Chapter 13 Progress and Performance Measurement and Evaluation

Chapter 13 Progress and Performance Measurement and Evaluation Irwin/Mc. Graw-Hill ©The Mc. Graw-Hill Companies, 2000

Earned Value Glossary of Terms AC The actual cost of the work completed. The sum of the costs incurred in accomplishing work. (Also called ACWP— actual cost of the work performed). BAC Budgeted cost at completion. The total budgeted cost of the baseline or project cost accounts. BCWP Older acronym for EV: Budgeted cost of the work performed. The earned value or original budgeted cost for work actually completed. BCWS Budgeted cost of the work scheduled. A cost estimate of the resources scheduled in a time-phased cumulative baseline. CV costs BCWP - ACWP). Cost variance - the difference between the earned value and the actual for the work completed to date where CV=EV-AC. (or EAC Estimated costs at completion. Includes cost to-date plus revised estimated costs for the work remaining. ETC Estimate to complete EV 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

Glossary of Terms (Continued) FAC Computed forecasted costs at completion PV Planned Value - 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 (or old: BCWS). SV Schedule variance - the difference between the earned value and the baseline to date where SV=EV-PV. (or old: BCWP - BCWS). 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. (or BAC - FAC). Indicates expected actual over or underun at completion

Project Management System Overview Earned Value Process FIGURE 13. 3

Project Monitoring and Control

Project Control Monitoring System Data Needed • Current status of project • Cost to compete project • Date of Completion • Potential problems • Out-of-control activities

Project Monitoring System… (cont’d) Data Collection • Who • How • When Data Analysis –Reports and reporting • Receiver

Project Progress Report • Progress since last report • Current status of project – • Cumulative trends • Problems and issues since last report • Corrective action planned

Project Control Process • Control Definition – Process of comparing actual performance against the original plan to identify:

Project Control Process (Cont’d) • Project Control Steps 1. Set a baseline plan 2. Measure progress and performance 3. Compare plan against actual • 4.

Time Performance • Tools 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. –Control charts • Plot the difference in scheduled time on the critical path with the actual point on the critical path.

Baseline and Tracking Gantt Charts FIGURE 13. 1

Project Schedule Control Chart FIGURE 13. 2

Earned Value (EV) System

Project Monitoring System (Earned Value - EV) • • • Current status of project (Schedule and cost) Cost to complete Project Completion Potential problems addressed now Causes for cost / schedule overruns Value for dollars spent

Earned Value (EV) • 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.

Earned Value (EV) • Depends on data from – WBS • Time phased budget ofr each task • New estimates of percent complete (realistic)

Earned Value (EV) • % of original budget that has been earned by actual work completed – Old - BCWP – Budgeted cost of work performed – The anchor for comparing to baseline • EV Usage

Steps in an EV Control Process • Step 1: Set a baseline • Step 2: Measure progress and performance • Step 3: Comparing actual against a baseline plan • Step 4: Taking action

Project Baselines • Purposes of a Baseline (EV) (also BCWP) –A 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.

Baseline Costs • Labor • Equipment • Materials • Project direct overhead costs (DOC)

Baseline Data Relationships FIGURE 13. 4

Rules for Costs in Baseline • Percent Complete – Most common on larger projects • Will use for this course • 0 -100 Percent Rule – Credit earned after work is complete • Ie: 100% of budget earned at completion – Used on projects with very short duration • 50/50 Rule – 50% of money up front – 50% of money at completion • Used on projects with short duration and small total costs

Variance Analysis Control

Variance Analysis • Earned Value Comparison • With the expected schedule value. • With the actual costs. • Assessment Status of a Project • Required data elements – Data Budgeted cost of the work scheduled (PV) – Budgeted cost of the work completed (EV) – Actual cost of the work completed (AC) • Schedule and cost variance calculation – Positive variance - a desirable condition, – Negative variance - problems

Methods of Variance Analysis • Cost Variance (CV) –Indicates if: • Work accomplished using labor and materials costs more or less than planned at any point in the project • Schedule Variance (SV) –Presents: • Overall assessment in $ of the progress of all WP’s in the project scheduled to date.

Cost Variance • Difference between earned value and actual costs – ACWP – Actual cost of work performed Anchor • CV = EV – AC

Schedule Variance • Difference between earned value to date and the baseline schedule (BCWS) – BCWS – Budgeted cost of work scheduled • SV = EV - PV Anchor

New Cost/Schedule Graph FIGURE 13. 5

Old Cost/Schedule Graph 13 -7

Old vs New Cost Schedule Graph New Old

New Earned Value Review Make Sure to Understand FIGURE 13. 6

Old Earned-Value Review 13 -8

Status Report: A Hypothetical Example • Assumptions to the hypothetical example – 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. – Baseline value will be assigned linearly, unless stated differently. – From the moment work on an activity begins, some actual costs will be incurred each period until the activity is completed.

Work Breakdown Structure and Cost Accounts FIGURE 13. 7

5 steps - A Must For: Integration of Cost/Schedule System Step 1: Define work with WBS • • • Scope Work packages Deliverables • Budgets for each work package

5 steps - A Must For: Integration of Cost/Schedule System Step 2: Develop work and resource schedules – Time phased work packages into network – Schedule resources to activities

5 steps - A Must For: Integration of Cost/Schedule System Step 3: Develop a time phased budget – Use Work Packages – Accumulation of these values becomes a baseline PV (or BCWS) – Collect budgeted cost for work accomplished • E V (or BCWP)

5 steps - A Must For: Integration of Cost/Schedule System • Step 4: Collect actual costs at WP level – Costs that are actually experienced • Actual cost of work performed AC (or ACWP) – Collect earned value or budgeted cost of work performed • (EV)

5 steps - A Must For: Integration of Cost/Schedule System Step 5: Compute SC and CV – SV = EV – PV – CV = EV – AC – Prepare Reports for management • Project roll-ups – Organization – Deliverable – Actual time performance of project checked against the network schedule

Baseline • Anchor • Set in concrete • Building blocks – Placement of work packages into network • Establishes start times of work packages • Time phases budgets from work package estimates

Baseline Budget • Budgeted cost of work performed – EV or BCWP – Sum of all cost accounts • Sum of all work packages for the cost account • Three typical costs – Materials – Labor and Equipment – Level of Effort (LOE)

Level of Effort • LOE – Administrative support – Computer support – Legal support – Public Relations • Often 10 to 20% of a project

Digital Camera Prototype Project Baseline Gantt Chart FIGURE 13. 8

Digital Camera Prototype Project Baseline FIGURE 13. 9

Digital Camera Prototype Status Reports: Periods 1– 3 TABLE 13. 2

Digital Camera Prototype Status Reports: Periods 4– 6 TABLE 13. 2 (cont’d)

Digital Camera Prototype Status Reports: Period 7 TABLE 13. 2 (cont’d)

Digital Camera Prototype Summary Graph (in $000) FIGURE 13. 10

Digital Camera Project Tracking Gantt Chart Showing Status—Through Period 7 FIGURE 13. 11

Digital Camera Project Rollup at End Period 7 (000) FIGURE 13. 12

Indexes to Monitor Progress • Performance Indexes –Cost Performance Index (CPI) • Measures the cost efficiency of work accomplished to date. • CPI = EV/AC –Scheduling Performance Index (SPI) • Measures scheduling efficiency • SPI = EV/PV –Percent Complete Indexes • Indicates how much of the work accomplished

Interpretation of Indexes TABLE 13. 3

Indexes Periods 1– 7 FIGURE 13. 13

13 -9 Hypothetical Work Organizational Structure

Example

13 -10 Example Project Network Plan Total Cost = 20 Total Cost = 30 Total Cost = 16 Total Cost = 24 Total Cost = 6 Total Cost = 9 Total Cost = 16 Total Cost = 18

Example Project Baseline Budget PV

Example Project Baseline Budget PV EV EV

Example Project Baseline Budget PV

Example Project Baseline Budget PV

Example Project Baseline Budget PV

Example Project Baseline Budget PV

Example Project Baseline Budget PV

Example Project Baseline Budget PV

Example Project Baseline Budget PV

Example Project Baseline Budget PV PV

Example Project Baseline Budget PV Estimated Cost at Completion PV PV

Example Project Now work has begun, are at the end of time period 4

Example Project Status Report at The End of Time Period 4 AC PV EV 13 -12

Example Project Status Report at The End of Time Period 4 AC PV EV 13 -12

Example Project Status Report at The End of Time Period 4 AC PV EV 13 -12

Example Project Status Report at The End of Time Period 4 AC PV EV 13 -12

Example Project Status Report at The End of Time Period 4 AC PV EV 13 -12

Example Project Status Report at The End of Time Period 4 AC PV EV EV 13 -12

Example Project Status Report at The End of Time Period 4 AC PV EV 13 -12

Example Project Status Report at The End of Time Period 4 AC PV EV 13 -12

Example Project Status Report at The End of Time Period 4 AC PV AC EV EV 13 -12

Example Project Status Report at The End of Time Period 4 AC PV AC AC EV 13 -12

Example Project Status Report at The End of Time Period 4 AC PV EV AC AC EV (CV= EV – AC) 13 -12

Example Project Status Report at The End of Time Period 4 AC PV EV AC AC EV EV (CV= EV – AC) (SV= EV – PV) 13 -12

Example Project Baseline Budget PV EV EV

Example Project Cost/Schedule Graph PV EV AC 13 -13

Example Project Cost Summary Report EV AC PV 13 -14

Example Project Rollup by Deliverables, Organization, and Cost Account PV EV AC PV EV AC PV 13 -15

Scope Changes to a Baseline 13 -17

Forecasting Final Project Cost • Methods used to revise estimates of future project costs: –EACe • Allows experts in the field to change original baseline durations and costs because new information tells them the original estimates are not accurate. –EACf • Uses actual costs-to-date plus an efficiency index to project final costs in large projects where the original budget is unreliable.

Forecasting Model: EACf The equation for this forecasting model:

Scope Changes to a Baseline FIGURE 13. 14

Performance Equations • CPI – Cost performance index – CPI = EV / AC – Worth of work planned to date for each dollar actually spent » Greater than one - good • SPI – Scheduling performance index – SPI = EV / PV – Worth of work accomplished for each dollar worth of scheduled work to date » Greater than one - good

Percent Complete Index • PCI – Percent complete index – PCI-B – percent complete in terms of budget amounts – PCI-B = EV/BAC • Indicates the work accomplished represents a certain percent of the total budgeted (BAC) dollars to date. • Does not include actual costs – Actual $ spent do not guarantee project success. • Favored when there is a high level of confidence in original budget

Percent Complete Index • PCI-C – – Percent complete in terms of actual dollars spent to accomplish the work to date and the actual expected dollars for the completed project (EAC). – PCI-C = AC/EAC • Indicates percent of project completed, when viewed from the actual dollars spent to complete the work to date and the revised actual expected costs to complete the project.

Scope Creep • Minor Refinements 1 + 1 becomes 4 or greater Build to big problems

Project Cost/Schedule Systems Software • Typical Computer-Generated Status Report –Schedule variance (EV-PV) by cost account and WBS and OBS –Cost variance (EV-AC) by cost account and WBS and OBS –Indexes—cost, schedule, total percent complete, and the to complete performance index –Cumulative actual total to date (AC) –Expected costs at completion –Paid and unpaid commitments