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... Scope, Schedule & Cost Control... : Project Management Professional M.P.D.C

Earned value management (EVM) is a technique that integrates scope, time, and cost to measure project performance against the original plan. It determines planned value (PV), actual cost (AC), and earned value (EV) to calculate cost and schedule variances. A cost performance index (CPI) or schedule performance index (SPI) below 1 indicates problems that mean a project is over budget or behind schedule. Calculating the estimate at completion (EAC) based on the budget at completion (BAC) and current CPI provides a realistic forecast of total costs.

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88 views

... Scope, Schedule & Cost Control... : Project Management Professional M.P.D.C

Earned value management (EVM) is a technique that integrates scope, time, and cost to measure project performance against the original plan. It determines planned value (PV), actual cost (AC), and earned value (EV) to calculate cost and schedule variances. A cost performance index (CPI) or schedule performance index (SPI) below 1 indicates problems that mean a project is over budget or behind schedule. Calculating the estimate at completion (EAC) based on the budget at completion (BAC) and current CPI provides a realistic forecast of total costs.

Uploaded by

Fendik Newbie
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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...Scope, Schedule & Cost Control...

PROJECT MANAGEMENT PROFESSIONAL


M.P.D.C
Cost Control
Project cost control includes:

Monitoring cost performance.

Ensuring that only appropriate project changes are included in a


revised cost baseline.

Informing project stakeholders of authorized changes to the project


that will affect costs.

Many organizations around the globe have problems with


cost control.
Earned Value Management (EVM)

EVM is a project performance measurement technique


that integrates scope, time, and cost data.
Given a baseline (original plan plus approved changes),
you can determine how well the project is meeting its
goals.
You must enter actual information periodically to use EVM.
More and more organizations around the world are using
EVM to help control project costs.
Earned Value Management Terms
The planned value (PV), formerly called the budgeted cost of work
scheduled (BCWS), also called the budget, is that portion of the
approved total cost estimate planned to be spent on an activity
during a given period.
Actual cost (AC), formerly called actual cost of work performed
(ACWP), is the total of direct and indirect costs incurred in
accomplishing work on an activity during a given period.
The earned value (EV), formerly called the budgeted cost of work
performed (BCWP), is an estimate of the value of the physical work
actually completed.
EV is based on the original planned costs for the project or activity
and the rate at which the team is completing work on the project or
activity to date.
S-curves

PROJECT MANAGEMENT PROFESSIONAL


M.P.D.C
Rate of Performance
Rate of performance (RP) is the ratio of actual work completed
to the percentage of work planned to have been completed at
any given time during the life of the project or activity.
Brenda Taylor, Senior Project Manager in South Africa,
suggests using this approach for estimating earned value.
For example, suppose the server installation was halfway
completed by the end of week 1. The rate of performance would
be 50 percent (50/100) because by the end of week 1, the
planned schedule reflects that the task should be 100 percent
complete and only 50 percent of that work has been completed.
Earned Value Formulas
Rules of Thumb for Earned
Value Numbers

Negative numbers for cost and schedule variance indicate


problems in those areas.

A CPI or SPI that is less than 100 percent indicates


problems.

Problems mean the project is costing more than planned


(over budget) or taking longer than planned (behind
schedule).
Case Study
To complete our analysis of the status of a project, we must calculate the budget at
completion (BAC) and the estimate at completion (EAC). The parameters for this
analysis can be determined by asking the following questions for the Georgia Light
Rail project:

how much work should be done to get the preliminary designs


completed? - i.e., what is the PV?
how much work is completed at the present moment? - i.e., what is the
EV?
how much did the actual completed work done cost? - i.e., what is the AC?
what was the total job of completing the preliminary designs supposed to
cost? - i.e., what is the BAC?

The BAC is the sum of the total budgets allocated to the project and is equivalent to
the final point on the project baseline. For the Georgia Light Rail project, the BAC to
deliver the preliminary designs is approximately $50,000. It is what the project effort
should cost.

The estimate at completion identifies either the hours or the dollars that represent a
realistic appraisal of the work when performed. It is equal to the sum of all costs to
PROJECT
date, plus the estimate of allMANAGEMENT
remaining work. PROFESSIONAL
M.P.D.C
Case Study (contd)
At week 4, the AC is $16,256 and the EV is $11,617 (where the CPI is 0.71 or
71%)

The EAC is BAC / CPI


$ 50,000 / 0.71
$ 70,423

The EAC indicated the amount of dollars required to complete the project. The
estimate at completion is the best estimate of the total cost of the project as it is
based on current performance

It is a periodic evaluation of project status, usually on a monthly basis or until a


significant change has been identified.

PROJECT MANAGEMENT PROFESSIONAL


M.P.D.C

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