Purpose and Scope
Performance measurement provides Project and Functional
Managers with a comprehensive analysis of contract progress. The information
provided is valid and timely and highlights those areas requiring special management
action. The following documents Earned Value techniques.
Individual elements are addressed from
work authorization through reporting. Descriptions of Task Plans (TAs), Work
Packages (WPs), and Planning Packages (PPs) have been included separately due
to their significance to the Task Manager (TM).
Author note:
The terms: "Earned Value",
Management by Objectives", and "Performance Management" are interchangeable.
The terms: "Cost Account Manager"(CAM), "Cost Account Leader"(CAL),
and "Task Manager" (TM) are interchangeable.
The terms: "Cost Account Plan"(CAP), ", and "Task Plan"
(TP) are interchangeable.
The terms: "Budgeted Cost of Work Scheduled" (BCWS) and "Scheduled
Work" (SW) are interchangeable.
The terms: "Budgeted Cost of Work Preformed" (BCWP) and "Performed"
(P) are interchangeable.
The terms: "Actual Cost of Work Preformed" (ACWP) and "Actuals"
(A) are interchangeable.
The terms: "Project" as in Project Master Schedule and " Program"
as in Program Master Schedule are interchangeable.
DISCRETE EARNED VALUE TECHNIQUES
At the end of each accounting period, Task Managers (TM) and
Cost Management record the performance measurement data. Performance measurement
data includes, but not limited to, Performed (P), the Actuals (A) and the Estimate
at Completion (EAC). The Task Manager, following the earned value technique
(EVT) specified on the Task Plan (TP), determines Performed (P). Performed (P)
represents the work accomplished or work progress. Cost Management summarizes
performance measurement data elements to the required reporting levels of the
CWBS and the OBS.
The following paragraphs described discrete EVTs that the Task Manager uses
to measure performance:
- Milestone Method
- Percent complete
- 50/50
- 0/100
- Units complete
- Apportioned effort
Milestone Method - Work packages that use objective indicators,
have measurable milestones. The Task Manager plans discrete work efforts.
These discrete work efforts have definable objectives with predetermined values.
The Task Manager determines that a definable objective is complete when the
milestone is recorded as complete. The Milestone Method is preferred over
all other EVTs. The Task Manager should select milestones which meaningfully
assess progress.
The Task Manager, Functional Managers, and the Project Management Office should
define milestones in meaningful, succinct terms. For example, "drawings
complete" is insufficient. Does this mean release by Design/Drafting?
Approved by Engineering? Released to the department? Released to the Project
Office? Released to Manufacturing? Released to the customer? Released to a
vendor? Uncontrolled? A milestone definition should be clear and unambiguous.
A milestone has a single owner. Other people support the milestone's owner.
For example, the program's Chief Engineer or Systems Engineer is usually designated
as the owner of PDR and CDR. Many other people support CDR but do not own
it.
CHARACTERISTICS OF THE MILESTONE METHOD
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(A) |
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A product or event which is clearly unambiguously defined. |
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(B) |
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Each milestone is owned by the performer. |
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(C) |
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Clear, Objective criteria for measuringt accompishment, which is always
quantified. |
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(D) |
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Directly related to the work package work scope. |
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(E) |
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Each milestone is weighted in relationship to the time-phased budget. |
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(F) |
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Each milestone is scheduled and related to the task plan, intermediate,
and prject master scheudle |
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Task Managers define the selected milestone on the Task Plan
Milestone List. Each milestone has an identification number. Milestones appear
on the Task Plan's work package schedule line by using a standard symbol. A
Task Plan Milestone List, is a key document
used to list, enumerate, and define the Task Plan's Milestones. Use of one or
two milestones per month minimizes cost and schedule distortions. This reduces
the number of artificially caused cost and schedule variances.
When the Task Manager develops the time phased budget for each
work package, the Task Manager has determined Scheduled Work (SW) for each fiscal
period. The milestone value is equal to the month's SW. If the milestone value
does not match a perceived BAC percentage, the Task Manager should identify
additional milestones, and/or adjust the work package SW profile. When the Task
Manager schedules two or more milestones within a fiscal period, the Task Manager
distributes the month's SW between the milestones. The Task Manager makes this
distribution proportional to the planned resources.
When using the Milestone Method, the work package's start is not acceptable
as a milestone. The work package's start does not indicate true work progress.
The Task Manager may set a minimum value for the start milestone when no measurable
milestone exists in the initial account period. For example, a minimum value,
say less then five percent of the work package budget, may be appropriate. If
the work package starts on August 18, the accounting period closes on August
24, and no logical measurable milestone is available for August, the Task Manager
can assign a nominal value to the start milestone. Work package completion is
always a milestone because work remains until the Task Manager reaches that
point. The Task Manager should make every reasonable effort to identify a meaningful
milestone each month.
When a discrete work package exists with one month without a meaningful milestone,
the Task Manager may estimate the next milestone's budget percentage and use
it to determine the milestone's value. The Task Manager sets the next milestone
value equal to the prior month's planned value (SW) plus a pro rata share of
the current month's SW. The Task Manager uses a pro rata share of the current
month's SW when there are two or more milestones in the month. Allow a partial
milestone completion claim only when the Task Manager completes all prior milestones
and records all prior milestone performance in an earlier accounting month.
During the month without a milestone, limit the Task Manager's P to 80% of the
milestone value.
50/50 Technique - Use this technique for work packages which start and
complete within two accounting periods. In theory, the process works as follows:
the Task Manager establishes two work package milestones - one milestone at
the scheduled start and one milestone at the scheduled completion. Each milestone
value is 50% of the work package budget. The Task Manager takes 50% earned value
credit (or P) when starting the work and the other 50% when completing the work.
In practice, the process requires common sense. The Task Manager must plan the
value of the two milestones. If the Task Manager weights the milestones according
to the resource expenditure plan, milestone values will be 60/40, 30/70, etc.
Normally, the Task Manager uses this method within manufacturing Task Plans.
In these Task Plans, the Task Manager predicates the work package as a bundle
of work orders.
50/50 TECHNIQUE
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JAN |
FEB |
MAR |
TOTAL |
Milestone Schedule |
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Resource Plan |
100 |
125 |
75 |
300 |
Milestone Weight |
50% |
0 |
50% |
100% |
Scheduled Work |
150 |
0 |
150 |
300 |
Performed |
125 |
0 |
175 |
300 |
Actuals |
100 |
125 |
75 |
300 |
0/100 Technique - This technique is similar to the 50/50 method. Use
this technique when the work package begins and completes in a single accounting
period. There is zero earned value credit for starting the work package and
100% earned value credit at completion. A key event, such as the customer's
Critical Design Review (CDR) period or an assembly work order pick date, is
a candidate for this technique. The Task Manager records the start and completion
milestones on the Task Plan. As appropriate, the completion milestone might
appear on the Intermediate Schedules to keep program personnel informed of this
event. For example, formal design review preparation utilizes a significant
amount of hours. The preparation effort leading to the review milestone has
a value. Upon finishing the preparation, the Task Manager records earned value.
0/100 TECHNIQUE
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JAN |
FEB |
MAR |
TOTAL |
Milestone Schedule |
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Resource Plan |
0 |
300 |
0 |
300 |
Milestone Weight |
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100% |
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100% |
Scheduled Work |
|
300 |
|
300 |
Performed |
|
300 |
|
300 |
Actuals |
|
290 |
|
290 |
Percent Complete - When a discrete work package does
not lend itself to the milestone method, 50/50 technique or 0/100 technique,
the Task Manager may use a Percent Compete Technique. With this EVT, the Task
Manager judges how much work effort was completed at the end of an accounting
month. This EVT is the least desirable technique since it is subjective. When
a Task Manager selects Percent Complete, the Task Manager must provide the PMO
and the Functional Manager formal selection rationale.
When a Task Manager selects Percent Complete, the PMO limits the amount of earned
value (derived from the percent complete) taken prior to total accomplishment.
A Management System Description should decreed, as a limit, that earned value
will not to exceed eighty percent (80%) of the BAC until the work package is
one hundred percent (100%) complete. The PMO may, as a secondary limit, restrict
the number of work packages in a Task Plan using the Percent Complete technique.
PERCENT COMPLETE
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OCT |
NOV |
DEC |
JAN |
FEB |
MAR |
TOTAL |
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Resource Plan |
150 |
250 |
250 |
200 |
150 |
|
1,000 |
Milestone Weight |
15% |
25% |
25% |
20% |
15% |
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100% |
Scheduled Work |
150 |
150 |
150 |
150 |
150 |
|
1,000 |
Performed |
70 |
150 |
250 |
230 |
100 |
200 |
1,000 |
Actuals |
85 |
255 |
300 |
270 |
190 |
85 |
1,155 |
As a third limiting condition on the use of Percent Complete, EVT may be the
number of work packages allowed to earn performance. When five or more work
packages within a Task Plan are assigned the Percent Complete Technique, the
Task Manager is limited to earning performance on three work packages in a "work
in process" state. As an example:
a. the Task Plan's WP (Work Package) #4, WP#5, WP#6 and WP#8 using the Percent
Complete Technique.
b. WP#4 is open and the Task Manager judges that it has progressed to the eighty
percent completion point.
c. WP#5 is open and the Task Manager judges that it has progressed to the sixty
percent completion point.
d. Same as c but use WP#6 - progressed to forty percent.
e. WP#8 may be opened for work to begin, but WP#8 will not earn any value until
WP#4 has been completed and earned 100% performance.
This process prevents a Task Manager from having ten work packages planned as
Percent Complete; opening all ten WPs; taking eighty percent earned value credit;
and then failing to progress beyond that point, for the next ten months.
Units Complete Techniques - The Task Manager can use one of three approaches
to measure earned value using the Units Complete Technique. In concert with
the selected Units Complete Technique approach, use a Line
of Balance (LOB) scheduling system. LOB communicates manufacturing status
quickly and easily to Division, Group, and customer management. Use LOB with
any one of the three Units Complete Technique Approaches.
Completed Unit Count - Use this technique when manufacturing produces
units in a short time, i.e., the fabrication and/or assembly lead time is less
than two accounting periods. By assigning a unit value, the Task Manager can
easily determine earned value for the exact number of units produced.
COMPLETED UNITS COUNT
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JAN |
FEB |
MAR |
APR |
MAY |
JUN |
TOTAL |
Schedule |
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Resource Plan |
|
200 |
300 |
200 |
150 |
150 |
1,000 |
Planned Units |
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40 |
60 |
40 |
30 |
30 |
200 |
Scheduled Work |
|
200 |
300 |
200 |
150 |
150 |
1,000 |
Cum Scheduled Work |
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200 |
500 |
700 |
850 |
1,000 |
1,000 |
Actual |
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Actual Units |
20 |
29 |
38 |
59 |
42 |
12 |
200 |
Performed |
100 |
145 |
190 |
295 |
210 |
60 |
1,000 |
Cum Performed |
100 |
245 |
435 |
730 |
940 |
1000 |
1,000 |
Actuals |
85 |
140 |
190 |
275 |
190 |
50 |
930 |
Cum Actuals |
85 |
255 |
415 |
690 |
880 |
930 |
930 |
For the end of the May fiscal month, the plan was to achieve
one hundred (100) units complete. Shop Floor Control system reported eighty-seven
units complete. The S value set for the 100 planned units was $500. The P (performance
achieved) was 87 actual units or $435. Actual accomplishment at this status
point is thirteen (13) units behind schedule, or $65 behind schedule. The A,
actual cost incurred, for the 87 completed units is $415. The difference between
Performed (P) [$435] and Actuals (A) [$415] is $20. This amount indicates an
underrun of $20 on the first 87 units or an average underrun of $0.23 per unit.
When using the Completed Unit Count technique, in-process or partially completed
parts receive no earned value credit. After QC completes the "inspection"
work order, the Task Manager claims Performed (P) credit for completed units.
By following this process, the Task Manager records Performed (P) for only "accepted/quality"
parts. The Completed Unit Count technique requires that Actuals (A) data be
recorded, collected, and reported by each unit. The Completed Unit Count technique
will apply to bundled parts/units and/or lot size units provided the bundled
parts or the lot does not stay in "Work in Process (WIP)" for longer
than two accounting periods.
Equivalent Unit Count - Use this technique when manufacturing produces
units over a long time, i.e., the fabrication and/or assembly time per unit
produced is more than two accounting periods. The LOB chart represents the plan
as "cumulative to date" units and compares the plan with the actual
units. The Task Plan represents the plan as time phased hours, units, and dollars.
On a monthly basis, the Task Manager measures the actual progress which, in
turn, determines the earned value. The Task Manager always compares actual progress
against the plan.
EQUIVALENT UNITS COUNT
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JAN |
FEB |
MAR |
APR |
MAY |
JUN |
TOTAL |
Schedule |
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Resource Plan |
|
200 |
300 |
200 |
150 |
150 |
1,000 |
Planned Units |
|
40 |
60 |
40 |
30 |
30 |
200 |
Scheduled Work |
|
200 |
300 |
200 |
150 |
150 |
1,000 |
Cum Scheduled Work |
|
200 |
500 |
700 |
850 |
1,000 |
1,000 |
Actual |
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Actual Units |
20.2 |
29.4 |
38.2 |
58.9 |
41.8 |
11.5 |
200 |
Performed |
101 |
147 |
191 |
294.5 |
209 |
57.5 |
1,000 |
Cum Performed |
101 |
248 |
439 |
733.5 |
942.5 |
1000 |
1,000 |
Actuals |
85 |
140 |
190 |
275 |
190 |
50 |
930 |
Cum Actuals |
85 |
255 |
415 |
690 |
880 |
930 |
930 |
Based upon SFC part status, the total percent complete is 29.4
equivalent units complete through February. When the Task Manager knows the
number of lower level (per the Bill of Material) parts completed, the Task Manager
converts the completed lower level parts into equivalent units complete.
For example, one "A" part requires one "B" part and two
"C" parts. An "A" part requires 5 minutes assembly time,
a "B" part requires 15 minutes fabrication time, and a "C"
part requires 3 minutes fabrication time. At fiscal month end, SFC reports 10
As, 25 1ST, and 86 Cs complete. By using this approach, the Task Manager gives
credit for "work in process" or partially completed units as well
as totally completed units. One "A" units requires 26 minutes of manufacturing
time. Therefore, from the SFC data there are 10 As plus B and C part minutes.
There are ((25 x 5) + (86 x 3)) or 333 minutes invested in acceptable B and
C parts. The 333 minutes is equivalent to 12.8 A parts. 333 divided by 26 equals
12.8. Performed (P) in units equals 10 plus 12.8 or 22.8 units. Note: If QC
scraps a part, the Task Manager will not record the equivalent unit representing
the scrapped part.
Earned Standards - The Task Manager derives an earned
value by setting standard hours (i.e., either machine or labor) for units produced.
The end result would be 333 minutes (or 5.55 hrs) plus 260 minutes (or 4.33
hrs) or 9.88 standard hours (or 22.8 equivalent units) invested in the parts
discussed in the Equivalent Units Technique example. The Task Manager then compares
earned value in standard hours against a planned value in standard hours. This
comparison will provide the performance measurement system with a valid performance
measurement data.
When using standards and earned standards, the Task Manager must communicate
the relationship of standards, manhours, and dollars. The Task Manager and Industrial
Engineering use an "audit factor" to convert standard hours to manhours.
This "audit factor" represents a composite of the realization factor
and the learning curve factor.
ALL VALUES ARE REPRESENTED BY HOURS
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JAN |
FEB |
MAR |
APR |
MAY |
JUN |
TOTAL |
Schedule |
|
|
|
|
|
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Resource Plan |
|
200 |
300 |
200 |
150 |
150 |
1,000 |
Planned Units |
|
40 |
60 |
40 |
30 |
30 |
200 |
Scheduled Work |
|
200 |
300 |
200 |
150 |
150 |
1,000 |
Cum Scheduled Work |
|
200 |
500 |
700 |
850 |
1,000 |
1,000 |
Actual |
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Actual Units |
20.2 |
29.4 |
21.4 |
16.8 |
6.2 |
6.0 |
200 |
Performed |
202 |
294 |
214 |
168 |
62 |
60 |
1,000 |
Cum Performed |
202 |
496 |
710 |
888 |
940 |
1000 |
1,000 |
Actuals |
170 |
285 |
236 |
105 |
75 |
59 |
930 |
Cum Actuals |
170 |
455 |
691 |
796 |
871 |
930 |
930 |
When using a Master Operations List containing standards and
earned standards, the Task Manager bases Performed (P) upon the weighted percentage
of earned standards, to total standards. The Task Manager develops the weighting
factor based upon the different parts contained in the work package.
Apportioned Effort (AE) - Apportioned Effort (AE)
Task Plans are a symbolistic relationship between two closely related organizational
elements. Use this EVT between Task Plans which contain related work packages.
The related work packages have work scope dependency. They are sequential or
supportive, and have implied schedule interdependencies. Use the AE Technique
for Quality Control, where their Task Plan has a "work in process"
inspection task relating directly to the fabrication Task Plan. An example of
the fabrication Task Plan is the model shop making widgets. The WIP inspection
task only happens if manufacturing produces a part. Therefore, "WIP"
inspection labor tasks are related, on a percentage basis, to a preceding manufacturing
labor tasks - i.e., it is an apportioned effort! Another example occurs in software
design. The Task Manager apportions computer costs to the design/coding effort.
Level Of Effort (LOE) Planning
LEVEL OF EFFORT (LOE) - NNH Enterprise does not classify
Level of Effort (LOE) as an EVT. LOE includes "as needed" efforts
which support the overall contractual goal. Discrete or apportioned EVT cannot
define LOE tasks. LOE is non-discrete. The Project Management Office, Field
Support Engineering, and Factory Sustaining Engineering are types of effort
which may be required to perform on a contract and have neither a definable
discrete set of task which can readily be predetermined or a tangible output
which can be measured using a EVT
In a level of effort Task Plan or work package, earned value (P) always equals
the planned value (SW) for the scheduled period of performance. At the end of
the accounting period, the work package's monthly SW value automatically becomes
Performed (P) value. Since P equals SW no schedule variance will occur - only
a cost variance. If the Task Manager hopes to share schedule problems with management,
the Task Manager should use a EVT. PMO policies limit the Task Manager's application
of LOE tasks. The Functional Manager and the Program Management Office review
each proposed LOE task prior to its approval and use.
LEVEL OF EFFORT (LOE)
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JAN |
FEB |
MAR |
APR |
MAY |
JUN |
TOTAL |
Start/Stop |
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Resource Plan |
150 |
250 |
250 |
200 |
150 |
|
1,000 |
Scheduled Work |
150 |
250 |
250 |
200 |
150 |
|
1,000 |
Performed |
150 |
250 |
250 |
200 |
150 |
|
1,000 |
Actuals |
0 |
450 |
500 |
250 |
10 |
300 |
1,510 |
The passage of time measures Level of Effort (LOE) performance.
LOE is subjective and does not use objective performance measurement indicators.
Level of effort work is general or of a supportive nature. LOE does not result
in producing definitive end products.
NOTE:
LEVEL OF EFFORT IS AN ALLOWABLE WORK PACKAGE PLANNING TECHNIQUE BUT IS NOT AN
EARNED VALUE MEASUREMENT TECHNIQUE. USE OF LOE WORK PACKAGES ARE DETRIMENTAL
TO GOOD PLANNING. THE TASK MANAGER, THE FUNCTIONAL MANAGER, AND THE PMO EXTENSIVELY
MONITOR LOE. LOE REQUIRES SPECIAL ANALYSIS FOR SIGNIFICANT COST VARIANCES. THE
TASK MANAGER MUST THOROUGHLY EVALUATE THE PROS AND CONS OF USING LOE WORK PACKAGES
BEFORE SELECTING THE PROCESS. THE TASK MANAGER SHOULD AVOID USING LOE WORK PACKAGES
IF AT ALL POSSIBLE.
When the Task Manager uses LOE and discrete work within the same Task Plan,
the Task Manager must minimize the LOE and planned the LOE in a separate work
package. This LOE and discrete separation permit undistorted performance analysis.
An Earned Value System Description does not permit the intermingling of LOE
and discrete work within the same Task Plan when the amount of both LOE and
discrete work is substantial.
The Task Manager must separately identify and segregate LOE work from discrete
measurement work when analysis for the Task Plan is performed. This segregation
avoids performance measurement distortions. The Task Manager should minimize
LOE use to the lowest practical amount and only for work that defies discrete
measurement.
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