Preview Extract
Chapter 13 Progress and Performance Measurement and Evaluation Chapter Outline 1. Structure of a Project Monitoring Information System A. What Data Are Collected? B. Collecting Data and Analysis C. Reports and Reporting 2. The Project Control Process A. Step 1: Setting a Baseline Plan B. Step 2: Measuring Progress and Performance C. Step 3: Comparing Plan against Actual D. Step 4: Taking Action 3. Monitoring Time Performance 4. Development of an Earned Value Cost/Schedule System A. Percent Complete Rule B. What Costs Are Included in Baselines? C. Methods of Variance Analysis 5. Developing a Status Report: A Hypothetical Example A. Assumptions B. Baseline Development C. Development of the Status Report 6. Indexes to Monitor Progress A. Performance Indexes B. Project Percent Complete Indexes C. Software for Project Cost/Schedule Systems D. Additional Earned Value Rules 7. Forecasting Final Project Cost 8. Other Control Issues A. Technical Performance Measurement B. Scope Creep C. Baseline Changes D. The Costs and Problems of Data Acquisition 9. Summary 10. Key Terms 11. Review Questions 12. Exercises 13. Case 13.1: Tree Trimming Project 14. Case 13.2: Shoreline Stadium Status Report 15 Case 13.3: Scanner Project 15. Appendix 13.1: The Application of Additional Earned Value Rules 16. Appendix Exercises 17. Appendix 13.2: Obtaining Project Performance Information from MS Project Learning Objectives After reading this chapter you should be able to: LO 13-1 Identify the four steps for controlling a project. LO 13-2 Utilize a tracking Gantt to monitor time performance. LO 13-3 Understand and appreciate the significance of earned value. LO 13-4 Calculate and interpret cost and schedule variance. LO 13-5 Calculate and interpret performance and percent indexes. LO 13-6 Forecast final project cost. LO 13-7 Identify and manage scope creep. Appendix 13.1 Learning Objective After reading this appendix you should be able to: LO A13.1-1 Apply pseudo earned value rules to measure progress on a project. Appendix 13.2 Learning Objective After reading this appendix you should be able to: LO A13.2-1 Obtain project performance information from MS Project 2010 or 2015. Review Questions 1. How does a tracking Gantt chart help communicate project progress? The tracking Gantt chart graphically compares the plan and actual time performance. The bar-chart layout makes it very easy to see differences between planned schedule and actual start, finish and remaining activity times. 2. How does earned value give a clearer picture of project schedule and cost status than a simple plan versus actual system? Earned value gives a clearer picture than a simple plan versus actual system because the earned value system includes the time variable in measuring progress. Plan versus actual can lead to false conclusions. Earned value measures what work was accomplished for the money spent. 3. Schedule variance (SV) is in dollars and does not directly represent time. Why is it still useful? SV gives a project view of how well all of the scheduled activities are meeting planned dates. Research shows that after twenty percent of a large project is complete, SV is a relatively good indicator of schedule performance (even though it is in dollars or labor hours). 4. How would a project manager use the CPI? The cost performance index (EV/AC) is a popular index. An index of .60 indicates that 60 cents of work has been completed for each actual dollar spent. This would suggest to the project manager that the project will be over budget or big savings in remaining work will be needed to bring the project in on budget. 5. What are the differences between BAC and EAC? BAC is the planned budget at completion. EAC is the estimate at completion. EAC can be calculated two ways. First is simply by formula, which is used in software programs; the formula applies a performance ratio from past work on the project to the remaining work for an EAC. A second method uses new cost estimates that have been made by project participants concerning specific work packages; these new estimates are then factored into the EAC. 6. Why is it important for project managers to resist changes to the project baseline? Under what conditions would a project manager make changes to a baseline? When would a project manager not allow changes to a baseline? The usefulness and integrity of the baseline, as a mechanism for monitoring progress and tracing back to the problem, can be eroded by constant changing of the baseline. Therefore, changes in baselines should be limited to major scope changes—for example, when the project will fail or the change represents a significant improvement of the project. Customers can request scope changes. Internally scope changes can come from project personnel—e.g., significant design changes to improve a product. Natural disasters can force a baseline change. Sometimes the complete elimination of a cost account can result in a baseline change. Do not change for small changes such as price and planning errors. Changes to “improve performance” should not change a baseline. Changes should not occur after a work package or cost account is complete. Teaching Tip, Earned Value Given the increasing trend of integrative project management, project portfolio management, and project offices, earned value is becoming the modus operandi for large multi-project organizations. Many students will find it difficult to avoid working with and under earned value systems in practice. Although earned value is difficult for some students, our experience tells us exposure now can be a good vehicle for advancement to a larger project. When discussing earned value, a good place to begin is asking the students to re-read the section titled “Why a Time-Phased Budget Baseline Is Needed” in Chapter 8. Reading the two examples drives home the point that without time-phasing, cost variance can actually be wrong and misleading. An alternative approach is to have the class re-read the section. Ask the class to discuss why the two examples may not reflect the true cost variance. Ask the students for a better system (their answers will not eliminate the problem, but students have come up with impractical ways to avoid the problem). Demonstrate how the baseline budget (PV) is developed. Students fail to remember that when they created the WBS, they gave a time and cost estimate for each work package. The cost estimate was to be time-phased. For example, if the work package had a duration of 4 time periods, the planned cost for each period was to be recorded (e.g., period 1 is $100, period 2 is $300, period 3 is $400, and period 4 is $50). These costs are then placed in the baseline budget (PV) to correspond to the activities in the project schedule. This little idea is a key to understanding earned value! Remind the students of this sequence in the earned value chapter and in the earlier discussion of “From Work Package to Network” in Chapter 6. Go over the chapter sections on “Baseline Development” and “Development of the Status Report.” Using the earned value system depends on estimates of percent complete. At this stage of the discussion try to avoid comments about poor percent complete estimates or contactors jiggering the data. These comments detract from the focus of how the system works and can be discussed after students have worked through the system and some exercises. A common student comment is “Where did you get the PV number in the status report for each period?” The answer is found in the budget baseline. Careful explanation of this number will eliminate many office hours and help students to truly understand earned value. Here is one approach using the Digital Camera Prototype example: Start with the status report at the end of period 1. The EV is 50% of the baseline budget for work package A (.5 x 20 = 10). The cumulative PV for work package A at the end of period 1 is 10. This number is found in the budget baseline for WP A. The status report at the end of period 2. WP A is complete. The cumulative PV for work package A at the end of period 2 is 20 (10+10). The status report at the end of period 3. WP A is complete. WP B is 33% complete. The EV is 33% of the baseline budget for work package A (.33 x 15 = 5). The cumulative PV for work package B at the end of period 3 is 5. WP C is 20% complete. The EV is 20% of the baseline budget for work package A (.20 x 100 = 20). The cumulative PV for work package C at the end of period 3 is 20. WP D is 60% complete. The EV is 60% of the baseline budget for work package A (.60 x 35 = 21). The cumulative PV for work package D at the end of period 3 is 15. The status report at the end of period 4. WP A is complete. WP B is complete. WP C is 50% complete. The EV is 50% of the baseline budget for work package A (.50 x 100 = 50). The cumulative PV for work package C at the end of period 4 is 50 (20+30). WP D is 80% complete. The EV is 80% of the baseline budget for work package A (.80 x 35 = 28). The cumulative PV for work package D at the end of period 4 is 25 (15+10). The process continues for each period until the latest reporting period. By this time every student should understand where the cumulative PV value for each reporting period comes from and how it is derived. The reason for creating status reports from period 1 to “Today” in the exercises is to give the student a keen understanding of how the Summary Graph is derived. This so-called “world famous graph,” which depends on the earned value system, is probably used in every country in the world because it clearly shows cost and schedule variance along with trends to the latest reporting period. Students frequently feel they will never use earned value; their projects are small. This feeling could be short sighted and career limiting. Today, organizations operate in a multi-project environment. We see more and more project offices appearing in these organizations. These project offices almost inevitably have turned to earned value to gain continuity and control over multiple projects. Students will find it difficult to avoid working within such systems in large organizations. Next is a review sheet that students have found useful in applying earned value concepts and indexes. Basics Calculation Comments PV The planned time-phased value of the work that is scheduled MS Project: BCWS – Budgeted cost of the work scheduled EV Earned value is simply percent complete times its budgeted cost of the work EV = % Complete * PV MS Project: BCWP – Budgeted cost of the work performed AC Actual cost of the work completed MS Project: ACWP – Actual cost of the work performed BAC The total planned value of the project Budgeted cost at completion Cost CV Cost variance adjusted budget costs to the actual spent costs CV = EV - AC Negative number indicates over budget. Positive number indicates under budget. Need to know % over budget to indicate magnitude. CPI Cost performance index is a measure of cost efficiency on a project CPI = EV / AC A value less than 1 indicates a cost overrun. A value greater than 1 indicates cost savings. CPI = .90 means “we are only earning 90 cents of planned work for each dollar spent.” Found on the EV Cost Indicators Table in MS Project. TCPI To complete performance index TCPI = (BAC - EV) / (BAC - AC) The amount of value each remaining dollar must earn for the project to stay within budget. A number greater than 1 means there is more work than there is budget left. A number less than 1 means there is less work than there is budget left. Found on the EV Cost Indicators Table in MS Project. Schedule SV Schedule variance: How much work that has been done compared with how much should have done at this point in time SV = EV - PV Negative number indicates work that was supposed to be done at this time has not been done. Positive number indicates work that was not supposed to be done by this time has been accomplished. SV = -1,000 means $1,000 worth of work that was scheduled to be done at this time has not been accomplished. SPI Schedule performance index is a measure of schedule efficiency on a project SPI = EV / PV A value less than 1 indicates that work on the project is behind schedule. A value greater than 1 indicates work on the ahead of schedule. SPI = 1.10 means “$1.10 worth of work has been accomplished for each $1 worth of scheduled work.” Found at MS EV Schedule Indicators Table. Critical Path Look at current activity on the critical path or most recent milestone to see if it is on schedule Compare the planned early start of most recent critical activity with the actual start. Alternative compare most recent milestone date and actual milestone date. PCIB Percent complete in terms of budget PCIB = EV / BAC What percentage of work has been completed to date based on planned budget? A good indicator of how much of the project has been completed. Not available in MS Project. PCIC Percent complete in terms of expected costs PCIC = AC / EACe What percentage of work has been completed to date based on revised estimates of total project costs? Preferred when you have confidence in revised estimates and or budget is not fixed. Not available in MS Project. Forecast EACf Forecasted estimate cost at completion EACf = AC + [(BAC - EV) / CPI] Gray & Larson refer to this as FAC or EACf. If we continue to earn? (CPI) on the project, how much will the total cost be? Reliability increases as PCIB or PCIC increases. EACe Revised estimate cost at completion EACe = AC + ETC ETC equals the revised estimates for remaining work. Only valid if revised estimates have been entered. VAC Forecasted cost variance VAC = BAC - EACf Positive number indicates that the project will be completed under budget. A negative number suggests that it will be completed over budget. Gray & Larson refer to it as VACf. Preferred on large projects and when it is not practical to obtain valid revised estimates. VACe Revised estimate cost variance VACe = BAC - EACe Positive number indicates that the project will be completed under budget. A negative number suggests that it will be completed over budget. Exercises 1. In month 9 the following project information is available: actual cost is $2,000, earned value is $2,100, and planned cost is $2,400. Compute the SV and CV for the project. CV=EV-AC=2,100-2,000=+1.00 SV=EV-PV=2,100-2,400=-300 2. On day 51 a project has an earned value of $600, an actual cost of $650, and a planned cost of $560. Compute the SV, CV, and CPI for the project. What is your assessment of the project on day 51? CV=EV-AC=600-650=-50 SV=EV-PV=600-560=+40 CPI=EV/AC=600/650=0.92 3. Given the project network and baseline information below, complete the form to develop a status report for the project at the end of period 4 and the end of period 8. From the data you have collected and computed for periods 4 and 8, what information are you prepared to tell the customer about the status of the project at the end of period 8? The project appears to be doing nicely. In both periods 4 and 8 the cost variance is positive—+$300 and +$400, respectively. This suggests a pattern of good cost variance that is under budget. The schedule variance is also positive—+$300 and +$400 for period 4 and period 8. Since Task D is already 25% complete, Task B must have been completed at least one period early. End of Period 4 Task Actual % EV AC PV CV SV Complete $ $ $ $ $ A Finished 400 300 400 +100 0 B 50% 1200 1000 800 +200 +400 C 33% 500 500 600 0 -100 D 0% 0 0 0 0 0 E 0% 0 0 0 0 0 Cumulative Totals $2100 $1800 $1800 $+300 $+300 End of Period 8 Task Actual % EV AC PV CV SV Complete $ $ $ $ $ A Finished 400 300 400 +100 0 B Finished 2400 2200 2400 +200 0 C Finished 1500 1500 1500 0 0 D 25% 400 300 0 +100 +400 E 33% 300 300 300 0 0 F 0% 0 0 0 0 0 Cumulative Totals $5000 $4600 $4600 $+400 $+400 Note: Completion of the answer sheet requires constant reference to the baseline figure. 4. Given the following project network, baseline, and status information, develop status reports for periods 2, 4, 6, 8 and complete the performance indexes table. Calculate the EACf and the VACf. Based on your data, what is your assessment of the current status of the project? At completion? The project is performing nicely in terms of cost. The project is currently 23 (000) under budget and is getting $1.18 worth of work for each dollar spent. In terms of the schedule, the SV indicates that there is $4 (000) worth of work that was supposed to have been done by the 8th period that has not been done. This work concerns activity D which is only 33% complete instead of the planned 55% complete. Since D is a critical activity the project is behind schedule. The project is 75 percent complete. In terms the future, if the project continues to earn 1.18 for each dollar spent the forecasted cost at completion would be 175 (000). The project would therefore be forecasted to come in 31 (000) under budget. However this may change since the project has incurred a significant cost over-run so far for activity D which is only 33% complete. If this pattern continues savings earned on other activities could be quickly absorbed and the project would not come in under budget. Management needs to investigate Activity D and take corrective action if possible. Assuming that there is no positive change in Activity D the project will be completed 1-2 time units late. Status Report: Ending Period 2 Task % ($000) Complete EV AC PV CV SV A 75% 30 25 20 5 10 B 50% 16 12 12 4 4 Cumulative Totals 46 37 32 9 14 Status Report: Ending Period 4 Task % ($000) Complete EV AC PV CV SV A 100% 40 35 40 5 0 B 100% 32 24 24 8 8 Cumulative Totals 72 59 64 13 8 Status Report: Ending Period 6 Task % ($000) Complete EV AC PV CV SV A 100% 40 35 40 5 0 B 100% 32 24 32 8 0 C 75% 36 24 24 12 12 D 0% 0 0 6 0 -6 E 50% 14 10 8 4 6 Cumulative Totals 122 93 110 29 12 Status Report: Ending Period 8 Task % ($000) Complete EV AC PV CV SV A 100% 40 35 40 5 0 B 100% 32 24 32 8 0 C 100% 48 32 48 16 0 D 33% 6 20 10 -14 -4 E 100% 28 20 28 8 0 Cumulative Totals 154 131 158 23 -4 Performance Indexes Summary Period EV AC PV SPI CPI PCIB 2 46 37 32 1.44 1.24 22% 4 72 59 64 1.13 1.22 35% 6 122 93 110 1.11 1.31 59% 8 154 131 158 0.97 1.18 75% 〖EAC〗_f=((BAC-EV))/((EV⁄Ac) )+AC =((206-154))/((154⁄131) )+131 =175 〖VAC〗_f=BAC-〖EAC〗_f =206-175 =31 5. Given the following project network, baseline, and status information, develop status reports for periods 1–4 and complete the project summary graph (or a similar one). Report the final SV, CV, CPI, and PCIB. Based on your data, what is your assessment of the current status of the project? At completion? After 4 time periods the project is roughly 77% (PCIB) complete and is current getting only 83 cents worth of work for each dollar spent. The project is currently $10,000 over budget. There is $3,000 worth of work on critical Activity 5 that has not been completed as planned so the project is behind schedule. Since so much of the project has been completed the project is expected to come in over budget. The forecast cost at completion is $78,000 which is $13,000 over budget. Whether the project will be completed on schedule will depend upon whether Activity 5 can make up for lost time. Status Report: Ending Period 1 ($000) Task % Complete EV AC PV CV SV 1 50% 6 6 4 0 +2 2 40% 6 8 3 -2 +3 3 25% 2 3 4 -1 -2 Cumulative Totals 14 17 11 -3 +3 Status Report: Ending Period 2 ($000) Task % Complete EV AC PV CV SV 1 Finished 12 13 12 -1 0 2 80% 12 14 10 -2 +2 3 75% 6 8 8 -2 -2 Cumulative Totals 30 35 30 -5 0 Status Report: Ending Period 3 ($000) Task % Complete EV AC PV CV SV 1 Finished 12 13 12 -1 0 2 80% 12 15 15 -3 -3 3 Finished 8 10 8 -2 0 4 50% 3 4 3 -1 0 5 0% 0 0 0 0 0 6 33.3% 3 4 3 -1 0 Cumulative Totals 38 46 41 -8 -3 Status Report: Ending Period 4 ($000) Task % Complete EV AC PV CV SV 1 Finished 12 13 12 -1 0 2 Finished 15 18 15 -3 0 3 Finished 8 10 8 -2 0 4 Finished 6 8 6 -2 0 5 30% 3 3 6 0 -3 6 66.7% 6 8 6 -2 0 7 0% 0 0 0 0 0 Cumulative Totals 50 60 53 -10 -3 6. The following labor hours data have been collected for a nanotechnology project for periods 1 through 6. Compute the SV, CV, SPI, and CPI for each period. Plot the EV and the AC on the summary graph provided (or a similar one). Plot the SPI, CPI, and PCIB on the index graph provided (or a similar one). What is your assessment of the project at the end of period 6? After 6 time periods the project is roughly 66% complete and so far work on the project has taken 1,600 hours less work than planned. There is 400 hours’ worth of work on Activity 4 which was supposed to have been done that has not done. Since Activity 4 is on the critical path, the project is behind schedule. If schedule is the number priority, the project manager may want to consider investing some of the savings on accelerating critical activities. Status Report: Ending Period 1 Task % Complete EV AC PV CV SV 1 50% 1000 500 1000 +500 0 Cumulative Totals 1000 500 1000 +500 0 Status Report: Ending Period 2 Task % Complete EV AC PV CV SV 1 Finished 2000 1500 2000 +500 0 Cumulative Totals 2000 1500 2000 +500 0 Status Report: Ending Period 3 Task % Complete EV AC PV CV SV 1 Finished 2000 1500 2000 +500 0 2 0% 0 0 1600 0 -1600 3 10% 300 200 500 +100 -200 4 20% 500 500 1000 0 -500 Cumulative Totals 2800 2200 5100 +600 -2300 Status Report: Ending Period 4 Task % Complete EV AC PV CV SV 1 Finished 2000 1500 2000 +500 0 2 50% 1200 1000 2400 +200 -1200 3 30% 900 800 1000 +100 -100 4 40% 1000 1500 2000 -500 -1000 Cumulative Totals 5100 4800 7400 -300 -2300 Status Report: Ending Period 5 Task % Complete EV AC PV CV SV 1 Finished 2000 1500 2000 +500 0 2 Finished 2400 2000 2400 +400 0 3 50% 1500 800 2000 +700 -500 4 60% 1500 1500 2200 0 -700 5 25% 400 400 400 0 0 Cumulative Totals 7800 6200 9000 +1600 -1200 Status Report: Ending Period 6 Task % Complete EV AC PV CV SV 1 Finished 2000 1500 2000 +500 0 2 Finished 2400 2000 2400 +400 0 3 80% 2400 2100 2300 +300 +100 4 80% 2000 1800 2400 +200 -400 5 50% 800 600 800 +200 0 Cumulative Totals 9600 8000 9900 +1600 -300 Indexes Period SPI CPI PCIB 1 1.00 2.00 .07 2 1.00 1.33 .14 SPI = EV / PV 3 .55 1.27 .19 CPI = EV / AC 4 .69 1.06 .35 PCIB = EV / BAC 5 .87 1.26 .54 6 .96 1.20 .66 7. The following data have been collected for a British health care IT project for two-week reporting periods 2 through 12. Compute the SV, CV, SPI, and CPI for each period. Plot the EV and the AC on the summary graph provided. Plot the SPI, CPI, and PCIB on the index graph provided. (You may use your own graphs.) What is your assessment of the project at the end of period 12? After 12 time periods the project is roughly 60 percent and the project is only getting 70 cents worth of work for each dollar spent. The project is current $6,200 over budget. There is $1,000 worth of work that supposed to have been done that has not been completed according to plan. However, this work involved a noncritical activity and the project is on schedule with regards to the critical path. Status Report: Ending Period 2 ($00) Task % Complete EV AC PV CV SV 1 50% 4 4 4 0 0 Cumulative Totals 4 4 4 0 0 Status Report: Ending Period 4 ($00) Task % Complete EV AC PV CV SV 1 Finished 8 10 8 -2 0 Cumulative Totals 8 10 8 -2 0 Status Report: Ending Period 6 ($00) Task % Complete EV AC PV CV SV 1 Finished 8 10 8 -2 0 2 25% 10 15 10 -5 0 3 33% 10 12 10 -2 0 4 0% 0 0 10 0 -10 Cumulative Totals 28 37 38 -9 -10 Status Report: Ending Period 8 ($00) Task % Complete EV AC PV CV SV 1 Finished 8 10 8 -2 0 2 30% 12 20 20 -8 -8 3 60% 18 25 25 -7 -7 4 0% 0 0 20 0 -20 Cumulative Totals 38 55 73 -17 -35 Status Report: Ending Period 10 ($00) Task % Complete EV AC PV CV SV 1 Finished 8 10 8 -2 0 2 60% 24 30 30 -6 -6 3 Finished 30 40 30 -10 0 4 50% 10 20 20 -10 -10 5 0% 0 0 0 0 0 6 30% 18 24 20 -6 -2 Cumulative Totals 90 124 108 -34 -18 Status Report: Ending Period 12 ($00) Task % Complete EV AC PV CV SV 1 Finished 8 10 8 -2 0 2 Finished 40 50 40 -10 0 3 Finished 30 40 30 -10 0 4 Finished 20 40 20 -20 0 5 50% 20 30 20 -10 0 6 50% 30 40 40 -10 -10 Cumulative Totals 148 210 158 -62 -10 Indexes Period SPI CPI PCIB 2 4/4 = 1.0 4/4 = 1.0 4/248 = .02 4 8/8 = 1.0 8/10 = .80 8/248 = .03 SPI = EV / PV 6 28/38 = .74 28/37 = .76 28/248 = .11 CPI = EV / AC 8 38/73 = .52 38/55 = .69 38/248 = .15 PCIB = EV / BAC 10 90/108 = .83 90/124 = .73 90/248 = .36 12 148/158 = .94 148/210 = .70 148/248 = .60 8. Part A. You are in charge of the Aurora Project. Given the following project network, baseline, and status information, develop status reports for periods 1–8 and complete the performance indexes table. Calculate the EACf and VACf. Based on your data, what is the current status of the project? At completion? Status Report: Ending Period 1 ($000) Task % Complete EV AC PV CV SV A 25% 25 50 50 -25 -25 Cumulative Totals 25 50 50 -25 -25 Status Report: Ending Period 2 ($000) Task % Complete EV AC PV CV SV A 50% 50 100 100 -50 -50 Cumulative Totals 50 100 100 -50 -50 Status Report: Ending Period 3 ($000) Task % Complete EV AC PV CV SV A 100% 100 200 100 -100 0 B 0% 0 0 100 0 -100 C 0% 0 0 150 0 -150 Cumulative Totals 100 200 350 -100 -250 Status Report: Ending Period 4 ($000) Task % Complete EV AC PV CV SV A 100% 100 200 100 -100 0 B 60% 150 100 150 50 0 C 50% 225 200 300 25 -75 Cumulative Totals 475 500 550 -25 -75 Status Report: Ending Period 5 ($000) Task % Complete EV AC PV CV SV A 100% 100 200 100 -100 0 B 100% 250 200 250 50 0 C 100% 450 400 450 50 0 Cumulative Totals 800 800 800 0 0 Status Report: Ending Period 6 ($000) Task % Complete EV AC PV CV SV A 100% 100 200 100 -100 0 B 100% 250 200 250 50 0 C 100% 450 400 450 50 0 D 75% 150 100 100 50 50 Cumulative Totals 950 900 900 50 50 Status Report: Ending Period 7 ($000) Task % Complete EV AC PV CV SV A 100% 100 200 100 -100 0 B 100% 250 200 250 50 0 C 100% 450 400 450 50 0 D 100% 200 150 200 50 0 E 20% 60 100 0 -40 60 F 5% 15 50 0 -35 15 Cumulative Totals 1075 1100 1000 -25 75 Status Report: Ending Period 8 ($000) Task % Complete EV AC PV CV SV A 100% 100 200 100 -100 0 B 100% 250 200 250 50 0 C 100% 450 400 450 50 0 D 100% 200 150 200 50 0 E 100% 300 350 200 -50 100 F 10% 30 100 100 -70 -70 Cumulative Totals 1330 1400 1300 -70 30 Performance Indexes Summary Period EV AC PV SPI CPI PCIB 1 25 50 50 .50 .50 2% 2 50 100 100 .50 .50 3% 3 100 200 350 .29 .50 5% 4 475 500 550 .86 .95 24% 5 800 800 800 1.00 1.00 40% 6 950 900 900 1.06 1.06 48% 7 1075 1100 1000 1.08 .98 54% 8 1330 1400 1300 1.02 .95 67% 〖EAC〗_f=((BAC-EV))/((EV⁄AC) )+AC=((2,000-1,300))/((1,330⁄1,400) )+1,400=2,105 〖VAC〗_f=BAC-〖EAC〗_f=2,000-2,105=-105 With two-thirds of the project completed the forecast is that the project will be $105,000 over budget at completion Part B. You have met with your Aurora project team and they have provided you with the following revised estimates for the remainder of the project: Activity F will be completed at the end of period 12 at a total cost of 500. Activity G will be completed at the end of period 10 at a total cost of 150. Activity H will be completed at the end of period 14 at a total cost of 200. Calculate the EACre and VACre. Based on the revised estimates, what is the expected status of the project in terms of cost and schedule? Between the VACf and the VACre, which one would you have the greatest confidence in? Revised Estimates: Ending Period 14 ($000) Task % Complete EV AC PV CV SV A 100% 100 200 100 -100 0 B 100% 250 200 250 50 0 C 100% 450 400 450 50 0 D 100% 200 150 200 50 0 E 100% 300 350 300 -50 0 F 100% 300 500 300 -200 0 G 100% 200 150 200 50 0 H 100% 200 200 200 0 0 Cumulative Totals 2000 2150 2000 -150 0 EACre = AC + ETCre = 1,400 + 750 = 2,150 VACre = BAC - EACre = 2,000 – 2,150 = -150 Revised estimates indicate that the project will be one month behind schedule and $150,000 over budget. Choosing between the VACf or the VACre depends upon how much confidence you have in the accuracy of the revised estimates. Since both activities F and G are underway, one should be inclined to go with in this case the more conservative VACre. Case 13.1 Tree Trimming Project Wil Fence is a large timber and Christmas tree farmer who is attending a project management class in the spring, his off season. When the class topic came to earned value, he was perplexed. Isn’t he using EV? (Rest of case not shown due to length.) Is Wil over, on, or below cost and schedule? Is Wil using earned value? Wil is applying the percent complete to the number of trees sheared (a version of CPIB). His system is always on cost and on schedule. His system does not allow him to really compute cost or schedule variance midway in the project. How can Wil set up a scheduling variance? Earned value requires planned values (PV) of sheared by cost or trees (PV) to be setup on a timeline. This is the major difference from straight accounting or percent complete math. The number of trees or dollars planned must be assigned to time periods over the life cycle of the project. An estimate of percent complete is needed in terms or trees or money. (Refer to pp. 273-274, “Why A Time-Phased Budget Baseline is Needed.”) In this project the most practical way to setup a schedule variance is to use trees in place of money. Later, tree numbers can be converted to money (dollars). An example is described below. Example Wil’s system with added planned value (PV) information needed to compute earned value. Wil counts 24,000 trees in a field. He traditionally to pays $1.25 per tree to shear Douglas Fir trees and assumes a single shearer can shear about 100 trees per eight hour shift. He contracts with a crew of ten to shear the complete field for $30,000. Project through Day 5. (Payday) On Friday evening, after five days of work, Wil estimates 6,000 trees have been sheared. He divides (6,000/24,000 = 25% complete) (.25 x $30,000) = partial payment of $7,500 paid to crew. Computing Variances The numbers suggest the following planned values baseline for trees. (Note: this is a good example to demonstrate that earned value is not limited to using dollars.) Trees Baseline: Planned Value (PV) 1,000 1,000 1,000 1,000 1,000 1,000 2,000 3,000 4,000 5,000 0 1 2 3 4 5 Earned Value Using Trees Wil has estimated that 6,000 trees have been sheared after 5 workdays. This number suggests 1,000 more trees sheared than expected through period five. Percent complete at the end of period 5 is 6,000/5,000 = 1.20 or 120 percent of expected. Cost (tree) Variance: CV = EV – AC EV = percent complete x planned value = 1.20% x 5,000 = 6,000 trees sheared CV = 6,000 – 6,000 actual = 0 (for trees) Schedule (tree) Variance: SV = EV – PV EV = 1.20% x 5,000 = 6,000 trees SV = 6,000 – 5,000 = +1,000 trees. You are ahead of schedule by 1,000 trees. Earned Value Using Money Wil has estimated that 6,000 trees have actually been sheared after 5 workdays. This number suggests 1,000 more trees sheared than expected through period five. Percent complete at the end of period 5 is 6,000/5,000 = 1.20 or 120%. Computations using the traditional money budget approach: Planned Baseline: Budget Values (PV) $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $2,500 $3,750 $5,000 $6,250 0 1 2 3 4 5 Cost Variance: CV = EV – AC EV = 1.20% x $6,250 = $7,500 CV = $7,500 – $7,500 actual = 0 (on cost) Schedule Variance: SV = EV – PV EV = 1.20% x $6,250 = $7,500 SV = $7,500 – $6250 = +$1,250 (ahead of schedule) (Note: $1,250 represent the value of schedule variance of 1,000 trees above) Case 13.2 Shoreline Stadium Status Report Case You are an assistant to Percival Young, president of G&L Construction. He has asked you to prepare a brief report on the status of the Shoreline Stadium project. (Rest of case not shown due to length.) Below is a sample report 8/8/2019 To: P. Youing, President From: Re: Current status of Shoreline Stadium project Forecasted Completion date is April 8, 2021. That is ten days behind schedule. CV= $9,900,000 SV= -$8,400,000 EACf= $325,299,103 VAC= -$15,299,103 Due to delays in setting up the construction site and pouring the main concourse the project is currently ten days behind schedule and six days behind the April 3rd deadline. In terms of cost, the project is -$9,900,000 over budget. If we continue to earn only 95 cents of work for each dollar spent the project will be completed at a cost of $325,299,103 and be over budget by $15,299,103. With roughly 65 percent of the project completed the project has utilized 28 percent of the management reserve and is forecasted to use 44 percent of the management reserve. Given the severe penalty for failing to meet the April 3rd deadline and the impact it would have on G&L reputation it is imperative that measures be taken to get the project back on schedule and build a buffer from the April 3rd date. Case 13.3 Scanner Project You have been serving as Electro scan’s project manager and are now well along in the project. Develop a narrative status report for the board of directors of the chain store that discusses the status of the project to date and at completion. Be as specific as you can using numbers given and those you might develop. Remember, your audience is not familiar with the jargon used by project managers and computer software personnel; therefore, some explanation may be necessary. Your report will be evaluated on your detailed use of the data, your total perspective of the current status and future status of the project, and your recommended changes (if any). (Rest of case not shown due to length.) This exercise allows the student to apply most of the topics covered in WBS, earned value, and project rollups. Rollup See rollup of Scanner Project by SV, CV and VAC. Also, see summary sheet of variances for WBS and OBS. Facts: The Coding Team is in trouble on cost (-$35,000) and schedule (-$40,000). At the current rate of efficiency the coding team is forecasted to be approximately $136,000 over budget. Can things be changed? The Development Team is also in trouble with CV of -$81,000 and forecasted to be approximately $117,000 over budget at completion. The Operating System deliverable is forecasted to be approximately $101,000 over budget at completion. The Utilities deliverable is forecasted to be approximately $74,000 over budget at completion. Given that the project is about 43% complete and they are only getting about $.83 of work for each actual dollar, there is opportunity to recover some forecasted overrun. The VAC is -$188,000 ($915,000 - $1,103,000). Variances SCANNER PROJECT: INDEXES & VARIANCES SCANNER PROJECT SCANNER PROJECT SV CV VAC CPI = EV / AC = 395 / 476 = 0.83 OBS Design 0 22 22 SPI = EV / PV = 395 / 420 = 0.94 Develop 45 -81 -117 Production 0 5 5 PCIB = EV / BAC = 395 / 915 = 0.43 Code -40 -35 -136 Document -30 8 13 PCIC = AC / EACf = 476 / 1103 = 0.43 Test 0 0 0 Actual (TEACHER'S MANUAL VERSION) Electroscan, Inc. 555 Acorn Street, Suite 5 29 IN-STORE SCANNER PROJECT Boston, Massachusetts ($000) ACTUAL PROGRESS AS OF JANUARY 1 NAME PV EV AC SV CV BAC EAC In process? VAC SATELITE COMMUNICATIONS PROJECT 420 395 476 -25 -81 915 1103 -188 H 1.0 HARDWARE 92 88 72 -4 16 260 213 47 H 1.1 Hardware specifications (DS) 20 20 15 0 5 20 15 c 5 H 1.2 Hardware design (DS) 30 30 25 0 5 30 25 c 5 H 1.3 Hardware documentation (DOC) 10 6 5 -4 1 10 8 IP 2 H 1.4 Prototypes (PD) 2 2 2 0 0 40 40 IP 0 H 1.5 Test prototypes (T) 0 0 0 0 0 30 30 x 0 H 1.6 Order circuit boards (PD) 30 30 25 0 5 30 25 c 5 H 1.7 Preproduction models (PD) 0 0 0 0 0 100 100 x 0 OP 1.0 OPERATING SYSTEM 195 150 196 -45 -46 330 431 -101 OP 1.1 Kernel specifications (DS) 20 20 15 0 5 20 15 c 5 OP 1.2 Drivers 45 55 76 10 -21 70 97 -27 OP 1.2.1 Disk drivers (DEV) 25 30 45 5 -15 40 60 IP -20 OP 1.2.2 I/O drivers (DEV) 20 25 31 5 -6 30 37 IP -7 OP 1.3 Code software 130 75 105 -55 -30 240 336 -96 OP 1.3.1 Code software (C) 30 20 40 -10 -20 100 200 IP -100 OP 1.3.2 Document software (DOC) 45 30 25 -15 5 50 42 IP 8 OP 1.3.3 Code interfaces (C) 55 25 40 -30 -15 60 96 IP -36 OP 1.3.4 Beta test software (T) 0 0 0 0 0 30 30 x 0 U 1.0 Utilities 87 108 148 21 -40 200 274 -74 U 1.1 Utilities specifications (DS) 20 20 15 0 5 20 15 c 5 U 1.2 Routine utilities (DEV) 20 20 35 0 -15 20 35 IP -15 U 1.3 Complex utilities (DEV) 30 60 90 30 -30 100 150 IP -50 U 1.4 Utilities documentation (DOC) 17 8 8 -9 0 20 20 IP 0 U 1.5 Beta test utilities (T) 0 0 0 0 0 40 40 x 0 S 1.0 System integration 46 49 60 3 -11 125 153 -28 S 1.1 Architecture decisions (DS) 9 9 7 0 2 10 8 c 2 S 1.2 Integration hard/soft (DEV) 25 30 45 5 -15 50 75 IP -25 S 1.3 System hard/software test (T) 0 0 0 0 0 20 20 x 0 S 1.4 Project documentation (Doc) 12 10 8 -2 2 15 12 IP 3 S 1.5 Integration acceptance testing (T) 0 0 0 0 0 30 30 x 0 *c = Complete, IP = In process, x = Not started Appendix 13.1 Exercises 1. Given the information provided for development of a product warranty project for periods 1 through 7, compute the SV, CV, SPI, and CPI for each period. Plot the EV and the AC on the PV graph provided. Explain to the owner your assessment of the project at the end of period 7 and the future expected status of the project at completion. Figure A13.1A presents the project network. Figure A13.1B presents the project baseline noting those activities using the 0/100 (rule 3) and 50/50 (rule 2) rules. For example, activity 1 uses rule 3, the 0/100 rule. Although the early start time is period 0, the budget is not placed in the time-phased baseline until period 2 when the activity is planned to be finished (EF). This same procedure has been used to assign costs for activities 2 and 7. Activities 2 and 7 use the 50/50 rule. Thus, 50 percent of the budget for each activity is assigned on its respective early start date (time period 2 for activity 2 and period 11 for activity 7) and 50 percent for their respective finish dates. Remember, when assigning earned value as the project is being implemented, if an activity actually starts early or late, the earned values must shift with the actual times. For example, if activity 7 actually starts in period 12 rather than 11, the 50 percent is not earned until period 12. Status Report: Ending Period 1 Task % Complete EV AC PV CV SV 1 0% 0 3 0 -3 0 Cumulative Totals 0 3 0 -3 0 Status Report: Ending Period 2 Task % Complete EV AC PV CV SV 1 Finished 6 5 6 +1 0 Cumulative Totals 6 5 6 +1 0 Status Report: Ending Period 3 Task % Complete EV AC PV CV SV 1 Finished 6 5 6 +1 0 2 0% 0 5 10 -5 -10 3 30% 9 7 9 +2 0 4 25% 5 5 8 0 -3 Cumulative Totals 20 22 33 -2 -13 Status Report: Ending Period 4 Task % Complete EV AC PV CV SV 1 Finished 6 5 6 +1 0 2 0% 0 7 10 -7 -10 3 50% 15 10 15 +5 0 4 50% 10 8 10 +2 0 Cumulative Totals 31 30 41 +1 -10 Status Report: Ending Period 5 Task % Complete EV AC PV CV SV 1 Finished 6 5 6 +1 0 2 50% 10 8 20 +2 -10 3 60% 18 12 21 +6 -3 4 70% 14 10 15 +4 -1 Cumulative Totals 48 35 62 +13 -14 Status Report: Ending Period 6 Task % Complete EV AC PV CV SV 1 Finished 6 5 6 +1 0 2 50% 10 10 20 0 -10 3 80% 24 16 27 +8 -3 4 Finished 20 15 20 +5 0 Cumulative Totals 60 46 73 +14 -13 Status Report: Ending Period 7 Task % Complete EV AC PV CV SV 1 Finished 6 5 6 +1 0 2 Finished 20 14 20 +6 0 3 Finished 30 20 30 +10 0 4 Finished 20 15 20 +5 0 5 0% 0 0 0 0 0 6 50% 9 9 9 0 0 Cumulative Totals 85 63 85 +22 0 Indexes Period SPI CPI PCIB 1 0 0 0 2 1.00 1.20 .05 3 .61 .91 .17 SPI = EV / PV 4 .76 1.03 .26 CPI = EV / AC 5 .77 1.37 .41 PCIB = EV / BAC 6 .82 1.30 .51 7 1.00 1.35 .72 2. Given the information provided for development of a catalog product return process for periods 1 through 5, assign the PV values (using the rules) to develop a baseline for the project. Compute the SV, CV, SPI, and CPI for each period. Explain to the owner your assessment of the project at the end of period 5 and the future expected status of the project at the completion. Status Report: Ending Period 1 Task % Complete EV AC PV CV SV 1 40% 12 8 15 +4 -3 2 0% 0 12 0 -12 0 3 30% 9 10 15 -1 -6 Cumulative Totals 21 30 30 -9 -9 Status Report: Ending Period 2 Task % Complete EV AC PV CV SV 1 80% 24 20 15 +4 +9 2 Finished 20 18 20 +2 0 3 50% 15 12 15 +3 0 Cumulative Totals 59 50 50 +9 +9 Status Report: Ending Period 3 Task % Complete EV AC PV CV SV 1 Finished 30 27 30 +3 0 2 Finished 20 18 20 +2 0 3 70% 21 15 15 +6 +6 4 0% 0 5 0 -5 0 5 30% 12 8 20 +4 -8 Cumulative Totals 83 73 85 +10 -2 Status Report: Ending Period 4 Task % Complete EV AC PV CV SV 1 Finished 30 27 30 +3 0 2 Finished 20 18 20 +2 0 3 Finished 30 22 30 +8 0 4 0% 0 7 0 -7 0 5 60% 24 22 20 +2 +4 Cumulative Totals 104 96 100 +8 +4 Status Report: Ending Period 5 Task % Complete EV AC PV CV SV 1 Finished 30 27 30 +3 0 2 Finished 20 18 20 +2 0 3 Finished 30 22 30 +8 0 4 Finished 10 8 10 +2 0 5 70% 28 24 20 +4 +8 6 30% 9 10 10 -1 -1 Cumulative Totals 127 109 120 +18 +7 Indexes Period SPI CPI PCIB 1 21/30 = 0.70 21/30 = 0.70 21/220 = .10 2 59/50 = 1.18 59/50 = 1.18 59/220 = .27 SPI = EV / PV 3 83/85 = 0.98 83/73 = 1.14 83/220 = .38 CPI = EV / AC 4 104/100 = 1.04 104/96 = 1.08 104/220 = .47 PCIB = EV / BAC 5 127/120 = 1.06 127/109 = 1.17 127/220 = .58 This exercise is designed solely for practice in assigning baseline values that use the 0/100 and 50/50 percent rules. The project seems to being doing well. The cost index continues to show a positive trend with over half of the project completed. The cost index is now at 1.17, which indicates a cost savings over budget of 17 percent. The schedule index also shows positive, which suggests the project is near schedule. (Note: Students often suggest assigning cost to the baseline linearly and only applying the 0/100 or 50/50 rule as the project is implemented. Their rationale is that actual costs are being incurred the moment the task starts. This approach can be used. But the basic intent is to reduce administration costs for small tasks of short duration. How the costs are assigned to the baseline for these tasks makes little difference in a real project of hundreds of activities.) If the project continues to earn 1.17 worth of work for each dollar spent the forecast cost at completion is 188. The project would therefore be completed with a savings of 32. Solution Manual for Project Management: The Managerial Process Erik Larson, Clifford F. Gray 9781259666094, 9780078096594
