PM Chapter 7 V1 - LB

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2012/05/02

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Chapter 7

Project execution, monitoring andcontrol: Understanding earned value

management

Learning outcomes

At the end of this session, you should be able to:

• Reflect on the importance of project performance management,control and monitoring.

• Understand the basics of project costing.

• Define earned value management as a method to measure

project progress.• Describe the various terms used in earned value management.

• Illustrate how earned value management works.

• Describe how to monitor time performance.

• Describe the relationship between monitoring and controllingproject performance and project risk.

• Describe configuration management and change control.

• Explain ethical considerations in project monitoring, control andevaluation.



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Project execution

• The project execution phase follows theplanning phase in the project management lifecycle.

• It is the longest, most resource intensive phaseof the project.

• It is during this phase that the work that has beenplanned is actually carried out.

• Here the project manager is responsible for

initiating, managing and controlling all tasks, anddirecting the efforts of the project team.

• Includes stakeholder management, riskmanagement as well as configurationmanagement and change control.

Project monitoring and control

• Most important part of project execution.

• Involves measurement of projectprogress and any deviations from

planned progress in particular.

• Earned value management is one of themore useful tools to monitor progress.



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Cost estimation

• Critical part of measurement ofprogress.

• Begins at proposal stage where a senseof the total project cost is provided.

• Top down approach involves providing

a rough estimate:

• Cost/square metre

• Apportionment method.

Cost estimation

• Bottom up approach involves more

accurate estimates

• Roll up technique.

•Iterative approach involves using the top

down approach to derive a roughestimate and the bottom up approach torefine the estimate.

• Bottom up and top down estimates form

budgets.

• Important to include contingencies in

budgets.





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EVM

• First implemented by the USA Department

of Defence in the 1960s as part of its

cost/schedule control systems criteria(C/SCSC).

• Introduced into industry in 1990s.

• EVM is a technique used to compareactual costs with planned costs as well ascost of work performed to date with

planned costs.

• Generally suited to larger projects.



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Earned value management (EVM)

graphically

How EVM works• Step 1: Define the project scope.

• Step 2: Complete the work breakdown structure and establish the budgets for your work

packages and cost accounts.

• Step 3: Complete the organisational breakdown structure (OBS) and allocate

organisational responsibility accordingly.

• Step 4: Develop the network diagram by time-phasing the work packages.

• Step 5: Develop the baseline budget by time-phasing the rand value of your work-packages. This baseline will constitute the Planned Values.

• Step 6: Capture actual costs for work completed (AC).

• Step 7: Compute the EVs by determining percentage of work completed to date and

multiplying this with total value of work planned for each activity.

• Step 8: Generate the final report in which you reflect:

• Variances in cost and schedule performance

• Cost and scheduling performance indices to determine cost and scheduling efficiency

• Forecasted final cost at completion

• Future time performance.



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EVM Step 1

• Project Objective: To

develop a low cost

surveillance dronewithin 9 weeks at a

cost not exceedingR750 000.

• Milestones.

• Technical

Requirements.

• Limits and

exclusions.

• Review.

• See Table 7.2

EVM Steps 2 and 3



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EVM Step 4

EVM Step 5



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EVM Step 6

EVM Step 7



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EVM Step 7

EVM Step 8

• Developing the status report,

• Milestone report, and

• Issue report.





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EVM Step 8

Extending EVM: the notion of‘earned schedule’

• ES uses EVM data to determineschedule performance, and, as such,provides a more reliable source of

schedule predictors for projects thatfinish late or early.



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Earned schedule

Earned schedule

• SVt = ES-AT = 2 – 4 = -2 (2 weeks behind

schedule).

• SPIt= ES/AT = 2/4 = 0.5 (< 1 thereforebehind schedule).

• ETCt= (PD-ES)/SPIt= (9-2)/0.5 = 14 weeksto completion at this point.

• EACt = AT + ETCt= 4 + 14 = 18 weeks .

• TSPI = (PD – ES)/(PD – AT) = (9 – 2)/(9 –

4) = 1.4 – is indicative of the fact that thecurrent schedule isn’t feasible. The workrate has to be higher than it currently is.



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EVM and risk

• During the execution phase, potentialsources of risk in South Africa might

include:

• Economic issues

• Labour unrest

• Technological failure

• Conflict, infighting and politicking

• Perceptions of political uncertainty by the

international community

• Infrastructural issues.

EVM and risk

• Ways to deal with risk:

• Transfer

• Avoid

• Share

• Contingency plans.



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Configuration management and

change control• Baseline central to configuration management (CM):

• Functional Baseline: all initial information

• Allocated Baseline: performance specifications

• Product Baseline: relates to actual deliverable

• CM consists of 4 stages:

• Configuration identification: risk identification, degree ofinterrelatedness etc

• Change control: project specific – documentation ofproject changes to the baseline

• Status accounting: updating of change requests etc

• Verification: assurances that processes have beenundertaken

The ethics of execution, monitoringand control

• Ethical issues might include:

• Altering of status reports

• Compromising quality• Exploitative labour practises

• Many organisations provide ethical codesand professional project managers wouldsubscribe to PMI’s ethical code too.



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Activity (30 mins)

To be handed out in class

Documents

PM Chapter 7 V1 - LB