© 2009, Ing. Rodolfo Ambriz, PMP, MCTS, MCITP - 1
© 2009, Ing. Rodolfo Ambriz, PMP, MCTS, MCITP - 1
© 2009, Ing. Rodolfo Ambriz, PMP, MCTS, MCITP - 1
r? Rodolfo Ambriz, PMP, PMI-RMP, MCTS, MCITP Managing Director, International Institute for Learning Mxico, S.A. de C.V. All project managers or leaders, who have ample experience as well as those who are just beginning in project management, must maintain very good communications with everyone involved in the project, with their clients, superiors, collaborators, contractors, etc., to establish an outstanding decision making process. Everyone always wants to know how is the project going?, the challenge lies in answering the question in an objective, truthful, clear and timely manner. Answering fine, its going well and then pretending that we are one hundred percent focused on our job (to avoid further questioning), generally doesnt calm peoples anxiety, and today this will only demonstrate that we do not have a system or process that allows us to provide trustworthy data. After the afore mentioned question, we might have to face the most important questions: How will the project end? Will it finish on time, within budget, and according to quality requirements? It is quite important to know, in an objective manner, the current status of our projects at all times, with the sole purpose of allowing us to make projections that will allow accurate forecasts for the completion of all main objectives; and based on this, take the appropriate corrective actions, in case they might be needed. The purpose of this article is to present a summary of project management processes, currently considered as best practices worldwide, according to various international standards. Framework A project is a temporary endeavor undertaken to create a unique product, service or result. Project Management (PM) can be defined as the application of knowledge, abilities, tools and techniques to the activities of a project in order to fulfill their requirements; we can also state that it is a process intended to improve project performance. Projects are not isolated or independent efforts, they will always be immersed within the regular operational processes of the performing organization, due to this fact the traditional project management approach has evolved into what we currently know as Enterprise Project Management (EPM), which focuses on improving the organizational/enterprise performance by linking the executed work within projects to the operational work, and above all, within the organizations strategic objectives.
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EPM includes management of individual projects, program management (group of projects related to each other) and portfolio management for the organization as a whole or for only a specific section. It is also important to have within the organization a Project Management Office (PMO), defined as the enterprise unit that centralizes and coordinates all project management efforts, focusing on process standardization, usage of corporate software tools, developing and training all project managers, and in general, to work as a center of excellence for project management. To explain even superficially all that is involved in EPM would lead us into topic so complex that it would turn this article into a full length book, of which many already exist, and will deviate us from the originally posed question at the beginning of this article, this is why we will focus solely in the management of one single project, as a fundamental part of the previously mentioned approach. The modern project management procedure is based on three fundamental concepts: Knowledge Areas: Integration, Scope, Time, Cost, Quality, Human Resources, Communications, Risk, and Procurement. Group of Processes: Initiating, Planning, Executing, Monitoring & Controlling, and Closing. Life Cycle and Project Phases. The integration of the above concepts is the basis for the main international standards regarding project management, for example the PMI (Project Management Institute); PMBOK (Project Management Body of Knowledge) Guide 4th Edition which, since 2000, has been an ANSI (American National Standard Institute) standard. As it was previously mentioned, it is not possible to cover all project management processes within this article, so I will focus in the process related to Earned Value Management, this will allow us to answer the questions posed at the beginning. Earned Value Management Framework A fundamental success factor in any project is the ability of the project manager to make correct and timely decisions. He or she can only achieve this, if they have clear, trustworthy and on time information regarding the projects progress. It is also very important to provide concise data to all project stakeholders. EVM gives us an approach to measure project performance based on the comparison of actual progress versus planned progress, allowing us to evaluate trends to establish forecasts. To implement EVM in a project, it is mandatory to establish the Performance Measurement Baseline (PMB), which is comprised of three elements: the work to be performed (scope), when the work will be performed (schedule), and resources, including costs, to perform the actual work (costs). (Figure 1).
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Figure 1. Performance Measurement Baseline Integration The Basic Elements Three key values: Planned Value (PV). The value of the PMB at the status date. Earned Value (EV). What you have accomplished at the status date, valued with the costs used to define the PMB. Actual Cost (AC). The cost incurred for the accomplished work at the status date. These can be expressed in percentages, divided between the Budget at Completion (BAC): PV% = PV / BAC EV% = EV / BAC AC% = AC / BAC Variances Schedule Variance (SV). SV = EV PV Cost Variance (CV). CV = EV AC SV% = SV / PV CV% = CV / EV
Performance Indices Schedule Performance Index (SPI). SPI = EV / PV Cost Performance Index (CPI). CPI = EV / AC To Complete Performance Index (TCPI). TCPI = (BAC EV) / (BAC AC).
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Forecasts Estimate at Completion (EAC). The forecasted final project cost. EAC can be calculated in different ways, depending on historical performance data and trends: o EAC = BAC SV. Future costs would be the same as in the PMB because variances to date were atypical. o EAC = BAC / CPI. Future costs are calculated based on the cost performance efficiency rate to date. o EAC = BAC / (CPI * SPI). Future costs are calculated based on the cost and schedule performance efficiency rates to date. o EAC = AC + new estimate for the remaining work. Estimate to Complete (ETC). ETC = EAC AC Variance at Completion (VAC). VAC = BAC EAC VAC% = VAC / BAC Cost Performance Index at Conclusion (CPIAC). CPIAC = BAC / EAC There is an emerging approach that takes time-based schedule measures instead of cost measures to calculate the schedule performance: Time Estimate at Completion (EACt). The forecasted duration of the project. It is recommended to obtain it through a network analysis of the project, or it could also be obtained through a gross estimate of the final duration using SPI in case the tendency might continue: EACt = (BAC / SPI) / (BAC / PMB duration) = PMB duration / SPI Time Variance at Completion (VACt). VACt = PMB duration EACt VACt% = VACt / PMB duration Time Schedule Performance Index at Conclusion (SPIACt). SPIACt = PMB duration / EACt
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Figure 2. EVM Elements Applying EVM EVM within Planning As mentioned previously, a good EVM implementation is based in the correct integration of scope, schedule and cost within project planning. Scope It is recommended to decompose the work to be performed following the rules, regulations and best practices to create a Work Breakdown Structure (WBS) that is adequate for the project. Schedule In terms of schedule, EVM can be applied with the information contained in a Gantt Chart, but it is widely recommended to use instead a dynamic schedule that will allow us to perceive the impact of any changes to the schedule and so be able to take all appropriate corrective measures in a timely manner. Resources and Costs To use EVM it is required that every task has all necessary resources assigned with their respective rates. If for some reason it is not required to control resources it might be possible to only estimate costs for tasks. Time Phased Budget and Earned Value Management Measurement Techniques Time phased budget distribution is the key to effective EVM implementation. For this it is necessary to take into consideration the technique that will be used to determine the EV during project execution.
Deliverables Characteristics Task Duration 1 or 2 measurement periods More than 2 measurement periods Recommended Earned Value Measurement Technique Fixed Formula Weighted Milestones % Duration Complete % Work Complete Percent Complete % Physical Units Complete % Physical Complete Apportioned Effort Level of Effort
Tangible
Intangible
Any duration
Figure 3. Earned Value Measurement Techniques As you can appreciate in figure 3, the recommended technique for measuring progress depends on the deliverable characteristics as well as task duration.
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Fixed Formula This is a simplified technique for assessing task progress quickly and easily. The most common formulas are 0/100 (no progress is credited until 100% of the task is done) and 50/50 (you credit a task as 50% complete when it started, and the other 50% when it is finished). Any other combination can be used. (30/70, 25/75, etc.). Weighted Milestones The weighted milestones technique is recommended for tasks with relatively long durations, where it could be difficult to evaluate partial progress, but where you have specific milestones with verifiable deliverables to which you can assign weighted values. Percent Complete The most generally used EV measurement technique, where progress is credited according to the percentage completed at the status date. Percent complete can be calculated in different ways, depending on the task characteristics and its deliverables. % Duration Complete = Actual Duration / Total Duration: It is recommended for tasks that have a linear performance (proportional and uniform) throughout its duration. % Work Complete = Actual Work / Total Work: It is recommended for tasks, whose partial progress is the same as the proportion of real time spent in relationship with total work (hours). % Physical Units Complete = Actual Units / Total Units: It is recommended for tasks, whose partial progress is estimated upon the number of physical units delivered versus the total amount of units produced; for example cubic meters of poured concrete or tons of placed steel. % Physical Complete = Physical complete evaluation at the status date: It is recommended for tasks in which the partial progress must be evaluated in accordance with the physical complete of all deliverables and where we are unable to apply any of the three techniques previously mentioned. Apportioned Effort This technique is recommended when a task has a direct relationship with another task that has its own Earned Value measurement technique.
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Level of Effort It is recommended for tasks that do not produce tangible and verifiable deliverables, or that produce a lot of them. For example, the Project Management task which produces a lot of deliverables every week. EVM Performance Analysis and Forecasting During project execution and control is necessary to analyze its performance in order to be able to answer the question posed by all stakeholders: How is the project going? Likewise, all trends must be reviewed, decide which corrective measures will be applied and determine all forecasts to answer the most important question of all: How will the project end? In each status date, actual progress needs to be registered for each project task in accordance to the selected Earned Value measurement technique during planning; moreover, the remaining work to be performed in the task needs to be updated; this way we will always have the most update and trustworthy information on the project. EVM and Quality Thresholds In every company there are acceptable tolerances of performance, and EVM allows you to establish quality thresholds so youll know if the project is within the control limits, or is out of control. This will also allow you to practice management by exception, directing your attention to projects and tasks with problems. The indices and variances calculated in EVM are perfect for this. You can define tolerable zones (green), warning zone (yellow) and trouble zone (red). We can also establish alert zones (blue) as an indicator that performance is too good, which might also represent some kind of problem.
Figure 5. Example Traffic light indicators to control EVM Example Conclusions The key to effective implementation of EVM is to keep your model as simple as you can. You need to balance the necessity of accurate detailed information with the need for easy handling of your model. Analyze your project and define what will work for it. Dont force your project to fit some criteria, approach or EVM measurement technique. Always remember the main objective of EVM is to give you the right feedback to facilitate your decision making; EVM itself will not make successful projects. That requires a project manager willing to do the required analysis and take corrective actions when needed. If all projects and programs within the organization are managed in a standard manner, it is possible to integrate a Corporate Control Panel for the Project Portfolio. Thus the performance of all projects can be reviewed with similar criteria, allowing you to obtain the necessary feedback to facilitate a good decision making process.
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