81
The future work rate required to complete on time is 150% of the planned rate in the baseline for the same
amount of work remaining; therefore, the work needs to be done faster. For example, for every month, the
amount of work to be accomplished will consume 1.5 months in the baseline. TSPI
t
can also be calculated in
relation to a potential schedule change (i.e., a what-if analysis), where an EAC
t
(revised duration) replaces SAC
in the denominator.
While less intuitive, the use of the time-based schedule performance indices, as an alternative to the traditional
volume-based indices for time-performance measurement, has been receiving some attention from a community
of EVM practitioners. The main argument is related to the natural tendency of volume-based SPI to float toward 1
when the work is behind schedule beyond the baseline completion date; therefore, it is not a reliable predictor of final
variance at completion. However, for forecasting purposes, in such behind-schedule scenarios, the volume-based SPI
can be adjusted to deliver consistent and valid future trends.
SPI = (EV / PV) × (SAC / AT)
Where: AT > SAC, as the baseline completion date overrun.
TSPI is an important index that assesses the remaining future of the project. It provides a proactive assessment of
whether the time remaining is sufficient to complete the work and determines the required future efficiency. Again, in
a mature organization, benchmarking is available to assess whether certain performance levels above the baseline,
as measured by TSPI, are attainable or whether it is better to consider project changes.
Table 4-1 presents a summary for the formulas of the EVM performance indices.
Index Past Future
Cost Performance
Shedule Performance
• CPI = EV/AC
• SPI
w
= EV/PV
where: AT ≤ SAC
• SPI
w
= (EV/PV) x (SAC/AT)
where: AT > SAC
• SPI
t
= ES/AT
TCPI = (BAC – EV)/(BAC – AC)
What-if analysis for BAC:
TCPI = (BAC – EV)/(IEAC
c
– AC)
• TSPI
w
= (BAC – EV)/(BAC – PV)
• TSPI
t
= (SAC – ES)/(SAC – AT)
What-if analysis for BAC and SAC:
• TSPI
w
= (BAC – EV)/(IEAC
c
– PV)
• TSPI
t
= (SAC – ES)/(IEAC
t
– AT)
Table 4-1. Formulas of the EVM Performance Indices
82 Section 4
When an organization is mature in using EVM, performance indices are compared against variation thresholds
derived from historical data of past projects, which work as control limits. When the performance indices vary
within the thresholds, then no corrective action is required. A variation beyond the control limit can be a warning
sign that corrective action is recommended to counter the negative performance or to exploit the positive
performance being observed. This approach, based on thresholds, can also be used to implement management
by exception.
4.4.1.4 POTENTIAL CAUSES OF VARIANCES
Once variances are identified and measured, it is important to diagnose the causes so that, when necessary, action
can be taken to either mitigate or enhance their influence over the project.
Effective management does not aim at the absence of variance. Instead, good management is about identifying and
measuring variance, understanding its causes, and acting upon them, when required. This is a continuous process
where negative variance is treated early to prevent propagation and ripple effects, and where positive variance is
exploited as opportunities to improve the project’s final performance.
The EVM metrics and indices help to diagnose variation by providing detailed visibility of where the variance is
occurring:
Causes for variances can be identified by using the varying levels of the WBS to identify the scope components
with the larger variances;
Variances can be calculated on specific segments of the project scope, for example:
Scope assigned to specific contractors or functional units,
Type of work (e.g., engineering, excavation, programming), and
Type of resource engaged in doing the work.
This type of top-down and segmented analysis is useful for understanding where, who, and what type of work is
overperforming or underperforming. This analysis focuses the action where it is most needed.
When an organization is mature in using EVM, correlations regarding the status of the project can be established
using EVM metrics, performance indices, and potential causes for variance based on historical data and lessons
learned. In other words, common symptoms can be consistently linked to potential causes, as shown in Table 4-2.
83
Table 4-2. Potential Causes for Variance
SPI < 1 (behind schedule) SPI > 1 (ahead of schedule)
CPI < 1
(above budget)
CPI > 1
(below budget)
Underestimation?
Unexpected scope complexity?
Underresourced?
Value engineering?
Overresourced?
Work executed out of sequence?
Overestimated?
Scope simpler than expected?
Effective risk management?
Once causes are diagnosed, they should be documented for later verification and review. Maintaining an updated
record of observed variance and its diagnosis is essential for continuous improvement in order to develop and maintain
effective responses. Such records are invaluable, particularly for large future projects to be used for forecasting both
at a strategic level and for creating future project estimates. For example, past experience may indicate that certain
specific causes of underperformance may persist in the project during certain periods of time and this would affect
the calculation of the estimates at completion.
4.4.1.5 POTENTIAL MANAGEMENT ACTIONS
When potential causes are identified and documented, a list of possible actions to conduct an impact analysis
should be developed prior to the decision to implement.
An organization using EVM systematically and consistently should be able to:
Develop a knowledge base linking the key three elements of decision making: symptoms, causes, and
recommended actions; or
Capture the information into existing organizational decision logs.
When the relationship between causes and effective actions is not supported by objective or consistent empirical
evidence, decision making may be limited to less scientific measures, such as general rules of thumb or personal
experience and preferences.
84 Section 4
A recommended practice is to develop a more systematic approach to the identification of possible actions so as
to act upon variations either by mitigating or enhancing their effect on the project. Examples of possible actions are
provided in Table 4-3.
Table 4-3. Examples of Possible Actions for Impact Analysis
SPI < 1 (behind schedule) SPI > 1 (ahead of schedule)
CPI < 1
(above budget)
CPI > 1
(below budget)
Underestimation?
Unexpected scope complexity?
Potential actions:
• Descope the project
• Increase budget/schedule
(when TCPI and TSPI are high)
Underresourced?
Value engineering?
Potential actions:
• Increase resources
• Rebaseline to extend the
schedule (if TSPI is very high)
Overresourced?
Work executed out of sequence?
Potential actions:
• Reduce resources
• Rebaseline for early completion
• Control work out of sequence
Overestimated?
Scope simpler than expected?
Effective risk management?
Potential actions:
• Expand the scope and/or quality
• Plan additional risk responses to
reduce project risk
• Rebaseline for early completion
and release budget
Once the potential actions are identified, they should be documented along with the rationale for further analysis
regarding the impact on the project.
4.4.2 FORECASTING
As the project progresses, future trends can be developed for cost and schedule performance in addition to scope
at completion. These trends should take the form of scenario analysis and incorporate the following elements as
impacting the project future:
Past performance,
Occurrence of risks,
85
Management actions, and
Review of project assumptions and constraints.
Trends are quantified in the form of forecasting EVM data points, which include:
Estimate to complete (ETC). The ETC is the expected cost or time needed to complete all of the remaining
work for a control account, work package, or project.
There are two possible ways to develop the ETC. The most detailed method is to develop a new bottom-up
estimate based on an analysis of the remaining work. This is sometimes referred to as a management ETC.
Another alternative is to use a top-down parametric approach, applying a future efficiency to the remaining
work. For cost, such an estimate is calculated as follows:
ETC = work remaining / future expected efficiency = (BAC − EV) / CPI-future
Where CPI-future is the assumed future cost efficiency for the work remaining, for which difference scenarios
can be considered:
Independent estimate to complete (IETC) assumes no management intervention. Common alternatives for
CPI-future are:
Future efficiency will be the same as the average observed in the past.
Future efficiency is the same as the average observed in the most recent control period (e.g., month,
quarter).
Future efficiency is based on a trend of the past efficiency (statistically derived).
Future efficiency is affected by management intervention and/or occurrences of other events foreseen by
management (e.g., risks and risk responses). This results in a change from the past efficiency. If CPI-future
becomes equal to TCPI, ETC will be equal to the budget remaining: BAC − AC.
Statistical, parametric, or empirical approaches can also be used to extrapolate CPI-future from past
performance indices and other factors, with some approaches using a combination of past CPI and SPI.
A similar rationale and approach can be used to estimate the ETC for the time remaining in the project, using
the time-efficiency indices.
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