Ch. 13

Integration of Cost/Schedule Table

1) Define the work using the WBS 2) Develop Work and Resource Schedule 3) Develop a Time-Phased Budget using work packages included in activity 4) At the work package level compile the actual costs for the work performed 5) Compute the Schedule Variance and Cost Variance: (SV=EV-PV) & (CV=EV-AC) -The reports should also include project rollups by organization unit and deliverables. In addition, actual time performance should be checked against the project network schedule.

Monitoring Time Performance

A major goal of progress reporting is to catch any negative variances from plan as early as possible to determine if corrective action is necessary. Fortunately, monitoring schedule performance is relatively easy. The project network schedule, derived from the WBS/OBS, serves as the baseline to compare against actual performance. -Gantt Chart = most favored

Project Monitoring System

A project monitoring system involves determining what data to collect; how, when, and who will collect the data; analysis of the data; and reporting current progress

To calculate the total estimated total cost at completion of the project:

AC + ETC -ETC or EAC

AC

Actual cost of the work completed. The sum of the costs incurred in accomplishing work [ACWP—actual cost of the work performed].

EACre

Allows experts in the field to change original baseline durations and costs because new information tells them the original estimates are not accurate. -Almost always used on smaller projects EACre = AC + ETCre -Where: EACre = revised estimated cost at completion. AC = cumulative actual cost of work completed to date. ETCre = revised estimated cost to complete remaining work.

50/50 Rule

Allows for 50% of the value of the work package budget to be earned when it is started and 50% to be earned when the package is completed. -Popular to be used with projects of short duration and little cost

VACf

BAC-EAC

BAC

Budgeted cost at completion. The total budgeted cost of the baseline or project cost accounts. -BAC will either be given or it can be found by adding all the costs or by looking at the total cumulative PV, ex: 65

Method for Measuring Accomplishments

Centers on two key computations: 1) Comparing earned value with the expected schedule value. 2) Comparing earned value with the actual costs.

Percent Complete with Weighted Monitoring Gate Rule

Combines subjective estimated percent complete with results at tangible monitoring points, overly optimistic estimates can be caught earlier in the project

Project Control Process

Control is the process of comparing actual performance against plan to identify deviations, evaluate possible alternative courses of actions, and take appropriate corrective action. Setting a baseline plan.: Derived from cost and duration info found in the WBS Measuring progress and performance.: Quantitative Comparing plan against actual. Taking action.

CPI formula

Cost efficiency of the work completed to date: CPI=EV/AC -The answer is a % of $1 -For every $1 spent on the project, the CPI is how much work has been completed as a ratio of to that dollar .7:1, etc.

VAC

Cost variance at completion. VAC indicates expected actual over- or underrun cost at completion. -Variance at Completion

CV

Cost variance is the difference between the earned value and the actual costs for the work completed to date where CV = EV − AC.

3 Data Elements Required to Assess Current Status:

EV, AC, PV

Earned Value (EV)

Earned value is necessary to provide a realistic estimate of performance against a time-phased budget. The physical work accomplished plus the authorized budget for this work. Previously this was called the budgeted cost of work performed (BCWP). (EV) is defined as the budgeted cost of the work performed. EV is the percent of the original budget that has been earned by actual work completed. -Is simply a project % complete X its original budget, -Older Acronym: BCWP

EAC

Estimated cost at completion. -For a flawed estimation use EAC as: EAC = AC + Bottom-up ETC -For a good estimation: EAC =BAC/Cumulative CPI

ETC

Estimated cost to complete remaining work. -ETC=(BAC-EV)/CPI

Indexes

Indexes are typically used at the cost account level and above. In practice, the database is also used to develop indexes that allow the project manager and customer to view progress from several angles. An index of 1.00 (100 percent) indicates progress is as planned. An index greater than 1.00 shows progress is better than expected.

Management Reserve Index (MRI)

Management Reserve index MRI = CV/MR = The percentage of 140/40 = 3.50 (350%!) Many managers assess cost overruns in terms of Management Reserve rather than simply cost variance since it reflects how much one can afford to spend on the project.

3 Work Package Conditions:

Not yet started. Finished. In-process or partially complete.

0/100 Rule

Only used for work packages having short durations

PCIB: Percent complete index budgeted costs

PCIB = EV/BAC = 160/320 = .50 (50%) =50% of the work accomplished of the total budget (BAC) -Favored when there is a high confidence in budget estimates -Does not include costs INCURRED

PCIC: Percent complete index actual costs

PCIC = AC/EAC = 230/575 = .40 (40%) Some managers favor this index because it contains actual and revised estimates that include newer, more complete information.

Project Percent Complete Indexes

Percent complete index budgeted costs: The implications underlying use of these indexes are that conditions will not change, no improvement or action will be taken, and the information in the database is accurate. PCIB: Favored when there is a high level of confidence in estimates PCIC: Favored because it includes re-estimates with actual and revised numbers = more complete information MRI: Favored by Construction Industry

How to Plot

Plot the cumulative actual costs to date (AC) with the earned value budgeted costs to date (EV) are plotted against the (PV) -Calculate CV: EV-AC -Calculate SV: EV-PV

Index Schedules vs. Absolute Values of SV/CV

Practitioners sometimes prefer to use schedule and cost indexes over the absolute values of SV and CV, because indexes can be considered efficiency ratios.

Schedule variance

Presents an overall assessment of all work packages in the project scheduled to date. Contains no Critical Path information, critical and non-critical activities are combined in this calculation. -SV = EV - PV

Status Reports

Reports that describe where a project stands at a specific point in time. -Should take place every 1-4wks

SPI

SPI = EV/PV

SPI Formula (Scheduling Performance Index)

SPI= EV/PV ANYTHING LESS THAN ZERO IS BAD -Measures schedule performance/efficiency

SV

Schedule variance is the difference between the earned value and the baseline line to date where SV = EV − PV.

Cost Variance

Tells us if the work accomplished costs more or less than was planned at any one point -EV - AC (earned value - actual cost)

Control Chart

The Control Chart is used to monitor past project schedule performance and to estimate future schedule trends. -The control project chart is used to monitor project schedule performance and to estimate future schedule trends. The chart is used to plot the difference between the scheduled time on the critical path at the report date with the actual point on the critical path. -Several paths pointing in the same direction indicate an identifiable cause.

To Complete Performance Index (TCPI)

The calculated cost performance index that must be achieved on the remaining work in order to meet the project budget (BAC-EV)/(BAC-AC). (TCPI), which is useful as a supplement to the estimate at complete (EACf) computation. This ratio measures the amount of value each remaining dollar in the budget must earn to stay within the budget. (BAC - EV) / (BAC - AC)

Tracking Gantt chart

The most preferred method to track planned vs. actual schedule comparisons. -Shows progress against the plan with a solid bar below the original bar.

Only Accurate Method to Determine if the Project is on time:

The only accurate method for determining the true time progress of the project is to compare the project network schedule against the actual network schedule to measure if the project is on time

Planned Value of The Work Scheduled (PV)

The planned time-phased baseline of the value of the work scheduled. An approved cost estimate of the resources scheduled in a time-phased cumulative baseline [BCWS—budgeted cost of the work scheduled]. -Provides the project baseline for the project and from which the PV can be extracted

Planned Time Phased Baseline (PV)

This is the sum of the cost accounts, and each account is the sum of the work packages in that account. Three direct costs are typically included: Labor, equipment and materials. -Calculate PV as budget for given period, only take part of budget that has been completed BY that period not THROUGH it

Percent Complete Rule

This rule is the heart of any EV system: The best method for assigning costs to the baseline under this rule is to establish frequent checkpoints over the duration of the work package and assign completion percentages in dollar terms. -It is common to limit % Complete to 80-90% until the project is 100% complete

Forecasting Final Project Cost

Two methods: 1) EACre 2) EACf

EACf

Uses actual costs-to-date plus an efficiency index to project final costs in large projects where the original budget is unreliable. -EACf=ETC+AC

EACf

Uses actual costs-to-date plus an efficiency index to project final costs in large projects where the original budget is unreliable. -This method uses the actual costs to date plus an efficiency index (CPI = EV/AC) The equation for this forecasting model (EACf) is as follows: EACf = ETC + AC ETC= Work remaining/CPI => BAC − EV/ EV/AC -Where: EACf = forecasted total cost at completion. ETC = estimated cost to complete remaining work. AC = cumulative actual cost of work completed to date. CPI = cumulative cost index to date. BAC = total budget of the baseline. EV = cumulative budgeted cost of work completed to date.

EACf

Uses actual costs-to-date plus an efficiency index to project final costs in large projects where the original budget is unreliable. EACf = ETC + AC

VACf

VACf = BAC-EAC