Slides 11 4 apply earned value management principles to corp

Apply Earned Value Management Principles to Case Study Scenario: Completing the Great Pyramid © Dale R Geiger 2011 If Only the Pharaoh Had the Corps of Engineers © Dale R Geiger 2011 Terminal Learning Objective • Task: Apply Earned Value Management Principles to Case Study Scenario • Condition: You are training to become an ACE with access to ICAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors • Standard: with at least 80% accuracy • Identify key variables from case study data • Calculate BAC, schedule and cost variances, and EAC © Dale R Geiger 2011 Building the Great Pyramid Case A: The Air Force Approach • Read the paper “If the Pharaoh Had Only Used an Earned Value System in Building the Pyramids” • By LTC Neimann (USAF Ret) found at https://acc.dau.mil/CommunityBrowser.aspx?id=19572 • Using the tools learned: • • • • Build and verify the BAC presented in the paper Determine schedule variance at Year 12 Determine the cost variance at Year 12 Calculate EAC at Year 12 © Dale R Geiger 2011 Budget at Completion: BAC Year Design 10 12 14 16 18 20 1 1 Mfg 1.5 1.5 1.5 1.5 Comp Test 1 1 Assemble 5 5 Intg Test Total Cum 1 1 2.5 3.5 3.5 2.5 1.5 1.5 1.5 1.5 20 3.5 10.5 13 14.5 16 17.5 19 20 BAC (Note: your chart may look a little different as there is some ambiguity about start/end dates) © Dale R Geiger 2011 Schedule and Cost Variances: Design at Year 12 BCWS Schedule Variance BCWP Cost Variance ACWP Design 1 Cost per Unit Design 4 Cost for Design © Dale R Geiger 2011 Schedule and Cost Variances: Manufacture at Year 12 BCWS Schedule Variance BCWP Cost Variance ACWP Blocks 1000 667 667 Cost per Block 006 006 009 Cost for Manufacture (2) © Dale R Geiger 2011 (2) Schedule and Cost Variances: Component Test at Year 12 BCWS Component Test Schedule Variance BCWP Cost Variance ACWP 100% 50% 50% Cost per Component Test 4 Cost for Component Test (2) © Dale R Geiger 2011 (1) Year 12 Results • We are now behind schedule and over cost: terrible!! BCWS Schedule Variance BCWP Cost Variance ACWP Cost for Design Cost for Manufacture (2) (2) Cost for Component Test (2) (1) Cost at end of Year 12 14 (4) 10 (3) 13 • ACWP is 130% of BCWP so EAC can be projected at 130% of BAC: (1.30)20M = 26M © Dale R Geiger 2011 Building the Great Pyramid Case B: Corps of Engineers • The Pharaoh was quite displeased with the Air Force Pyramid Building Project’s AAR results • LTC Neimann was re-assigned to flying carpets and moved to a lovely tent in the Sinai where he soon retired • The Pharaoh turned to the Corps of Engineers • He asked for project proposals to complete the Great Pyramid within four years • The Corps of Engineers tasked six teams to make proposals to complete an enhanced, Army-ized pyramid © Dale R Geiger 2011 10 Task 2: AAR for the Pharaoh • Generate actual cost and schedule per following page’s instructions • Present to class • Cost and schedule variances for each year until completion (4+ slides) • BAC and EAC for the first year (1 slide) • Graph of BCWS, BCWP, ACWP (1 slide) • A reconciliation of your variance results at completion (1 slide) • Suggestions for continuous improvement (1 slide) • A view of what your finished pyramid looks like (1 slide) © Dale R Geiger 2011 17 Task 2: Developing Actual Cost and Schedule • Use the randbetween formula in Excel to generate a random number between and 10 for each task: =RANDBETWEEN(1,10) • Follow the instructions on the next page to find what happened to the actual cost and schedule for that task • Determine the actual results of the project year by year © Dale R Geiger 2011 18 Task 2: Reality Hits Freak rain storms wash out a year’s progress: add year at same cost Assyrians attack but are easily defeated: however, add 20% to task cost Engineering error: task takes a third year at same average cost per year Outsourcing accelerates progress, raises 1st year cost 50% but completes task Slaves rebel: add 50% to task cost Conquests add slaves to workforce: cut task cost 30% & finish one year early Dust storms disrupt work: add 20% to task cost Hidden Air Force funds discovered: reduce task cost 50% LSS improves process: eliminate 2nd year and its cost 10 Finance Corps ACES assigned to project: reduce cost of all tasks 10% © Dale R Geiger 2011 19 Team AAR Presentations © Dale R Geiger 2011 20 Teacher’s Notes: Example Selected tasks block assemble divert nile dam and lake camo armor roads total bcws 500 500 total cum 500 1000 1000 500 1000 2000 1000 1000 2000 4000 2000 1000 3000 7000 2000 1000 3000 10000 1000 1000 2000 12000 500 500 1000 13000 1000 4500 5500 2000 13000 Budget for tasks BAC BCWS © Dale R Geiger 2011 21 Teacher’s Notes: Actual Costs random # impact 1st +50% no 2nd 20% more cost 1010% less all tasks add yr at same cost 20% more cost 50% less cost 50% less cost 675 540 540 900 1800 block assemble divert nile 900 dam and lake 900 camo 2160 armor 450 roads 225 225 total 1215 3465 4635 © Dale R Geiger 2011 Total cum 675 675 1080 1755 1800 3555 1350 4050 7605 1080 3240 10845 450 900 11745 450 12195 2880 12195 22 Teacher’s Notes: Example 1st Year Results block assbly units completed cost per unit cost at point in time schedule bcws variance 166.5 500 500 cost bcwp variance 333 1000 325 acwp 333 675 units completed cost per unit cost at point in time year total 0.5 1000 500 1000 0.5 1000 500 1500 0.5 1080 540 1215 acwp/bcwp bac eac 500 (40) 285 81% 13000 10530 © Dale R Geiger 2011 23 Teacher’s Notes: 2nd Year Results units completed block cost per unit cost at point in time schedule bcws variance 166.5 500 (500) cost bcwp variance 0 acwp 0 units completed assbly cost per unit cost at point in time 0.5 1000 500 0.5 1000 500 (40) 0.5 1080 540 units completed cost per unit cost at point in time 0.5 2000 1000 0.5 2000 1000 100 0.5 1800 900 units completed cost per unit cost at point in time 0.67 3000 2000 (667) 0.44 3000 1333 (467) 0.44 3941 1800 units completed cost per unit cost at point in time year total 0.5 1000 500 4500 (1167) 0.5 1000 500 3333 275 (132) 0.5 450 225 3465 5500 (667) 4833 153 4680 nile lake road after years © Dale R Geiger 2011 24 Teacher’s Notes: 3rd Year Results nile units completed cost per unit cost at point in time schedule bcws variance 0.5 2000 1000 cost bcwp variance acwp 0.5 0.5 2000 1800 1000 100 900 lake units completed cost per unit cost at point in time 0.33 3000 1000 (333) 0.22 3000 667 0.22 4050 (233) 900 units completed camo cost per unit cost at point in time 0.67 3000 2000 0.67 3000 2000 0.67 3240 (160) 2160 units completed armor cost per unit cost at point in time 0.50 2000 1000 0.50 2000 1000 0.50 900 550 450 units completed road cost per unit cost at point in time year total 0.5 1000 500 5500 0.5 1000 500 (333) 5167 0.5 450 275 225 532 4635 11000 (1000) 10000 685 9315 after years © Dale R Geiger 2011 25 Teacher’s Notes: 4th Year Results lake units completed cost per unit cost at point in time schedule cost bcws variance bcwp variance 0.00 0.33 000 0/ 3000 (1350)/ 0/ 1000 0/ 1000 (350) units completed camo cost per unit cost at point in time 0.33 3000 1000 units completed armor cost per unit cost at point in time 0.50 2000 1000 year total 2000 0/ 1000 after years 13000 0.33 3000 1000 0.50 2000 1000 2000/ 3000 13000 © Dale R Geiger 2011 (80) 550 (880)/ 120 acwp 0.33 4050 1350 0.33 3240 1080 0.50 900 450 2880 805 12195 26 Graphing the Pyramid Project ACWP BCWP BCWS © Dale R Geiger 2011 27 Graphing the Pyramid Project ACWP BCWP BCWS © Dale R Geiger 2011 28 Teacher’s Notes: Reconciliation Budgeted at Completion 13000 Actual Cost at Completion 12195 Cost Variance 805 Reconciliation: Army audit agency discovered hidden Air Force funds 1500 Added ACES to project 1300 Block outsourcing continuous improvement Engineering error on dam task 250 (1500) Disruption from Assyrian attacks Miscellaneous rounding effects (800) 55 Total Explained 805 © Dale R Geiger 2011 29 Teacher’s Notes: Continuous Improvement Suggestions • Get more ACES and involve them more • Check Engineering designs before they create major cost overruns • Double check Engineering designs • Look for more outsourcing opportunities © Dale R Geiger 2011 30 Camouflaged Pyramid on Lake: Excellent Camouflage, Isn’t It?! © Dale R Geiger 2011 31 ... lake 900 camo 2160 armor 45 0 roads 225 225 total 1215 346 5 46 35 © Dale R Geiger 2 011 Total cum 675 675 1080 1755 1800 3555 1350 40 50 7605 1080 3 240 10 845 45 0 900 117 45 45 0 12195 2880 12195 22... 3000 1333 (46 7) 0 .44 3 941 1800 units completed cost per unit cost at point in time year total 0.5 1000 500 45 00 (116 7) 0.5 1000 500 3333 275 (132) 0.5 45 0 225 346 5 5500 (667) 48 33 153 46 80 nile... Pharaoh Had the Corps of Engineers © Dale R Geiger 2 011 Terminal Learning Objective • Task: Apply Earned Value Management Principles to Case Study Scenario • Condition: You are training to become an