helberdcmacedo

Cost Control - Part I Page 1

1 Definition 4 Example – Planned - Lifecycle
The application of procedures to monitor US$ Total per year (US$)
expenditures and performance against 20 Planned Cumulative 15300

Thousands
progress of projects or manufacturing 15
Planning phase
operations; to measure variance from 10 Execution phase 2022
2021 14000
authorized budgets and allow effective 5 2022 Execution phase
action to be taken to achieve minimum 0 1300 2021 Planning phase

03/2021
01/2021

05/2021

07/2021

09/2021

11/2021

01/2022

03/2022

05/2022

07/2022

09/2022

11/2022
costs.1 1 AACE International

2 Methods
• EVM* 5 Example – Cost Control (after 6 months) – YEAR VISION - 2021
• Performed x Planned ** US$ +15%
• S Curve* 1600 1500
• Rundown Curve* 1400 Planned Cumulative 1300
• Indicators, etc 1200 Performed Cumulative
1000 Forecast Cumulative +17%
* See reference **Detailed from fig 4 -7
800 770
660
3 Control Period 600 Variance of $110 up
Performed
400
period
to June and $200 on
• Year 200 the year, but WHY?
• Lifecycle 0 Forecast
Variance (year) Performed
Variance (up to date) Planned
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Cost Control – Part I Page 2
6 Variance Analysis - Waterfall graph US$ 7 Variance Analysis (by area) - Radar graph
YEAR VISION - 2021 YEAR VISION - 2021
1500
HSE
50%
40%
30%
The key factors are shown to 20% Civil
explain the 2021 variance. Other
10% Construction
0%
Two areas are
responsible for the
Planned Scope Redesign High Currency Forecast variance (95%).
changed /Rework Productivity variance Electrical Mechanical

8 Tool* Improve your graphs

Methods
* It is not free
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Cost Control – Forecast - Part II Page 1
1 Forecast Definition 4 Example – Math Method
An estimate and prediction of
future conditions and events based
on information and knowledge Planned
Monthly Actual Forecast
200 200 200 200 200 200
available at the time of the 180
forecast.1 1 AACE International 150
140 138
2 Methods 120
100
• EVM* Data Analysis
• New estimate
• Planned
• Expert Opinion
Math
• Mathematical
* See reference 1 2 3 4 5 6 Month Method
choice
3 Method x Performance Last months average
Average = (100 + 180 + 120+150+140)/5 = 138
Forecast adopted is $ 138 for sixth month Apply and
90%>
<10% Benefits Test
Manual
Planned • Easy and straightforward to apply
• Useful to challenge other methods.
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Cost Control – Forecast - Part II Page 2
5 Example – EVM Forecast 950 6 Example – EVM Forecast
850 Equation 1
Planned 800
Actual 700 700
750
700
Forecast = (Budget – Earned Cum.) + Actual Cum.
Earned 600
CPI
500
CPI = EV / Actual
400 500
SPI = EV / Planned
700 650 CPI = 3050 /3900 = 0.78
600
200 500
400 SPI = 3050 / 3750 = 0.81
200
Duration Forecast = 12 m / SPI = 15 m
1 2 3 4 5 6 Month Forecast = (7480 – 3050) + 3900 = $ 9565
Estimate ($) at
Data: 0.78
Completion
• Duration: 12 Months

Forecast
• Budget: $ 7480 Duration (month)

Calculate % Calculate

Forecast
Performance Up to date ($)

Budget
Indicators 9565

Planned
15 7480
Calculate the Estimate at 12 3900
3750
earned value completion 3050
Planned Actual Earned