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Brought to you byitionDeltek Special EdUnderstand how EVM can saveyour company money and timeThis book is designed to introduce EVM conceptsto any project professional who is considering theimplementation of EVM for the first time. Whetheryou’re a seasoned project manager, a projectcontrols professional, or an executive, this bookprovides the basic EVM principles you need tomake this journey successful. Get to know EVM — EVM is a projectmanagement methodology, not anadditional set of tasks Understand EVM basics — EVM helpsyou measure project status, analyzevariances, and avoid surprisesOpen the book and find: An illustative exampleproject Some common mythsabout EVM The difference betweenEVM and EVMSeulaVdeEarntnemeganMa A helpful glossary How to calculate earnedvalue from an initialbaseline Learn how to use EVM — take a look ata simple project through the eyes of EVM EVM versus EVMS — what’s the differenceand how are they related?Making Everything Easier! EVM and technology are a perfect fit —get to know what types of technologywill help you manage more effectivelyLearn to: Manage projects with EVM Understand the project lifecycleGo to Dummies.com for videos, step-by-step examples,how-to articles, or to shop! Adapt to early warnings andkeep your project on-trackLearn more at www.Deltek.com/EVM978-1-118-09192-0Not for resaleKim KosterDave WallaceJason KinderChris Bell
About DeltekDeltek (Nasdaq: PROJ) is the leading global provider of enterprisesoftware and information solutions for professional servicesfirms, government contractors, and government agencies. Fordecades, they have delivered actionable insight that empowerscustomers to unlock their business potential. Over 14,500organizations in approximately 80 countries around the world useDeltek to research and identify opportunities, win new business,optimize resources, streamline operations, and deliver profitableprojects. Deltek – Know more. Do more. www.deltek.com.Learn more at www.Deltek.com/EVMThese materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.
Earned ValueManagementFORDUMmIES‰DELTEK SPECIAL EDITIONby Kim Koster, Dave Wallace,Jason Kinder, and Chris BellThese materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.01 9781118091920-ffirs.indd i5/27/11 2:21 PM
Earned Value Management For Dummies , Deltek Special EditionPublished byWiley Publishing, Inc.111 River StreetHoboken, NJ 07030-5774www.wiley.comCopyright 2011 by Wiley Publishing, Inc., Indianapolis, IndianaPublished by Wiley Publishing, Inc., Indianapolis, IndianaNo part of this publication may be reproduced, stored in a retrieval system or transmitted in anyform or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise,except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without theprior written permission of the Publisher. Requests to the Publisher for permission should beaddressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Referencefor the Rest of Us!, The Dummies Way, Dummies.com, Making Everything Easier, and related tradedress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in theUnited States and other countries, and may not be used without written permission. All other trademarks are the property of their respective owners. Wiley Publishing, Inc., is not associated with anyproduct or vendor mentioned in this book.LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKENO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES,INCLUDING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE.NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS.THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOTENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONALPERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLEFOR DAMAGES ARISING HEREFROM. THE FACT THAT AN ORGANIZATION OR WEBSITE ISREFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHERINFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THEINFORMATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS ITMAY MAKE. FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED INTHIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ.For general information on our other products and services, please contact our Business DevelopmentDepartment in the U.S. at 317-572-3205. For details on how to create a custom For Dummies book foryour business or organization, contact info@dummies.biz. For information about licensing the ForDummies brand for products or services, contact BrandedRights&Licenses@Wiley.com.ISBN: 978-1-118-09192-0Manufactured in the United States of America10 9 8 7 6 5 4 3 2 1Publisher’s AcknowledgmentsDevelopment Editor: Kathy SimpsonProject Editor: Jen BinghamEditorial Manager: Rev MengleBusiness Development Representative: Sue BlessingCustom Publishing Project Specialist: Michael SullivanThese materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.01 9781118091920-ffirs.indd ii5/27/11 2:21 PM
About the AuthorsKim Koster is currently Director of Product Marketing forEPM (Enterprise Program Management) at Deltek. She has21 years of industry experience working for Raytheon andATK where she had the opportunity to work on many projectteams utilizing EVM. Kim held management positions such asProduct Line Business Manager, Controller, and EVMS FocalPoint. She has been a trainer in her organizations and hasprovided guidance to many project and executive teams. Kimholds a BBA from the University of North Texas.Dave Wallace is a senior systems consultant with Deltekmainly developing earned value management systems fororganizations with little or no earned value experience. Byteaching earned value in the context of the overall projectmanagement process, organizational adoption has occurredreadily and effectively. With a BS in Business Administrationfrom the University of Redlands, Dave has been operating inthe world of earned value since 1984.Jason Kinder is Director of Product Marketing for EPM(Enterprise Program Management) at Deltek. Jason has over 15years experience in program management specializing in earnedvalue management. He spent those years working for Raytheonand L3. Jason led new program start ups where he was responsible for mentoring program teams to facilitate successful program planning and execution. He has briefed executives andcustomers all around the world about the status of programsand the value of earned value management. Jason holds a BAfrom SFA St. University in Texas and is a member of NDIA.Chris Bell is Vice President of Product Marketing at StrategicThought Group, LLC, a Deltek Partner. Formerly the VicePresident of Product Strategy for Deltek, Chris has been studying the project management industry for over 18 years and hasa passion for moderating industry panels and workshops toidentify the root cause of today’s most pervasive challengesfacing project management professionals. Because of his uniqueperspective, he has been invited to speak at many conferencessuch as Integrated Program Management Conference (IPM),Project Management Institute (PMI) Global Congress, EVMWorld and many others. He holds a Bachelor of Science degreefrom Mansfield University, and has completed graduate work atBoston University, Oklahoma State University, and Arizona StateUniversity.These materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.01 9781118091920-ffirs.indd iii5/27/11 2:21 PM
Authors’ AcknowledgementsThe authors would like to acknowledge Deltek colleagues LauraRiviere, Kevin Iaquinto, and Namita Dhallan for their encouragement and assistance in the preparation of this work.We would also like to recognize project controls professionalseverywhere. Your tireless work and dedication in support ofproject management is an invaluable service and an essentialpart of every project. Simply put, projects could not run without you.A special thank you to the professional associations who arecommitted to the development of project management professionals worldwide, including: The Project Management Institute (PMI) Earned Value Management Community of Practice Association for the Advancement of Cost Engineering(AACE International), National Defense Industrial Association (NDIA) ProgramManagement Systems Committee Society of Cost Estimating and Analysis (SCEA), Association for Project Management (APM)Kim Koster Dedication: To Art, you taught me everything Iknow and I will always be grateful to have had the opportunityto work with you.Dave Wallace Dedication: To Lisa McAfee, who didn’t laugh atmy first variance analysis report . . . or the second. Thank you.These materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.01 9781118091920-ffirs.indd iv5/27/11 2:21 PM
Table of ContentsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1About This Book . 1Icons Used in This Book . 1Chapter 1: What Is EVM? . . . . . . . . . . . . . . . . . . . . . . . . . . .3Understanding Projects and Project Management . 4Understanding EVM . 5Why Use EVM in the First Place? . 6Looking at the great things about EVM . 7Other project managementmethodologies . 7Making a Great Start . 8Chapter 2: Managing Projects with EVM . . . . . . . . . . . .15Measuring Earned Value from an Initial Baseline . 15Collecting status information . 16Calculating earned value . 16Analyzing Variance . 18Understanding and calculating variances . 18Setting thresholds. 18Analyzing out-of-tolerance variances . 19Using EVM for Project Monitoring and Control . 19Identifying risks. 19Managing the critical path . 20Forecasting final project costs . 21Applying EVM to Specific Types of Projects . 21Cost-reimbursable projects . 21Fixed-price projects . 22Chapter 3: Everyday EVM . . . . . . . . . . . . . . . . . . . . . . . . . .23Tracking the Project Life Cycle . 23Proposal . 23Planning . 24Execution . 25Closeout . 26Seeing EVM at Work in an Example Project. 26Proposing the project: Neighborhood barbecue. 26Planning the event . 27These materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.02 9781118091920-ftoc.indd v5/27/11 2:04 PM
viEarned Value Management For Dummies, Deltek Special EditionExecuting the plan . 30Closing out the project . 34Chapter 4: Introducing EVMS . . . . . . . . . . . . . . . . . . . . . .35What Is ANSI/EIA-748? . 35Seeing What Makes up an EVMS . 37People. 37Processes . 37Tools . 38Knowing When EVMS Is Required for a Project . 38Required reports. 40Chapter 5: Better Project Management throughTechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41Planning and Scheduling Software. 41Earned Value Software . 42Analytics/Intelligence Software . 43Risk Management Software. 44Integrated Program Management Software . 45Chapter 6: Demystifying EVM . . . . . . . . . . . . . . . . . . . . . .47Myth 1: EVM Is Hard . 47Myth 2: EVM Is Expensive . 48Myth 3: EVM Looks Backward . 49Myth 4: EVM Is Only for U.S. Government ProjectsValued at over 20 Million . 49Myth 5: Only Very Large Government ContractorsUse EVM . 50Myth 6: Only Aerospace and Defense Firms Use EVM . 50Chapter 7: Seven Ways to Succeed with EVM . . . . . . .51Go for It!. 51Get Organizational Buy-In . 51Define Project Management Processes . 52Instill the Processes into the Culture . 52Maintain a Consistent Business Cadence . 53Practice Rigorous Risk/Reward Management . 53Facilitating EVM in Your Organization . 54Identifying a focal point . 54Establish a center of excellence . 55Set up a project management office . 55Train the project management team . 56These materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.02 9781118091920-ftoc.indd vi5/27/11 2:04 PM
viiTable of ContentsAppendix A: Formulas . . . . . . . . . . . . . . . . . . . . . . . . . . . .57Acronyms . 57Formulas . 57Appendix B: Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59Appendix C: Resources . . . . . . . . . . . . . . . . . . . . . . . . . . .63Web Resources . 63Conferences . 64These materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.02 9781118091920-ftoc.indd vii5/27/11 2:04 PM
viiiEarned Value Management For Dummies, Deltek Special EditionThese materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.02 9781118091920-ftoc.indd viii5/27/11 2:04 PM
IntroductionWelcome to Earned Value Management For Dummies,Deltek Special Edition, which introduces earnedvalue management (EVM) concepts in an easy-to-understand,accessible format. Regardless of your background in projectmanagement, this book provides you a basic yet thoroughgrounding in EVM principles.About This BookThis book is designed to introduce EVM concepts to anyproject professional who is considering the implementationof EVM for the first time. Whether you’re a seasoned projectmanager, a project controls professional, or an executive thisbook will give you practical advice on making this journeysuccessful.No assumptions have been made about previous experiencewith either project management or EVM, thus providing thosewho have only recently found themselves operating in an EVMenvironment the ability to become valued contributors to theproject management function.This book was written by EVM practitioners who have leadthe implementation of EVM processes and tools at severalmajor corporations. They are currently employed by Deltekand have included some information about Deltek-specificproducts. The Deltek writers worked with For Dummies editors to turn it into a For Dummies book.Icons Used in This BookLike all For Dummies books, this one uses icons to identifyspecific types of information.These materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.03 9781118091920-intro.indd 15/27/11 2:04 PM
2Earned Value Management For Dummies, Deltek Special EditionYou’ll find the Tip icon wherever you find helpful advicethroughout the book.The Remember icon asks you to remember somethingimportant.You can skip the optional text marked with the Technical Stufficon, but if you do, you’ll be missing some in-depth info.Don’t skip anything with a Warning icon next to it, because itpoints out critical information.These materials are the copyright of Wiley Publishing, Inc. and anydissemination, distribution, or unauthorized use is strictly prohibited.03 9781118091920-intro.indd 25/27/11 2:04 PM
Chapter 1What Is EVM?In This Chapter Examining projects and project management Understanding EVM Examining the value of EVM Getting startedEarned value management (EVM) is simply a set ofproject management best practices. EVM is a projectmanagement methodology, not an additional set of tasks tobe performed along with the “normal” project managementfunctions — which are to plan, execute, and assess how theproject is performing against the plan. EVM does nothingmore than facilitate these tasks, which the project managermust perform one way or another.It provides an objective measure of progress while deliveringearly warning indicators through trends and estimates. Justby managing a project, you’re already practicing some of thefundamentals of EVM. But EVM takes project management tothe next level by providing structure and a common lexiconfor the entire team.This chapter introduces EVM by relating it to basic projectmanagement principles — necessary knowledge, because youmust understand these principles to understand EVM. Thischapter also introduces EVM fundamentals and shows howorganizations c
EVM and EVMS † A helpful glossary † How to calculate earned value from an initial baseline 978-1-118-09192-0 Not for resale Go to Dummies.com for videos, step-by-step examples, how-to articles, or to shop! This book is designed to introduce EVM concepts to any project professional who i
