PROJECT COST

MANAGEMENT
-
 Cost Management
 The development of a project budget
is just a beginning.
 The budget serves as a standard or
benchmark.
 The actual performance needs to be
monitored and controlled to ensure
successful completion within time
and cost.
 Earned Value Technique
 The technique used for this purpose
is the earned value technique.
 A method to measure project
performance against the project
baseline.
 Results from an earned value
analysis indicate potential deviation
of the project from cost and schedule
baselines.
 Earned value terminology
 Once every thing has been put into
action, one need to control progress
from various aspects by applying the
earned value technique.
 Some of the very commonly used
indicators used under this technique
are,
 Earned value terminology

 PV
 Stands for Planned Value
 INTERPRETATION
 What is the estimated value of work
planned to be done.
 Earned value terminology

 EV
 Stands for Earned Value
 INTERPRETATION
 What is the estimated value of the
work actually accomplished.
 Earned value terminology

 AC
 Stands for Actual Cost
 INTERPRETATION
 What is the actual cost incurred for
the work accomplished.
 Earned value terminology

 BAC
 Stands for Budget at Completion
 INTERPRETATION
 How much did we budget for the
total project effort.
 Earned value terminology
 CV
 Stands for Cost Variance
 INTERPRETATION
 It tells us about the difference of the
earned value (actual work
accomplished)
and actual cost
 -ve is over budget & +ve is under
budget
 Earned value terminology

 CPI
 Stands for Cost Performance Index
 INTERPRTATION
 We are getting $__ worth of work
out of every $1 spent. Funds are or
are not being used efficiently.
 Earned value terminology
 SV
 Stands for Schedule Variance
 INTERPRETATION
 It is actually the difference of the
earned value (actual work done) and
planned value (standard)
 -ve is behind schedule and +ve is
ahead of schedule
 Earned value terminology
 SPI
 Stands for Schedule Performance
Index
 INTERPRETATION
 We are (only) progressing at __
percent of the rate originally
planned.
 It indicates the actual schedule
efficiency or inefficiency in
comparison with the standard
 Earned value terminology
 EAC
 Stands for Estimate At Completion
 INTERPRETATION
 As of now, how much do we expect
the total project to cost in terms of
money
 Earned value terminology

 ETC
 Stands for Estimate to Complete
 INTERPRETATION
 How much more will the project cost
us.
 Earned value terminology

 VAC
 Stands for Variance at Completion
 INTERPRETATION
 How much over or under budget will
we be at the end of the project.
CALCULATIONS
EXERCISES