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TOPIC 7:
PROGRESS AND PERFORMANCE
MEASUREMENT AND
EVALUATION

Monitoring and Controlling the project

EARNED VALUE

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT 1

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT 2

Instructor: Dr. Nguyen Thi Duc Nguyen 1

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CONTENTS

1. Introduction

2. Earned value Cost/Schedule System

3. Assignments

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT 3

INTRODUCTION

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Instructor: Dr. Nguyen Thi Duc Nguyen 2

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Structure of a Project Monitoring Information System

A project monitoring system involves

• Determining what data to collect
• Determining how, when, and who will collect the data
• Analysis of the data
• Reporting current progress

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT

Project Monitoring System for Control

Information System Structure

What data are collected?
• Current status of project (schedule and cost)
• Remaining cost to compete project
• Date that project will be complete
• Potential problems to be addressed now
• Out-of-control activities requiring intervention
• Cost and/or schedule overruns and the reasons for them
• Forecast of overruns at time of project completion

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT

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Project Monitoring System-

(cont’d)

Information System Structure (cont’d)

Collecting data and analysis
• Who will collect project data?
• How will data be collected?
• When will the data be collected?
• Who will compile and analyze the data?
Reports and reporting
• Who will receive the reports?
• How will the reports be transmitted?
• When will the reports be distributed?
Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT

Project Progress Report Format

1. Progress since last report

2. Current status of project
Schedule
Cost
Scope
3. Cumulative trends
4. Problems and issues since last report
Actions and resolution of earlier problems
New variances and problems identified
5. Corrective action planned
Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT

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The Project Control Process

Control
The process of comparing actual performance
against plan to identify deviations, evaluate courses
of action, and take appropriate corrective action.

Project Control Steps

1. Setting a baseline plan.
2. Measuring progress and performance.
3. Comparing plan against actual.
4. Taking actions
Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT 9

Monitoring Time Performance

Tools used to catch negative variances from plan and
communicate project schedule status:
Tracking and baseline Gantt charts
• Show expected, actual, and trend data for event duration
performance. It is commonly referred to as a tracking Gantt chart.
Control charts
• Plot the difference in scheduled time on the critical path with the
actual point on the critical path at a given point on the project.
Milestone schedules are often used to keep more distal
stakeholders informed on the progress of a project.
Milestones are significant project events that mark major
accomplishments.

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT 10

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through Period 6

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Project Schedule Control Chart

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Disparity Among Monitoring Systems

Time-Phase Baseline Plan

Corrects the failure of most monitoring systems to
connect a project’s actual performance to its
schedule and forecast budget.
Example: Weekly report of a construction project
Planned cost of Actual cost of week Difference at the
week 2: 12.000$ 2: 14.000$ end of week 2:
2.000$
Accumulatively Accumulatively Accumulative
planned cost at actual cost at the difference at the
the end of week 2: end of week 2: end of week 2:
25.000$ 29.000$ 4.000$
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Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT

Common problems:
• Systems that measure only cost variances do not
identify resource and project cost problems associated
with falling behind or progressing ahead of schedule.
• If expenditures are lower than expected for a given period
it may be good or bad, depending on whether progress is
line with that amount of expenditure.

• If expenditures are higher than expected, this may be

acceptable if progress is sufficiently greater than planned
for that period

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THE NEED OF
EARNED
VALUE
MANAGEMENT?

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EARNED VALUE
COST/SCHEDULE SYSTEM

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Earned Value Cost/Schedule System

An integrated project management system based
on the earned value concept that uses a time-
phased budget baseline to compare actual and
planned schedule and costs.

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT 17

Developing an Integrated Cost/Schedule

System
3. Develop a time-phased
1. Define the work using a WBS.
budget using work packages
a. Scope included in an activity.
b. Work packages Accumulate budgets (PV).

c. Deliverables 4. At the work package level,

collect the actual costs for
d. Organization units the work performed (AC).
e. Resources 5. Multiply percent complete
f. Budgets for each work package times original budget (EV).`
2. Develop work and resource 6. Compute the schedule
schedules. variance (EV-PV) and the
cost variance (EV-AC).
a. Schedule resources to activities
b. Time-phase work packages into
a network
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Project Management information System

Overview

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Development of Project Baseline

Purposes of a Baseline (PV)

• To measure and report progress
• To estimate cash flow
Rules in Assigning Costs to the Baseline
• Costs are placed (time-phased) in the baseline exactly as managers
expected them to be “earned.”
• Percent complete is the workhorse most commonly used. Someone
familiar with each task estimates what percent of the task has been
completed or how much of the task remains.
What Costs Are Included in Baselines?
• Baseline is the sum of the cost accounts and each cost account is the
sum of the work packages in the cost account.
• Three direct costs are typically included in baselines—labor,
equipment, and materials.
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Methods of Variance Analysis

Comparing earned value with

• The expected schedule value
• The actual costs
Assessing current status of a project requires three data elements
• Planned cost of the work scheduled (PV)
• Budgeted cost of the work completed (EV)
• Actual cost of the work completed (AC)
Computing schedule variance (SV) and cost variance (CV)
• A positive variance indicates a desirable condition, while a
negative variance suggests problems or changes that have
taken place.
Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT

Variances
Cost variance (CV) = EV − AC
• Tells us if the work accomplished costs more or less than was
planned at any point over the life of the project.
Schedule variance (SV) = EV − PV
• Presents an overall assessment of all work packages in the
project scheduled to date.
• Contains no critical path information.
• Measures progress in dollars rather than time units.
Variance at completion (VAC) = BAC − EAC
• Suggests whether the costs at completion of the project will
differ from what was planned.

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Cost/Schedule Graph

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT 23

Glossary of Terms
EV (Earned Value) BCWP—budgeted cost of the work performed
The percent complete times its original budget. The percent of the
original budget that has been earned by actual work completed. The
older acronym for this value was BCWP—budgeted cost of the work
performed.
PV (Planned Value) (BCWS—budgeted cost of the work scheduled)
The 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).
AC (Actual Cost) ACWP—actual cost of the work performed
The actual cost of the work completed. The sum of the costs incurred in
accomplishing work. (ACWP—actual cost of the work performed).

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Glossary of Terms

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

SV (Schedule Variance)
Schedule variance is the difference between the earned value
and the baseline line to date where SV=EV-PV.

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT 25

Glossary of Terms

BAC (Budgeted cost At Completion)

The total budgeted cost of the baseline or project cost accounts.
ETC (Estimate To Complete)
Estimated cost to complete remaining work
ETC = (BAC-EV)/CPI = ETCf
EAC (Estimated costs At Completion)
Estimated costs at completion. Includes costs to-date plus revised
estimated costs for the work remaining.
EAC = ETC + AC

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Glossary of Terms

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Glossary of Terms
CPI
1,10
Integrating SPI and CPI
CPI (Cost Schedule problems On schedule
Performance Index) 1,05 Week 4 and on budget
(0.84,1.01) Week 1
Measures cost efficiency of (1.01, 1.01)
the work accomplished to 1,00
date
0,95
Budget
CPI = EV/AC Schedule and problems
SPI (Schedule 0,90 budget problems
Performance Index) 0,85
Measures scheduling Week 2
efficiency to date 0,80 (1.05, 0.85)
Week 3
SPI = EV/PV 0,75
(0.79,0.79)
0,75 0,80 0,85 0,90 0,95 1,00 1,05 1,10
SPI
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Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT

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Glossary of Terms

ETCe
EACe

0 SD n1 n2
PV ETCf BAC
VACf
EV EACf
AC
VACe

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT 29

Glossary of Terms

VAC
Cost variance at completion (BAC-EACe), where EACe is derived by
estimators in the field.

Or, alternatively, cost variance at completion (BAC-EACf), where EACf is

derived from a formula using actual and earned value costs.
VAC indicates expected actual over-or underrun cost at completion.

VAC Cost variance at completion. VAC indicates expected actual

over- or underrun cost at completion.

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Indexes to Monitor Progress

Project Percent Complete Indexes

Indicates how much of the work accomplished represents of

the total budgeted (BAC) and actual (AC) dollars to date.

-Percent complete index budgeted costs (PCIB) = EV/BAC

-Percent complete index actual costs (PCIC) = AC/EAC

-Management reserve index (MRI) = CV/MR

Is popular in the construction industry
Reflects the amount of management reserves that has
been absorbed by cost overruns.
Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT
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Interpretation of Indexes

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT
1. TABLE 13.3 3

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Additional Earned Value Rules

1. Rules applied to short-duration activities and/or small-cost activities
- 0/100 rule
Assumes 100% of the budget is earned when the work package is completed.
- 50/50 rule
Allows 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.
1. Rule used gates before the total budgeted value of an activity can be claimed
- Percent complete with weighted monitoring gates
Uses subjective estimated percent complete in combination with hard, tangible
monitoring points.

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT
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Forecasting Final Project Cost

Two methods used to revise estimates of future project costs

- Revised estimated cost at completion (EACre)

Allows experts in the field to change original baseline
durations and costs because new information tells them
the original estimates are not accurate.

- Forecasted total cost at completion (EACf)

Uses the actual costs to date plus an efficiency index
(CPI=EV/AC) applied to the remaining project work.

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Forecasting Models: EACre and EACf

1.

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Another Forecasting Index

1.

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Glossary of Terms

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Other Control Issues

- Technical performance measurement is as important as

measuring schedule and cost performance.

- Scope creep causes problems because the “minor

refinements” eventually build to be major scope changes.

- Baseline changes should be allowed only if it is clear that

the project will fail without the change, the project will be
improved significantly with the change, or the customer
wants it and will pay for it.

- Data acquisition is time consuming and costly.

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT
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Scope Changes to a Baseline

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Key Terms

• Control chart
• Revised estimated cost at completion
• Cost performance index (CPI)
(EACre)
• Cost variance (CV)
• Schedule variance (SV)
• Earned value (EV)
• Scheduling performance index (SPI)
• Earned value management (EVM)
• Scope creep
• Forecasted total cost at completion
(EACf) • To complete performance index
• Management reserve index (MRI) (TCPI)
• Percent complete index actual • Tracking Gantt
costs (PCIC)
• Variance at completion (VAC)
• Percent complete index budgeted
costs (PCIB)

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EXAMPLES

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Earned Value Example

Suppose that work on a project task was expected to cost $1500 to

complete the task and the workers were originally scheduled to
have finished today. As of today, however, the workers have
actually expended $1350, and our best estimate is that they are
about 2/3 finished.
Evaluate the progress of project task by EV, PV, AC, CV, SV, CPI,
SPI, BAC, ETC, EAC, VAC

Project : 1000 m, total cost: 200 000 USD.

Plan: 25m/day, 200USD/m
If the 18th ,Actual: finish: 400 m, actual cost: 80 000 USD.
Evaluate project progress at the 18th

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Project : 1000 m, total cost: 200 000 USD.

Plan: 25m/day, 200USD/m
If the 18th ,Actual: finish: 400 m, actual cost: 80 000 USD.
Evaluate project progress at the 18th
1. BCWS =PV (Planned Value) (BCWS—budgeted cost of the work scheduled)
2. ACWP= AC (Actual Cost) ACWP— actual cost of the work performed
3. BCWP= EV (Earned Value) BCWP—budgeted cost of the work performed
4. SV = BCWP-BCWS
SV>0: ahead schedule
SV=0: on schedule
SV<0: behind schedule
5. CV = BCWP-ACWP
CV>0: cost under run
CV=0: on cost
CV<0: cost over run
6. AV = BCWS-ACWP
AV>0: budgeted cost of the work scheduled > actual cost of the work performed
AV=0: budgeted cost of the work scheduled = actual cost of the work performed
AV<0: budgeted cost of the work scheduled < actual cost of the work performed
7. SPI = BCWP/BCWS
8. CPI = BCWP/ACWP
9. FCTC (Forecast cost to complete project)= (BCAC-BCWP)/CPI; BCAC: Budgeted cost at
completion
10. FCAC (Forecast cost at Completion) = ACWP+FCTC 43
Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT

Developing a Status Report: A Hypothetical

Example
Assumptions

- Each cost account has only one work package, and each
cost account will be represented as an activity on the
network.

- The project network early start times will serve as the

basis for assigning the baseline values.

- From the moment work on an activity task begins, some

actual costs will be incurred each period until the activity is
completed.
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Work Breakdown Structure with Cost

Accounts

FIGURE 13.6
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Digital Camera Prototype Project

Baseline Gantt Chart

FIGURE 13.7

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Digital Camera Prototype Project

Baseline Budget ($000)

FIGURE 13.8

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Digital Camera Prototype Status

Reports: Periods 1–3

TABLE 13.2
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Digital Camera Prototype Status

Reports: Periods 4–5

TABLE 13.2 (Continued)

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Digital Camera Prototype Status

Reports: Periods 6–7

TABLE 13.2 (Continued)

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Digital Camera Prototype Summary

Graph ($000)

FIGURE 13.9

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Digital Camera Project-Tracking Gantt Chart Showing Status—

through Period 7

FIGURE 13.10

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Project Rollup End Period 7 ($000)

FIGURE 13.11

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Indexes Periods 1–7

Cost performance index (CPI)=

EV/AC= 160/230 = .696, or .70

Scheduling performance index

(SPI) = EV /PV = 160/200 = . 80

FIGURE 13.12

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Project Percent Complete Indexes

Percent complete index budgeted costs

PCIB = EV/BAC = 160/320 = .50 (50%)
Percent complete index actual costs
PCIC = AC/EAC = 230/575 = .40 (40%)
Let's assume that $40 was reserved for the Digital Camera
project:
Management reserve index
MRI= CV/MR= The percentage of 140/40 = 3.50 (350%)

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT

Forecasting Final Project Cost

Total baseline budget (BAC) for the project $320
Cumulative earned value (EV) to date $160
Cumulative actual cost (AC) to date $230

Instructor: Dr. Nguyen Thi Duc Nguyen, School of Industrial Management, HCMUT

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Monthly Status Report

1. EXHIBIT 13.1
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Scope Changes to a Baseline

FIGURE 13.13

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Conference Center WiFi Project

Communication Plan

FIGURE 13.14

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