Use of Earned Value Management Trends to Forecast Cost Risks
Journal of Cost Analysis and Parametrics
This article uses earned value management trend analysis to forecast trends in BAC and BCWP. The resulting equations are then used to solve for the expected month at completion. With the month at completion date in hand, the article uses trend analysis to ï¬nd the EAC at that month along with the BAC at that month far in the future to solve for VAC. By using variance against a baseline, the article shows how much risk this program will incur by the date at completion. A monthly risk burndown chart is developed to illustrate how the program burns down risk during life of the program. It indi-cates that the rate of risk burndown may very well be more rapid than the rate of accomplishment of remaining work. The article concludes that program managers would be well advised to require analysis of EVM trends to understand how much additional schedule is being added to a contract with each addition of scope as measured by the increase in BAC over time.
Dr. Roy E. Smoker, Ph.D. Colonel, USAF (ret.) is Senior Technical Director, Space Programs, at MCR Technologies, LLC. Dr. Smoker is a professional economist who has served in various capacities in the United States Air Force and now is serving as Chief Practitioner of MCR, LLC for Acquisition Management. Since September 2000, he has been an instructor in Project Cost Management, teaching on-line, in the classroom, and on site at several companies. Dr. Smoker is an active member of the Society of Cost Estimating and Analysis (SCEA), International Society of Parametric Analysts (ISPA), and Project Management Institute (PMI), and is a past president of the American Society of Military Comptrollers (Los Angeles Chapter). His papers at the 2004 ISPA Conference and the 2005 SCEA Conference received ‘Best in Track recognition. He currently serves as the Chief Parametric Practitioner for ISPA. Dr. Smoker’s military decorations include the Legion of Merit, Defense Meritorious Service Medal with one Oak Leaf Cluster, the AF Meritorious Service Medal with six Oak Leaf Clusters, the Joint Service Achievement Medal, the Humanitarian Service Medal, and the National Defense Service Medal. Dr. Smoker holds a Ph.D. in Economics from the University of Missouri and is a graduate of the Defense Acquisition University Executive Management Course.