Project Control, SV, PV, and AC

13–1
STRUCTURE OF A PROJECT
MONITORING INFORMATION SYSTEM

• Creating a project monitoring system involves

determining:
– What data to collect
– How, when, and who will collect the data
– How to analyze the data
– How to report current progress to management

13–2
PROJECT MONITORING
INFORMATION SYSTEM

• Information System Structure

– What data are collected?
• Current status of project (schedule and cost)
• Remaining cost to compete project
• Date that project will be complete
• Potential problems to be addressed now
• Out-of-control activities requiring intervention
• Cost and/or schedule overruns and the reasons for them
• Forecast of overruns at time of project completion

13–3
PROJECT MONITORING
INFORMATION SYSTEM
(CONT’D)
(CONT’D)

• Information System Structure (cont’d)

– Collecting data and analysis
• Who will collect project data?
• How will data be collected?
• When will the data be collected?
• Who will compile and analyze the data?

– Reports and reporting

• Who will receive the reports?
• How will the reports be transmitted?
• When will the reports be distributed?

13–4
PROJECT PROGRESS REPORT FORMAT
• Progress since last report
• Current status of project
1. Schedule
2. Cost
3. Scope
• Cumulative trends
• Problems and issues since last report
1. Actions and resolution of earlier problems
2. New variances and problems identified
• Corrective action planned

13–5
THE PROJECT CONTROL PROCESS
• Control
– The process of comparing actual performance against plan to identify
deviations, evaluate courses of action, and take appropriate
corrective action.
• Project Control Steps
1. Setting a baseline plan.
2. Measuring progress and performance.
3. Comparing plan against actual.
4. Taking action.
• Tools
– Tracking and baseline Gantt charts
– Control charts

13–6
BASELINE AND TRACKING GANTT CHARTS

FIGURE 13.1

13–7
PROJECT SCHEDULE CONTROL CHART

FIGURE 13.2

13–8
DEVELOPMENT OF AN EARNED VALUE
COST/SCHEDULE SYSTEM
• Time-Phase Baseline Plan
– Corrects the failure of most monitoring systems to
connect a project’s actual performance to its schedule and
forecast budget.
• Systems that measure only cost variances do not identify resource
and project cost problems associated with falling behind or
progressing ahead of schedule.
• Earned Value Cost/Schedule System
– An integrated project management system based on the
earned value concept that uses a time-phased budget
baseline to compare actual and planned schedule and
costs.
13–9
GLOSSARY OF TERMS
EV Earned value for a task is simply the percent complete times its original budget. Stated differently,
EV is the percent of the original budget that has been earned by actual work completed.

PV The planned time-phased baseline of the value of the work scheduled. An approved cost estimate
of the resources scheduled in a time-phased cumulative baseline [BCWS—budgeted cost of the
work scheduled].

AC Actual cost of the work completed. The sum of the costs incurred in accomplishing work. [ACWP
—actual cost of the work performed].

CV Cost variance is the difference between the earned value and the actual costs for the work
completed to date where CV = EV – AC.

SV Schedule variance is the difference between the earned value and the baseline line to date where
SV = EV – PV.

BAC Budgeted cost at completion. Total budgeted cost of the baseline or project cost accounts.

EAC Estimated cost at completion.

ETC Estimated cost to complete remaining work.

VAC Cost variance at completion. VAC indicates expected actual over- or under-run cost at completion.

TABLE 13.1
13–10
DEVELOPING AN INTEGRATED
COST/SCHEDULE SYSTEM
1. Define the work using a WBS.
a. Scope
b. Work packages
c. Deliverables
d. Organization units
e. Resources
f. Budgets
2. Develop work and
resource schedules.
a. Schedule resources
to activities
b. Time-phase work packages into
a network
3. Develop a time-phased budget
using work packages included in
an activity. Accumulate budgets
(PV).
4. At the work package level,
collect the actual costs for the
work performed (AC). Multiply
percent complete times original
budget (EV).`
5. Compute the schedule variance
(EV-PV) and the cost variance
(EV-AC).
13–11
PROJECT MANAGEMENT INFORMATION SYSTEM
OVERVIEW

FIGURE 13.3

13–12
DEVELOPMENT OF PROJECT BASELINES
• Rules for Placing Costs in Baselines
– Costs are placed exactly as they are expected to be
“earned” in order to track them to their point of origin.
– Percent Complete Rule
• Costs are periodically assigned to a baseline as units of work are
completed over the duration of a work package.

13–13
DEVELOPMENT OF PROJECT BASELINES
• Purposes of a Baseline (PV)
– An anchor point for measuring performance
• A planned cost and expected schedule against
which actual cost and schedule are measured.
• A basis for cash flows and awarding progress payments.
• A summation of time-phased budgets (cost accounts as summed
work packages) along a project timeline.
• What Costs Are Included in Baselines?
– Labor, equipment, materials, project direct overhead costs
(DOC)

13–14
METHODS OF VARIANCE ANALYSIS
• Comparing Earned Value
– With the expected schedule value.
– With the actual costs.
• Assessing Status of a Project
– Required data elements
• Data Budgeted cost of the work scheduled (PV)
• Budgeted cost of the work completed (EV)
• Actual cost of the work completed (AC)
– Calculate schedule and cost variances
• A positive variance indicates a desirable condition,
while a negative variance suggests problems or
changes that have taken place.

13–15
METHODS OF VARIANCE ANALYSIS
• Cost Variance (CV)
– Indicates if the work accomplished using labor
and materials costs more or less than was
planned at any point in the project.
• Schedule Variance (SV)
– Presents an overall assessment in dollar terms
of the progress of all work packages in the project
scheduled to date.

13–16
COST/SCHEDULE GRAPH

FIGURE 13.4

13–17
EARNED-VALUE REVIEW EXERCISE

FIGURE 13.5

13–18
DEVELOPING A STATUS REPORT:
A HYPOTHETICAL EXAMPLE
• Assumptions
– Each cost account has only one work package, and each
cost account will be represented as an activity on the
network.
– The project network early start times will serve as the
basis for assigning the baseline values.
– From the moment work an activity begins, some actual
costs will be incurred each period until the activity is
completed.

13–19
• Example of Schedule Variance (SV)
• You have a project to be completed in 12 months
and the budget of the project is 100,000 USD. 6
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.

• Find the project’s Schedule Variance (SV) and

determine if you are ahead of schedule or behind
schedule.

13–20
• Given in the question:
• Actual Cost (AC) = 60,000 USD
• Planned Value (PV) = 50% of 100,000= 50,000 USD
• Earned Value (EV) = 40% of 100,000

13–21
• = 40,000 USD
• Now, Schedule Variance = Earned Value – Planned
Value= 40,000 – 50,000= -10,000 USD
• The project’s Schedule Variance is -10,000 USD.
You are behind schedule since it is negative.
• Please note that in the question, the Planned Value is
not specifically given but the question says that half
of the time has passed. In such a situation, you can
assume that the budget was evenly distributed, so
the planned value will be 50%.

13–22
• Example of Cost Variance (CV)
• You have a project to be completed in 12 months,
and the budget of the project is 100,000 USD. 6
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.

• Find the project’s Cost Variance (CV) and determine

if you are under budget or over budget.

13–23
• Given in the question:
• Actual Cost (AC) = 60,000USD
• Earned Value (EV) = 40% of 100,000 USD= 40,000
USD
• Now, Cost Variance = Earned Value – Actual Cost
• CV = EV – AC
• = 40,000 – 60,000= –20,000 USD
• Hence, the project’s Cost Variance is –20,000 USD,
and you are over budget since it is negative.

13–24
Estimate at Completion (EAC)
• Example of the Estimate at Completion (Case 1)
• You have a project to be completed in 12 months
and the cost is 100,000 USD. 6 months have passed,
and 60,000 USD has been spent, but upon closer
review, you find that only 40% of the work has been
completed.
• Find the Estimate at Completion (EAC) for this
project.

13–25
• Given in the question:
• Budget at Completion (BAC) = 100,000 USD
• Actual Cost (AC) = 60,000 USD
• Planned Value (PV) = 50% of 100,000= 50,000 USD
• The question did not say that the Planned Value was
50%. However, it says that the duration is 12 months
and 6 months have passed. In this case, you can
safely assume that the PV was 50% unless it is given
in the question.
• Earned Value (EV) = 40% of 100,000= 40,000 USD

13–26
• First, you have to calculate the Cost Performance
Index to calculate the EAC:
• Cost Performance Index (CPI) = EV / AC
= 40,000 / 60,000= 0.67
• =>Cost Performance Index (CPI) = 0.67
• Now,Estimate at Completion (EAC) = BAC / CPI
• = 100,000 / 0.67= 149,253.73
• Hence, the Estimate at Completion (EAC) is
149,253.73 USD.

13–27
• In other words, if the project continues with CPI =
0.67 until the end, you will have to spend 149,253.73
USD to complete it.
• The Estimate at Completion (EAC) gives the amount
of money the project will cost at the end.
• The Estimate at Completion can be determined by
four methods, depending on how the project is
performing. However, from a PMP certification exam
point of view, the first method is the most important.
There is a smaller chance you will see questions
based on the others.
13–28
• Example of the Estimate at Completion (Case 2)
• You have a project with a budget of 500,000 USD. An incident during the
execution phase that costs you a lot of money. However, you are sure that
this will not happen again, and that you can continue with your calculated
performance for the rest of the project.
• To date, you have spent 200,000 USD, and the value of the completed
work is 175,000 USD.
• Calculate the Estimate at Completion (EAC).
• You will use this formula because the cost increase is temporary, and you
can complete the rest of the project as planned.
• Estimate at Completion = Money spent to date + (Budgeted cost for the
remaining work – Earned Value)
• EAC = AC + (BAC – EV)

13–29
• Given in the question:
• Actual Cost (AC) = 200,000 USD
• Budget at Completion (BAC) = 500,000
• Earned Value (EV) = 175,000
• Hence, EAC = 200,000 + (500,000 – 175,000)
• = 200,000 + 325,000= 525,000 USD

• Hence, the Estimate at Completion is 525,000 USD.

13–30
• Forecasting Technique #2: Estimate to Complete
(ETC)
• Estimate to Complete is the second forecasting
technique. It is the cost of completing the remaining
work.
• Estimate to Complete = Estimate at Completion –
Actual Cost
• ETC = EAC – AC

13–31
• Forecasting Technique #3: To Complete Performance Index
(TCPI)
• The To Complete Performance Index estimates how fast you
have to move to achieve the target.
• It is the estimate of the future cost that you may need to
complete the project within the approved budget. This
budget may be the BAC or an updated budget, i.e., Estimate
at Completion (EAC).
• TCPI = (Remaining Work) / (Remaining Funds)
• TCPI = (BAC – EV) / (BAC – AC)
• Or
• TCPI = (BAC – EV) / (EAC – AC)

13–32
Schedule Performance Index
• Example of Schedule Performance Index (SPI)
• You have a project to be completed in 12 months,
and the budget is 100,000 USD. Six months have
passed, and 60,000 USD has been spent, but upon
closer review, you find that only 40% of the work has
been completed so far.

• Find the Schedule Performance Index and deduce

whether the project is ahead or behind of schedule.

13–33
• Given in the question:
• Actual Cost (AC) = 60,000USD
• Planned Value (PV) = 50% of 100,000 USD=50,000
USD
• In the question, the Planned Value is not given.
However, the project duration is 12 months and 6
months have passed. In this situation, you can
assume the budget was distributed evenly for each
month. Therefore, in 6 months, 50% of the budget
will have been spent.

13–34
• Earned Value (EV) = 40% of 100,000 USD= 40,000
USD
• Now, Schedule Performance Index (SPI) = EV / PV
= 40,000 / 50,000= 0.8
• Hence, the Schedule Performance Index is 0.8
• You are behind schedule since the Schedule
Performance Index is less than one.

13–35
Cost Performance Index
• Example of Cost Performance Index (CPI)
• You have a project to be completed in 12 months,
and the budget of the project is 100,000 USD. 6
months have passed, and 60,000 USD has been
spent, but upon closer review, you find that only 40%
of the work has been completed.

• Find the Cost Performance Index for this project and

deduce whether you are under budget or over
budget.

13–36
• The following information is given in the question:
• Actual Cost (AC) = 60,000USD
• Planned Value (PV) = 50% of 100,000 USD = 50,000 USD
• Earned Value (EV) = 40% of 100,000 USD
• = 40,000 USD
• Now, Cost Performance Index (CPI) = EV / AC = 40,000 / 60,000= 0.67
• Hence, the Cost Performance Index is 0.67
• This means you are earning 0.67 USD for every 1 USD spent since the Cost
Performance Index is less than one. This means you are over budget.

13–37
Problems
• Given a project with the following characteristics,
answer the following questions:
• You are the project manager of a project to build
fancy birdhouses.
• You are to build two birdhouses a month for 12
months.
• Each birdhouse is planned to cost $100.
• Your project is scheduled to last for 12 months.
• It is the beginning of month 10.
• You have built 20 birdhouses and your CPI is .9091.

13–38
• 1. How is the project performing?
• A. Over budget and ahead of schedule
B. Under budget and ahead of schedule
C. Over budget and behind schedule
D. Under budget and behind schedule.
• 2. What is the actual cost of the project right now?
• A. $1800
B. $2000
C. $2200
D. $2400

13–39
• 3. Assuming that the COST variance experienced
so far in the project will continue, how much
more money will it take to complete the project?
• A. $400
B. $440
C. $2800
D. $2840

13–40
• 4. If the variance experienced so far were to stop,
what is the project’s estimate at completion?
• A. $2400
B. $2440
C. $2600
D. $2800

13–41
• 5. What is the project’s TCPI using the project’s
budget at completion?
• A. .5
B. 1
C. 1.5
D. 2

13–42
WORK BREAKDOWN STRUCTURE WITH
COST ACCOUNTS

FIGURE 13.6

13–43
DIGITAL CAMERA PROTOTYPE PROJECT
BASELINE GANTT CHART

FIGURE 13.7

13–44
DIGITAL CAMERA PROTOTYPE PROJECT BASELINE
BUDGET ($000)

FIGURE 13.8

13–45
DIGITAL CAMERA PROTOTYPE STATUS REPORTS:
PERIODS 1–3

TABLE 13.2

13–46
DIGITAL CAMERA PROTOTYPE STATUS REPORTS:
PERIODS 4 & 5

TABLE 13.2 (cont’d)

13–47
DIGITAL CAMERA PROTOTYPE STATUS REPORTS:
PERIODS 6 & 7

TABLE 13.2 (cont’d)

13–48
DIGITAL CAMERA PROTOTYPE SUMMARY GRAPH
($000)

FIGURE 13.9

13–49
DIGITAL CAMERA PROJECT-TRACKING GANTT
CHART SHOWING STATUS—THROUGH PERIOD 7

FIGURE 13.10

13–50
Project
Project Rollup
Rollup
End
End Period
Period 77
($000)
($000)

FIGURE 13.11
13–51
INDEXES TO MONITOR PROGRESS
• Performance Indexes
– Cost Performance Index (CPI)
• Measures the cost efficiency of work accomplished to date.
• CPI = EV/AC
– Scheduling Performance Index (SPI)
• Measures scheduling efficiency
• SPI = EV/PV
– Percent Complete Indexes
• Indicate how much of the work accomplished represents of the
total budgeted (BAC) and actual (AC) dollars to date.
• PCIB = EV/BAC
• PCIC = AC/EAC

13–52
INTERPRETATION OF INDEXES

Index Cost (CPI) Schedule (SPI)

>1.00 Under cost Ahead of schedule
=1.00 On cost On schedule
<1.00 Over cost Behind schedule

TABLE 13.3

13–53
Indexes
Periods 1–7

FIGURE 13.12

13–54
ADDITIONAL EARNED VALUE RULES
• Rules applied to short-duration activities and/or
small-cost activities
– 0/100 percent rule
• Assumes 100 % of budget credit is earned at once and only when
the work is completed.
– 50/50 rule
• Allows for 50% of the value of the work package budget to be
earned when it is started and 50% to be earned when the package
is completed.
– Percent complete with weighted monitoring gates
• Uses subjective estimated percent complete in combination with
hard, tangible monitoring points.

13–55
FORECASTING FINAL PROJECT COST
• Methods used to revise estimates of future project
costs:
– EAC
re
• Allows experts in the field to change original baseline durations
and costs because new information tells them
the original estimates are not accurate.

– EAC
f
• Uses actual costs-to-date plus an efficiency index to project final
costs in large projects where the original budget is unreliable.

13–56
FORECASTING MODEL: EACFF

The equation for this forecasting model:

13–57
Monthly
Monthly Status
Status Report
Report

EXHIBIT 13.1

13–58
TROJAN NUCLEAR PLANT DECOMMISSIONING
EARNED VALUE STATUS REPORT

EXHIBIT 13.2

13–59
OTHER CONTROL ISSUES

Issues
Issues In
In Maintaining
Maintaining Control
Control Of
Of Projects
Projects

Scope
ScopeCreep
Creep

Baseline
BaselineChanges
Changes

Data
DataAcquisition
Acquisition
Costs
Costsand
and Problems
Problems

13–60
SCOPE CHANGES TO A BASELINE

FIGURE 13.13

13–61
CONFERENCE CENTER WIFI PROJECT
COMMUNICATION PLAN

FIGURE 13.14

13–62
KEY TERMS
Baseline budget
Budget at completion (BAC)
Control chart
Cost performance index (CPI)
Cost variance (CV)
Earned value (EV)
Estimated Cost at Completion—Forecasted (EACf)
Estimated Cost at Completion—Revised Estimates (EACre)
Percent complete index—budget costs (PCIB)
Percent complete index—actual costs (PCIC)
Schedule performance index (SPI)
Schedule variance (SV)
Scope creep
To complete performance index (TCPI)
Tracking Gantt chart
Variance at completion (VAC)
13–63