Table of ContentsPurpose and Scope
Discrete Earned Value TechniquesMilestone MethodLevel of Effort (LOE)
Units Complete Techniques
Completed Unit Count
Equivalent Unit Count
Apportioned Effort (AE)Level Of Effort (LOE) Planning
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).
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 - 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. (See Figure 5-6)
- Milestone Method
- Percent complete
- Units complete
- Apportioned effort
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.
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.
CHARACTERISTICS OF THE
(A) A product or event which is clearly unambiguously defined. (B) Each milestone is owned by the performer. (C) Clear, Objective criteria for measuringt accompishment, which is always quantified. (D) Directly related to the work package work scope. (E) Each milestone is weighted in relationship to the time-phased budget. (F) Each milestone is scheduled and related to the task plan, intermediate, and prject master scheudle
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 shall 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.
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.
50/50 TECHNIQUE JAN FEB MAR TOTAL M/S Schedule Resource Plan 100 125 75 300 M/S Weight 50% 0 50% 100% SW 150 0 150 300 P 125 0 175 300 A 100 125 75 300
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 shall provide the PMO and the Functional Manager formal selection rationale.
0/100 TECHNIQUE JAN FEB MAR TOTAL M/S Schedule Resource Plan 0 300 0 300 M/S Weight 100% 100% SW 300 300 P 300 300 A 290 290
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. Figure 5-11 illustrates the application of the Percent Completed Technique.
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:
PERCENT COMPLETE OCT NOV DEC JAN FEB MAR TOTAL Resource Plan 150 250 250 200 150 1,000 M/S Weight 15% 25% 25% 20% 15% 100% SW 150 150 150 150 150 1,000 P 70 150 250 230 100 200 1,000 A 85 255 300 270 190 85 1,155
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.
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.
COMPLETED UNITS COUNT JAN FEB MAR APR MAY JUN TOTAL Schedule Resource Plan 200 300 200 150 150 1,000 Planned Units 40 60 40 30 30 200 SW 200 300 200 150 150 1,000 Cum SW 200 500 700 850 1,000 1,000 Actual Actual Units 20 29 38 59 42 12 200 P 100 145 190 295 210 60 1,000 Cum P 100 245 435 730 940 1000 1,000 A 85 140 190 275 190 50 930 Cum A 85 255 415 690 880 930 930
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.
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.
EQUIVALENT UNITS COUNT JAN FEB MAR APR MAY JUN TOTAL Schedule Resource Plan 200 300 200 150 150 1,000 Planned Units 40 60 40 30 30 200 SW 200 300 200 150 150 1,000 Cum SW 200 500 700 850 1,000 1,000 Actual Actual Units 20.2 29.4 38.2 58.9 41.8 11.5 200 P 101 147 191 294.5 209 57.5 1,000 Cum P 101 248 439 733.5 942.5 1000 1,000 A 85 140 190 275 190 50 930 Cum A 85 255 415 690 880 930 930
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 shall 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.
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.
ALL VALUES ARE REPRESENTED BY HOURS JAN FEB MAR APR MAY JUN TOTAL Schedule Resource Plan 200 300 200 150 150 1,000 Planned Units 40 60 40 30 30 200 SW 200 300 200 150 150 1,000 Cum SW 200 500 700 850 1,000 1,000 Actual Actual Units 20.2 29.4 21.4 16.8 6.2 6.0 200 P 202 294 214 168 62 60 1,000 Cum P 202 496 710 888 940 1000 1,000 A 170 285 236 105 75 59 930 Cum A 170 455 691 796 871 930 930
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) - Some people do 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. Figure 5-17 illustrates LOE Technique application.
Level Of Effort (LOE) Planning - 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.
LEVEL OF EFFORT (LOE) JAN FEB MAR APR MAY JUN TOTAL Start/Stop Resource Plan 150 250 250 200 150 1,000 SW 150 250 250 200 150 1,000 P 150 250 250 200 150 1,000 A 0 450 500 250 10 300 1,510
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 shall 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 shall 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.