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Advanced Project Management for the Energy Industry

Earned Value Management 12:20 – 13:00 Interactive Roundtable Discussion Benefit, Outcome and Value of EVM. Moderator: Milan Šmigić PMI Serbia Chapter Panelist: Vladimir Liberzon PMI Russia Chapter Panelist: Jose Angelo Pinto PMI Portugal Chapter Panelist: Tim Cummins ,

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Advanced Project Management for the Energy Industry

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  1. Earned Value Management 12:20 – 13:00 Interactive Roundtable Discussion Benefit, Outcome and Value of EVM Moderator: Milan Šmigić PMI Serbia Chapter Panelist: Vladimir Liberzon PMI Russia Chapter Panelist: Jose Angelo Pinto PMI Portugal Chapter Panelist: Tim Cummins, International Association for Contract and Commercial Management (IACCM) Advanced Project Management for the Energy Industry Ensuring an Effective Project Execution and Avoiding Pitfalls 13th – 14th September 2012 The Cumberland Hotel London, United Kingdom

  2. Earned Value Management • Basic elements • Cummulatives: • Actual Cost (AC) • Planned Value (PV) • Earned Value (EV) • Variance Amounts: • Schedule Variance (SV = EV – PV) • Cost Variance (CV = EV – AC) • Performance Indexes: • Schedule Performance Index (SPI = EV/PV) • Cost Performance Index (CPI = EV/AC)

  3. How to Drive your Project with Earned Value?

  4. Benefit, Outcome and Value of EVMInteractive Roundtable Discussion • EVM Advantages • Problems with EVM application • When and how to apply EVM • Risk Management and EVM

  5. EVM Advantages • Provides simple and easy to understand indicators of overall program cost and schedule performance • Creates a set of quality requirements for program and project performance control models • Supports integrated decision making process

  6. Problems with EVM application • Projects often use different resources at different stages. Forecasting future performance basing on past experience is not proper if future resources are different • EV analysis does not distinguish between the work done on critical activities and activities with large floats. • If EVA is used as the main tool for estimating project performance project managers are motivated to do expensive works first. • If the targets are set by (p)adding time and cost contingency reserves to the working schedule the realistic baseline schedule does not exist and application of EVA is complicated.

  7. When and how to apply EVM • EVM shall be applied in large projects and programs for proper structuring of project data and obtaining useful indicators of Project performance • EVM was designed for deterministic project management and requires an existence of project baseline. • EVM does not consider project network dependencies and shall be used together with other performance measurement tools. One of the ways to increase reliability of EVA indicators is application of EVA to a set of near critical activities • EVA forecasts shall be applied to project phases that use the same resources • If the project uses expensive equipment EVA shall be applied to work cost, resource-hours, etc.

  8. Risk management and EVM • Application of risk management methods and tools means creating contingency reserves and setting reliable targets that do not belong to any schedule. • It means that baseline schedule does not exist and current schedule may be compared with other schedule (most probable as an example) that does not finish on target date and does not have target budget. • It means that SPI<1 and CPI<1 will not mean that project performance is worse than expected. • Past performance may be perfect but new risks identified and probability to meet project targets may become lower. EVA does not look forward and will not notice future problems.

  9. Main discussion topics and conclusions • EVM Advantages, • Problems with EVM application, • When and how to apply EVM, • Risk management and EVM • Thank You for your participation! EVM

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