Eduard Pfister June 27, 2013

1. Go for Gold! EVM + Risk Management+ Early Warning System Eduard Pfister June 27, 2013

2. EVA Parameters • EVA and Critical Path Method • EVA and Estimation Risks • Regularily update your Project Plan • Compare EVA Results with Simulation (Monte Carlo) • Include single Risk and/or Opportunity Events •  Lessons Learned for Project Managers • Inform your Managers •  Lessons Learned for Enterprise Managers • Questions / Discussion

3. "Earned Value" and "Earned Schedule" Parameters

4. Lesson 1: EVA Critical Path

5. OurBaseline Project Plan (Example) – GANTT

6. OurBaseline Project Plan (Example) – EV GRAPH

7. EV Graph updatedat End ofWeek 16

8. Forecast / Completion? Estimated Completion - Cost TCPI, To-Complete Performance Index; 1.098 ETC, Estimate to Complete; 184'490 SPI, Schedule Performance Index; 0.582 CPI, Cost Performance Index; 0.768 CR, Critical Ratio; 0.447 EAC1, Estimate at Completion "overrun-to-date"; 196'488 EAC2, Estimate at Completion "low-end"; 239'177 EAC3, Estimate at Completion "high-end"; 371'672 VAC1, Variance at Completion "overrun-to-date"; -12'688; -7% VAC2, Variance at Completion "low-end"; -55'377; -30% Additional Cost to Complete; 12‘688 … 187‘872; 7% … 102% VAC3, Variance at Completion "high-end"; -187'872; -102% Additional Time to Complete; 46.1 weeks; 103% Estimated Completion - Schedule ED(t), Estimated Duration; 91.1 Projected End Date; 02.10.2011 TSPI, To-Complete Performance Index; 1.279 VAC(t), Variance at Completion; -46.1; -103%

9. What do we learn? React immediately! Deviation (performance, EV) was already visible week 11/12 – why wait till week 16? Let‘s look at GANTT!

10. GANTT updatedat End ofWeek 16

11. What do we learn? Check Critical Path! Current delay is mainly caused on NON critical tasks! The time reserve on these non critical tasks is similar to the actual delay!  Rearrange tasks (without touching tasks on Critical Path) … we might be able to catch-up the time!

12. Tasks rearranged at End of Week 16 without moving planned End Date

13. EstimatedCompletion - Cost TCPI, To-Complete Performance Index; 1.098 ETC, EstimatetoComplete; 184'490 Forecast / Completion? SPI, Schedule Performance Index; 0.582 CPI, Cost Performance Index; 0.768 CR, Critical Ratio; 0.447 EAC1, EstimateatCompletion "overrun-to-date"; 196'488 EAC2, EstimateatCompletion "low-end"; 239'177 EAC3, EstimateatCompletion "high-end"; 371'672 VAC1, VarianceatCompletion "overrun-to-date"; -12'688; -7% VAC2, VarianceatCompletion "low-end"; -55'377; -30% VAC3, VarianceatCompletion "high-end"; -187'872; -102% EstimatedCompletion - Schedule ED(t), Estimated Duration; 51.4 Projected End Date; 29.12.2010 Additional Cost to Complete; 12‘688 … 187‘872; 7% … 102% TSPI, To-Complete Performance Index; 1.069 Additional Time to Complete; 6.4 weeks; 14% VAC(t), VarianceatCompletion; -6.4; -14% Previously, before rearrangement: Additional Time to Complete; 46.1 weeks; 103%

14. Lesson 2: Add Estimation Risk to Baseplan Lesson 1: EVA Critical Path

15. Adding Duration Estimation Risks per Task Remember deterministic data: Planned End Date = 17.11.2010 Planned Cost = 183‘800 Run Simulation

16. Simulations „Finish Date“ & „Total Cost“

17. Simulations „Finish Date“ & „Total Cost“

18. Simulations „Finish Date“ & „Total Cost“ 80% 50%

19. What do we learn from our Example? Deterministic “End Date (PD)” and “Total Cost (BAC)” are highly unreliable! The chance to finish before the planned End Date (according to Critical Path Analysis) is 20% The chance to finish within planned Budget is 28% No wonder that EVA data (EV, AC) won‘t be in line with Planned Value (PV) Enhance your basic EVA/PV by adding Estimation Risks , and run a simulation! • The simulation gives you a good understanding of what delays and cost overruns may occur • Look at the data (time, cost) that gives you the desired level of confidence (e.g. 80%) • Adjust your contingency budget and management reserve accordingly • Add additional buffer times in your schedule (GANTT)

20. Lesson 3: Repeat Simulation during Project Execution Lesson 2: Add Estimation Risk to Baseplan Lesson 1: EVA Critical Path Let‘s simulate the entire project with the knowledge/status of week 16

21. Simulations „Finish Date“ & „Total Cost“ – W 16

22. Simulations „Finish Date“ & „Total Cost“ – W 16

23. Comparison Baseplan … Plan Week 16 - Time Baseplan W 0 Plan W 16

24. Comparison Baseplan … Plan Week 16 - Cost Baseplan W 0 Plan W 16

25. Comparison Baseplan … Plan Week 16 - Cost Baseplan W 0 Plan W 16

26. What can we learn? Repeat risk simulation during the project! The confidence about time and cost increases with the duration of the project Remember: in our example we made plan corrections (GANTT) without touching the Critical Path(no change of planned End Date). In reality this is not always possible  the uncertainty about outcome is greater. Let‘s compare EVA and simulation results!

27. Lesson 4: Compare EVA Simulation Lesson 3: Repeat Simulation during Project Execution Lesson 2: Add Estimation Risk to Baseplan Lesson 1: EVA Critical Path

28. Comparison of all Values (EVA & Simulation) Deterministic (Baseplan) EVA, Overrun-to-Date (w 0) EVA, low-end (w 0) EVA, high-end (w 0) EVA, Overrun-to-Date (w 16) EVA, low-end (w 16) EVA, high-end (w 16) Simulation, 80% (w 0) Simulation, 80% (w 16) PL? „I will make new bottom-up estimates…“

29. What do we learn? Never believe 1 single prediction method! EVA predictions may or may not be precise – it highly depends on individual project (type) EVA is mainly a controlling instrument with “Early Warning Character (traffic light)” Once traffic light becomes yellow immediately review your project plan (GANTT) Run additional simulations with each GANTT scenario Ask the Project Leader to create a new bottom-up budget (EAC) Ask the Project Team to review the estimation uncertainty estimates Ask the expert to help you interpreting the data For similar projects or project types use historical data

30. Lesson 5: Include single Opportu-nities & Risks Lesson 4: Compare EVA Simulation Lesson 3: Repeat Simulation during Project Execution Lesson 2: Add Estimation Risk to Base Plan Lesson 1: EVA Critical Path

31. Risk Register to account for single Events … let’s assign the identified and analysed risks/opportunities to the project tasks and run simulation …

32. Revised Project Planning (pre-mitigation)

33. Simulation inclusive single Risk- & Opportunity Events

34. Comparison „nosingleRisks“ vs. „Risksincluded“

35. What do we learn? Forgetting to include single Risks or Opportunities in your Project Plan makes your EVA worthless! Single Risk or Opportunity events may heavily influence the Planned Value (PV) If PV is wrong or at random then all other EVA parameters are misleading Plan mitigation actions and only then calculate PV curve

36. Summary – LessonsLearnedfor Project Managers React immediately! Enhance your basic EVA/PV by adding Estimation Risks , and run a simulation! Repeat risk simulation during the project! Never believe 1 single prediction method! Forgetting to include single Risks or Opportunities in your Project Plan makes your EVA worthless! Serious planningisessentialtouseEVA! Check Critical Path! Deterministic “End Date (PD)” and “Total Cost (BAC)” are highly unreliable!

37. Keep you and your management informed!

41. Lessons Learned for Enterprise Managers Define an automated early warning system - for your own sake! An early warning system informs you about critical deviations from plan You do not need to study a bunch of reports If you introduce a hierarchical management information system then your superiors never can blame you of retaining information Managers are sure that they have trustworthy information early enough to react less risk  less money lost  less reputation lost

42. Questions and Discussion

43. Thank you! More information: Eduard Pfisterparm ltd.Mövenstrasse 12CH-9012 St.Gallen+41 (0)71 243 1000 www.parm.cominfo@parm.com YOU are the Winner!