In this lecture we will introduce the Earned-Value Management System, which conceptually links the last step of the planning and the first step of the controlling phases of a project. Let’s start with a brief sum up. In the planning phase, we’ve seen as how in the very first step we should define the scope of the project going through scope definition. Once we know what is and what is not part of our project, we can put in place two of the tools we discussed: the WBS, for activities definition, and the OBS for resource planning. These two views can be taken together with the RAM, defining who is going to do what and therefore defining the duration and the costs of activities. This means that we first define the cost control account with the cost control account definition and then we can do the project schedule and the project cost. With all this information we can define the project baseline. The project baseline is that tool that brings all this information together, creating indeed, a baseline to control the execution of the project. It represents the starting point of the earned value management system (also known as EVMS). Let’s start from our needs: what would be a good output in the controlling phase? What should we know? Well, first of all we would like to understand if we are on time or if we are ahead or behind  the schedule. Still, this is not enough, we would also like to know if we are on cost or we are over cost or around the cost. Moreover, we’ll also need to calculate somehow the final estimation, which means when and how, in terms of costs, we now plan to finish the project. In other words, we need to be able to forecast  what is going to happen in the future standing in the situation we have got now. It is a complex system, where we need to monitor many variables, such as scope, time and costs, and to gather information from many sources, to know for example the actual cost or the actual duration of the activities and how these will impact future activities. The first thing we can do, to start considering some of these variables together, is to create a time-phased budget. Said in other words, we need to know when the costs we planned are going to be used in the project. Let’s assume we have got the following  project: it has 5 activities: A, B, C, D and E, with their predecessors, duration and in this case even costs. We have already built the gantt chart which says the project lasts 8 periods. While looking at the table we can easily see how the total cost equals 210. The duration and the total costs are the first two input for the time phased budget, that sees time on the horizontal axis and costs on the vertical axes. First, we need to make a very strong assumption, which is a linear relation between time and cost within the same activity. In other words, taking activity A, which lasts 3 and cost 30, we will consider a cost per period equal to 10. This is obviously a huge assumption, but this is needed to manage this method, which is pretty complex, in a feasible way. In advanced usage of the EVMS we may remove this assumption for those activities that actually have a very different behavior than the linear one. Let’s start building the time phased budget starting from the gantt chart. The time phased budget has on the horizontal axis the time and the cumulative budget on the vertical axis. In period 1, we’ll be working only on activity A, as you can see from the gantt chart, which we said has a cost per period equal to 10. Therefore the first point of the time phased budget will be 10 in period 1. In period 2, we’ll be in the same situation, so we’ll have a second point at 20, considering the cost of the second period. Please note here that the time phased budget is a cumulative curve. So it's summing the cost period after period. The third period will have the same impact, reaching 30. The situation changes in period 4, where we’ll be working on activities B, C and D at the same time. Activity B lasts 2 and costs 30, which means having a cost per period of 15. Activity C lasts 3 and costs 60, therefore it will have a cost per period of 20 and the activity D lasts 4 with a cost of 60, having therefore a cost per period of 15. This means that in period 4, the time phased budget will need to consider three different sources of costs: 15 coming from B, 20 coming from C and 15 coming from D, for a total of 50, moving from 30 to 80. The same would happen in period 5, reaching 130. In Period 6 activity B is over, so we’ll need to consider 20 coming from C and 15 coming from D, but also 10 coming from E, which lasts 3 and has a cost of 30 having a cost per period of 10. This means that in period 6 we’ll move from 130 to 175. In period 7 we’ll have only activity D and activity E, which means a cost per period equal to 25, moving from 175 to 200. Finally, we’ll have only activity E in period 8 moving from 200 to 210. 210 is exactly the value of the planned cost of this example, which is also known as the budget at completion BAC. This simple example is showing how our project will use the resources we planned over time, also in this case there are many softwares that, with the right information, would create this for us. Once again, I would invite you to use the tool, but to pay particular attention to understand how it works, to be sure that there are no other hypotheses or options in the calculations that you are not aware of, since you’ll be using this tool to take relevant decisions on your project. The project baseline is usually an s-shaped curve, coherently with the expectations of resource usage in the various phases of the project: a low consumption in initiating and planning, a strong resource usage in the execution phase, when we use material and we are actually working on the project, and then again a less expensive phase in the closing. The time phased budget has got also different names: is known as baseline or BCWS: budgeted cost of work schedule, which we’ll see is the starting point of the controlling activities.
