Measure Performance

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Fundamentals

MANAGEMENT SUBSYSTEMS

COST MANAGERS

COST AND SCHEDULE PERFORMANCE BY WBS & OBS

PERFORMANCE MEASUREMENT

  • Art of determining and Presenting​
    • Cost​
    • Schedule ​
    • Technical Performance ​
  • Make trade offs ​
    • Cost​
    • Schedule​
    • Technical performance​
  • Many Management Systems​
    • Were developed independently of each other​
    • Not well integrated​
    • Serve specific needs​
      • Accounting ​
      • Project schedule​
      • Requirements Documents​
    • So Need to pull together data  it so can be used in project management, be accurate, not mislead/misrepresent,  and not be fragmented ​

Comparison actual performance against a baseline plan

Budget versus Actual cost​

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When budget is only considered it is difficult to judge status of project. May appear as cost underrun but cannot infer anything related to schedule.  

EARNED VALUE​

Earned Value (EV) Calculated using​
ACWP –Actual Cost of Work Performed​
BCWS – Budgeted Cost of Work Scheduled​
BCWP – Budgeted Cost of Work Performed​
EV is the amount of work performed and remaining work

SCHEDULE PERFORMANCE​

Schedule Reports:​
Method of providing indicators  of project status​
Can show status of tasks and  Milestones​
Useful in determining if completed ahead, behind, or on schedule, float available, etc…​
But cannot give a value of x number of days ahead or behind

Work Breakdown Structure (WBS)

Break down of products and services that make up the project ​
Level 1: Includes work required to complete the project​
Level 2: Depicts Project Products, software, etc.. To be developed, produced…​
Level 3: divides level2 into component parts and services​
Level #: Further defines project components and parts to a manageable degree suitable for assigning responsibility for accomplishment​
A logically Developed WBS facilitates schedule development at certain levels that will accommodate System, subsystem, or component development, production, or construction

Operational Breakdown Structure (OBS)

Identifies the people that will do the work​
Should account for factors such as work scope, complexity, volume, cost, time, duration, span of organizational control​
Used to assign work to individuals responsible for accomplishment​
Must be integrated to WBS to identify control accounts​

WBS vs. OBS

Used to form control accounts​
An organizational effort for a WBS element​
Should represent a manageable unit of work and provide visibility but not be so many as to be cumbersome and costly to maintain​
Work complexity, Funding, Time, and duration of work for replanning must be considered​
Should provide sufficient detail so that adequate resources are available to complete the work​
Should include all work to properly establish a realistic baseline for the entire project

Scheduling

Use formally structured project​
Use WBS to recognize and define all effort involved in project and work that must be accomplished​
Depending on type of project activities milestone, networks, Gantt chart, Manufacturing Resource planning can be used for scheduling Techniques​
Networking: Used for Large One –of-a Kind projects. Document the workflow sequence and interdependencies between tasks. Used to measure the progress and analyze the critical path​
There should be a master schedule that lays out the total scope of the project from beginning to end​
Once established A Schedule Risk Assessment (SRA) can be performed to identify Technical, Programmatic, and schedule risks in a program and quantify the impact of risks on programs schedule

Integrated master plan (IMP) and Schedule (IMS)

IMP​

Helps give visibility of an event based plan consisting of a hierarchy of program events​
Used to identify events at the beginning of the program and developed prior to contract award

IMS​

Includes discrete tasks, work packages, and planning packages from the the Performance Measurement Baseline (PMB)​
Physical Products, Milestones, Technical Performance Goals, and other indicators that are used in Performance Measurement​
Schedule will outline the time needed to accomplish the technical Scope, evaluate progress, and forecast completion dates for work​
Should not change unless contractual modifications or deliberate management decisions require updating​
Chages due to inability  to complete work should be allowed and work arounds  for problems should be displayed

Vertical Traceability

Detail level schedules used to manage work and must be connected to the master schedule, and if included intermediate level schedules​
Must be vertically traceable from master to detail level ​
The Detail Level Schedule takes the form of a control account planning sheet with work packages and tasks supporting control account work requirements ​
After Schedules for Control Accounts is established schedule data for higher level WBS or organizational elements can be derived by simply summarizing data

CONTROL ACCOUNT MANAGEMENT​

Control Account is key management control Point​
Responsibility for work accomplishment is established​
Defined element of work to be performed by a specific organizational entity​
Defined scope of work, Schedule, and Budget​
Control account Manger (CAM)  plans the detailed work tasks, manages accomplishment and reports regularly to the project manager

BUDGETING​

A Performance Measurement System (Earned Value Management Syatem EVMS) is dependant on good budgeting Practices.​Provides a realistic baseline against which performance can be compared to​ Internal budgets must add up to the Contract Budget Base (CBB)​
Total Budgets are set by management as cost goal for the project activities​
Based on allocations from estimates of managerially significant elements of work (Control Accounts) each with a budgeted value in terms of overall project budget​
As work is performed actual cost can be compared to the budgeted value to reflect cost performance. The contract negotiated cost provides the departure for the budget baseline

Resources

The distribution of budget to scheduled increments of work can be used to produce a time-phased budget baseline for the project.​
The Spread of resources on a resource loaded schedule can be analyzed to find over and under allocating resources in order to maximize the efficient use of people, materials, facilities, etc… ​
Adjusting Schedule may involve contracted dates and target set by management which must be accommodated and may not result in the earliest possible completion date 

Identifying cost elements

Cost Elements: Labor, Material, Subcontracts, and other direct cost should be identified so that reporting and analysis can be performed for the program manager and customer.

Budget Allocation

Budgets should be identified by cost elements (Labor, Material, Subcontracts, and other direct costs) ​
Cost element segregation is necessary to accommodate the differences of management and control of the elements so Cost variances can be analyzed​.
Separates how much is related to labor performance and material cost ​
Helps determine estimated cost of work remaining

Undistributed Budget (UB)

Remainder of a project’s budget​
Authorized for the internal organizations assigned to perform the work​
Internal budgets must address the indirect and indirect activities, Direct costs are managed at the control account level while indirect costs usually managed at a more summary level in a pool arrangement​
Planning must consider what parts of the project cannot be identified in the WBS or the OBS at a detail level  so budget can be set aside for work and does not get distributed to other control accounts

MANAGEMENT RESERVE (MR)

Budget Set aside for Known Unknowns, or unforeseen work within the project’s scope of work​
Used to reduce the risk due to complexity and uncertainty and management judgement​
Used to provide budget and resource load the schedule for newly identified work at the control account level

Project Funding vs Performance budgeting

Funding = Real Money​
Funding must be made available as required by management for internal projects, or by customers on contract. Allocation of the projects Total Budget or Contract Budget Base for the work to be performed. Each segment of work will be given a value that relates it to the project’s Total Budget. When the work is done it becomes the earned value regardless of actual cost. At the end of the project the earned value = 

32 Guidelines for EVMS

I.    Organization ​

Guideline 1 –     Define Work Scope (WBS) ​

Guideline 2 –     Define Project Organization (OBS) ​

Guideline 3 –     Integrate Processes ​

Guideline 4 –     Identify Overhead Management ​

Guideline 5 –     Integrate WBS/OBS to Create Control Accounts ​

II.    Planning, Scheduling, and Budgeting ​

Guideline 6 –     Schedule with Network Logic ​

Guideline 7 –     Set Measurement Indicators ​

Guideline 8 –     Establish Budgets for Authorized Work ​

Guideline 9 –     Budget by Cost Elements ​

Guideline 10 –     Create Work Packages, Planning Packages ​

Guideline 11 –     Sum Detail Budgets to Control Account ​

Guideline 12 –     Level of Effort (LOE) Planning and Control ​

Guideline 13 –     Establish Overhead Budgets ​

Guideline 14 –     Identify Management Reserve and Undistributed Budget ​

Guideline 15 –     Reconcile to Target Cost Goal ​

III.    Accounting Considerations ​

Guideline 16 –     Record Direct Costs ​

Guideline 17 –     Summarize Direct Costs by WBS Elements ​

Guideline 18 –     Summarize Direct Costs by OBS Elements ​

Guideline 19 –     Record/Allocate Indirect Costs ​

Guideline 20 –     Identify Unit and Lot Costs ​

Guideline 21 –     Track and Report Material Costs and Quantities  ​

IV.    Analysis and Management Reports ​

Guideline 22 –     Calculate Schedule Variance and Cost Variance ​

Guideline 23 –     Identify Significant Variances for Analysis ​

Guideline 24 –     Analyze Indirect Cost Variances ​

Guideline 25 –     Summarize Information for Management ​

Guideline 26 –     Implement Corrective Actions ​

Guideline 27 –     Revise Estimate at Completion (EAC)  ​

V.    Revisions and Data Maintenance​

Guideline 28 –     Incorporate Changes in a Timely Manner ​

Guideline 29 –     Reconcile Current to Prior Budgets ​

Guideline 30 –     Control Retroactive Changes ​

Guideline 31 –     Prevent Unauthorized Revisions ​

Guideline 32 –     Document Performance Measurement Baseline (PMB) Changes 

The 16 foundational guidelines are

ORGANIZATION​

Guideline 1: Define the authorized work elements for the program.​

Guideline 3: Provide for the integration of the company’s planning, scheduling, budgeting, work authorization and cost accumulation processes with each other, and as appropriate, the program Work Breakdown Structure (WBS) and the program organizational.

PLANNING AND BUDGETING​

Guideline 6: Schedule the authorized work in a manner, which describes the sequence of work and identifies significant task interdependencies required to meet the requirements of the program.​

Guideline 7: Identify physical products, milestones, technical performance goals, or other indicators that will be used to measure progress.​

Guideline 8: Establish and maintain a time-phased budget baseline, at the Control Account level, against which program performance can be measured.​

Guideline 9: Establish budgets for authorized work with identification of significant cost elements (labor, material, etc.) as needed for internal management and for control of subcontractors.​

Guideline 10: To the extent it is practical to identify the authorized work in discrete work packages, establish budgets for this work in terms of dollars, hours, or other measurable units.​

Guideline 12: Identify and control level of effort activity by time-phased budgets established for this purpose.  Only that effort which is immeasurable or for which measurement is impractical may be classified as level of effort. 

ACCOUNTING CONSIDERATIONS​

Guideline 16: Record direct costs in a manner consistent with the budgets in a formal system controlled by the general books of account.​

 Guideline 21: For EVMS, the material accounting system will provide for:​

Accurate cost accumulation and assignment of costs to Control Accounts in a manner consistent with the budgets using recognized, acceptable, costing techniques.​

Cost performance measurement at the point in time most suitable for the category of material involved, but no earlier than the time of progress payments or actual receipt of material.​

Full accountability of all material purchased for the program including the residual inventory.

ANALYSIS AND MANAGEMENT REPORTS​

Guideline 23: Identify, at least monthly, the significant differences between both planned and actual schedule performance and planned and actual cost performance, and provide the reasons for the variances in detail needed by program management.​

Guideline 26: Implement managerial actions taken as a result of earned value information.​

Guideline 27: Develop revised estimates of cost at completion based on performance to date, commitment values for material, and estimate of future conditions. Compare this information with the performance measurement baseline to identify variances at completion important to company management and any applicable customer reporting requirements including statements of funding requirements.

REVISIONS AND DATA MAINTENANCE​

Guideline 28: Incorporate authorized changes in a timely manner, recording the effects of such changes in budgets and schedules.  In the directed effort prior to negotiation of a change, base such revisions on the amount estimated and budgeted to the program organizations.​

Guideline 30: Control retroactive changes to records pertaining to work performed that would change previously report amounts for actual costs, earned value, or budgets.​

Guideline 32: Document changes to the performance measurement baseline.

Questions For Stakeholders

  1. What Specific Business Needs Does The Project Meet Satisfy?​
  2. What Measurable Goals Does The Project Define?(Requirements)​
  3. What Operations and Processes Will be Included in the Project?​
  4. How Are The Projects Scope, Time Constraints, and Cost Interrelated?​
  5. Who Are The Stakeholders and Key Stakeholders of the Project?​
  6. What Are The Stakeholder’s Requirements? What do They Need From the Project, What do They Expect, What Information do They Have​
  7. What Will Determine if the Project is Successful?​
  8. Who is Requesting the Project? Internal or External Customer/Business Analyst​
  9. What are the Outputs of the Project… Up to the Final Product?