Session 7

Project Management
 Project Plan

• Project Scope is everything about a project –work

content as well as expected outcomes
• Project Scope consists of naming all the activities to be
performed, the resources consumed and the end products
that result , including quality standards
• Project Scope includes a Project’s goals, constraints
and objectives
 ELEMENTS IN PROJECT SCOPE
MANAGEMENT
1. Conceptual Development
2. The Scope Statement
3. Work Authorization
4. Scope Reporting
5. Control Systems
6. Project Close out
 Conceptual Development

• Conceptual Development is the process that addresses

project objectives by finding best ways to meet them
• To create an accurate sense of conceptual development
for a project , the project management team must collect
data and develop several pieces of information
 Conceptual Development

• The key steps in information development are

 Problem statement

 Information gathering

 Constraints

 Alternative analysis

 Project objectives
 Problem Statement

• Problem or need statement: Scope management for a

project begins
• With a statement of the goals
• Why there is a need in search of a solution
• What the underlying problem is ?
• What the project intends to do
 Information gathering

• Research to gather all relevant data for the project is the

next step
• Project can be effectively initiated when the project
manager has a clear understanding of the current state of
affairs
 Specific Target Dates
 Alternative Supplier Options
 Degree of Top Management Support etc
 Constraints

• Project Managers must understand any restrictions

that may affect project development
• Time constraints, Budget constraints and Client
demands can all become serious constraints on
project development
 Alternative Analysis

• Problems usually offer alternative methods for

solution
• In project management , alternative analysis consists
of first clearly understanding the nature of the
problem and then working to generate alternative
solutions
 Project objectives

• Conceptual development concludes with a clear

statement of the final objectives for the project in
terms of outputs, required resources and timings
• All steps in the conceptual development process work
together as a system to ultimately affect the outcome
• When each step is well done , the project objectives
will logically follow from the analysis
 The Statement of Work

• The impetus to begin a project is often the

result of a statement of work
• The Statement of Work (SOW) is a detailed
narrative description of the work required for a
project
 SOW-Example
• In case of a Department of Defense Request for
Proposal (RFP) for a new Army field
communication device that is
• “ No greater than 15 inches long by 15 inches wide
by 9 inches deep ,can weigh no more than 12 pounds
, has a transmitting and receiving range of 60 miles ,
must remain functional after being fully immersed in
water for 30 minutes and can sustain damage from
being dropped at heights upto 25 feet”
 Statement of Work

• Some elements in an effective SOW include:

 Introduction and background

 Technical description of the project

 Timeline and milestones

 Work Breakdown Structure(WBS)

• The WBS organizes the work to be done on the project

• In a WBS a project is broken down into its major
components , referred to as modules
• These components are further then subdivided into
detailed subcomponents , which are further broken down
into activities and finally, individual tasks
• The end result is a Project Hierarchical Structure made up
of different levels
 A Simple Case

• Consider the simple case of a student team working

together on a term paper and final presentation for a
college seminar
• One of the first steps in the process of completing the
assignment consists of breaking the project down into
series of tasks , each of which can be allocated to a
member of the student team
• The overall project consisting of specific products- a
final paper and presentation
 Refine Topic
Task 1

Assign library research

Task 2 responsibilities

Develop preliminary outline for

Task 3 paper and presentation

Assign team member to began

Task 4 putting presentation together
Task 5 Begin producing drafts of paper

Task 6 Proofread and correct draft

Task 7 Refine class presentation

Turn in paper and make classroom

Task 8
presentation
 Logic of WBS

• The main logic of WBS is to provide a string of

check points
• These checkpoints address the specific steps in the
project that naturally lead from start to the logical
conclusion
A Goal Setting Using WBS

Project
Project Start
Completion
Goal Goal Goal Goal
1 2 3 4

B Goal Setting Without WBS

Project Start ? Project Completion

 Purposes of WBS
1. It echoes project objectives
2. It is the organizational chart for the project
3. It creates the logic for tracking costs, schedule and
performance specifications for each element in the
project
4. It may be used to communicate project status
5. It may be used to improve overall project
communication
6. It demonstrates how the project will be controlled
 WBS Example
• Consider the case of large , urban hospital that has
made the decision to introduce organization wide
information system technology (IT) for billing ,
accounts receivable, patient record-keeping,
personnel supervision, and medical process control
• The first step in launching this installation project is
to identify the important elements in introducing the
technology
 IT Installation Flowchart

Match IT to Identify user Prepare

problems needs proposal

Identify IT Seek Staff Seek & hire

location Support consultant

Formal Solicit RFP from

vendors Pilot project
proposal

Adopt and Contract for

use IT purchase
 WBS Example
• This list identifies only first level tasks involved in
completing this project
• Each of the 11 steps shown in the flowchart have
some various supporting subtasks associated with
them
• For example 2 , identifying IT user needs, might
have three tasks
1. Interview potential users
2. Develop a presentation of IT benefits
3. Gain user “buy-in” to the proposed system
Partial Work Breakdown Structure
Complete WBS
 Complete WBS

• The 1.0 level shown in the figure identifies the overall

project
• Underneath this level ( e. g. , 1.1,1.2,1.3 etc) are the
major deliverables that support the completion of the
project
• Underneath these deliverables are the various work
packages that must be completed to conclude the
project variables
 Logic of Hierarchy for WBS
Level WBS Term Description

Level 1(Highest) Project The overall project

under development

Level 2 Deliverable The major project

components
Level 3 Sub deliverable Supporting
deliverables
Level 4(Lowest) Work Package Individual project
activities
 Organizational Breakdown Structure
• WBS for a project is able to organize the work
needed to be performed into cost control accounts
that are assignable to various units within the
company that are engaged in performing project
activities
• The outcome of organizing this material is the
Organization Breakdown Structure (OBS)
Intersection of WBS and OBS
 Organizational Breakdown Structure

• The benefit of using an OBS is that it allows for

better linking of project activities and their budgets,
either at a departmental level or even more directly,
on an individual –by-individual basis as shown in the
following figure
Cost Account Rollup using OBS
Cost and Personal Assignments
 Scope Reporting
• Scope Reporting fulfils function by determining the
types of information that will be regularly reported,
who will receive the information, and how this
information will be acquired and disseminated
 Scope Reporting
Scope Reports usually contain the following
• Cost Status: Updates on budget performance
 S curves : graphical display of costs (including labor hours
and other costs) against project schedule
 Earned value: reporting project status in terms of both cost
and time(the budgeted value of work performed regardless
of actual costs incurred)
 Variance or exception reports: documenting any
slippages in time, performance or cost against planned
measures
• Schedule Status: Updates on schedule adherence
• Technical performance: Updates on technical
challenges and solutions
S-Curve
 Understanding S-Curve
• For a typical construction project, work starts at a relatively slower
pace in the beginning. Then it picks up and most of the work is done
in the middle of the project timeline. Afterwards, it gradually slows
down and few activities remain towards the end of the project.
Common Types of S-curves
 Earned Value Management
• The earned value management is an effective
technique of tracking projects. Earned value
comprises of three dimensions
 Budgeted cost of work scheduled(BCWS)
 Budgeted cost of work performed(BCWP)
 Actual cost of work performed( ACWP)
 Budgeted cost of work scheduled(BCWS)

• It is the sum of the cost budget for all the activities in the
baseline( original) plan of the project at any specific future
point in time.
• It is budgeted (planned) cost as per the project plan for a part
of the project to be completed in a given time frame
• For example , the BCWS for all the activities in a product
development project till day is from commencement is say Rs
2.0 Lakhs.
• Budgeted Cost of Work Scheduled (BCWS) is also referred
to as Planned Value
 Budgeted cost of work scheduled(BCWS)

Formula
• Planned Value = (Planned % Complete) X
(BAC)
• BAC is the budget at completion.
 Example

• You have a project to be completed in 12

months. The budget of the project is 100,000
USD. Six months have passed and the
schedule says that 50% of the work should be
completed.
• What is the project’s Planned Value (PV)?
 Solution
• Project duration: 12 months
• Project cost (BAC): 100,000 USD
• Time elapsed: 6 months
• Percent complete: 50% (as per the schedule)
• In this case, we should have completed 50% of the total
work.
• Planned Value = 50% of the value of the total work
• = 50% of BAC
• = 50% of 100,000
• = (50/100) X 100,000
• = 50,000 USD
• Therefore, the project’s Planned Value (PV) is 50,000 USD.
Budgeted cost of work performed (BCWP)

• When a project is under implementation, a certain part of

the project is completed at a given point of time.
• The budgeted (planned) cost of all the activities performed
till that point in time is called(BCWP).
• In our earlier example of product development project, let
us say that BCWP till day is Rs 1.2 lakh.
• Budgeted Cost of Work Performed (BCWP) is also known
as Earned Value .
 Budgeted cost of work performed (BCWP) or
Earned value
Formula

• Earned Value = % of completed work X BAC

(Budget at Completion).
 Example

• You have a project to be completed in 12 months.

The budget of the project is 100,000 USD. Six
months have passed and 60,000 USD has been
spent. On closer review, you find that only 40% of
the work has been completed so far.
 Solution

• Earned Value = 40% of the value of total work

• = 40% of BAC
• = 40% of 100,000
• = 0.4 X 100,000
• = 40,000 USD
• Therefore, the project’s Earned Value (EV) is
40,000 USD.
 Actual cost of work performed (ACWP)

• It is the actual cost incurred in implementing a part of the

project till a given point in time.
• Let us assume that in the example of product
development project , the ACWP is Rs 1.7 lakh till day 5.
• The three dimensions helps us in controlling the time as
well as the cost of implementation of a project.
Actual cost of work performed (ACWP) or
Actual cost(AC)

■ You have a project to be completed in 12 months. The budget

of the project is 100,000 USD. Six months have passed and
60,000 USD has been spent, but on closer review, you find
that only 40% of the work has been completed so far.

• Actual Cost is the amount of money that you have spent so

far.
• In the question, you have spent 60,000 USD on the project so
far.
• Hence, The project’s Actual Cost is 60,000 USD.
 Cost variance (CV)

• Cost variance(CV) = BCWP(EV) –ACWP(AC)

• In our example , CV = 1.2- 1.7 = -0.5
• The negative value of CV indicates being
overbudget and is obviously undesirable.
 Schedule variance (SV)

• Schedule variance(SV) = BCWP(EV) –BCWS(PV)

• In our example , CV = 1.2- 2.0 = -0.8
• The negative value of SV indicates that less work has
been performed compared to what was scheduled to be
performed till a given point in time.
• In our example , work worth Rs 2.0 lakh of cost
should have ben completed till day 5 , while the cost
of work performed till this day is less-worth 1.2 lakhs.
• Naturally a negative value of SV is undesirable.
 Cost Performance Index(CPI)

• CPI can help a project manager assess if the project is

on budget and gives a sense of how efficiently costs
are allocated.
• CPI = EV / AC
• Where:
• CPI = Cost Performance Index
• EV = Earned Value (dollars, euros, etc.)
• AC = Actual Cost (dollars, euros, etc.)
 Interpretation of Results

• If CPI is less than 1, the task is over budget.

• If CPI is zero, the task is on budget.
• If CPI is greater than 1, the task is under
budget.
• CPI = 0 means the project work has not
started.
• CPI = 0.5 means the project has spent twice
the amount that it should have at this point.
• CPI = 1.0 means the project is on schedule.
• CPI = 2.0 means the project has spent half the
amount that it should have at this point.
 Example

■ Let’s say we have a project with two tasks, building a

fence and laying sod. The initial cost baseline is:
ID Task Start date End Date Budget

100 Build Fence Feb. 10 Feb. 20 $4,000

200 Lay Sod Feb. 12 Feb. 25 $3,000

TOTAL $7,000

• Let’s say it’s Feb. 15. Determine the Cost Performance

Index for the project.
 Solution
• Step 1: Determine the percent complete for each
task. Since this is not a real project we will assume the
tasks are 75% and 10% complete, respectively.
• We will add a percent complete column to the table.

%
Start
ID Task End Date Budget Complet
date
e
Build
100 Feb. 10 Feb. 20 $4,000 75%
Fence
200 Lay Sod Feb. 12 Feb. 25 $3,000 10%
TOTAL $7,000
 Solution
• Step 2: Determine Earned Value (EV)
• Task 100 is 75% complete, therefore EV = 75% x $4,000
= $3,000.
• Task 200 is 10% complete, therefore EV = 10% x $3,000
= $300.
• Next we will add a column called EV.

%
ID Task Start date End Date Budget EV
Complete
Build
100 Feb. 10 Feb. 20 $4,000 75% $3,000
Fence

200 Lay Sod Feb. 12 Feb. 25 $3,000 10% $300

TOTAL $7,000
 Solution
• Step 3: Determine Actual Cost (AC).
• Again, since this is not a real project we will have to
assume that Task 100 has an actual cost of $2,500, and
Task 200 has an actual cost of $400.
• Now we will add a column called AC.

ID Task Start date End Date Budget % Complete EV AC

100 Build Fence Feb. 10 Feb. 20 $4,000 75% $3,000 $2,500

200 Lay Sod Feb. 12 Feb. 25 $3,000 10% $300 $400

TOTAL $7,000
 Solution
• Step 4: Determine Cost Performance Index (CPI)
• CPI = EV / AC.

%
Start End
ID Task Budget Comple EV AC CPI
date Date
te

Build
100 Feb. 10 Feb. 20 $4,000 75% $3,000 $2,500 1.20
Fence

200 Lay Sod Feb. 12 Feb. 25 $3,000 10% $300 $400 0.75

TOTAL $7,000 $3,300 $2,900 1.14

 Solution

• The overall project cost performance index, CPI

= 1.14, therefore the project is 14% under
budget. Even though the second task is over
budget, the first task is under budget by a greater
amount, therefore the project is in good shape
overall.
 Schedule Performance Index

• It tells the project manager how far ahead or behind the

project is at the point of analysis (Usually right now).

Formula

SPI = EV / PV

Where:
•SPI = Schedule Performance Index
•EV = Earned Value (dollars, euros, etc.)
•PV = Planned Value (dollars, euros, etc.)
 Interpretation of Results
• If SPI is less than 1, the task is behind schedule.
• If SPI is 1, the task is on schedule
• If SPI is greater than 1, the task is ahead of schedule.
• For example,
• SPI = 0 means the project work has not started.
• SPI = 0.5 means the project has performed half the
work it was supposed to at this point.
• SPI = 1.0 means the project is on schedule.
• SPI = 2.0 means the project has performed twice the
work it was supposed to at this point.
 Example
• Let’s say we have a project with two tasks, building a fence
and laying sod. The initial schedule baseline is:

ID Task Start date End Date Budget

100 Build Fence Feb. 10 Feb. 20 $4,000
200 Lay Sod Feb. 12 Feb. 25 $3,000
TOTAL $7,000

 Let’s say it’s Feb. 15. Determine the Schedule Performance

Index for the project.
 Solution
• Step 1: Determine the percent complete for each
task. Since this is not a real project we will assume
the tasks are 75% and 10% complete, respectively.

ID Task Start date End Date Budget % Complete

100 Build Fence Feb. 10 Feb. 20 $4,000 75%

200 Lay Sod Feb. 12 Feb. 25 $3,000 10%

TOTAL $7,000
 Solution
• Step 2: Determine Planned Value (PV).
• Task 100 should be 50% complete, given the start and end
dates of Feb. 10 and Feb. 20, respectively. Therefore PV =
50% x $4,000 = $2,000.
• Task 200 should be 3 out of 13 days complete, which is
23%. Therefore, PV = 23% x $3,000 = $690.
%
ID Task Start date End Date Budget PV
Complete
Build
100 Feb. 10 Feb. 20 $4,000 75% $2,000
Fence
200 Lay Sod Feb. 12 Feb. 25 $3,000 10% $690

TOTAL $7,000 $2,690

 Solution

• Step 3: Determine Earned Value (EV)

• Task 100 is actually 75% complete, therefore
EV = 75% x $4,000 = $3,000.
• Task 200 is actually 10% complete, therefore
EVID = 10%
Task
x Start
$3,000
date
= $300.
End Date Budget % Complete PV EV

100 Build Fence Feb. 10 Feb. 20 $4,000 75% $2,000 $3,000

200 Lay Sod Feb. 12 Feb. 25 $3,000 10% $690 $300

TOTAL $7,000 $2,690 $3,300
 Solution
• Step 4: Determine Schedule Performance
Index (SPI)
• SPI = EV / PV.
%
Start End
ID Task Budget Comple PV EV SPI
date Date
te
Build
100 Feb. 10 Feb. 20 $4,000 75% $2,000 $3,000 1.25
Fence
200 Lay Sod Feb. 12 Feb. 25 $3,000 10% $690 $300 0.43
TOTAL $7,000 $2,690 $3,300

 The overall project schedule performance index is $3,300 /

$2,690 = 1.23, which means that 23% more work has been
accomplished than the project plan at this point. However, task
200 has an SPI of 0.43 which means that it is significantly behind
schedule.