Chapter Thirteen

Progress and Performance Measurement and Evaluation

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 Where We Are Now

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 Learning Objectives
1. Identify the four steps for controlling a project
2. Utilize a tracking Gantt to monitor time
performance
3. Understand and appreciate the significance of
earned value
4. Calculate and interpret cost and schedule
variance
5. Calculate and interpret performance and
percent indexes
6. Forecast final project cost
7. Identify and manage scope creep
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 Chapter Outline
13.1 Structure of a Project Monitoring Information
System
13.2 The Project Control Process
13.3 Monitoring Time Performance
13.4 Development of an Earned Value
Cost/Schedule System
13.5 Developing a Status Report: A Hypothetical
Example
13.6 Indexes to Monitor Progress
13.7 Forecasting Final Project Cost
13.8 Other Control Issues
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 Structure of a Project Monitoring
Information System

• Creating a project monitoring system involves

determining:
– What data to collect
– How, when, and who will collect the data
– How to analyze the data
– How to report current progress to management

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 Project Monitoring Information System

• 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

• Cost and/or schedule overruns and the reasons for them

• Forecast of overruns at time of project completion

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 Project Monitoring Info. 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?

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 Project Progress Report Format

• Progress since last report

• Current status of project
1. Schedule
2. Cost
3. Scope
• Cumulative trends
• Problems and issues since last report
1. Actions and resolution of earlier problems
2. New variances and problems identified
• Corrective action planned
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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 action
• Tools for Monitoring Time Performance
– Tracking Gantt chart
– Control chart
– Milestone schedules

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 Baseline and Tracking Gantt Charts

FIGURE 13.1

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 Project Schedule Control Chart

FIGURE 13.2

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 Development of an Earned Value
Cost/Schedule System
• Time-Phase Baseline Plan
– Corrects the failure of most monitoring systems to
connect a project’s actual performance to its
schedule and forecast budget.
• Systems that measure only cost variances do not identify
resource and project cost problems associated with falling
behind or progressing ahead of schedule.
• 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
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 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. [BCWP—
budgeted cost of the work performed].

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.

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.

TABLE 13.1
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Developing an Integrated Cost/Schedule System

1. Define the work using a WBS. 3. Develop a time-phased

a. Scope budget using work packages
included in an activity.
b. Work packages
Accumulate budgets (PV).
c. Deliverables
4. At the work package level,
d. Organization units collect the actual costs for
e. Resources the work performed (AC).
f. Budgets Multiply percent complete
times original budget (EV).`
2. Develop work and
resource schedules. 5. Compute the schedule
variance (EV-PV) and the
a. Schedule resources
to activities cost variance (EV-AC).
b. Time-phase work packages
into a network

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 Project Management Information System Overview

FIGURE 13.3

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 Development of Project Baselines (cont’d)
• Rules for Placing Costs in Baselines
– Costs are placed exactly as they are expected to be
“earned” in order to track them to their point of origin.
– Percent Complete Rule
• Costs are periodically assigned to a baseline as units of work
are completed over the duration of a work package.

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 Development of Project Baselines (cont’d)

• Purposes of a Baseline (PV)

– An anchor point for measuring performance
• A planned cost and expected schedule against which actual
cost and schedule are measured
• A basis for cash flows and awarding progress payments
• A summation of time-phased budgets (cost accounts as
summed work packages) along a project timeline

• What Costs Are Included in Baselines?

– Project direct overhead costs: labor, equipment,
materials

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 Methods of Variance Analysis

• Comparing Earned Value with:

– The expected schedule value
– The actual costs
• Assessing Status of a Project
– Required three data elements
• Planned cost of the work scheduled (PV)
• Budgeted cost of the work completed (EV)
• Actual cost of the work completed (AC)
– Calculate schedule and cost variances
• A positive variance indicates a desirable condition, while a
negative variance suggests problems or changes that have
taken place.

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 Methods of Variance Analysis

• Cost Variance (CV)

– Indicates if the work accomplished costs more or less
than was planned at any point in the project.
• Schedule Variance (SV)
– Presents an overall assessment in dollar terms of the
progress of all work packages in the project scheduled
to date.

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 Cost/Schedule Graph

FIGURE 13.4
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 Earned-Value Review Exercise

FIGURE 13.5

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 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 an activity 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 (cont’d)

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 Digital Camera Prototype Status Reports: Periods 6 & 7

TABLE 13.2 (cont’d)

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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 to Monitor Progress
• Performance Indexes
– Cost Performance Index (CPI) = EV/AC
• Measures the cost efficiency of work accomplished to date.
– Scheduling Performance Index (SPI) = EV/PV
• Measures scheduling efficiency to date.
– Percent Complete Indexes
• Indicate 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
– Reflects the amount of Management Reserve (MR) that has been
absorbed by cost over-runs.
– Is popular in the construction industry.
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 Interpretation of Indexes

Index Cost (CPI) Schedule (SPI)

>1.00 Under cost Ahead of schedule
=1.00 On cost On schedule
<1.00 Over cost Behind schedule

TABLE 13.3

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 Indexes
Periods 1–7

FIGURE 13.12

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 Additional Earned Value Rules
• Rules applied to short-duration activities and/or
small-cost activities
– 0/100 percent rule
• Assumes 100% of budget credit is earned at once and only
when the work is completed.
– 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.
• Ruled 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.
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 Forecasting Final Project Cost

• 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.
– Forecasting cost at completion (EACf)
• Uses actual costs-to-date plus an efficiency index to project
final costs in large projects where the original budget is
unreliable.

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 Forecasting Models: EACre and EACf

The equation for

The equation for

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 Forecasting Final Project Cost (cont’d)

• Method supplemented to the estimate at

completion (EACf) computation:
– To Complete Performance Index (TCPI)
• Measures the amount of value each remaining dollar in the
budget must earn to stay within the budget.
• A ratio less than 1.00 indicates an ability to complete the
project without using all of the remaining budget.

The equation for

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 Monthly Status Report

EXHIBIT 13.1

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Trojan Nuclear Plant Decommissioning Earned Value Status Report

EXHIBIT 13.2

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 Other Control Issues

Issues In Maintaining Control of Projects

Technical Performance Measurement

Scope Creep

Baseline Changes

Data Acquisition Costs and Problems

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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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 Key Terms
Baseline budget
Budget at completion (BAC)
Control chart
Cost performance index (CPI)
Cost variance (CV)
Earned value (EV)
Estimated Cost at Completion—Forecasted (EACf)
Estimated Cost at Completion—Revised Estimates (EACre)
Percent complete index—budget costs (PCIB)
Percent complete index—actual costs (PCIC)
Schedule performance index (SPI)
Schedule variance (SV)
Scope creep
To complete performance index (TCPI)
Tracking Gantt chart
Variance at completion (VAC)
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