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Term paper # 03:

A construction company has signed a fixed cost contract to supply, installation, testing
and commissioning of 200 pre-casts concrete slabs of same specification at a cost of
Rs.600 lakhs. The company had estimated that it could supply, install, test & commission
10 slabs per day so that the entire work would be completed in 20 days time. The project
status was reviewed by project manager after completion of 16 days. Project manager
was noted at the time of review that only 120 slabs have been installed & the cost
incurred (as per account maintained in site) was Rs.380 lakhs. Based on above data, as
you being a project manager of this company, calculate cost variance, schedule variance,
performance analysis, and various connected parameters. What is your conclusion with
the calculated results?

Solution:

Cumulative
Cost ( Rs.)

BCWS

ACWP

BCWP/EV

16 days Time (days)

Figure-1
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Total cost of project for 200 Nos. precast concrete slabs = 600 lakhs.
Project completion Time = 20 days
Reporting Date = Now =16 days
Cost per unit slab = Total Cost / Nos. of slabs
= 600 / 200
= Rs.3 lakhs
Per day supply, install, test & commissioning = 10 slabs
At date of Reporting i.e. 16 days, BCWS = 16*10*3
= 480 lakhs
(BCWP or EV) = 120*3
= 360 lakhs
Account maintained at site = ACWP = 380 lakhs

1) Cost variance (CV) = (BCWP or EV) – ACWP

= 360 – 380
= ( -) 20 lakhs
Here a negative value obtained i.e. cost is over-run, so the project is over budgeted by
RS.20 lakhs.

2) Schedule variance (SV) = (BCWP or EV) – BCWS

= 360 – 480
= (-) 120 lakhs
Here a negative value obtained i.e. time overrun so the project schedule value (in terms of
cost) of Rs.120 lakhs is behind the schedule.

3) Cost Performance Index (CPI) = (BCWP or EV) / ACWP *100

=360 / 380 *100
=94.736%
Project is obtaining 94.73% paisa of earned value for every 1 rupee expended.
Here, CPI = 94.73% < 100, project is over budgeted.
Hence, the final cost forecasting = Total project cost / CPI
= 600 / 0.94736
= 633.33 lakhs
Project will be (633.38 – 600) = 33.33 lakhs over budget, if there is no change in
performance.

4 Schedule performance Index (SPI) = (BCWP or EV) / BCWS * 100

= 360/480 *100
=75%
Only 75% of that planned, which is less than 100 means project is behind the schedule,
i.e. schedule slippage to date.
Final completion time forecasting = Project planned time / SPI
= 20 / 0.75
= 26.67 days
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Thus, project will be (26.66 – 20) = 6.66 days late i.e. Time lag, if there is no change in
performance and schedule and resources.

Since, based on the above calculated results, I came to conclude that time & cost of the
project has overrun so that the company has to face the budget constraints of Rs.33.33
lakhs within time lag of 6.66 days. To overcome this situation, it will be better to
understand cause and effects relationship in the project environment. The likely
happening causes are:

 No integrated project planning and control.

 Company resources (i.e. man, money, materials, equipment, facilities and
information & technology) are overcommitted.
 Unrealistic project planning and scheduling.
 Lack of coordination, interpersonal skills and motivation with the employees by
the project manager. Impossible project schedule commitment.

 Public obstruction or any force measure.

Reference:
1. “Fundamentals of Project Management Class Notes”