Agile Street Smarts Series – Earned Value for Agile Projects

This blog is part of a series exploring Agile methodologies. Read the last post in the series here.

Conventional Earned Value Management (EVM) is a project management technique for measuring project performance and progress. It has the ability to combine measurements of scope, time, and costs (the Project Management Triangle) and is measured against a project baseline

• The quality of work is constrained by the project’s budget, deadlines and scope (features) and the project manager can trade between constraints.
• Changes in one constraint necessitate changes in others to compensate or quality will suffer.
• In a single integrated system, earned value management is able to provide accurate forecasts of project performance problems, which is an important contribution for project management.
• Planned Value, Earned Value and Actual Cost are the three main features of Earned Value Measurement

Earned Value Estimation in Agile has historically been challenging to measure.

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Agile metrics neither provide estimates of cost at completion of the release, nor cost metrics to support the business when they consider making decisions like changing requirements in a release.

• Pure Agile methods do not define how to manage and track costs to evaluate expected Return on Investment information
• Iteration burn-down and burn-up charts (as used in Scrum) do not provide at-a-glance project cost information.
• Traditional EVM calculations require a baseline difficult to express in an Agile framework
• The concepts of Planned Value, Earned Value and Actual Cost are derived differently in the Agile framework

Agile Earned Value Management uses the Scrum framework artifacts as inputs, uses traditional EVM calculations, and is expressed in traditional EVM metrics.

• It requires a minimal set of input parameters:
  • the actual cost of a project,
  • an estimated product backlog,
  • a release plan that provides information on the number of iterations in the release and
  • the assumed velocity.
  • All estimates can be in hours, story-points, team days or any other consistent estimate of size. The critical factor is that it must be a numerical estimate of some kind.

Earned Value (EV) against the Planned Value (PV) lies at the core of any Earned Value Management technique so how does it work in the Agile world?

• Planned Value is the value of the work planned for a certain date within a project plan.
  • In the Agile world, this translates to the sum of the estimated feature sizes for all the features up until the planned date.
• Earned Value is the value of work completed at the same date as used for PV.
  • For Agile, it is the sum of the estimated story points for the features up until the calculation date
• Actual Cost is the cost in dollars to complete a set of features.

This approach provides a measure of Earned Value using Cost Variance and Schedule Variance in a manner almost identical to the Waterfall technique.

Please feel free to reach out for a detailed example of Earned Value calculation for Agile Scrum projects

‘Till next time