Con 2013 5

Project
managing,
Scheduling and
Jobsite
Planning II
Module 5: Project Schedule &
Cost Control
1
Project Managing, Scheduling and Jobsite Planning II
Module 3 & 4 Review
 Schedule and Cost Management Processes
 Schedule components: WBS,WPs,Activity
 Develop Project Schedule
 Develop Project Budget
 Project Budget Components
MODULE 5- Project time and cost control 2

PMBOK‐Figure 6‐1:Project
Time Management Overview

PMBOK‐Figure 7‐1:Project
Cost Management Overview

Project Budget Components

Module 5 Agenda
 S‐curve
 Earned Value Management (EVM) Technique
 The Key Parameters of EVM
 Forecasting

S‐curve (Cost Baseline)

S‐Curve (Cost Baseline)
• S curve consists of “a display of cumulative cost, labour hours or
other quantities plotted against time”
• Time‐phased Cost baseline
• Name derives from the S‐like shape of the curve which is flatter at
beginning and end and steeper in middle where more of the
resources are used
• Known also as Budget At Completion, or Planned Value (PV)
• There can be multiple S‐curves to represent planned or target
values, and actual progress completed.

Earned Value Management (EVM)
• Earned value management (EVM) is a methodology that combines scope,
schedule, and resource measurements to assess project performance and
progress.
• It is a commonly used method of performance measurement for projects.
It integrates the scope baseline with the cost baseline, along with the
schedule baseline, to form the performance baseline, which helps the
project management team assess and measure project performance and
progress.
• It is a project management technique that requires the formation of an
integrated baseline against which performance can be measured for the
duration of the project. The principles of EVM can be applied to all projects
in any industry

Earned Value Management (EVM)
• EVM is a project tool of performance measurement for:
– Assessing project trends
– Determining schedule (ahead/behind)
– True budget status (over/under)
• Reporting project status to senior management
• The project’s WBS is divided and subdivided into logical, measurable
work packages
• Work packages provide the units for comparing progress in work
planned, work completed or earned and funds spent

Key Parameters of EVM
• EVM develops and monitors three key dimensions for each work
package and control account:
Planned Value (PV): Budgeted Cost for Work Scheduled (BCWS)
Earned Value (EV): Budgeted Cost for Work Performed (BCWP)
Actual Cost (AC): Actual Cost for Work Performed (ACWP)

EV PV
Planned Value (PV): What did we plan to
achieve by now?
 Earned Value (EV): What have we
AC
achieved so far?
 Actual Cost (AC): What have we spent so
far? EVM

• Planned value (PV) is the authorized budget assigned to scheduled work.
• It is the authorized budget planned for the work to be accomplished for an
activity or work breakdown structure component, not including
management reserve.
• At a given moment, planned value defines the physical work that should
have been accomplished.
• The total of the PV is sometimes referred to as the performance
measurement baseline (PMB). The total planned value for the project is
also known as budget at completion (BAC).

• Earned value (EV) is a measure of work performed expressed in terms of the
budget authorized for that work.
• It is the budget associated with the authorized work that has been completed.
• The EV being measured needs to be related to the PMB, and the EV measured
cannot be greater than the authorized PV budget for a component.
• The EV is often used to calculate the percent complete of a project.
• Progress measurement criteria should be established for each WBS component to
measure work in progress.
• Project managers monitor EV, both incrementally to determine current status and
cumulatively to determine the long‐term performance trends.

• Actual cost (AC) is the realized cost incurred for the work performed
on an activity during a specific time period.
• It is the total cost incurred in accomplishing the work that the EV
measured.
• The AC needs to correspond in definition to what was budgeted in the
PV and measured in the EV (e.g., direct hours only, direct costs only,
or all costs including indirect costs).
• The AC will have no upper limit; whatever is spent to achieve the EV
will be measured.

Example? Simple project
Activity Predecessor Duration(days) Cost/day Total Cost
A ‐ 2 300 600
B A 3 400 1200
C B 3 400 1200
D B 2 200 400
E D 3 100 300

Example?
Reporting date: At the end of day 7
Activity Actual % Complete Incurred Cost

A 100 600
B 100 1400
C 33 500
D 50 200
E 0 0

Example?
Activity Planned Value (PV) Earned Value (EV) Actual Cost (AC)
A
B
C
D
E
Total to Date

Calculate Variance
Schedule Cost
Variance Variance

EVM Measures & Indices
• Schedule variance (SV) is a measure of schedule performance expressed
as the difference between the earned value and the planned value.
• It is the amount by which the project is ahead or behind the planned
delivery date, at a given point in time.
• The EVM schedule variance will ultimately equal zero when the project
is completed because all of the planned values will have been earned.
• Equation: SV = EV − PV

• Cost variance (CV) is the amount of budget deficit or surplus at a given point
in time, expressed as the difference between earned value and the actual
cost.
• It is a measure of cost performance on a project. The cost variance at the end
of the project will be the difference between the budget at completion (BAC)
and the actual amount spent.
• The CV is particularly critical because it indicates the relationship of physical
performance to the costs spent. Negative CV is often difficult for the project
to recover.
• Equation: CV= EV − AC.

• The SV and CV values can be converted to efficiency indicators to reflect
the cost and schedule performance of any project for comparison
against all other projects or within a portfolio of projects. The variances
are useful for determining project status.
 Schedule performance index : SPI = EV/PV
Cost performance index : CPI = EV/AC

Example: Variances?
Activity Planned Earned Actual CV CPI SV SPI

Value Value Cost
(PV) (EV) (AC)
A 600 600 600
B 1200 1200 1400
C 800 400 500
D 400 200 200
E 0 0 0
Total to 3000 2400 2700 ‐300 0.89 ‐600 0.8
Date

Forecasting
• As the project progresses, the project team may develop a forecast for
the estimate at completion (EAC) that may differ from the budget at
completion (BAC) based on the project performance.
• If it becomes obvious that the BAC is no longer viable, the project
manager should consider the forecasted EAC.
• Forecasting the EAC involves making projections of conditions and
events in the project’s future based on current performance information
and other knowledge available at the time of the forecast.

Forecasting
• EACs are typically based on the actual costs incurred for work completed, plus
an estimate to complete (ETC) the remaining work.
• It is incumbent on the project team to predict what it may encounter to
perform the ETC, based on its experience to date. The EVM method works
well in conjunction with manual forecasts of the required EAC costs.
• The most common EAC forecasting approach is a manual, bottom‐up
summation by the project manager and project team. The project manager’s
bottom‐up EAC method builds upon the actual costs and experience incurred
for the work completed, and requires a new estimate to complete the
remaining project work. Equation: EAC = AC + Bottom‐up ETC.

Forecasting: Common Methods
• EAC forecast for ETC work performed at the budgeted rate.
o Equation: EAC = AC + (BAC − EV)
• EAC forecast for ETC work performed at the present CPI.
o Equation: EAC = BAC / CPI
• EAC forecast for ETC work considering both SPI and CPI factors.
o EAC = AC + [(BAC − EV) / (CPI × SPI)]

To‐Complete Performance Index (TCPI)
• The to‐complete performance index (TCPI) is a measure of the cost
performance that is required to be achieved with the remaining resources
in order to meet a specified management goal, such as the BAC or the
EAC. If it becomes obvious that the BAC is no longer viable, the project
manager should consider the forecasted EAC. Once approved, the EAC
may replace the BAC in the TCPI calculation.
• TCPI = Work Remaining (BAC‐EV)/Funds Remaining (BAC‐AC)or(EAC‐AC)

Figure 7‐12 (PMBOK): EV,PV,AC,BAC,EAC,ETC
EVM Summary tables

EVM Summary tables

EVM Summary tables

Example: Home Renovation Project

• The Home Renovation Project has a total budget of $400,000 and a
schedule of 100 days.
• Project reporting is scheduled at periods of 25 days. At the end of the
first period the project should have achieved $120,000 worth of work.
Before the P1 status meeting the project manager found out from the
PM team that the work completed had a value of $140,000. In addition,
the expenditures and commitments to date for that completed work
totaled $100,000.

• Questions
1. Should the project manager be pleased or not? Why?
2. What is the Cost Variance in dollars?
3. What is the Schedule Variance in dollars?
4. What is the Cost Performance Index?
5. What is the Schedule Performance Index?
6. What is the estimated cost at completion (EAC) for the project at this
point?

• Answers
1. Yes, the project is ahead of schedule and under budget.
2. CV = EV – AC = $140,000 – $100,000 = $ 40,000
3. SV = EV – PV = $140,000 – $120,000 = $ 20,000
4. CPI = Earned Value/Actual Cost = 140,000 /100,000 = 1.4
5. SPI = Earned Value/Planned Value = 140,000 / 120,000 = 1.17
6. EAC = Total Budget / CPI = $ 400,000 / 1.4 = $ 285,714


Review
 EVM Parameters?
 How to calculate project variance?
 How to forecast project completion?

Topic for Oral Presentation
 Explain a sample project (case study) using EVM System

Next Module
 Case study: Construction Project time and Cost control

Thank you for your Attention

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Project

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Activity Actual % Complete Incurred Cost

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Activity Planned Value (PV) Earned Value (EV) Actual Cost (AC)

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Activity Planned Earned Actual CV CPI SV SPI

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