EVM in Practice. Strategic Control throughout Project Life Cycle. Peerapong Aramvareekul, Ph.D., PMP, PSP, EVP Ronnie D. Stephens

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1 EVM in Practice Strategic Control throughout Project Life Cycle Peerapong Aramvareekul, Ph.D., PMP, PSP, EVP Ronnie D. Stephens

2 Peerapong Aramvareekul, Ph.D., PMP, PSP, EVP Born: in Bangkok, Thailand Education: Civil Engineering, Management & Economics Massachusetts Institute of Technology (MIT Sloan) State University of New York at Buffalo (SUNY) Chulalongkorn University Ph.D., M.Eng., MBA, M.A., B.Eng. Work Experience: 15+ years of Construction & Project Management Infrastructure & Construction Engineering & Design Real Estate Development Oil & Gas Currently working: Williams Company, USA Engineer Staff; Project Excellence PLC/PM Hobbies: Spending time with my son, Tennis, Soccer, Reading, Movies LinkedIn # Tennis & EVM Rock

3 Ronnie D. Stephens Born: in Tulsa, OK Education: Engineering and Business Chemical Engineering BS Oklahoma State University MBA Pittsburg State University Work Experience: 20+ years of Construction & Project Management Process Engineering/Process Safety Management Chemical processing, manufacturing, and Oil & Gas Executed construction projects in Australia, France, Mexico, South Africa, China, and the United States Currently working: Williams Company, USA Director of Project Life Cycle (PLC) and Project Management Processes Hobbies: Kids, Soccer, Music, Fishing, and Movies Something You Don t Know About Me Once interned as a radio station DJ Ronnie.Stephens@williams.com LinkedIn # Soccer & EVM Rock

4 Discussion Points Purposes of EVM Causes of Failure when implementing EVM EVM Fundamentals and In Practices EVM Process and Structures Integrated EVM with Stage Gate Model

5 INTRODUCTION & FUNDAMENTALS FOR THE EVM PROCESS What is EVM? What is EVM used for? Can EVM fail?... If yes, then WHY?

6 Introduction Earned Value Management (EVM) - a project management technique for measuring project performance and progress in an objective manner. EVM has the ability to combine measurements of scope, schedule, and cost in a single integrated system.. EVM integrates: Scope Time Cost

7 Introduction EVM integrates: All are interdependent If there is change in one element, at least one of the other two will be changed (or both will be changed) Ability to trade off between Time & Cost

8 Introduction EVM Benefits Common performance measurement system Data which is timely, valid, and justifiable Data which can be used as a basis for management decisions Cost and schedule performance measurement Isolation of problem areas COMMUNICATION Early identification of problems TOOL Provides an indication of work progress Consistent management reporting on all projects Practical level of metrics and reporting

9 EVM Fundamentals EVM - Cause Mapping

10 EVM Fundamentals What are the 3 things needed in order to calculate EVM?

11 EVM Fundamentals EVM Definitions and Terminology Budgeted Cost of Work Scheduled (BCWS) also called Planned Value (PV): Budgeted resources or dollars representing what is planned to be done by the milestone date (schedule baseline). Budgeted Cost of Work Performed (BCWP) also called Earned Value (EV) : Earned dollars representing what was done based on monthly status updates and rules of progress. (EV = BAC x Physical % Complete) Actual Cost of Work Performed (ACWP) also called Actual Costs (AC), represents what costs where incurred, including accruals, during the reporting period.

12 EVM Fundamentals Actual Costs versus Earned Value Tracking Actual Costs Actual Costs Earned Value Reporting Earned Value Report $'s spend plan actuals Same Project Same Status $'s spend plan actuals work completion or earned value Time Time Today Today The project is under running planned costs and most of the work is complete Different Conclusion This project is overrunning costs and is significantly behind schedule

13 EVM Fundamentals Earned Value Management (EVM) $4,000 $3,500 Estimate at Completion (EAC) Cost Overrun $3,000 Cost Variance Value ($) $2,500 $2,000 Schedule Variance Project Budget $1,500 $1,000 $500 $0 BCWS BCWP ACWP Project Slippage Status Date BCWS ($) A CWP ($) BCWP ($) Time (Week)

14 EVM In Practice EVM foundation EVM application Data integration & meaningful information Quality & Value Process Integration

15 EVM In Practice Three foundations required for an effective EVM WBS that allows actual costs or resources to be tracked at the same level of detail as they were planned. Project Schedule that illustrates how the project will be executed, typically resource loaded. Detailed Estimate which aligned to the project execution plan and schedule.

16 EVM In Practice Important!!! a. The quality of EVM depends on the quality of project schedule and cost estimate. So, the schedule and cost estimate must reflect how the project will actually be executed. b. SPI from cost based EVM always equal 1.00 when the project is complete no matter whether the project is finished on time or behind schedule. c. Running EVM on early curve and/or on late curve. What should be considered? d. Understanding your actual cost to be used in the EVM calculations.

17 EVM In Practice EVM: Cost-Based vs Time-Based

18 EVM In Practice EVM: on Early and Late Curves

19 EVM In Practice Actual Cost of Work Performed (ACWP) Total costs incurred and recorded in accomplishing work performed during a given time period for a schedule activity or work package ACWP EAC Actual Cost of Work Performed Processed Costs Accruals Forecast Actuals (incurred) Estimate to Complete (ETC) 11/12/12 4/30/13 10/31/15

20 EVM In Practice Stakeholder Engagement & Communication Types of EVM Stakeholders Process Champions Step 1.: Identify the stakeholders Data Providers Analyst or Project Controls End Users Step 4.: Establish engagement & communication method EVM Stakeholder Analysis Step 3.: Create a relationship model Step 2.: Profile the stakeholders Unengaged sponsor sinks the ship. Angela Waner

21 EVM In Practice Key take away points EVM is not just a Plug & Play methodology. In order for an EVM system to be effective, it must integrate with your companies other Processes

22 Plan Organize Authorize EVM In Practice Collect Calculate The Process & Cycle of EVM Status Interpret Translate Report Corrective Action

23 EVM In Practice Time Spending Collect / Measure Calculate / Statusing Interpret / Analyze Translate to Solutions Communicate Planned Value (PV) Actual Cost (AC) Earned Value (EV) Schedule Cost Schedule Variance (SV) Schedule Performance Index (SPI) Estimate at Completion (EACt) Estimate to Complete (ETCt) Cost Variance (CV) Cost Performance Index (CPI) Estimate at Completion (EACc) Estimate to Complete (ETCc) > 1 is ahead schedule = 1 is on schedule < 1 is behind schedule various scenarios > 1 is budget underrun = 1 is on budget < 1 is budget overrun various scenarios Report Decision & Corrective Action

24 EVM In Practice Typical Project Controls Practitioners Spend 61% of Their Time on Unproductive Activities Source: studied by EcoSys customer

25 EVM In Practice Best in class Project Controls Targeted Utilization Source: studied by EcoSys customer

26 EVM Foundations & Structures PEOPLE PLANNING GG PROCESS TOOLS

27 Tools / Techniques Interpretation Certainty Predictability Repeatability People / Culture Process / Procedure EVM Foundations & Structures Corrective Action Communication Detailed Estimate Project Schedule Work Breakdown Structure (WBS)

28 EVM & Stage Gate Implementation

29 EVM & Stage Gate Implementation Integrated EVM throughout E&C Stage Gate Process Decide to Initiate Decide to Proceed Decide to Continue Decide to Sanction Operations Handoff Close Out Does the opportunity support economic development? Is the project technically & commercially viable? Optimize the recommended technical and economical concept Do the budget, timeline, and commercial terms support full sanction? Is the asset ready for operation? EVM executed Have the lessons learned been captured? Is the asset performing as expected?

30 EVM & Stage Gate Implementation Integrated EVM throughout E&C Stage Gate Process

31 EVM & Stage Gate Implementation Integrated EVM throughout E&C Stage Gate Process WBS, Created/Customized to fit the project

32 EVM & Stage Gate Implementation Work Breakdown Structure (WBS) Permitting/ Environment Civil Electrical Conduit & Materials Chartering Engineering Long Lead Electrical, Valves, Pipes, Site Instrumentation work & Fittings & Controls Procurement Construction Commissioning Closeout Land/ROW Compressor Procurement Power Structural Steel Management, process, and organization Planning, scheduling, and budgeting Data, tracking, and communication Analysis and management reporting Maintenance, revisions, and lessons learned

33 EVM & Stage Gate Implementation Permitting/ Environment Civil Electrical Conduit & Materials Work Breakdown Structure (WBS) Chartering Land/ROW Engineering Long Lead Electrical, Valves, Pipes, Site Instrumentation work & Fittings & Controls Procurement Compressor Procurement Power Power Compressor RFQ Structural Steel Compressor Construction Commissioning Closeout Issue Compressor RFQ Submit Compressor PO Receive Compressor Specs from Vendor 1 st Payment 25% for Compressor 2 nd Payment 25% for Compressor 3 rd Payment 25% for Compressor Management, process, and organization Planning, scheduling, and budgeting Final Payment 25% for Compressor Receive Compressor Data, tracking, and communication Analysis and management reporting Maintenance, revisions, and lessons learned

34 EVM & Stage Gate Implementation Work Breakdown Structure (WBS) Permitting/ Environment Civil Electrical Conduit & Materials Chartering Issue Compressor RFQ Engineering Submit Compressor Compressor Land/ROW Land/ROW PO Procurement Receive Compressor Specs from Vendor 1 st Payment 25% for Compressor 2 nd Payment 25% for Compressor 3 rd Payment 25% for Compressor Long Lead Electrical, Valves, Pipes, Site Instrumentation work & Fittings & Controls Procurement Power Final Commercial/Business Payment 25% for Compressor Development Receive Compressor Project Management/Compliance/Regulatory Analysis and management reporting Compressor RFQ FS+10d SS Structural FS+20d Steel FS+30d Compressor Construction FS+6mon FS+40d Commissioning FS+40d Closeout Maintenance, revisions, and lessons learned

35 EVM & Stage Gate Implementation

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37 EVM Summary Summary!!! a. EVM is a project management technique that integrates Scope, Schedule, and Cost. b. To calculate EVM, the three inputs needed are Planned value, Earned value, Actual cost c. Critical EVM foundations are WBS, Project Schedule, and Detailed Estimate that integrated with project schedule. d. To set up an effective EVM process, it must be integrated throughout a companies project stage gate. It is a. PROCESS. e. EVM In Practice for better value and quality integrates EVM Foundation, Stakeholder Engagement & Communication, and Process Integration. f. EVM should be used as a COMMUNICATION tool. Data is like garbage. You d better know what you are going to do with it before you collect it. Mark Twain

38 EVM Summary EVM Process Map for E&C projects Plan & Organize Collect & Review Calculate & Status Analyze & Interpret Translate to Solutions Communicate & Report Corrective Action Contracting SOV Planning: Budget & Scheduling Justifiable Project Control Construction Construction Schedule EVM Tracking Forms EVM Reports Tracking Reporting Lessons Learned EVM Construction ($$$ or MHW) Be Proactive Decision Making Manage by Exception Certainty Predictability Repeatability Business Opportunities Improvement Opportunities Contractor Performance Database

39 EVM Summary EVM In-Practice Data integration & meaningful information Quality & Value Process Integration

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