Phase III: Execution

Phase IV: Monitoring and

Control
Earned Value Analysis
Burns: Chapter 8: pages 10-13
Burns: Chapter 12: the entire chapter
Schwalbe: Chapter 7
 Next Student Chapter PMI:
November 15, Rm 289, 7 pm
 Speaker is Sandy Williams
 She is a former project and program manager with
U.S. West
 She will talk about her CMMI implementation
experience

 Her talk will be 45 min

 Recitation
 What does RAM stand for in the context of HR
Management?
 What was the name of the guy who categorized all
job satisfaction factors into two categories?
 What were those two categories?
 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 action.
 Tools
 Tracking and baseline Gantt charts
 Control charts
13–4
 What is a baseline?
 It makes the plan difficult to change
 It is rather like writing the plan (schedule and cost)
on the backside of Moses’ tablets
 Its an anchor point for measuring performance
against plan
 Planned cost
 Planned schedule
 Planned scope
 Baseline and Tracking Gantt Charts

FIGURE 13.1
13–6
 Project Schedule Control Chart

FIGURE 13.2
13–7
Important Concepts during Execution
 Leadership
 Communication
 Focus
 Tracking
 Questions
 Would you use a Cost Reimbursement contract in
a situation where the requirements are well known
and nonvolatile?
 Would you use a Fixed Price contract in a situation
where the user does not know exactly what he
wants?
 If the material requirements are certain, but the
time and effort entailed and requirements are
uncertain, what type of contract would you use?
 Freeze Requirements???
 What are the PROS?

 What are the CONS?

 Freeze those requirements!!
 Late-project creeping requirements are the most
common source of cost and schedule overruns
 Late-project creeping requirements are a major factor in
project cancellations
Rather than freezing, use some kind of
change control system
 Allows for some changes to happen, depending
upon contractual considerations
 Allows for the system to reject some proposed
changes
 Use of a CCB is considered a modern BEST
PRACTICE
 Forces pushing for late-project
requirements change
 Competition intros new version of competitive product
with unanticipated KILLER features
 New work is undiscovered late in the project
 A “Wouldn’t It be Great if…” scenario happens
 End-users want changes because they now know more
about their requirements than they did 18 months ago
 Developers want changes because they have a great
emotional and intellectual investment in all of the
system’s details
 Processes utilized in Phase III
of the
 Integration management:
lifecycle
 Monitor and Control Project Work
 Perform Integrated Change Control
 Scope management:
 Control Scope
 Time management:
 Control Schedule
 Cost management:
 Control cost
 Quality management:
 Perform Quality Control
 Processes utilized in Phase III,
Continued
 Communication management:
 Distribute Information
 Report Performance
 Risk management:
 Monitor and Control Risks

 Procurement management:
 Administer Procurements
Controlling Changes to the Project
Schedule
 Perform reality checks on schedules
 Allow for contingencies??
 Don’t plan for everyone to work at 100%
capacity all the time
 Hold progress meetings with stakeholders and
be clear and honest in communicating
schedule issues
 Execution
 Focus and leadership are keys to success in
execution
 Poor execution leads to losses in the business
world just as it does in sports
 Factors leading to poor Execution
 Multitasking—doing several things at once

 Procrastination (student syndrome)—putting things

off until the last minute

 Others we will discuss later

 Multitasking

A finishes

A finishes

B finishes
 Cost Control
 Project cost control includes
 monitoring cost performance
 ensuring that only appropriate project changes are
included in a revised cost baseline
 informing project stakeholders of authorized changes to
the project that will affect costs
 Earned value analysis is an important tool for cost
control
 Earned Value Analysis (EVA)
 EVA is a project performance measurement
technique that integrates scope, time, and cost
data
 Given a baseline (original plan plus approved
changes), you can determine how well the
project is meeting its goals with EVA
 You must enter actual information periodically
to use EVA. Figure 6-1 shows a sample form
for collecting information
 Glossary of Terms

EV Earned value for a task is simply the percent complete times its original budget. Stated differently,
EV is the percent of the original budget that has been earned by actual work completed.

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].

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

CV 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 is the difference between the earned value and the baseline line to date where
SV = EV – PV.

BAC Budgeted cost at completion. Total budgeted cost of the baseline or project cost accounts.

TAC The duration of the critical path

EAC Estimated cost at completion.

ETC Estimated cost to complete remaining work.

VAC Cost variance at completion. VAC indicates expected actual over- or under-run cost at completion.
13–24 TABLE 13.1
 Earned Value Analysis Terms
 Budgeted cost of work performed (BCWP), also
called earned value, is the percentage of work
actually completed multiplied by the budget for the
activity
 Budgeted cost of work scheduled (BCWS), also called
planned value, is that portion of the approved total
cost estimate planned to be spent on an activity
during a given period
 Actual cost of work performed (ACWP), also called
actual cost, are the total direct and indirect costs
incurred in accomplishing work on an activity during
a given period
 Earned Value analysis--EVA
 Earned value = Budgeted Cost of Work Performed
(BCWP)
 Planned value = Budgeted Cost of Work
Scheduled (BCWS), and
 Actual Cost = Actual Cost of Work Performed
(ACWP)
 When you complete an activity, you earn the
budgeted value of that activity
 Schedule Variance (SV)—ahead or behind
 Defined as the difference between the budgeted
cost of work performed and the budgeted cost of
work scheduled
 = BCWP – BCWS = EV - PV
 Is also equal to Earned Value (EV) minus Planned
Value (PV)
 Indicates the deviation between the work content
performed and the work content scheduled to be
performed for the control period
 Cost Variance (CV)—over or under
 Defined as the difference between the budgeted
cost of work performed and the actual cost of work
performed
 = BCWP – ACWP = EV - AC
 Is also equal to Earned Value (EV) minus Planned
Value (PV)
 A positive CV indicates a lower actual cost than
budgeted for the control period, while a negative
CV indicates a cost overrun
 Schedule Performance Index (SPI)
 Defined as the ratio BCWP/BCWS = EV/PV
 A value close to 1 indicates an activity that is on
schedule
 Values greater than 1 suggest the activity is
ahead of schedule
 Values less than 1 indicate a schedule overrun
 Cost Performance Index (CPI)
 Defined as the ratio BCWP/ACWP = EV/AC
 A value close to 1 indicates an activity that is on
budget
 Values greater than 1 suggest the activity is
below budget
 Values less than 1 indicate a budget overrun
Rules of Thumb for EVA Numbers
 Negative numbers for cost and schedule
variance indicate problems in those areas. The
project is costing more than planned or taking
longer than planned
 CPI and SPI less than 100% or 1 indicate
problems with cost or schedule
 The project is over-budget if CPI < 1
 The project is behind schedule if SPI < 1
Figure 6-2. Earned Value Calculations for a
One-Year Project After Five Months
 In the Figure above
 Budget at Completion = BAC = original budget at the
planned completion date
 Time at Completion = TAC = original completion time
 In the figure above, $100,000 in month 12
 Estimate at completion = EAC = BAC/CPI
 Estimate at completion = $100,000/.83 = $120,455
 Estimated time to complete = ETAC = TAC/SPI
 Estimated time to complete = 12/.96 = 12.55 mos.
 Why Earned Value Analysis??
 Youcan’t tell what your true cost variance is
because you don’t know where you are relative to
schedule
 Suppose you are behind schedule but also you have
spent less than what the schedule has called for. Are
you really under budget?
 Updating cost estimates
 BAC = Budget at completion = total budget of the
project activities based on the original project plan
 Assuming the original budget (the BAC) was
$200,000 and the CPI is 1.12, what is EAC?
 EAC = BAC / CPI = $200,000 / 1.12
 $178,571
 Updating schedule estimates
 TAC = Time at completion = total time required to
complete the schedule, as determined by the CP
 ETAC = Estimated (revised) time to complete
 Assuming the TAC was 12 months and the SPI =
.77, what is the ETAC?
 ETAC = TAC / SPI = 12 / .77
 15.6 months
 Project will be delayed almost 4 months
 Updating, Cont’d
 WR = Work Remaining = budgeted cost of the
work not yet accomplished by the end of the
reporting period
 WR = BAC – BCWP = BAC - EV
 EAC = updated estimate of the total project cost =
BAC/CPI = BAC/CI
 ETAC = updated estimate of the total project
duration = TAC/SPI = TAC/SI
 Figure 6-3. Earned Value Chart for
Project After Five Months
EAC

100,000 BAC

90,000

80,000

70,000

60,000 BCWS
50,000
$

ACWP
40,000

30,000
BWCP
20,000

10,000

-
1 2 3 4 5 6 7 8 9 10 11 12
Month

BCWS or Cumulative Plan ACWP or Cumulative Actual BCWP or Cumulative EV

 Cost/Schedule Graph

FIGURE 13.4
13–43
 Earned-Value Review Exercise

FIGURE 13.5
13–44
 Using Software to Assist in Cost
Management
 Spreadsheets are a common tool for resource
planning, cost estimating, cost budgeting, and cost
control
 Many companies use more sophisticated and
centralized financial applications software for cost
information
 Project management software has many cost-
related features
 Using MS Project for Execution &
Control
 First,make certain your project plan is complete
and final
 Second, save it as a baseline
 Begin entering actual information
 Actual costs
 Percentage complete
 Tracking: MS Project will track—
 Task start dates
 Task finish dates
 Task duration
 Task cost work
 Percentage of task that is complete
 Getting Earned Value Data Visible
 You can go to view and replace the entry table
with the Earned Value table
 Or, you can enter the earned value columns into
your existing table through the Insert Column
facility.
 Thecolumns are BCWP, BCWS, ACWP, CV, SC, SPI,
CPI, etc.
You can also request the Tracking Gantt Chart off the
LHS side of MS Project
Entering actual start & Finish dates for
a task
 On the view bar, click Gantt chart
 In the task name field select the task to update
 On the Tools menu, point to tracking and click
Update Tasks
 Under Actual, type the dates in the Start and
Finish boxes
 Indicating progress on a task as a
percentage
 In the task name field of the Gantt Chart
 Double click—this brings up the task information
sheet
 Select the general tab
 In the percentage complete box type a whole
number between 0 and 100
 Entering actual costs for a resource
assignment
 On the Tools menu, click options, then click the
calculation tab
 Clear the Actual costs are always calculated by MS
Project check box
 Click OK
 On the view bar, click Task usage
 On the view menu, point to the Table, and click Tracking
 Drag the divider bar to the right to view the Activity Cost
field
 In the activity cost field, type the actual cost for the
assignment for which you want to update costs
The End…..
Earned Value analysis--EV An Example
= Budgeted Cost of Work
Performed (BCWP)
Budget
 Also uses Budgeted Cost of Work
Scheduled (BCWS), and
 Actual Cost of Work Performed Overrun???

(ACWP)
 When you complete a milestone, Actual

you earn the budgeted value of that

milestone Budget

TIME
James R. Burns, Texas Tech Univeresity James R. Burns, Texas Tech Univeresity

Budgeted Cost of Work

Performed (BCWP) Cost Variance (CV)
 Defined as the monetary value of  Defined as the difference between
the work actually accomplished the budgeted cost of work
within the control period. performed and the actual cost of
work performed
ACTIVITY BCWP
 = BCWP - ACWP
1 $12,000  A positive CV indicates a lower
2 $30,000
3 $16,000 actual cost than budgeted for the
CUMULATIVE $58,.000 control period, while a negative CV
indicates a cost overrun

James R. Burns, Texas Tech Univeresity James R. Burns, Texas Tech Univeresity
 Recitation
 What are two of the four Myers/Briggs
dimensions?
 What are the other two?
 To what Myers/Briggs category do most IT
professionals belong?
 Who is the motivation guru?
 What are his five levels?
 Who gave us Theory X and Theory Y??