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Introduction
Hello everyone, today I'll be sharing insights on Project Evaluation and Control. This
concept addresses a crucial challenge in project management, focusing on the establishment of a
precise monitoring and control system for effective implementation.
The constraints, particularly budget and schedule limitations, are highlighted as defining
factors for projects, underscoring the need for meticulous management. Project monitoring and
control are identified as the primary mechanisms to keep the project team well-informed about the
evolving status of the project as it progresses through different life cycle stages toward
completion.
The key emphasis here is on avoiding a passive "no news is good news" mentality.
Instead, the approach encourages a proactive stance, highlighting the benefits derived from
comprehensive and proactive status assessments throughout the project's advancement.
I'll be summarizing the Control Cycles - A General Model, which outlines a continuous
organizational control process with four essential components.
● The first component involves setting a project goal, extending beyond defining the scope
to establish a baseline plan using a precise Work Breakdown Structure (WBS) process.
● The second component focuses on measuring progress, emphasizing the need for
accurate and real-time measurement mechanisms in project systems for efficient
management.
● Moving on to the third component, it involves comparing actual performance with the
planned baseline through methods like gap analysis, forming the foundation for evaluating
the project's current status.
In summary, the Control Cycles - A General Model provides a dynamic and iterative
system for effective organizational control, encompassing goal-setting, progress measurement,
performance comparison, and corrective action implementation. It's a comprehensive approach
designed to ensure efficient project management and alignment with project goals.
Monitoring Project Performance
In essence, monitoring project performance entails regularly assessing the ongoing status
of the project against the established baseline budget. This method is crucial as it serves as a
vital means of evaluating the project's progress in comparison to the original budget projections.
Essentially, it helps us stay on track and understand how well the project is aligning with the
initial financial plans.
S-CURVE DRAWBACKS
● and about the drawbacks associated with S-curves, despite their valuable insights into
project performance. While these curves excel at highlighting positive or negative
variances in budget expenditures, it's important for project teams to recognize their
limitations. One notable drawback is that S-curves may fall short in providing clear
interpretations of the underlying causes behind these variances. To ensure a
comprehensive evaluation of project progress, it becomes crucial for project teams to
understand and navigate these limitations effectively.
MILESTONE ANALYSIS
● the concept of Milestone Analysis, which serves as an additional method for monitoring
project progress. In this approach, a milestone represents a noteworthy event or stage in
the project, symbolizing a significant accomplishment on the path to project completion.
The method involves tracking and assessing these key project milestones to gauge overall
progress and success. Essentially, Milestone Analysis provides a focused and structured
way to evaluate the project's journey by highlighting significant achievements along the
way.
2. Team Motivation: In extensive projects, milestones become crucial for sustaining team
motivation. They provide clarity on individual contributions and the projected timeline, requiring
strong leadership and communication for success throughout the project's duration.
3. Client Needs and Change Requests: Milestones offer structured points for reviewing client
needs and integrating change requests. This approach ensures transparency, agility, and effective
collaboration, allowing seamless adjustments to the project trajectory.
4. Coordination with Suppliers: Ensuring punctual delivery without disrupting project activities is
a critical challenge. Milestones help coordinate delivery dates with the project timeline, enhancing
overall efficiency and ensuring successful project progression.
5. Project Review Gates: Project managers skillfully synchronize delivery dates with the
comprehensive project timeline, ensuring a smooth workflow and the attainment of project
milestones. This proficiency enhances operational efficiency and facilitates successful project
progression.
In short, milestones in project management serve as essential markers for progress, motivation,
communication, and strategic adaptation, contributing significantly to the overall success of a
project.
I'd like to share with you a key aspect of project monitoring and control known as Earned
Value Management (EVM). Developed in response to U.S. government contracting agencies'
concerns about the accuracy of tracking costs in the 1960s, EVM has become a widely embraced
method. It integrates cost, schedule, and performance data to offer a thorough evaluation of a
project's status, enabling effective monitoring and control throughout its development. This
approach has proven to be a valuable tool in project management, allowing for a comprehensive
assessment of a project's progress and ensuring accountability in tracking costs over its
lifecycle.
● PV Planned value.
Let’s begin with the essential concept in Earned Value Management known as
Planned Value (PV). PV represents the authorized budget allocated to scheduled work in a
project. It serves as a metric that indicates the expected physical work that should have
been completed up to a specific point in time. Think of it as a cost estimate that
encapsulates the budgeted resources scheduled throughout the cumulative baseline of a
project's life cycle. In simpler terms, PV is a dynamic indicator that helps project managers
assess planned progress and resource allocation at different stages of a project.
● EV Earned value.
I'd like to delve into another crucial concept in Earned Value Management – Earned
Value (EV). EV is a vital metric that measures the work accomplished in relation to the
budget authorized for that specific task. It essentially quantifies the actual budgeted cost
or the "value" of the work completed up to the present date. This metric provides a
tangible and real-time assessment of a project's progress, allowing project managers to
evaluate the efficiency and value derived from the resources invested in ongoing work. As
a key performance indicator, EV plays a pivotal role in enabling informed decision-making
and effective monitoring of project outcomes throughout its lifecycle.
● SV Schedule variance.
SV quantifies schedule performance by calculating the difference between Earned
Value (EV) and Planned Value (PV). A positive SV means the project is ahead of schedule,
while a negative SV indicates a delay.
● CV Cost variance.
CV assesses cost performance by comparing EV to the Actual Cost of work
performed (AC). A positive CV signals being under budget, while a negative CV indicates a
deficit.
Understanding and leveraging these metrics are essential for effective project management,
allowing project managers to make informed decisions and ensure both schedule adherence and
financial control throughout the project's lifecycle.
We'll explore the crucial process of creating project baselines, especially in the context of
Earned Value Management (EVM). Establishing project baselines is a foundational step in
implementing an effective control process. While baseline information is essential for any control
method, it becomes elemental in the realm of EVM.
In the context of EVM, the planned value is a key component of the project baseline. This
planned value acts as a reference point against which project progress is measured accurately. It
provides project managers with a solid foundation to assess deviations, make informed
decisions, and maintain effective control throughout the entire project's lifecycle.
Today, let's delve into two fundamental tools in project management: the Work Breakdown
Structure (WBS) and the time-phased budget.
1. Work Breakdown Structure (WBS): The WBS is a vital tool that plays a crucial role in
project management. It identifies individual work packages and tasks that are essential for the
project's completion. Essentially, it breaks down the project into manageable components,
offering a clear roadmap for successful project execution.
2. Time-Phased Budget: Building upon the WBS, the time-phased budget takes project
planning to the next level. It not only helps in sequencing tasks but also provides valuable
insights into when budget allocations are likely to be spent throughout the project's progression.
This dynamic aspect enhances the project team's ability to plan and allocate resources efficiently,
ensuring a well-managed and cost-effective project lifecycle.
In summary, the WBS gives us a structured breakdown of project tasks, while the time-
phased budget adds a temporal dimension, helping us understand when budgetary resources are
expected to be utilized. Together, they form a powerful combination for effective project planning
and resource management.
We’ll explore the essential steps in Earned Value Management (EVM), a comprehensive
project management approach that empowers organizations to effectively monitor and control
project performance. Here are the key components:
4. Actual Cost Calculation (Actual Cost - AC) and Earned Value (EV):
- Calculate actual costs (AC) associated with completing each task. Simultaneously, compute
the budgeted values for tasks in progress, known as earned value (EV). EV is a critical metric
forming the basis for EVM.
By following these steps, project managers gain valuable insights into project progress, identify
deviations from the planned budget and schedule, and make informed decisions. EVM serves as a
powerful tool for proactive project control, enabling the management and mitigation of potential
risks.
Host: Earned Value Management (EVM) is a powerful project management technique used to
assess a project's performance and progress. When applied to a portfolio of projects, EVM
becomes a valuable tool for monitoring and managing the overall health and success of multiple
projects.
Host: The key components of EVM include Planned Value (PV), Earned Value (EV), and Actual
Cost (AC). Planned Value represents the authorized budget for the scheduled work, while Earned
Value quantifies the value of the work performed in terms of the budget allocated for that work.
Actual Cost reflects the actual expenditures incurred for the completed work.
Host: These components are crucial for calculating performance indices that provide insights
into cost and schedule adherence.
Host: The Cost Performance Index (CPI) is derived by dividing EV by AC, indicating cost
efficiency. Similarly, the Schedule Performance Index (SPI) is obtained by dividing EV by PV,
revealing schedule efficiency. Values above 1 indicate favorable performance, while values below
1 suggest potential issues.
Host: The Cost Performance Index (CPI) is derived by dividing EV by AC, indicating cost
efficiency. Similarly, the Schedule Performance Index (SPI) is obtained by dividing EV by PV,
revealing schedule efficiency. Values above 1 indicate favorable performance, while values below
1 suggest potential issues.
Host: Let’s take a look at the three (3) figures as examples of how a project can be monitored.
Figure 13.8 shows monitoring project performance using the S-Curve Analysis.
Figure 13.9 shows monitoring project performance using the Control Charting.
Figure 13.10 shows monitoring project performance using the Earned Value.
Host: We also have here all the terminology used for earned value. (The host will read each item
and the definition)
Host: Now let’s talk about the steps in EVM or Earned Value Management. (The host will read
each item and the definition)
Clearly define each activity or task that will be performed on the project, including its resource
needs as well as a detailed budget.
Create the activity and resource usage schedules.
Develop a “time-phased” budget that shows expenditures across the project’s life.
Total the actual costs of doing each task to arrive at the actual cost of work performed (AC)
Calculate both a project’s budget variance and schedule variance while it is still in process.
Host: Now Here are the benefits of using earned value to manage a portfolio of projects. (The
host will read each item below)
It can work at the portfolio level as well as with individual projects
The process simply involves the aggregation of all earned value measures across the firm’s
entire project portfolio
Offers top management an excellent window into the firm’s ability to efficiently run projects
Allows for comparisons across all projects currently in development
Isolates both the positive and negative variances as they occur
Host: There are 4 stages or flow of the earned value system. (The host will read each item and
the definition)
Proposal stage - The specifics of the program are determined at this stage. Among the key
considerations to be determined is the form of EVM to be applied to the program if the
proposal is successful and the contract awarded. Different clients may require different
earned value metrics or evaluation windows that have to become part of the proposal.
Contract award - When Northrop Grumman is selected as the successful contractor, all
critical elements and requirements of the project are defined, including WBS, scope,
delivery schedule, and target budgets, as well as an earned value plan that will be used as
the basis for status measurement and updates across the project life cycle.
Baseline stage - Once the preliminary scope and deliverables have been agreed to between
the contractor and the client, the detailed planning, project schedule, and formal work
authorization is developed. The baseline is created now that key work packages and
deliverables are identified, and budgets are assigned to create a time-phased project budget.
Maintenance phase - Once the project baseline is established and formally signed off by
key parties, the project passes to the monitoring and control stage, where the key
advantages of EVM are realized. Performance is measured, schedules are updated, and all
significant variances are identified and reported.
Host: Earned Value Management (EVM) is a powerful project management technique used to
assess a project's performance and progress. When applied to a portfolio of projects, EVM
becomes a valuable tool for monitoring and managing the overall health and success of multiple
projects.
Host: The key components of EVM include Planned Value (PV), Earned Value (EV), and Actual
Cost (AC). Planned Value represents the authorized budget for the scheduled work, while Earned
Value quantifies the value of the work performed in terms of the budget allocated for that work.
Actual Cost reflects the actual expenditure incurred for the completed work.
Host: These components are crucial for calculating performance indices that provide insights
into cost and schedule adherence.
Host: The Cost Performance Index (CPI) is derived by dividing EV by AC, indicating cost
efficiency. Similarly, the Schedule Performance Index (SPI) is obtained by dividing EV by PV,
revealing schedule efficiency. Values above 1 indicate favorable performance, while values below
1 suggest potential issues.
Host: The Cost Performance Index (CPI) is derived by dividing EV by AC, indicating cost
efficiency. Similarly, the Schedule Performance Index (SPI) is obtained by dividing EV by PV,
revealing schedule efficiency. Values above 1 indicate favorable performance, while values below
1 suggest potential issues.
Host: Let’s take a look at the three (3) figures as examples of how a project can be monitored.
Figure 13.8 shows monitoring project performance using the S-Curve Analysis.
Figure 13.9 shows monitoring project performance using the Control Charting.
Figure 13.10 shows monitoring project performance using the Earned Value.
Host: We also have here all the terminology used for earned value. (The host will read each item
and the definition)
Host: Now let’s talk about the steps in EVM or Earned Value Management. (The host will read
each item and the definition)
Clearly define each activity or task that will be performed on the project, including its resource
needs as well as a detailed budget.
Create the activity and resource usage schedules.
Develop a “time-phased” budget that shows expenditures across the project’s life.
Total the actual costs of doing each task to arrive at the actual cost of work performed (AC)
Calculate both a project’s budget variance and schedule variance while it is still in process.
Host: Now here are the benefits of using earned value to manage a portfolio of projects. (The
host will read each item below)
It can work at the portfolio level as well as with individual projects
The process simply involves the aggregation of all earned value measures across the firm’s
entire project portfolio
Offers top management an excellent window into the firm’s ability to efficiently run projects
Allows for comparisons across all projects currently in development
Isolates both the positive and negative variances as they occur
Host: There are 4 stages or flow of the earned value system. (The host will read each item and
the definition)
Proposal stage - The specifics of the program are determined at this stage. Among the key
considerations to be determined is the form of EVM to be applied to the program if the
proposal is successful and the contract awarded. Different clients may require different
earned value metrics or evaluation windows that have to become part of the proposal.
Contract award - When Northrop Grumman is selected as the successful contractor, all
critical elements and requirements of the project are defined, including WBS, scope,
delivery schedule, and target budgets, as well as an earned value plan that will be used as
the basis for status measurement and updates across the project life cycle.
Baseline stage - Once the preliminary scope and deliverables have been agreed to between
the contractor and the client, the detailed planning, project schedule, and formal work
authorization is developed. The baseline is created now that key work packages and
deliverables are identified, and budgets are assigned to create a time-phased project budget.
Maintenance phase - Once the project baseline is established and formally signed off by
key parties, the project passes to the monitoring and control stage, where the key
advantages of EVM are realized. Performance is measured, schedules are updated, and all
significant variances are identified and reported.
REPORTER: Today, I'll be discussing the critical role of Earned Value Management (EVM) in
understanding the true status of our ongoing projects. The effectiveness of EVM hinges on the
provision of accurate and up-to-date information, especially regarding the percentage of work
packages completed. Let's delve into how the calculated Earned Value (EV) is as accurate as
our reporting system allows it to be.
REPORTER: As with any metric, accuracy is paramount in evaluating the health of a project.
The accuracy of our EV depends on the honesty and precision of our reporting system. It's
crucial for both project team members and managers to contribute to and enforce a reporting
system that reflects the true status of our ongoing projects.
REPORTER: Now, let's explore the common methods for assigning completion values, which
play a pivotal role in determining EV.
REPORTER:
0/100 Rule
The first method is the 0/100 rule. This straightforward approach assigns a value of zero until
the activity is completed, at which point it switches to 100%. While effective for very short work
packages, it lacks real-time insights for longer durations.
REPORTER:
50/50 Rule
Next, we have the 50/50 rule. This method automatically assigns a 50% completion value when
an activity starts, which then shifts to 100% upon completion. Similar to the 0/100 rule, it's more
suitable for short-duration work packages.
REPORTER:
Percentage Complete Rule
The third method is the Percentage Complete Rule. Here, the project manager and team
members agree on completion milestones, often based on quarters (25%, 50%, 75%, 100%),
thirds (33%, 67%, 100%), or other values. It provides a more nuanced and dynamic approach to
tracking progress.
REPORTER: However, it's important to note a caution with the percentage complete rule.
There's some controversy surrounding its application, and careful consideration is required
when defining completion milestones to ensure accuracy and transparency in reporting.
REPORTER: Despite its imperfections, EVM offers real-time insights that are invaluable for
project managers to make informed decisions and course corrections. Recent developments,
such as Earned Schedule (ES), aim to enhance EVM processes, addressing concerns about
using cost data for schedule performance.