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Instructor'S Resource Manual: Project Evaluation and Control
Instructor'S Resource Manual: Project Evaluation and Control
CHAPTER THIRTEEN
Project Evaluation and Control
To Accompany
PROJECT MANAGEMENT:
Achieving Competitive Advantage
By
Jeffrey K. Pinto
CHAPTER 13
TRANSPARENCIES
Design
10
Engineer
15
20
25
20
Install
Test
30
35
40
45
Total
Total
12
28
Cumul.
12
20
32
60
68
74
78
80
80
Cumulative Cost
($ in thousands)
80
60
40
20
10
15
20
25
30
35
40
45
60
20
10
15
20
25
30
35
40
45
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.
Design
10
Engineer
15
20
25
30
35
40
45
% Comp.
100
Install
20
Test
100
6
50
Total
12
28
Cumul.
12
20
32
60
68
74
78
80
10
Planned
Design
% Comp.
Earned Value
100
Engineer
28
100
28
Install
30
50
15
Test
14
Cumul.
Earned
Value
51
11
Cumulative Cost
($ in thousands)
80
Project Baseline
60
Earned Value
40
20
10
15
20
25
30
35
40
45
12
AC
Actual
Overspend
Cost
PV
EV
Budget
Slip
Schedule
Performed
Schedule
13
Activity
Jan
Feb
Staffing
Blueprinting
Mar
Apr
May
Jun
Jul
Plan
%C
Value
15
100
15
10
80
10
60
Prototype
Devel
Full Design
Construction
10
21
33
30
32
25
10
10
20
Transfer
Punch List
15
118
Monthly Plan
17
10
55
15
Cumulative
15
21
38
48
103
118
Monthly Actual 8
11
11
10
30
19
27
38
48
78
44
Cumulative
Actual
14
Schedule Variances
Planned Value (PV)
103
44
15
Cost Variances
Actual Cost of Work (AC)
78
44
16
4. CLIENT CONSULTATION
5. PERSONNEL
6. TECHNICAL TASKS
7. CLIENT ACCEPTANCE
9. COMMUNICATION
10.TROUBLE-SHOOTING
17
DISCUSSION QUESTIONS
1. Why is the generic four-stage control cycle useful for understanding how to
monitor and control projects?
One of the more difficult challenges of project control is finding a way to accurately
measure progress. The four-stage cycle breaks project down into specific goals that can
be measured against the project baseline. Deviations from the planned budget or time
line can be identified and corrected swiftly. The fact that it is a cycle, implying repetition
of the process, demonstrates the constant need for project monitoring and control
measures. The final step in the cycle is to recycle the process resulting in continuous
project control.
2. Why was one of the earliest project tracking devices referred to as an S-curve?
Do you see value in the desire to link budget and schedule to view project
performance?
This early device compared project time and cost graphically. The nature of project time
and costs creates an S when the points are plotted on a graph, hence the term S-curve.
There is value in linking the budget and schedule as an indicator of project performance.
Following the S-curve, managers can get a rough depiction of expected progress. They
can also see deviations of their own project from the typically expected progression.
18
4. What are the benefits and drawbacks with the use of milestone analysis as a
monitoring device?
Milestone analysis is beneficial in signaling the completion of important project stages
and in creating distinctions between work packages. This increases the teams ability to
respond to change and create logical review points. Milestones also provide periodic
goals that keep team members motivated. They represent significant accomplishments
within the larger picture of the project. It also draws the teams attention to the projects
status. Overall, the analysis provides a clear picture of project development. However,
this form of analysis only allows for reaction to problems, not foresight or prevention.
Problems are then able to compound and grow to the point of unmanageable resulting in
a significantly over budget/schedule project.
5. It has been said that Earned Value Management (EVM) came about because the
Federal Government often used Cost plus contractors with project
organizations. Cost plus contracting allows the contractor to recover full project
development costs plus accumulate profit from these contracts. Why would
requiring contractor firms to employ earned value management help the
government hold the line against project cost overruns?
Earned Value Management goes beyond reporting costs and progress. It links costs
incurred to the time and budget baseline as well as to measurable performance
milestones. By using EVM, the government is requiring that costs incurred during the
project be directly tied to performance or progress of the project. The cost of the project
19
6. What are the major advantages of using EVM as a project control mechanism?
What do you perceive are its disadvantages?
The major advantages of EVM are that it is a comprehensive approach to measuring
progress (links cost, time and completion), its use of objective criteria, and it enables
more accurate information for decision making. Disadvantages may include the time
consuming nature of analysis in large scale projects, mathematical formulas used for
efficiency do not take into account unique problems that stall the project or spike costs in
one area (which may not lead to overall poor efficiency), and a lack of information
regarding what type of corrective action may need to be taken.
20
8. The ten critical success factors have been applied in a variety of settings and
project types. Consider a project with which you were involved. Did any sub-set
of these factors emerge as clearly the most important for project success? Why?
This question requires students to give a specific answer based on their own experience
with projects. Responses will vary depending upon the project they select to respond to
with the critical success factor model.
9. Identify the following terms: PV, EV, and AC. Why are these terms important?
How do they relate to each other?
PV refers to Planned Value. This is the expected (planned) budget for all project
activities that are planned to occur within a specific time period. Planned Value is
compared with Earned Value to determine the real progress that has been made on a
project.
EV refers to Earned Value. Earned value is the budgeted cost of the work performed.
This is important in establishing the true progress of the project and in understanding the
meaning of variances from the project baseline.
AC stands for Actual Cost. These are the total costs incurred to complete project work.
10. What do the schedule performance index and budget performance index
demonstrate? How can a project manager use this information to estimate future
project performance?
The indexes compare the planned value and actual cost of the project with the earned
value (EV) measure to assess true project performance. The goal for an organization is
21
to maintain SPI and BPI of 1.0 or higher, indicating that the projects progress is ahead of
schedule. The lower the projects SPI and CPI are from 1.0, the less progress is being
made on the project and the higher the likely overruns on schedule and budget we can
anticipate.
11. Suppose the SPI is calculated as less than 1.0. Is this good news for the project or
bad news? Why?
This would probably be viewed as bad news. A performance index of less than 1.0
indicates that the project, based on current EV and PV information, is not progressing at
the planned rate. Depending upon how much less than 1.0 the SPI is, the projects
schedule could either be marginally or significantly delayed.
22
CASE STUDIES
23
reasonable projections into the future to avoid any surprises regarding how projects
are performing.
3. How would you blend hard data and managerial or behavioral information to
create a comprehensive view of the status of ongoing projects at Kimble College?
Using concepts such as earned value, coupled with softer information provided by tools
such as critical success factor analysis, will give project managers and top management a
more comprehensive assessment or how projects are performing, how effectively project
teams are functioning, and early-earning signs in cases where behavioral issues may be
poised to negatively affect the projects performance. Hard data and soft data each
serve a purpose in detailing a clear view of the projects current status as well as the
status of project team performance, which is critical to the ability to successfully
complete the project.
24
good stakeholder management; that is, keeping all the powerful project stakeholders
happy and supportive of the project.
Questions:
1. Suppose you were a consultant called into the project by the Federal Government
in 1990, when it was still seemingly viable. Given the start to the project, what
steps would you have taken to reintroduce some positive spin on the
Superconducting Supercollider?
This question asks students to think about developing stakeholder management strategies
for the project to enhance its reputation. Early warning signs were already emerging
about poor cost control and slow, expensive development. However, there was still a
window of time in which a canny project manager could have worked to reestablish
support for the project from the key funding agencies and powerful congressional
members. Students should consider steps to reengage these crucial supporters.
2. What were the warning signs of impending failure as the project progressed.
Could these signs have been foreseen and addressed or, in your opinion, was the
project simply impossible to achieve? Take a position and argue its merits.
There are several points of departure that students can adopt in answering this question.
First, the divisive nature of the competition for the location of the Superconducting
Supercollider was guaranteed to ensure that losing communities, and their federal
25
representatives, would be upset and unlikely to give the project the benefit of the doubt
downstream. Second, the way that project funding was initially doled out at a slow pace
(due to Federal budget deficit concerns) made it difficult for the project to kick off
strongly; in fact, they had to begin slowly and never were able to gain much momentum.
Third, the project also was sold on the basis of European financial support, which never
materialized. When this lack of funding became evident, it gave the projects enemies
powerful ammunition to move to kill the program.
The larger question regarding how much of these problems were foreseeable is a
debatable issue and one that can generate a lot of in-class discussion as students take one
position or the other. The ultimate goal of this component of the case is for them to
develop some guidelines for their own careers in projects, in terms of how to uncover
warning signs of project difficulties and what positive steps can be taken to address them
before they become debilitating to the project.
This is a summary question that asks students to consider the lessons to be learned from
this disaster. Most internet sites that address just the science underlying the
Superconducting Supercollider offer a mixed view of it and are supportive of the particle
26
physics science that drove its development. Federal watchdog groups, on the other hand,
view the project as a classic case of governmental waste with nothing to show for it.
27
PROBLEMS
20
30
40
50
60
70
80
Activities
12
20
10
Cumulative
12
24
44
54
62
68
70
28
Solution:
20
30
40
50
60
70
80
Activities
10
14
20
24
28
Cumulative
12
22
36
56
80
108
116
29
Solution:
The non-S shape of the curve reflects the fact that project expenditures occurred later in
the project, suggesting that the projects activities may not have followed the traditional
life cycle model for resource usage.
30
Design
Engineer
10
15
Install
Test
20
25
30
12
12
24
35
40
45
Total
Total
Monthly
Cumul.
a) Calculate the monthly budget and the monthly cumulative budgets for the
project.
b) Draw a project S-curve identifying the relationship between the projects
budget baseline and its schedule.
31
Solution:
a)
Budgeted Costs for Sample Project
Duration (in weeks)
Design
10
15
Engineer
Install
20
25
12
12
24
Test
30
35
40
45
Total
Monthly
12
24
34
12
Cumul.
11
23
47
81
93
99
103
105
Total
a. S-Curve rendering
32
Duration
Preceding Activities
5 days
none
4 days
3 days
6 days
B, C
4 days
2 days
D, E
Highlight project status on day 14 using the tracking option and assuming that all tasks to
date have been completed on time. Print the output file.
33
Solution:
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.
34
5) Using the above information, highlight the projects status on day 14 but assume that activity D has not yet begun. What
would the new tracking Gantt chart show? Print the output file.
Solution:
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.
35
6) Use the following table to calculate project schedule variance based on the units
listed below.
A
20
B
15
C
10
D
25
E
20
F
20
Value
Earned
10
10
10
20
25
25
Total
110
Value
Schedule
variance
Solution:
Schedule Variance Work Units
Planned
A
20
B
15
C
10
D
25
E
20
F
20
Total
110
Value
Earned
10
10
10
20
25
25
100
Value
Schedule
-10
-5
-5
-10
variance
36
7) Using the following data, calculate the planned and actual monthly budgets
through the end of June. Assume the project is planned for a 12-month duration
and $250,000 budget.
Activity
Jan
Feb
Staffing
Blueprinting
Prototype
Development
Mar
Apr
May
Jun
6
2
Full Design
8
3
Construction
Plan
%C
15
100
10
100
10
70
10
21
67
30
32
25
10
10
Transfer
Value
Monthly Plan
Cumulative
Monthly Actual
10
15
14
40
Cumul. Actual
37
Solution:
Activity
Jan
Feb
Staffing
Blueprinting
Prototype
Development
Mar
Apr
May
Jun
6
2
Full Design
8
3
Construction
Plan
%C
Value
15
100
15
10
100
10
10
70
10
21
67
14
30
32
25
10
10
54
Transfer
Monthly Plan
11
11
10
50
Cumulative
19
27
38
48
98
Monthly Actual
10
15
14
40
Cumul. Actual
10
25
31
45
54
94
38
Solution:
Schedule Variances
Planned Value (PV)
98
54
mos.
Cost Variances
Actual Cost of Work Performed (AC)
94
54
39
9) You are calculating the estimated time to completion for a project of 1-year
duration and a budgeted cost of $500,000. Assuming the following information,
please calculate the schedule performance index and estimated time to
completion.
Schedule Variances
Planned Value of Work Scheduled (PV)
65
58
Solution:
Schedule Performance Index (SPI) = 58/65 = .89
Estimated Time to Completion = (1/.89) x 12 months = 13.45 months, or almost 2
months behind schedule.
40
10)
Suppose, for the problem above, that your PV was 75 and your EV was
80. Recalculate the SPI and estimated time to completion for the project with this
new data.
Solution:
Schedule Performance Index (SPI) = 80/75 = 1.07
Estimated Time to Completion = (1/1.07) x 12 months = 11.25 months, or
approximately 3 weeks ahead of schedule.
41
11)Assume you have collected the following data for your project. Its budget is
$75,000 and it is expected to last 4 months. After two months, you have
calculated the following information about the project:
PV
$45,000
EV
$38,500
AC
$37,000
Calculate the SPI and CPI. Based on these values, estimate the time and budget
necessary to complete the project? How would you evaluate these findings (i.e., are they
good news or bad news?)
Solution:
SPI = EV/PV = $38,500/45,000 = .86
CPI = EV/AC = $38,500/37,000 = 1.04
Estimated Time to Completion = (1/.86) x 4 months = 4.68 months
Estimated Cost to Completion = (1/1.04) x $75,000 = $72,078
The findings are a bit of good news and a bit of bad. The good news is that your
estimated cost to completion is lower than the original budget; however, the bad news is
that the project is behind schedule and is likely to take 4.65 months to complete, rather
than the originally planned 4 months.
42
MSProject EXERCISES
Problem 13.1
Using the following data, enter the various tasks and create a Gantt chart using
MSProject. Assign the individuals responsible for each activity and once you have
completed the network, update it with the percentage complete tool. What does the
MSProject output file look like?
Activity
Duration
Predecessors
Resource
% complete
A. Research product
Tom Allen
100
B. Interview customers
Liz Watts
75
C. Design Survey
Rich Watkins
50
D. Collect Data
B, C
Gary Sims
Solution:
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.
43
Problem 13.2
Now, suppose we assign costs to each of the resources in the following amounts:
Resource
Cost
Tom Allen
$50/hour
Liz Watts
$55/hour
Rich Watkins
$18/hour
Gary Sims
$12.50/hour
a. Create the resource usage statement for the project as of the most recent update. What
are project expenses per task to date?
Solution:
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.
44
Problem 13.3
Use MSProject to create a Project Summary Report of the most recent project status.
Solution:
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.
45
Problem 13.4
Using the data shown in the network precedence table below, enter the various tasks onto
MSProject. Then select a date approximately halfway through the overall project
duration and update all tasks in the network to show current status. You may assume that
all tasks in the first half of the project are now 100% completed. What does the Tracking
Gantt look like?
Duration
Predecessors
A.
B.
C.
D.
A, B, C
E.
F.
G.
H.
I.
J.
K.
L.
I, K
M.
12
N.
O.
Develop RFQ
P.
N, O
Q.
R.
46
Solution:
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.