Last but not least, for the Project Manager, responsible for the financial performance of the project, utilizing EVM as part of his or her project management tools can ensure that better pro-active actions can be taken to stir the project in the right direction.

If you haven’t implemented EVM and have a burning desire to use this technique in your next Agile project I suggest you follow the following steps:

  1. Start Small – Use a small to medium size project (2-4 months long) to trial out your data collection and performance measurement interpretation techniques.
  2. Make sure you have the necessary pre-requisites in place and if not, take concrete steps to have them established. For instance, if your organization does not have a time recording (timesheet) system in place, introduce a simple spreadsheet in which daily effort data, per team member, can be recorded. But be careful – don’t complicate the process and don’t attempt to record data at unrealistic or impractical levels of granularity as this will put your team members off and your chances at collecting reliable and accurate data will rapidly diminish.
  3. Remember, you only need three basic planning parameters identified to begin with: Backlog, Velocity and Cost. These will provide you with the baseline measures for your scope, throughput and cost.
  4. In order to calculate your actual costs you will might need to also collect the real cost per day for each of your resources. Try your HR or Finance departments, as they more than likely keep track of this data. With this data and the actual data collected in your timesheet system you will have no difficulty in calculating your actual costs.
  5. Give it a go – it is not difficult and both you and your stakeholders will derive much benefit from it.

Think about it!

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