Standard Deviation (σ) assesses EVM time and cost forecast stability, and is a dynamic evaluation tool for inflight projects. 3 min read.
EVM Forecast Stability
Since forecasts are made at regular periods, knowledge of predicted values between consecutive review periods is important for decision-support. Consequently, forecast stability is as equally important as forecast accuracy, and both should be evaluated when selecting a forecasting method.
Standard Deviation (σ)
A forecast is considered to be perfectly stable when the forecasted value for any period equals the previous period’s forecasted value. Stability is measured using forecast standard deviation overall review periods. Therefore, time/cost forecasting stability calculations are given using the following,
EVM Forecast Stability Research
Project performance stability research dates to the 1990s and early 2000s. The main conclusion being cumulative CPI stabilises when the project is 20% complete. Unfortunately, some studies show that stability results can not be generalised for all project types.
Unlike the accuracy metrics, the stability metrics do not require prior knowledge of the project outcome. Therefore, no prior analysis using Monte Carlo simulation is necessary. Instead, stability metrics are calculated and updated during execution, thereby providing a dynamic evaluation tool.
Microsoft Project Demonstration Project
Shown below is a Microsoft Project demonstration project, which is adequately resourced and costed. This project has a schedule duration of 9-weeks and a cost budget of $150. The delivered project and the resulting tracking information, show a final duration of 11-weeks and an actual cost of $210.
EVM Forecast Stability Results
Shown below are the time and cost standard deviation results,
EVM Forecast Stability Conclusions
The most stable time forecast method is the Earned Duration method with a performance factor equal to 1, i.e. remaining work is done according to schedule. Fortunately, this method is also the most accurate. Meaning this is the preferred method to dynamically manage time.
The most stable cost forecast method is that with a performance factor equal to the SPI(t) trend, which also happens to be the most accurate forecast method. Meaning this is the preferred method to dynamically manage cost.
In summary, time/cost forecasts need to be both accurate and stable as they predict whether current performance will lead to time/cost deviations, thereby providing an early warning signal to trigger corrective actions.
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