KIX2006
ENGINEERING ECONOMICS AND PROJECT MANAGEMENT
Week 12: Project Tracking and Control
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
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
• Out-of-control activities requiring intervention
• Cost and/or schedule overruns and the reasons for them
• Forecast of overruns at time of project completion
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?
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
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 (cost and duration from WBS, etc.).
2. Measuring progress and performance
(Qualitative/Quantitative/EV).
3. Comparing plan against actual.
4. Taking action.
• Tools
– Tracking and baseline Gantt charts
– Control charts
– Milestone schedules
Baseline and Tracking Gantt Charts
Added
actual and
revised time
FIGURE 13.1
Project Schedule Control Chart
Plot the difference between scheduled and actual times FIGURE 13.2
on the critical path at a given point.
Milestones Schedules
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.
Development of an Earned Value
Cost/Schedule System
• Earned Value Management
– A methodology that combines scope, schedule and
resources measurements to assess project
performance and progress.
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.
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
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
a. Schedule resources
variance (SV=EV-PV) and
to activities the cost variance (CV=EV-
AC).
b Time-phase work packages
into a network
Project Management Information System Overview
FIGURE 13.3
Development of Project Baselines
• 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?
Labor, equipment, materials, project direct overhead
costs
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.
Methods of Variance Analysis
• Comparing Earned Value
– With the expected schedule value.
– With the actual costs.
• Assessing 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)
– Calculate schedule and cost variances
• A positive variance indicates a desirable condition,
while a negative variance suggests problems or
changes that have taken place.
Methods of Variance Analysis
• Cost Variance (CV)
Indicates if the work accomplished using labor
and materials 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.
Cost/Schedule Graph
Over budget: EV-AC=-140 FIGURE 13.4
Behind schedule: EV-PV=-100 13–21
ed-
Earned-Value Review Exercise
FIGURE 13.5
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.
Work Breakdown Structure with Cost Accounts
• Baseline development
FIGURE 13.6
Digital Camera Prototype Project Baseline Gantt Chart
FIGURE 13.7
Digital Camera Prototype Project Baseline Budget ($000)
FIGURE 13.8
Digital Camera Prototype Status Reports: Periods 1–
1-3
• Development of the Status Report
TABLE 13.2
Digital Camera Prototype Status Reports: Periods 4 -&5
TABLE 13.2 (cont’d)
Digital Camera Prototype Status Reports: Periods 6 & 7
TABLE 13.2 (cont’d)
Digital Camera Prototype Summary Graph ($000)
FIGURE 13.9
Project-- Tracking Gantt Chart
Digital Camera Project
Through Period 7
Status—
Showing Status
FIGURE 13.10
Project Rollup
End Period 7
($000)
FIGURE 13.11
Indexes to Monitor Progress
• Indexes can be considered as efficiency ratios.
• 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
• Indicate how much of the work accomplished represents of
the total budgeted (BAC) and actual (AC) dollars to date.
• PCIB = EV/BAC
• PCIC = AC/EAC
Indexes to Monitor Progress
• Performance Indexes
– Management Reserve Index (MRI)
• Reflects the amount of management reserves that has been
absorbed by cost overruns.
• MRI = CV/MR
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
Indexes
Periods 1–
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.
– 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:
– EACre
• Allows experts in the field to change original baseline
durations and costs because new information tells them
the original estimates are not accurate.
EACre = AC + ETCre
ETCre= revised estimated cost to complete remaining work
– 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 Model: EACf
The equation for this forecasting model:
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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
Scope Creep
Baseline Changes
Data Acquisition
Costs and Problems
Technical Performance Measurement
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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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Review Questions / Discussion
1. How does a Tracking Gantt chart help communicate project progress?
2. How does earned value give a clearer picture of project schedule and
cost status than a simple plan versus actual system?
3. Schedule variance (SV) is in dollars and does not directly represent
time. Why is it still useful?
4. How would a project manager use the CPI?
5. What are the differences between BAC and EAC?
6. Why is it important for project managers to resist changes to the
project baseline? Under what conditions would a project manager
make changes to a baseline? When would a project manager not allow
changes to a baseline?
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Review Questions / Discussion
1. How does a Tracking Gantt chart help communicate project progress?
The Tracking Gantt chart graphically compares the plan and actual time performance. The bar-chart layout makes it very easy to see differences
between planned schedule and actual start, finish and remaining activity times.
2. How does earned value give a clearer picture of project schedule and cost status than a simple plan versus actual system?
Earned value gives a clearer picture than a simple plan versus actual system because the earned value system includes the time variable in
measuring progress. Plan versus actual can lead to false conclusions. Earned value measures what work was accomplished for the money
spent.
3. Schedule variance (SV) is in dollars and does not directly represent time. Why is it still useful?
SV gives a project view of how well all of the scheduled activities are meeting planned dates. Research shows that after twenty percent of a
large project is complete, SV is a relatively good indicator of schedule performance (even though it is in dollars or labor hours).
4. How would a project manager use the CPI?
The cost performance index (EV/AC) is a popular index. An index of .60 indicates that 60 cents of work has been completed for each actual
dollar spent. This would suggest to the project manager that the project will be over budget or big savings in remaining work will be needed to
bring the project in on budget.
5. What are the differences between BAC and EAC?
BAC is the planned budget at completion. EAC is the estimate at completion. EAC can be calculated two ways. First is simply by formula,
which is used in software programs; the formula applies a performance ratio from past work on the project to the remaining work for an EAC. A
second method uses new cost estimates that have been made by project participants concerning specific work packages; these new estimates
are then factored into the EAC.
6. Why is it important for project managers to resist changes to the project baseline? Under what conditions would a project
manager make changes to a baseline? When would a project manager not allow changes to a baseline?
The usefulness and integrity of the baseline, as a mechanism for monitoring progress and tracing back to the problem, can be eroded by
constant changing of the baseline. Therefore, changes in baselines should be limited to major scope changes—for example, when the project
will fail or the change represents a significant improvement of the project. Customers can request scope changes. Internally scope changes can
come from project personnel—e.g., significant design changes to improve a product. Natural disasters can force a baseline change. Sometimes
the complete elimination of a cost account can result in a baseline change. Don’t change for small changes such as price and planning errors.
Changes to “improve performance” should not change a baseline. Changes should not occur after a work package or cost account is complete.
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