CHAPTER 10

MAINTAIN PERFORMANCE MEASUREMENT BASELINE

10.1 Introduction

Maintain Performance Measurement Baseline is the process of managing changes to the project scope and maintaining the integrity of the performance measurement baseline. Figure 10-1 shows the inputs and outputs for this process.

Change in projects is inevitable. The project manager should expect that requirements will evolve, and so will the performance measurement baseline (PMB). Most projects, especially complex projects, will incorporate changes to the PMB at some point. Established rules exist within the context of earned value management (EVM) for dealing with these changes to the PMB.

10.2 Inputs

10.2.1 Project Management Plan

The project management plan defines the processes used to execute, monitor, control, and close the project. Two important elements of the project management plan are the performance measurement baseline and the integrated change control process.

10.2.2 Performance Measurement Baseline

The performance measurement baseline (PMB) is the budget against which project performance is measured. It is formed by combining the budgets assigned to control accounts, summary level planning budgets, and undistributed budgets. It equals the PBB minus the management reserve. The PMB is maintained by project management, and all changes within the PMB are approved by the project manager. Figure 10-2, from Earned Value Project Management, Fourth Edition [8], displays the PMB relative to the management reserve.

10.2.3 Change Requests

Change requests can be the result of project performance, an error in defining the scope of the project or the product, evolving requirements, a customer request, a change to a contract, a shift in the regulatory environment, or a change in the market. Changes to the PMB may occur because the existing budget or schedule is no longer realistic.

10.2.4 Integrated Change Control System

The integrated change control system is a formal process for evaluating project changes. Changes must be authorized, implemented, and communicated in a timely manner.

10.3 Description

10.3.1 Change Control Board Meetings

A change control board (CCB) is frequently used to analyze the impact of scope, schedule, cost, and other types of changes on the project and the performance measurement baseline (PMB). The only changes that are implemented are those that are approved by the CCB. On small projects, the project manager may act as the CCB.

Changes to the project or product scope impact the resources, schedule, and cost of a project. The change control process needs to account for the analysis which a scope change entails. Changes that do not impact the scope, such as changes to the schedule or the costs, still impact the PMB. The change control process needs to ensure that the integrity of the baseline is not compromised because of these changes or due to external dependencies that this change may impact.

10.3.2 Scope Change Analysis

All scope changes must be analyzed, the scope defined, and the impact on the control accounts assessed, including the need to add new control accounts or delete existing control accounts.

When new scope is added to the project, the PMB must be changed at the WBS level where the scope change will occur.

If new work is added to the control account, the new work should be placed into one or more new work packages. If an existing work package needs to be modified, it should first be closed, with the remaining budget plus the new budget placed in a new work package. In the latter case, when closing the control account, make the current budget (i.e., the cumulative-to-date planned value) equal to the earned value. This eliminates the schedule variance (i.e., no work remaining to be accomplished in the control account), but the cost variance is maintained at whatever value it has. Actual costs should not be changed for a control account that has begun and then is closed due to a scope change. Doing so maintains the historical cost variance, which contributes to the project's overall cost variance.

Often when scope changes occur, new control accounts are created. Although more rare, it is possible for the project to be de-scoped. In this case, unopened control accounts that are affected may be deleted.

At times the customer may initiate a change that needs to be incorporated into the project immediately, and the work should be planned and executed prior to negotiations on the pricing or cost for the change request. These types of customer-initiated changes are referred to as authorized but unnegotiated changes. In these circumstances, a firm commitment with regard to the price has not been agreed to by both the customer and the vendor. Typically, the customer will authorize work to begin and issue a letter with a not to exceed amount (NTE) (e.g., work is to be initiated, not to exceed $1 million) which authorizes the vendor to begin the work. After receipt of this letter, the customer and vendor enter into negotiations with respect to the cost for the requested change. In the meantime, the vendor initiates work and plans the new or revised scope that the customer has authorized. Where work can be executed immediately, the vendor initiates those efforts as well.

The portion of the authorized, but unnegotiated scope, which can begin immediately, can be distributed directly to the control account, and the PMB can be modified. However, typically, the bulk of the scope identified is for work not yet begun for downstream control accounts and work packages. In these cases, the remaining scope and associated value from the NTE letter are held in the higher level undistributed budget account.

As planning progresses to analyze the scope and associated budget, the remaining scope (or portions thereof) may be allocated to summary level planning packages. In addition, an analysis of new risks associated with the additional scope may be performed. Once risks are analyzed and risk management strategies crafted, the vendor may want to allocate a portion of the budget for management reserve to address any unforeseen risks.

Undistributed budget accounts should be resolved as quickly as possible, and the proposed scope provided in an NTE letter should be negotiated as soon as practical.

10.3.3 Cost and Schedule Rebaselining

A rebaseline equates to a major realignment of the PMB. The desired result from a rebaseline of the PMB is to improve the correlation of the planned work to the budget baseline, scope, and schedule.

The rebaseline takes one of two forms, listed below:

• Replanning involves a realignment of the remaining schedule and/or a realignment of the remaining budget to meet the original target.
• Reprogramming is a comprehensive effort to revamp the PMB. The result of this activity is an over-target baseline (OTB) or over-target schedule (OTS). An OTB includes additional budget in excess of the original budget allocation. An OTS occurs when the scheduled work and the associated budgets are time-phased beyond the original completion date.

The over target baseline is an acknowledgement that the current PMB cannot be executed within the current cost constraints. Essentially, the need for the over target baseline is an acknowledgement that the current PMB cost and schedule objectives are unattainable.

The OTB is an attempt to attain the project performance objectives in the context of new cost parameters. However, unless the causes for the cost variances are identified and rectified, the OTB will not be effective. All parties should focus on the conditions that led to the cost variances and agree on the proper corrective actions to take. In some instances, this may be recognition that the original cost objectives were unrealistic. For example, perhaps the original estimates did not account for the risk component of the estimate.

The over target schedule (OTS) acknowledges that the current schedule is unattainable and cannot be executed within the time frames required.

The OTS is an attempt to attain the project performance objectives in the context of new schedule parameters. However, unless the causes for the schedule variances are identified and rectified, the OTS will not be effective. All parties should focus on the conditions that led to the schedule variances and agree on the proper corrective actions to take. In some instances, this may be recognition that the original schedule objectives were unrealistic.

10.4 Outputs

10.4.1 Performance Measurement Baseline Updates

The result of the previous actions described in Section 10.3 is a new PMB. Once the rebaseline is completed, it needs to be formally accepted.

10.4.2 Project Management Plan Updates

When scope is added or deleted, the WBS and WBS dictionary need to be updated to reflect the change in scope. The risk register, cost management plan, and scope management plan may need to be examined and updated accordingly.

10.4.3 Change Request Status Updates

Changes that are approved are implemented and the corresponding project management plan components, PMB, and project documents are updated. Changes that are deferred or not approved are recorded in the change log along with the reason for the decision. Figure 10-3 displays a change log to record key information about the change request that affects the baseline.

10.5 Considerations

Baseline changes occur and need to be dealt with in a timely manner in order to make EVM effective over the span of the entire project. The goal is to maintain the integrity of the performance measurement baseline (PMB) so that measurements are meaningful. Changes to the PMB will cause changes to some unopened control accounts.

Work scope and budget, if moved from one control account to another, are always moved together. Budget must never be transferred simply to eliminate variances.

The cumulative PV can not be changed without changes to the scope and corresponding budget. Cumulative AC or EV cannot be changed either, except to correct prior errors.

When new scope is added, consider whether additional management or contingency reserves need to be added to the existing management or contingency reserves. How these reserves are treated relative to the PMB is addressed in Chapter 8.

10.6 Threaded Example for Bicycle Project

A customer-initiated and approved change request (see Figure 10-4) is received for the bicycle project.
The impact is to one control account that has not been opened and work has not begun.

The change affects the first branch of the WBS at 1.1.4 (seat). The customer has requested that the material for the seat be changed from a polyester fabric to leather. The original schedule is shown in Figure 10-5. This change results in an estimated $600 increased cost and an estimated 2-week schedule delay (see Figure 10-6). The PMB will need to be revised.

The existing budget for the new seat material acquisition work package is increased by $600 (the estimated increase due to the change in material cost). The leather material is estimated to cost an additional $600. With the change to leather material, the new budget for the construct seat control account is $5,000 (see Figure 10-7), and the time to acquire the leather material will take 2 weeks longer than the original baseline schedule. The customer was apprised of the schedule and cost impact, and agreed to the delay and increased cost.

All other work packages and control accounts are unaffected by this change request, aside from the impact of the schedule delay on downstream control accounts.

10.7 Summary

This chapter provides detailed information with regard to the reasons why a baseline may change, the process for dealing with changes, and the project outputs once the changes take place. It is essential that the integrity of the performance measurement baseline be maintained in order to track project performance in a consistent manner.