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1. N O T E If the slide show is not launched, click on View  Slide Show in the menu bar at the top of the Power Point window. When the View option is not visible, the slide show has been launched and you must click to proceed to the next slide. “CLICK” TO CONTINUE…

2. B A S I C E V C H A R TA N A L Y S I S The presentation that follows provides some basic guidance in the analysis of EV charts (Note: Recommend that you print these slides for reference. Because some of the graphics have small fonts they should be printed full page. “Slides” should be selected under “Print What” at the bottom.) “CLICK” TO CONTINUE…

3. B A S I C E V C H A R T A N A L Y S I S Cumulative Variance Chart If the Cost Variance (BCWP-ACWP) is less than 0.0, then the contractor has spent more than planned to accomplish the tasks. If this is sloping downward, then the amount overspent/overrun is increasing. Conversely, if the Cost Variance (BCWP-ACWP) is more than 0, then the contractor has spent less than planned. If the Schedule Variance (BCWP-BCWS) is less than 0.0, then the contractor has taken longer than planned to accomplish the tasks. If this is sloping downward, then even fewer tasks are getting completed than planned. Conversely, if the Schedule Variance (BCWP-BCWS) is more than 0.0, then the contractor has accomplished tasks sooner than planned. (NOTE: At contract completion, the SV will always be 0.0 because, at that point, BCWS will equal BCWP.) This chart also compares the Cumulative Cost Variance trend with the contractor’s predicted Variance at Completion (VAC = BAC – EAC). If these are approximately the same, then the contractor’s EAC is reasonable based on the CV trend data. If the VAC is more than the CV and the trends are diverging, then it becomes less likely that the Contractor’s EAC can be achieved. If they are converging, then the EAC is becoming more achievable based on the trends. Note: Cost and Schedule Variance formulas both start with BCWP “CLICK” TO CONTINUE…

4. B A S I C E V C H A R T A N A L Y S I S Cumulative Variance Chart Positive CV = Underrun Positive SV = Tasks finished early Cum VAC is the contractor’s prediction of variance at the end of the contract. VAC = BAC - EAC Breakeven (exactly at budget and on schedule) Negative CV = Overrun Negative SV = Tasks finished late Cum CV and CUM SV reflect contractor data calculations CV = BCWP - ACWP SV = BCWP - BCWS VAC = BAC - EAC Compare VAC to CV trend--Is CV trending toward VAC or away? “CLICK” TO CONTINUE…

5. B A S I C E V C H A R T A N A L Y S I S Cost Performance Chart ( ) Work Remaining TCPI (for BAC) = Budget Remaining You should be able to determine whether the contractor’s CPI (aka efficiency) is as planned (1.00), less than 100% efficient (< 1.00) or better than 100% efficient (>1.00). You should be able to identify the general trend of the contractor’s CPI. If it is sloping downward, it is getting worse. If it is sloping upward, it is getting better. When dealing with the TCPI (efficiency needed to achieve a cost target), you should understand from looking at the formulas, that the SMALLER the BAC or EAC, the GREATER the efficiency needed to achieve it. ( ) (BAC - BCWP) = (BAC - ACWP) ( ) Work Remaining TCPI (for EAC) = Budget Remaining ( ) (BAC - BCWP) = (EAC - ACWP) Note: In the EAC formula, you may substitute either the contractor EAC (aka LRE) or the PMO/government EAC to determine the TCPI for that EAC.) “CLICK” TO CONTINUE…

6. B A S I C E V C H A R T A N A L Y S I S Cost Performance Chart (cont.) One way to determine the reasonableness of an EAC, is to compare the TCPI to achieve the EAC (or BAC) to the contractor’s performance efficiency to date, which is the cumulative CPI. If the Contractor’s CPI is greater than the TCPI, than the EAC (or BAC) is more likely to be achievable than if the contractor’s CPI is less than the TCPI because the contractor will need to be more efficient than they have been up to this point. If the trend lines of the CPI and TCPI for the EAC (or BAC) are diverging, then the likelihood of the contractor achieving that cost target is decreasing because the gap between the contractor’s performed efficiency and the efficiency needed to reach the cost goal is getting greater. “CLICK” TO CONTINUE…

7. Starting Day 1 of the next month, the CPI needed to achieve: Contractor EAC (LRE) and BAC Cum CPI Current period CPI Cum CPI Cur CPI TCPIBAC TCPIEAC WORK REMAINING BAC – BCWPCUM = • TCPI = BAC BUDGET REMAINING BAC – ACWPCUM WORK REMAINING BAC – BCWPCUM • TCPI = = EAC BUDGET REMAINING EAC – ACWPCUM B A S I C E V C H A R T A N A L Y S I S Cost Performance Chart • Compare contractor’s efficiency (CPI) to the efficiency needed to meet the BAC (TCPIBAC) and contractor EAC (TCPIEAC) “CLICK” TO CONTINUE…

8. B A S I C E V C H A R T A N A L Y S I S Cost/Schedule Variance Trend Chart(aka “Cone Chart”) If the Cost Variance (BCWP-ACWP) is less than 0.0, then the contractor has spent more than planned to accomplish the tasks. If sloping downward, then the amount overspent/overrun is increasing. Conversely, if the Cost Variance (BCWP-ACWP) is more than 0.0, then the contractor has spent less than planned. If the Schedule Variance (BCWP-BCWS) is less than 0.0, then the contractor has taken longer than planned to accomplish the tasks. If this is sloping downward, then even fewer tasks are getting completed than planned. This DOES NOT necessarily mean that the contract is behind schedule. The network schedule must also be consulted to determine if these tasks are on the critical path before making assumptions about schedule impact. Conversely, if the Schedule Variance (BCWP-BCWS) is more than 0.0, then the contractor has accomplished tasks sooner than planned. (If the contractor has a large number of 50/50 work packages, a positive schedule variance could also result from contractor opening work packages early.) Note: At contract completion, the SV will always be 0.0 because, at that point, BCWS will equal BCWP.) “CLICK” TO CONTINUE…

9. B A S I C E V C H A R T A N A L Y S I S Cost/Schedule Variance Trend Chart(aka “Cone Chart”) It is also important to look for changes in trends. Frequently negative Schedule Variance trends are followed by negative Cost Variance trends. Normally, the BEST that the contractor can do is to flatten the Cost Variance trend; meaning that there are no additional overruns. The contractor will rarely spend LESS than planned in the future (causing the trend to track up) if the trend to date is a negative one. So if the CV trend needs to turn drastically UP to reach the PMO or Contractor VAC, this is highly unlikely to happen and would require a good explanation as to how this could occur. (See dotted lines on chart.) As previously mentioned, the Schedule Variance will eventually trend back upward to 0.0, when the contract tasks are all complete, and at that point in time, BCWP will equal BCWS. (This does NOT mean that these tasks will be completed according to the original plan/schedule, only that they will EVENTUALLY be completed and earned value taken.) Use of Management Reserve is also something to track. Early use of MR is generally an indication of planning problems. The +/- 10% threshold bands provide perspective of the relative significance of the cost and schedule variances. The goal is to stay within these “cones.” “CLICK” TO CONTINUE…

10. KTR VAC Management Reserve (MR) Trend for CV to reach Ktr estimate Upper 10% (of Cum BCWP) Band Trend for CV to reach PMO estimate Lower 10% (of Cum BCWP) Band VAC = BAC - Ktr EAC VAC = BAC - PMO EAC B A S I C E V C H A R T A N A L Y S I S Cost/Schedule Variance Trends Chart “CLICK” TO CONTINUE…

11. B A S I C E V C H A R T A N A L Y S I S Estimates at Completion Chart ( ) (BAC – BCWP) EAC = ACWP + Performance Factor • The EAC may be calculated using a number of different performance factors by substituting different efficiency factors for the performance factor in the basic formula. No one factor is “better” than another. The choice of efficiency factor is based on program history, current trends, technical performance and other programmatic information. (In this standard chart format, the performance factor used is Cumulative CPI.) • EACs are used to assist in management decision making and planning. They are frequently included in reports made to upper levels of management including budget documents. If the calculated EACs differ greatly from the BAC and contractor EAC (aka LRE), then the contractor and/or the PMO should be prepared to explain why. (Based on years of experience, OSD considers the EAC using the Cumulative CPI as a performance factor to be the "best" the contractor will do.) The Estimates at Completion chart compares the contractor’s baseline (BAC) with the contractor’s EAC (aka LRE). The contractor’s EAC is one way of determining what the contract may actually cost versus the original plan. This chart can also display one or more of the CALCULATED EACs based on the basic EAC formula: “CLICK” TO CONTINUE…

12. B A S I C E V C H A R T A N A L Y S I S Estimate at Completion Chart Calculated EAC using CUM CPI as the Performance Factor BAC LRE (Contractor EAC) “CLICK” TO CONTINUE…

13. B A S I C E V C H A R T A N A L Y S I S Six-Period Summary ( ) (BAC – BCWP) EAC = ACWP + Performance Factor Statistical & Independent Forecasts In the last section of the Six-Period Summary, there are a number of pre-calculated EAC’s in the Statistical and Independent Forecasts section. Most of the forecasts are calculated using the basic EAC formula: • Most of these forecasts use this formula and substitute for the Performance Factor (PF) as identified on the next chart with the following exceptions: • Linear Regression uses a “least squares” fit to draw a line for the EAC • User input is a bottoms up calculation generated by identifying an EAC method at lower WBS levels that gets summarized to the total level • PMO EAC is also a user input at the Total Contract Level • (Note: Both the user input and PMO input are entered using “INPUT” on the tool bar.) • The choice of efficiency factor is based on program history, current trends, technical performance and other programmatic information. “CLICK” TO CONTINUE…

14. B A S I C E V C H A R T A N A L Y S I S Six-Period Summary (cont.) As of: JUL 00 Contract Name: LAR VEHICLE 2 Financial Analyst: Mr Ed Money Contract Number: A05601-99-C-0023 Contract Manager: Maj Nuisance Contractor: Increda, Corp Element Code: 1 Project Officer: Maj Nuisance Element Name: LAR VEHICLE 2 Office Symbol: MTDP “CLICK” TO CONTINUE…

15. E S T I M A T E S A T C O M P L E T I O N ( E A C s ) SAMPLE To print the PowerPoint slides, click on File  Print… You will then be prompted to choose your print options. Select them and click OK. “CLICK” TO CONTINUE…