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PM592 Week 6 Lecture

PM592 Week 6 Lecture

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Published by Huyen Bui
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592 lecture

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Published by: Huyen Bui on Jul 24, 2013
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11/21/2013

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7/11/13Proj Cost & Schedule Controlwww.devryu.net/re/DotNextLaunch.asp?courseid=8140243&userid=12817512&sessionid=9544b2b271&tabid=5jpmjjK09CxjfilQn/FPYG66LTczzFQvW1FQcLi//V6…1/7
Week 6: Cost and Schedule Management - Lecture
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ProjectControl
In Week 5, our focus was on calculating earned value performance variances and performance indexes as the primarycomponent of the project control plan. This focus on performance alerts us to how the project has progressed from the startof the project to the assessment date. Week 6 adds to the process with a focus on the time between the assessment dateand the end of the project (i.e., the immediate future). We will be forecasting an
Estimate at Completion (EAC)
, determiningthe cause of any variances, and determining plans of action to control the project. For this, it's necessary to revisit thebudget and estimates generated at the start of the project (i.e., our baselines) as we figure out exactly why the variancesare occurring and our appropriate response to them. The importance of accurate estimating and documenting assumptionsduring the planning stage now becomes evident, as deviations to the plan can be the result of either the parameters of execution differing from our plan, or of lapses in actual performance.Our decisions made at this point in time will likely require us to evaluate and adjust the project management tripleconstraints: cost, time, and scope. As we have previously discussed, these constraints help define the project and must bebalanced because they are directly related to each other. For example, if we decide to spend additional money to get theproject back on schedule (time), then cost will increase. We could also reduce the scope as well, and preserve the budget(cost). Please navigate to the following interactive tutorial which discusses the trade-offs between the three constraints infurther detail.
Managing Project Trade-Offs
This tutorial demonstrates the relationship among the triple constraints of project management: cost, time, and scope.
 
Estimate at CompletionEstimating or Forecasting the Cost at Completion (EAC):
The cost at completion is another name for an adjusted project budget. This process for adjusting the budget builds uponthe earned value calculations for a project in progress. Forecasting the total cost of the project at completion requiresmathematics, management decisions, and judgment. We can consider three possible process options/methods for theproject to continue from where we are to the finish.
1.
We have encountered variances to date but all seems back on track. We will use actual cost to date (includes anyvariance) and add the budgeted cost of the tasks that have not been started, and then add the performance adjustedcosts of tasks underway. You can think of this as a "one-time" adjustment to the project budget.
 
7/11/13Proj Cost & Schedule Controlwww.devryu.net/re/DotNextLaunch.asp?courseid=8140243&userid=12817512&sessionid=9544b2b271&tabid=5jpmjjK09CxjfilQn/FPYG66LTczzFQvW1FQcLi//V6…2/7
2.
Our experience with the project to date makes us believe it will continue to perform much as it has. Hence, we willmodify the budget for the remainder of the project using the CPI as a modifying factor. Remember the CPI is the costperformance index for the project up to this point. It is an indicator of how efficiently or inefficiently we are spendingmoney. Applying it to the remainder of the project assumes we will continue at the same rate of efficiency. This issometimes called the "trend" adjustment.
3.
Our experience with the project to date leaves us uncertain how the remainder will go. We should stop andreestimate the remainder of the project to forecast the estimate to complete it. We may also wish to evaluatewhether we should continue the project after we see the new estimate for the EAC for the project. This approach isobviously the most invasive and may require significant time reestimate the project.
Expert Says
Test your knowledge of concepts learned in this lecture.
Answer the following question by typingyour reply in the textbox. Then click "Compare Response" to find out what the professor says.View transcript hereIt should also be noted that Option 1 and 3 both require that task budgets are accounted for individually based on the taskstatus at the time of the review. Both options also apply the current task performance to the task budget for tasksunderway.Option/Method 1: EAC = ACWP (if task is complete)+ Budgeted cost (if task is not started)+ Task Budget / CPI (if task is underway)Option/Method 2: EAC = (BAC/CPI)Option/Method 3: EAC = + ACWP (if task is complete)+ re-estimate the reminder of the project (if task is not started)+ Task Budget / CPI (if task is underway)Once again, we will define the terms used for earned value management using the classic acronyms used in the text andthe PMI equivalent terms.
EV Definitions
BCWS (PV) Budgeted cost of work scheduled
the $ value of work scheduled to be complete at a given
 
7/11/13Proj Cost & Schedule Controlwww.devryu.net/re/DotNextLaunch.asp?courseid=8140243&userid=12817512&sessionid=9544b2b271&tabid=5jpmjjK09CxjfilQn/FPYG66LTczzFQvW1FQcLi//V6…3/7
point in the project. This is the planned value (PV) in PMI terminology.
BCWP (EV) Budgeted cost of work performed
the budgeted $ value of work complete at a given point inthe project, also known as earned value (EV); PMI uses EV.
ACWP (AC) Actual cost of work performed
the actual cost of work completed at a given point in theproject; actual cost (AC) in PMI terminology.
EAC Estimate at completion
a projection of the total cost of the project at completion made at someintermediate stage.
 
EAC Demonstration ProblemEarned Value Demonstration 6-1: (this is an expansion of Demonstration Problem 5-1 to include EAC)
Reference the site clearance project, used in the resource allocation demonstration in Week 4. In this project, wedeveloped the project budget and schedule as follows:
ActivityPredecessorDurationBudget
 A---6 weeks$50,400B---2 weeks$ 8,800CA1 week$ 6,800DB3 weeks$16,800EC4 weeks$13,600 Total Budget =$96,400
Schedule Gantt Chart
The line for each task shows the number of weeks needed to complete each task as well as which tasks must be done firstbefore the next task can start. Task A and B can be done at the same time at the start of the project (week 0); Task Dmust wait until Task B is complete before starting at week 2; Task C must wait until week 6 when Task A is complete;Task E cannot start until Task C is complete at week 7.

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