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training on project management for construction of a project from concept to commissioning

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**Module 6: Metrics, Performance
**

Measurements and Forecasting

Prepared by:

Module 6: Metrics, Performance Measurements and Forecasting

**Welcome to Module 6. The objective of this module is to introduce you to the
**

Metrics and Performance Measurement tools used, along with Forecasting,

in Earned Value Management.

The Topics that will be addressed in this Module include:

• Define Cost and Schedule Variances

• Define Cost and Schedule Performance Indices

• Define Estimate to Complete (ETC)

• Define Estimate at Completion (EAC) and Latest Revised Estimate (LRE)

**Module 6 – Metrics, Performance Measures and Forecasting
**

Prepared by: Booz Allen Hamilton

2

Review of Previous Modules

**Let’s quickly review what has been covered in the previous modules.
**

• There are three key components to earned value: Planned Value, Earned

Value and Actual Cost.

– PV is the physical work scheduled or “what you plan to do”.

– EV is the quantification of the “worth” of the work done to date or “what

you physically accomplished”.

– AC is the cost incurred for executing work on a project or “what you

have spent”.

• There are numerous EV methods used for measuring progress.

**The next step is to stand back and monitor the progress against the
**

Performance Measurement Baseline (PMB).

**Module 6 – Metrics, Performance Measures and Forecasting
**

Prepared by: Booz Allen Hamilton

3

What is Performance Measurement?

**Performance measurement is a common phrase used in the world of project
**

management, but what does it mean? Performance measurement can have

different meanings for different people, but in a generic sense performance

measurement is how one determines success or failure on a project. How

then can performance measurement have different meanings for different

people?

To answer this question, consider the ACME House Building project. You

have two major stakeholders on this project, the Buyer and the Builder. Do

you think they both measure success on the project identically or do you

believe their definition of project success may be different? Let’s take a look

on the next page.

**Module 6 – Metrics, Performance Measures and Forecasting
**

Prepared by: Booz Allen Hamilton

4

What is Performance Measurement?

**It seems logical to say that they both want a home that provides security,
**

meets building code, and keeps them warm in the winter and cool in the

summer. Now let’s look at possible differences in the way they define

successful performance on the project.

Buyer

Buyer

–– Home

Homehas

has44bedrooms,

bedrooms,33

bathrooms

bathrooms

–– Backyard

Backyardisislandscaped

landscapedfor

for

children

childrentotoplay

play

–– Two

Twocar

cargarage

garage

–– Walls

Wallsdon’t

don’thave

havepaint

paintstreaks

streaks

–– Carpeting

Carpetingisiscorrect

correctcolor

color

Builder

Builder

–– Completed

Completedon

ontime

time

–– Within

Withincontract

contractprice

price

–– Sells

Sellswithin

withinfirst

firsttwo

twomonths

months

–– Less

Lessthan

than10%

10%Post-sell

Post-sell

maintenance

maintenance

**Can you see how different parties or individuals can have conflicting views of
**

what defines project success?

Module 6 – Metrics, Performance Measures and Forecasting

Prepared by: Booz Allen Hamilton

5

It looks at the relationships between the Earned Value (EV) and the Planned Value (PV). Module 6 – Metrics. The Schedule Management focuses on the schedule performance of the project. The Cost Management focuses on the cost performance of the project.What is Performance Measurement? The Stakeholders (Buyer and Builder in the ACME House Building Project) should understand how each party defines project success and what each party measures to determine that success. In the case of Earned Value Management. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 6 . performance measurements focus on cost and schedule management. Now let’s look at these relationships in more detail on the following pages. It looks at the relationships between the Earned Value (EV) and the Actual Cost (AC).

The formulas used are as follows: Variance Analyses Cost Variance (CV) = Earned Value (EV) – Actual Cost (AC) Schedule Variance (SV) = Earned Value (EV) – Planned Value (PV) Performance Indices Cost Performance Index = Earned Value (EV)/Actual Cost (AC) Schedule Performance Index = Earned Value (EV)/Planned Value (PV) Let's take a look at the Variance Analyses on the next page. Module 6 – Metrics. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 7 .Earned Value: Metrics and Performance Measurements Earned value performance measurements look at the project cost and schedule performance by analyzing the cost and schedule variance along with cost and schedule efficiency.

CV tells you the earned value of work performed for each dollar’s worth of work scheduled. Cost Variance (CV) = EV – AC If the result is POSITIVE. project is experiencing an “Overrun” Module 6 – Metrics.Variances The Cost Variance (CV) is the difference between the earned value of work performed and the actual cost. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 8 . project is experiencing an “Underrun” If the result is NEGATIVE.

200 $6. let's calculate the Cost Variance (CV) for the project.Variances: Cost Variance example Using the ACME Home Building project information from Module 5.$ 32.100 $32. = = $ .149 .269 EV $15.961 $38.400 Cost EV PV = $3 8.394 $8.250 $3.166 $6.850 $7. 26 9 CV = EV – AC CV = $33. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 9 .608 $2. as of 1/31 Foundation Patio Exterior Walls Stairway Project Total PV $15.149 AC $15.748 $5.400 CV = $749 AC What does this tell you? Look at the explanation on the next page.981 $33.40 9 Cost Variance 0 1/31 Time Module 6 – Metrics.394 $8. 33 2 $3 14 .166 $8.

33 2 $3 14 . Please note that the cost variance. you can see that on 1/31 the EV line (green) is above the AC line (red). This means that it cost less to accomplish the work then was budgeted. the cumulative and current are the same. Since we are in the first status period in our example. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 10 . thus a positive cost variance. along with all other performance analyses tools. 26 9 Cost AC = = $ . $3 8. Let's look at another Cost Variance calculation on the next page.Variances: Cost Variance example A Cost Variance of $749 tells you that the project is “Underrun” or under budget. = EV PV Using the graph to right. can be computed (or assessed) in terms of cumulative and current.40 9 Cost Variance 0 1/31 Time Module 6 – Metrics.

Variances: Cost Variance example Another calculation for reviewing Cost Variance (CV) Percentage is CV%.3% To date the project has a Cost Variance of $749 or 2.3% Module 6 – Metrics.149 .400 CV% = $749/$33. what is the CV%? CV = EV – AC CV% = CV/EV CV = $33.149 CV = $749 CV% = .$32. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 11 . Cost Variance (CV)% = CV/EV Tells you what percentage cost varies from what has been earned to date.023 or 2. Using our example.

project is behind schedule Module 6 – Metrics. Schedule Variance (SV) = EV – PV If the result is POSITIVE. project is on schedule or exceeding the schedule If the result is NEGATIVE. SV tells you the value of work performed less value of work scheduled.Variances The Schedule Variance (SV) is the difference between the earned value of work performed and the work scheduled. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 12 .

149 AC $15. 26 9 SV = EV – PV SV = $33.166 $6.748 $5.961 $38.166 $8.120 AC What does this tell you? Look at the explanation on the next page.608 $2.Variances: Schedule Variance example Using the ACME Home Building project information from Module 5.$38. 33 . Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 13 .981 $33.394 $8.100 $32.250 $3. as of 1/31 Foundation Patio Exterior Walls Stairway Project Total PV $15.269 SV = -$5. let's calculate the Schedule Variance (SV) for the project.394 $8. = =$ $ .850 $7.4 32 14 9 00 1/31 Time Module 6 – Metrics.200 $6.269 EV $15.149 .400 Cost Schedule Variance EV PV = $3 8.

you can see that on 1/31 the EV line (green) is below the PV line (blue). Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 14 .4 32 14 9 00 1/31 Time Module 6 – Metrics. 26 9 Schedule Variance EV PV = Using the graph to right. 33 .120 tells you that the project is “Behind” schedule. = =$ $ .Variances: Schedule Variance example A Schedule Variance of -$5. Cost $3 8. AC Now consider on the following page what schedule variance does and does not address. This means that what was earned to date is less then what was planned to be accomplished.

Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 15 .Variances: Schedule Variance Schedule Variance status does: • indicate the dollar value difference between work that is ahead or behind the plan • reflect a given measurement method Schedule Variance status does not: • address impact of work sequence • address importance of work • reflect critical path assessment • indicate amount of time it will slip • identify source (labor & material) of difference • indicate the time ahead/behind (or regain) schedule • indicate the cost needed to regain schedule Let's look at another Schedule Variance calculation on the next page. Module 6 – Metrics.

269 SV% = -$5.4% To date the project has a Schedule Variance of -$5.120/$38.120 SV% = -. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 16 .Variances: Schedule Variance example Another calculation for reviewing Schedule Variance (SV) is SV%. Schedule Variance (SV)% = SV/PV Tells you what percentage schedule varies from what has been planned to date.269 SV = -$5.4% Module 6 – Metrics.134 or -13.149 .120 or -13. Using our example.$38. what is the SV%? SV = EV – PV SV% = SV/PV SV = $33.

140 -2. as of 1/31 Foundation Patio Exterior Walls Stairway Project Total PV EV AC $15. our project information is as follows.961 $2.Variances: Review You should have a solid understanding of the cost and schedule variance calculations and what they mean.100 $38.120 CV -456 966 358 -119 749 Now let's look at the performance indices on the following pages. Let's review them now.980 -5.149 $32.981 $3.166 $7.850 $8. Module 6 – Metrics.608 $6.394 $15.200 $8.748 $6.166 $8.394 $15.400 SV 0 0 -2. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 17 .250 $5. Cost Variance (CV) = EV – AC Schedule Variance (SV) = EV – PV If the result is POSITIVEà “Underrun” If the result is NEGATIVEà “Overrun” If the result is POSITIVE à “On Schedule” If the result is NEGATIVE à “Behind Schedule” Using these variance calculations.269 $33.

Performance Indices The Cost Performance Index (CPI) is a measure of Cost Efficiency. cost is LESS than budgeted Example 1: Example 2: PV = $950 EV = $1000 AC = $ 900 PV = $1100 EV = $1000 AC = $1200 CPI = $1000 = 1. Cost Performance Index (CPI) = EV/AC If the result is less than 1.0. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 18 .11 $900 CPI = $1000 = .83 $1200 Module 6 – Metrics. The CPI measures the value of work performed against the actual cost. cost is GREATER than budgeted If the result is greater than 1.0.

let's calculate the Cost Performance Index (CPI) for the project.981 $3.608 $6.200 $8.100 $38.Performance Indices: Cost Performance Index example Using the ACME Home Building project information.166 $8.400 CPI = 1.40 49 0 1/31 Time Module 6 – Metrics.149/$32. 26 9 CPI = EV/AC CPI= $33.400 Cost EV PV = $3 8.269 $33. as of 1/31 Foundation Patio Exterior Walls Stairway Project Total PV EV AC $15.961 $2. .748 $6. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 19 .394 $15.166 $7.394 $15.02 AC What does this tell you? Look at the explanation on the next page.250 $5.850 $8. = = $3 2 $3 1 3.149 $32.

02 worth of work for every $1. 1. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 20 .00 spent.05 1 0.85 0. You are getting $1.Performance Indices: Cost Performance Index example A Cost Performance Index (CPI) of 1.95 CPI1.1 1.02 tells you that your actual costs are less then what was budgeted.9 0.15 1.2 1.02 CPI 1. Module 6 – Metrics.8 Now let's look at some causes of favorable and unfavorable cost performance.02 0.

Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 21 .Performance Indices: Cost Performance Index example Potential Causes of Favorable (+) Cost Performance Potential Causes of Unfavorable (-) Cost Performance • Work more complex than anticipated • Design review comments extensive • Rework • Unclear Requirements • Scope Creep • Unfavorable Market Fluctuations in the Cost Labor or Material • Overhead Rate Increases • • • • Efficiencies being realized Work less complex than anticipated Fewer revisions and rework Favorable Market Fluctuations in the Cost of Labor or Material • Overhead Rate Decreases Module 6 – Metrics.

project is “AHEAD of schedule Example 1: Example 2: PV = $950 EV = $1000 AC = $ 900 PV = $1100 EV = $1000 AC = $1200 SPI = $1000 = 1.05 $950 SPI = $1000 = . The SPI measures the value of work performed against the work scheduled. project is “BEHIND” schedule If the result greater than 1.0.Performance Indices The Schedule Performance Index (SPI) is a measure of Schedule Efficiency.0. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 22 .91 $1100 Module 6 – Metrics. Schedule Performance Index (SPI) = EV/PV If result is less than 1.

87 Cost AC What does this tell you? Look at the explanation on the next page.269 $33.149 $32.981 $3.250 $5.200 $8.149/$38.394 $15.748 $6.166 $7.850 $8. 26 9 SPI = EV/PV SPI = $33.4 32 14 9 00 1/31 Time Module 6 – Metrics.100 $38. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 23 . let's calculate the Schedule Performance Index (SPI) for the project. = =$ $ .961 $2. 33 .166 $8.400 EV PV = $3 8.269 SPI = .394 $15. as of 1/31 Foundation Patio Exterior Walls Stairway Project Total PV EV AC $15.608 $6.Performance Indices: Schedule Performance Index example Using the ACME Home Building project information.

87 0.15 1. It can be defined in two ways: You are 13% behind schedule Or You are working at an 87% efficiency 1.1 1.85 SPI 0.95 CPI 1.05 1 0.2 1.8 Now let's look at some causes of favorable and unfavorable schedule performance on the following page. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 24 .02 CPI 1.9 0.87 tells you that you are behind schedule. Module 6 – Metrics.02 0.Performance Indices: Schedule Performance Index example A Schedule Performance Index (SPI) of .

Performance Indices: Schedule Performance Index example Potential Causes of Favorable (+) Schedule Performance Potential Causes of Unfavorable (-) Schedule Performance • Manpower shortage • Revised Execution Plan • Supporting organizations behind schedule • Late Vendor delivery • Delayed customer feedback/direction • Rework • Work more complex than anticipated • Design review comments extensive • Unclear requirements • Scope creep • • • • Efficiencies being realized Work less complex than anticipated Fewer revisions and rework Favorable Market Fluctuations in the Cost of Labor or Material • Subcontractor ahead of schedule Module 6 – Metrics. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 25 .

00 0.980 -5.981 $3.120 CV -456 966 358 -119 749 SPI 1.100 $38. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 26 .149 $32.166 $7.00 1.Review of Variance and Performance Indices Below is a summary of the ACME Home Building project.02 What conclusions can be inferred as to the cost and schedule performance of this project? Let’s take a look on the next page.50 0.87 CPI 0.76 0.166 $8. as of 1/31 Foundation Patio Exterior Walls Stairway Project Total PV EV AC $15.394 $15.250 $5.96 1.850 $8. Module 6 – Metrics.269 $33.97 1.400 SV 0 0 -2.608 $6.06 0.961 $2.200 $8.13 1.748 $6.140 -2.394 $15.

269 $33.120 CV -456 966 358 -119 749 SPI 1.166 $7.97 1.50 0.394 $15.608 $6.87 CPI 0.748 $6.140 -2.76 0.394 $15.Review of Variance and Performance Indices as of 1/31 Foundation Patio Exterior Walls Stairway Project Total PV EV AC $15.149 $32. On the cost side. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 27 .981 $3.961 $2. Module 6 – Metrics.00 0.02). What is the standard reporting variance threshold for a project? Find out on the next page. In review of the activities.400 SV 0 0 -2.13 1.250 $5. Installation of the Stairway and Framing the Exterior Walls are the activity causing the project to be behind (SPI = .02 The ACME Home Building Project is 13% behind schedule (SPI = .850 $8.96 1.76) schedule.50 and .00 1.100 $38.166 $8. the Installation of the Patio is costing less then budgeted (CV =$966) and is the main reason for the project underrunning its budget.06 0.980 -5.87) but is ahead on cost by 2% (CPI = 1.200 $8.

Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 28 .2-R 5000. Variance Report for Department ACME Housingof Department Defense of Project Defense 5000. but most set the variance level between + or .90 to 1.7% to 10%. Different industries and government agencies will set variance thresholds at different levels. This means that a SPI or CPI of . Note that you need to explain positive variances as well as negative variances.Reporting Variances The size and complexity of the project determines the reporting needed.2-R Module 6 – Metrics.1 will require an official variance analysis to explain what is happening on the project.

Cost Performance Index (CPI) = EV/AC Schedule Performance Index (SPI) = EV/PV If result is less than 1.0. project is “AHEAD of schedule Module 6 – Metrics. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 29 . cost is GREATER than budgeted If the result greater than 1.0. CPI. Cost Variance (CV) = EV – AC Schedule Variance (SV) = EV – PV If the result is POSITIVEà “Underrun” If the result is NEGATIVEà “Overrun” If the result is POSITIVE à “On Schedule” If the result is NEGATIVE à “Behind Schedule” Cost Variance (CV)% = CV/EV Schedule Variance (SV)% = SV/PV Tells you what percentage cost varies from what has been earned to date.0. Take some time to review the formulas below.Review of Variance and Performance Indices So far we have only looked at how to analyze what has happened on a project (CV. cost is LESS than budgeted If result is less than 1. Tells you what percentage schedule varies from what has been planned to date.0. SPI).SV. project is “BEHIND” schedule If the result greater than 1.

The chart on the following page lists the parameters of the BAC and EAC along with the other EVM items we have covered. The Project BAC must always equal the Project Total PV. Anticipating future progress requires determining when the project will be completed and how much it will cost to complete it.Estimate at Completion Now it is time to learn how to analyze the future or what is expected to happen on a project given the progress measurements reported to date. The objective in preparing an EAC is to provide an accurate projection of cost at the completion of the project. Module 6 – Metrics. which was defined in Module 5. is the actual cost to date plus an objective estimate of costs for remaining authorized work. If they are not equal. The Estimate at Completion (EAC). To complete our analysis. we will look at the Estimate at Completion (EAC) and the Budget at Completion (BAC). Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 30 . your earned value calculations and analysis will be inaccurate. The Budget at Completion (BAC) is the sum of all budgets allocated to a project scope.

Estimate at Completion Item Planned Value (PV) Earned Value (EV) Actual Cost (AC) Budget at Completion (BAC) Estimate at Completion (EAC) Questions How much work should be done? How much work was done? How much did the work cost? What is the total job budgeted to cost? What do we expect the total job to cost? Another term you may hear is Latest Revised Estimate (LRE). Module 6 – Metrics. Estimate At Completion = Latest Revised Estimate For the remainder of the Modules. The LRE is equal to the EAC. we will refer to Estimate at Completion as “EAC”. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 31 .

Module 6 – Metrics. There are multiple ways to develop an EAC. A comprehensive EAC is usually prepared annually or if there are any major changes in the project. accounting system available and the accuracy of the estimates. The EAC is a periodic evaluation of the project status. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 32 . EACs are developed with varying degrees of detail and supporting documents.Estimate at Completion The EAC is the best estimate of the total cost at the completion of the project. The technique selected is based upon the dollar value of the project. Let's take a look on the following pages at the most frequently used EAC formulas. usually on a monthly basis or when a significant change happens to the project. the risk. The EAC is developed for projects as well as Control Accounts and Work Packages. The EAC should be reviewed on a monthly basis by the Control Account Manager (CAM) or those responsible.

Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 33 . This formula assumes that all remaining work is independent of the burn-rate incurred to date. Take a look on the next page. Now let's look use the EAC formula for our ACME Home Building project.Calculating Estimate at Completion The first EAC calculation we will look at is Estimate to Complete: EAC = Actual Cost (AC) + Estimate to Complete (ETC) The Estimate to Complete (ETC) is the estimated cost of completing the authorized remaining work. A detailed ETC will include a description of the work remaining and any revisions to the estimated resources or cost for completing the project. Module 6 – Metrics.

their actual cost replaces their ETC (see chart below).957 Module 6 – Metrics.3 Install roofing trusse 1.483 $9.656 $4. It will also be assumed that all other activities will have no adjustments to their ETC.1.2 Install shingles 1.887 $6.2 Frame interior walls 1.3.984 $2.850 $7.1.3 Install B/K fixtures 1.3 Painting 1.1 Install wiring 1.1.1.025 $15.521 $11. we will assume that they will be completed as budgeted even though they have current cost variances (see ETC adjustments below).200 $3.3 Install vents ACTUALS January $15.445 $812 $42.317 $18.1 Frame exterior walls 1. Activity 1.1.3.1. By reviewing the chart to the left you can see that our new Estimate at Completion (EAC) is $164.477 $2.5. Now lets look at the same example with some additional changes to the ETC.194 $6.250 $6.3.5.250 $6.100 $6.822 $10.483 $1.1.6.317 $18.255 $6.1.1.1 Install felt 1.4. For the two activities current being worked.957.4. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 34 .3 Install fixtures 1.2 Install Carpeting 1.1 Install drywall 1.445 $812 $164.2.922 $16.200 $11.2 Install gas lines 1.1.1 Pour foundation 1. For the two activities that are 100% complete.6.4.1. Now we need to determine the Estimate to Complete (ETC) for all activities.400.1.1.5.1.969 $6.194 $6.255 $6.6.834 $32.1.Calculating Estimate at Completion Earlier in this module.1.265 $18.2.1.2 Install Patio 1.2. we determined the actual cost (AC) for January to be $32.1.1.271 $11.250 February April $8.400 ETC March $85.1 Install waterlines 1.850 $7.265 $13.625 $6.656 EAC Total $15.445 $2.2 Install outlets/switches 1.984 $2.1.3 Pour stairway 1.025 $15.1.813 $4.477 $611 $2.088 $9.887 $6.

Module 6 – Metrics.100. lets take a look at the EAC. The project manager asks for a new estimate and the carpeting contractor tells him that it will now cost $3. your superintendent tells you that the current ETCs for Framing the Exterior Walls and Pour Stairway are good. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 35 . With this information. He tells you that the original budget for installing the carpet ($2.250) is no longer correct because the price of the carpet increased.Calculating Estimate at Completion As the project manager you are reviewing your ETC and you get a call from the carpeting contractor. Additionally. thus the current cost underrun ($358) for Framing and the cost overrun ($120) for Stairway will be realized at the completion of each activity.

445 $812 $165.1.2 Install gas lines 1.850 $7.984 $3.1.569 Module 6 – Metrics.6.887 $6.Calculating Estimate at Completion EAC = Actual Cost (AC) + New Estimate to Complete The new ETC total is $133.6.194 $6.1.850 $9. you can also include expert opinion.1 Pour foundation 1.1.3.163 $11.2.100 $6.100 $6.625 $6.3 Painting 1.4.1.169 (ETC)).400 ETC March $84.2 Install shingles 1.3.5.2. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 36 .445 $812 $43.969 $6.2 Frame interior walls 1.265 $18.1.400 (AC) + $133.4.5.1.1 Install felt 1.169 ($84.200 $3.4.025 $15.663 $4. Activity 1.255 $6.477 $2.1.3 Pour stairway 1.1.483 $9.317 $18.1.200 $12.2 Install outlets/switches 1.1.656) The new EAC total is $165.2.1 Install waterlines 1.042 $16.1 Frame exterior walls 1.1.984 $3.5.3 Install B/K fixtures 1.1.1.850 $7.3.1 Install drywall 1.025 $15.656 EAC Total $15.2 Install Carpeting 1.1.1 Install wiring 1.1.656 $4.887 $6.1.265 $13.834 $32.1.850 + $43.477 $611 $2.1.3 Install roofing trusse 1.6.3 Install vents ACTUALS January $15.942 $9. project and industry trends and other forms of objective analysis.100 $6. When using this formula to calculate EAC.913 $11.2 Install Patio 1.1.255 $6.483 $1.250 February April $8.1.445 $2.663 + $4.317 $18.3 Install fixtures 1.569 ($32.194 $6.

project is projecting an “Overrun” Now let's determine the VAC for our project as shown on the next page. EAC is the best estimate of the total cost at the completion of the project. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 37 . what does it tell us? As mentioned earlier. It is also used to determine the Variance at Completion (VAC) for the project.Calculating Estimate at Completion Now that we have the EAC. Module 6 – Metrics. The VAC is calculated as follows: VAC = BAC – EAC If the result is POSITIVE. project is projecting an “Underrun” If the result is NEGATIVE.

These calculations use performance-to-date data to help calculate the EAC. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 38 . keep in mind that they are subjective analyses. Several other methods can be used. As you examine the remaining Estimate at Completion (EAC) formulas. Let’s consider those on the following pages.Calculating Estimate at Completion The VAC for our project is determined as follows: BAC – EAC $ 165.569 = VAC = . the project is now forecasted to overrun by $102 using this form of EAC. this is only one method of forecasting the performance of the project. Module 6 – Metrics.$102 In other words. Remember. Sometimes these forms of EAC Calculations are called Independent Estimate at Completion (IEAC).467 – $165.

Take a look on the next page. but it assumes that the “burn-rate” will be the same for the remainder of the project. Module 6 – Metrics. Let's use our ACME Home Building project to calculate the EAC using this formula.Calculating Estimate at Completion The second EAC formula is as follows: EAC = AC/EV x BAC This calculation uses the Actual cost. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 39 . This formula is the easiest to use. Earned value and Budget at Completion for the project.

445 $0 $0 $0 $2.149 $32.467 Module 6 – Metrics.194 $0 $0 $0 $6.394 $15. Now let's look at the next EAC formula on the next page.850 $15.255 $0 $0 $0 $6.467 EAC = $162. Performance Measures and Forecasting 40 Prepared by: Booz Allen Hamilton .250 $16.309. our project is projected to underrun by $3.394 $15.$162.887 $0 $0 $0 $6.483 $0 $0 $0 $9.981 $3.625 $0 $0 $0 $2.400/$33.309 Using this EAC calculation.100 $11.748 $6.200 $8.317 $0 $0 $0 $18. as of 1/31 Foundation Patio Frame exterior Walls Stairway Frame interior walls Install roofing trusse Install waterlines Install gas lines Install B/K fixtures Install wiring Install outlets/switches Install fixtures Install felt Install shingles Install vents Install drywall Painting Install Carpeting PV EV AC BAC $15.149 x $165.984 $0 $0 $0 $6.445 $0 $0 $0 $815 $0 $0 $0 $6.Calculating Estimate at Completion EAC = AC/EV x BAC EAC = $32.608 $6.467 EAC = .400 $165.394 $8.961 $2.521 $5.265 $0 $0 $0 $18.166 $8.250 $38.922 $0 $0 $0 $11.158 VAC = 3.166 $8.98 x $165.025 $0 $0 $0 $15.166 $7.477 $0 $0 $0 $2.158 VAC = BAC – EAC VAC = $165.269 $33.467 .

Note that with this formula you need additional information than the previous formula. Module 6 – Metrics. This formula is derived from the previous formula and thus should result in the same EAC figure. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 41 . Let's use our ACME Home Building project and calculate the EAC using this formula. Take a look on the next page.Calculating Estimate at Completion The third EAC formula is as follows: EAC = BAC/CPI This calculation uses the Budget at Completion (BAC) and the Cost Performance (CPI) Index to calculate EAC. This formula is also easy to use and assumes that the “burn-rate” remains constant for the remainder of the project.

608 $6.922 $0 $0 $0 $11.467/1.13 1.445 $0 $0 $0 $2.50 0.400 as of 1/31 Foundation Patio Frame exterior Walls Stairway Frame interior walls Install roofing trusse Install waterlines Install gas lines Install B/K fixtures Install wiring Install outlets/switches Install fixtures Install felt Install shingles Install vents Install drywall Painting Install Carpeting SV 0 0 -2.269 $33.222 VAC = 3.980 -5.02 PV EV AC BAC $15.887 $0 $0 $0 $6. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 42 .477 $0 $0 $0 $2.166 $8.984 $0 $0 $0 $6.00 1.625 $0 $0 $0 $2. Why is this answer different then the previous calculation when it was mentioned that the two formulas are derived from each other? Rounding to the second decimal is the reason for the $64 difference.100 $11.02 EAC = $162.265 $0 $0 $0 $18.250 $16.245.100 $38.00 0.981 $3.222 as of 1/31 Foundation Patio Exterior Walls Stairway Project Total VAC = BAC – EAC VAC = $165.748 $6.467 .608 $6. PV EV AC $15.269 $33.255 $0 $0 $0 $6.149 $32.97 1.245 Using this EAC calculation.394 $8.250 $38.140 -2.250 $5.961 $2. our project is projected to underrun by $3.394 $15.981 $3.166 $8.149 $32.87 CPI 0.166 $8.748 $6.850 $8.400 $165.025 $0 $0 $0 $15.961 $2.394 $15.76 0.394 $15.194 $0 $0 $0 $6.483 $0 $0 $0 $9.467 Module 6 – Metrics.Calculating Estimate at Completion EAC = BAC/CPI EAC = $165.394 $15.521 $5.200 $8.445 $0 $0 $0 $815 $0 $0 $0 $6.120 CV -456 966 358 -119 749 SPI 1.850 $15.317 $0 $0 $0 $18.166 $7.200 $8.$162.96 1.166 $7.06 0.

Earned value. Let's use our ACME Home Building project and calculate the EAC using this formula. Module 6 – Metrics.Calculating Estimate at Completion The fourth EAC formula is as follows: EAC = AC/EV x [Work Completed and in Progress] + [Cost of work not yet begun] This calculation uses the Actual cost. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 43 . Take a look on the next page. the value of work completed and in process and the cost of work not yet begun. This formula assumes that the work not yet begun will be completed as planned.

400 $165.317 $0 $0 $0 $18.521 $5.467 Module 6 – Metrics.608 $6.025 $0 $0 $0 $15.922 $0 $0 $0 $11.961 $2.477 $0 $0 $0 $2.400/$33.981 $3.748 $6.Calculating Estimate at Completion EAC = AC/EV x [Work Completed and in Progress] You need the chart to the left to determine the first part of the formula (actual cost and earned value). AC/EV = $32.194 $0 $0 $0 $6.445 $0 $0 $0 $815 $0 $0 $0 $6.394 $15.887 $0 $0 $0 $6. Let's take a look on the next page at the final two part of this formula.265 $0 $0 $0 $18.984 $0 $0 $0 $6.166 $7.200 $8.483 $0 $0 $0 $9.250 $38.149 AC/EV = .255 $0 $0 $0 $6.98 To obtain the remaining two parts. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 44 .166 $8. but some calculations will be needed.100 $11.625 $0 $0 $0 $2.269 $33.445 $0 $0 $0 $2.166 $8.850 $15.149 $32. + [Cost of work not yet begun] as of 1/31 Foundation Patio Frame exterior Walls Stairway Frame interior walls Install roofing trusse Install waterlines Install gas lines Install B/K fixtures Install wiring Install outlets/switches Install fixtures Install felt Install shingles Install vents Install drywall Painting Install Carpeting PV EV AC BAC $15.394 $8.250 $16. you will also need to use the chart.394 $15.

The final part is the cost of work not yet begun.166 $8.166 $8. The value of these activities is obtained by using the BAC column. Frame exterior walls and stairway).748 $6.025 $0 $0 $0 $15.Calculating Estimate at Completion EAC = AC/EV x [Work Completed and in Progress] The project has 4 activities that are completed and in progress (Foundation.394 $15.250 $38.483 $0 $0 $0 $9.922 $0 $0 $0 $11. The total Cost of work not yet begun is $113.521 $5. Patio.961 $2.394 $8.477 $0 $0 $0 $2.625 $0 $0 $0 $2.850 $15.317 $0 $0 $0 $18.100 $11.400 $165. Now let's calculate our EAC.250 $16.981 $3. The total for Work Completed and in Progress is $52.445 $0 $0 $0 $815 $0 $0 $0 $6.984 $0 $0 $0 $6. Check it out on the next page.887 $0 $0 $0 $6.149 $32. The value for this section is the sum of the activities not yet begun. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 45 .265 $0 $0 $0 $18.200 $8.194 $0 $0 $0 $6.464.269 $33.608 $6.255 $0 $0 $0 $6.467 Module 6 – Metrics.394 $15.445 $0 $0 $0 $2. + [Cost of work not yet begun] as of 1/31 Foundation Patio Frame exterior Walls Stairway Frame interior walls Install roofing trusse Install waterlines Install gas lines Install B/K fixtures Install wiring Install outlets/switches Install fixtures Install felt Install shingles Install vents Install drywall Painting Install Carpeting PV EV AC BAC $15.166 $7.003.

427 VAC = 1.003) + $113.Calculating Estimate at Completion EAC = AC/EV x [Work Completed and in Progress] + [Cost of work not yet begun] EAC = (. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 46 .040 Using this EAC calculation.$164.464 EAC = $164. our project is projected to underrun by $1. Now let's look on the next page at our final EAC formula.427 Now let's calculate the Variance at Completion (VAC).467 .040. Module 6 – Metrics. VAC = BAC – EAC VAC = $165.98 x $52.

Module 6 – Metrics. This formula is a very subjective way of calculating EAC.Calculating Estimate at Completion The final EAC formula is as follows: EAC = AC + [1/CPI (BAC-EV)] This calculation uses the Actual Cost (AC) Budget at Completion (BAC). Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 47 . Earned Value (EV) and the Cost Performance (CPI) Index to calculate EAC. Check it out on the next page. Let's use our ACME Home Building project and calculate the EAC using this formula.

467 PV EV AC $15.467 – $33.400 $165.166 $8.477 $0 $0 $0 $2.394 $15.149 $32.073 VAC = 3.394 $15.250 $5.850 $15.394 $15.319) Foundation EAC = $32.400 + [.748 $6.166 $7.025 $0 $0 $0 $15.120 CV -456 966 358 -119 749 SPI 1.50 0.400 SV 0 0 -2.961 $2. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 48 .445 $0 $0 $0 $815 $0 $0 $0 $6.255 $0 $0 $0 $6.96 1.100 $11.97 1.625 $0 $0 $0 $2.483 $0 $0 $0 $9.149 $32.269 $33.748 $6.00 1.980 -5.13 1.265 $0 $0 $0 $18.984 $0 $0 $0 $6.100 $38. our project is projected to underrun by $3.887 $0 $0 $0 $6. as of 1/31 Foundation Patio Exterior Walls Stairway Project Total Stairway Frame interior walls Install roofing trusse Install waterlines Install gas lines Install B/K fixtures Install wiring Install outlets/switches Install fixtures Install felt Install shingles Install vents Install drywall Painting Install Carpeting PV EV AC BAC $15.200 $8.317 $0 $0 $0 $18.02 Module 6 – Metrics.394 $8.521 $5.467 .445 $0 $0 $0 $2.$162.00 0.726 Patio Frame exterior Walls EAC = $162.194 $0 $0 $0 $6.922 $0 $0 $0 $11.06 0.608 $6.Calculating Estimate at Completion EAC = AC + [1/CPI (BAC-EV)] EAC = $32.02 ($165.400 + [1/1.140 -2.166 $7.073 VAC = BAC – EAC VAC = $165.149)] as of 1/31 EAC = $32.981 $3.166 $8.250 $38.269 $33.87 CPI 0.394 $15.400 + $129.98 ($132.394 Using this EAC calculation.608 $6.200 $8.166 $8.394.850 $8.250 $16.961 $2.981 $3.76 0.

569 -$102 EAC = AC/EV x BAC $162. If you need to review these techniques.Calculating Estimate at Completion The outcomes of the various methods for computing EAC are shown in the table below: EAC VAC EAC = AC + ETC $165. Module 6 – Metrics.073 $3.040 $162.394 EAC Formula EAC = AC/EV x [Work Completed and in Progress] + [Cost of work not yet begun] EAC = AC + [1/CPI (BAC-EV)] In reviewing the EAC formulas. The EAC formula you choose should be determined by the specifics of the project. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 49 .309 EAC = BAC/CPI $162.427 $1.222 $3.158 $3. be aware that the formula you use impacts your project’s EAC.245 $164. choosing the appropriate formula for your project is important. Though all the EAC calculations are correct. please pay close attention to the assumptions of each.

– Schedule Variance (SV) is the difference between the earned value of work performed and the work scheduled. – Schedule Performance Index (SPI) is a measure of Schedule Efficiency. performance measurements focus on cost and schedule management. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 50 . CV tells you the earned value of work performed for each dollars worth of work scheduled. The CPI measures the value of work performed against the actual cost.Review Module 6 At this point. Module 6 – Metrics. The SPI measures the value of work performed against the work scheduled. SV tells you the value of work performed less value of work scheduled. you have covered all of the content in Module 6. – Cost Variance (CV) is the difference between the earned value of work performed and the actual cost. • Earned value performance measurements look at the project cost and schedule performance by analyzing the cost and schedule variance along with cost and schedule efficiency. – Cost Performance Index (CPI) is a measure of Cost Efficiency. Take some time now to review the major items: • Performance measurement defines how success or failure is determined on a project. In the case of Earned Value Management.

The objective in preparing an EAC is to provide an accurate projection of cost at the completion of the project. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 51 . Each project needs to be evaluated to determine which EAC formula best fits the project’s size and complexity.Review Module 6 cont. • There are multiple methods for determining EAC. Module 6 – Metrics. • The Estimate at Completion (EAC) is the actual cost to date plus an objective estimate of costs for remaining authorized work.

review this module to ensure you have a solid understanding of the basics metrics and performance measures used in EVMS. Rebaselining.Summary of Module 6 At this point we have examined the basic metrics and performance measures used in EVMS. and Change Control. This concludes Module 6. Module 6 – Metrics. Otherwise. Performance Measures and Forecasting Prepared by: Booz Allen Hamilton 52 . feel free to progress to the next module. If you have a firm grasp of the concepts covered in this module. In the next module you will examine the concepts of Integrated Baseline Review (IBR).

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