Project Control Earned

8/4/2019 Project Control Earned

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Dr. Hesham A. Aziz 1

Project Control

American University in Cairo

Egypt

Presented By

Dr. Hesham A. Aziz

Project Cost Planning and Control


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Control The process of comparing actual performance

against plan to identify deviations, evaluate courses

of action, and take appropriate corrective action.

Project Control Steps1. Setting a baseline plan.

2. Measuring progress and performance.

3. Comparing plan against actual.4. Taking actions

The Project Control Process


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Project Control

Indirect &Overhead

costs

Changeorders

Lump-sumContract

costs

Project Plan, Schedule,Budget, Quality

Safety

Other

Contractcosts

Materialcosts

Equipment

costs

Laborcosts

ProgressReports

Projectplanning

Design

Collecting information for Project Control


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A typical information filter

Top management / executive

Project Manger

Project team

Updated priceOn completion

Project completiondate

Money expendedSo far

Project completionprice

Programmedstatus

WeeklySite

reports

Anticipatedclaims

ChangesIn scope

Future problemareas

Site instructionsAnd variations

Abortivework

Percentage

completion

Monthlyvaluations

MACROLEVEL

MESOLEVEL

MICROLEVEL


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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

Project Monitoring System for Control


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Information System Structure (contd) 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?

Project Monitoring System (contd)


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Progress since last report Current status of project

Schedule

Cost

Scope Cumulative trends

Problems and issues since last report

Actions and resolution of earlier problems

New variances and problems identified

Corrective action planned

Project Progress Report Format


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Time-Phase Baseline Plan

Corrects the failure of most monitoring systems toconnect a projects actual performance to its

schedule and forecast budget. Systems that measure only cost variances do not

identify resource and project cost problemsassociated with falling behind or progressing

ahead of schedule.

Disparity Among Monitoring Systems


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Earned Value Cost/Schedule System

An integrated project management systembased on the earned value concept that uses atime-phased budget baseline to compare actual

and planned schedule and costs.


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Baseline Data Relationships


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Project Management System Overview


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Integration of WBSand OBS


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Direct Labor Budget

Rollup (000)


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Baseline andTracking Gantt

Charts


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Project Schedule Control Chart


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Relationships Between Time and Work

* Overall design effort a work/time curve can be developed.

Example Illustrative Weight Multipliers for Design Work_________________________________________

Weight Project

Design Work Multiplier Timing

_______________________________________________

Review backup material 0.05 0% - 10%

Design calculations 0.10 10% - 25%

Initial drafting 0.25 15% - 45%

Final calculations 0.20 35% - 60%

Production drawings 0.30 50% - 90%

Drawing approval 0.10 90% - 100%

_________

1.00________________________________________________

The slope of each graph is the ratio of the weight multiplier to the timerequired for the work to be performed.


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Work / Time Relationship (Design Work)

Over Laps


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Over Laps


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Integrated Cost / Schedule / Work Graph.


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Over Cost and Behind Schedule

1

2

3


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Under Cost and Behind Schedule

1

2 3

Under Cost and Ahead of Sched le


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Under Cost and Ahead of Schedule

1

23


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Over Cost and Ahead of Schedule

1

23


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Earned Value Management

Earned Value Management is a methodology used to measureand communicate the real physical progress of a plan taking intoaccount the work complete, the time taken and the costs incurred tocomplete that work.

Earned Value helps evaluate and control risk by measuring

the progress in monetary terms.

By taking a snap-shot of the projected plan and calculatingthe Earned Value metrics we can compare the planned with the actualand make a subjective assessment of the progress.

By extrapolating the curves and further calculation allowsestimate the costs to completion and the probable completion date.

The basics of Earned Value can best be shown on theubiquitous 'S-Curve'.


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Earned value analysis makes use of the followingvariables:

Actual cost of the works performed (ACWP); Budgeted cost of the works performed (BCWP); Budgeted costs of the works specified (BCWS); Scheduled time for work performed (STWP); Actual time for work performed (ATWP);

Cost Variance (CV); Schedule variance (SV); Budget at completion (BAC); Estimate at completion (EAC); Variance at completion (VAC).


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Total work package budgeted cost = 1 000 000The EVA analysis is taken up to week 6 (week 6 is time now).

The actual progress or works performed is 70 per cent. This means:Budgeted cost of the works performed (BCWP) = 1 000 000 70% = 700 000Actual cost to date = 750 000Work scheduled to date = 60%Budgeted cost of the works scheduled (BCWS) = 1 000 000 60% = 600 000

Earned value analysis (EVA)


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Sample SV and CV values

Position at week 6


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Position at week 7

Comparative positions weeks 6 and 7


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EVM: A Simple Concept

Time

Actual Cost

EarnedValue

$

Time Now

Schedule

Delay

}

Estimate atCompletion

}Risk

Planned Value

Th i f l ti (VAC) i th diff b t th l d


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The variance of completion (VAC) is the difference between the plannedand actual cost.

The cost variance is the result of a comparison of how much the work hascost in comparison with what it was budgeted to cost, both in relation

to works actually completed.

Schedule variance (SV) is the difference between budgeted cost for theworks completed and performed and the budgeted cost of the worksscheduled

The budget at completion (BAC) is the sum of all the individual budgets(BCWS) that make up . It is sometimes known as the baseline.

The estimate at completion (EAC) is the estimated total cost . It is the sumof all direct and indirect costs to date plus authorized work remaining.The EAC can also be expressed in terms of a revised estimate.

The cost accounting process of the PCCS involves looking at costvariance (CV) and schedule variance (SV) in order to assess theperformance of individual packages and groups of packages. This canbe done in several ways. The two most common are by direct evaluationof the variances themselves or by conversion of the variances toindices.


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Scheduled time for work performed (STWP) This is the estimated timerequired to perform a defined amount of work.

Actual time for work performed (ATWP) This is the actual time taken to

perform a defined amount of work.

Cost Variance (CV) The cost variance is the budgeted cost of workperformed (BCWP) minus the actual cost of work performed (ACWP).This is normally abbreviated to the formula:

CV = BCWP ACWPCost variance is therefore a comparison of how much the work has cost inrelation to what it was budgeted to cost, both figures being in relation toworks actually completed.

Schedule variance (SV) The schedule variance is the difference between

budgeted cost for the works performed (BCWP) and the budgeted cost ofthe works scheduled (BCWS). This is normally abbreviated to the formula:

SV = BCWP BCWSSchedule variance is therefore a measure of the performance of the worksin relation to budgeted costs.


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Estimate at completion (EAC) :is the estimated total cost . It is the sum ofall direct and indirect costs to date plus authorized work remaining.

EAC = ACWP + estimate to complete (ETC)and this is the updated estimate of the total cost.

EAC can also be expressed in terms of the budget at completion BACas follows:

EAC = BAC CV

EAC can also be expressed in terms of the cost variance index (CVI) as

EAC = (ACWP/BCWP) BAC

Variance at completion (VAC) The variance at completion (VAC) is the

difference between what should have cost (BAC) and what it isexpected to actually cost (EAC).

VAC = BAC EAC


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Example EVA distribution

CV = BCWPACWP = 75 00090 000 = 15 000 (i.e. a cost overrun of 15 000)SV = BCWPBCWS = 75 00050 000 = 25 000 (i.e. ahead of schedule by 25 000)

TV = STWP ATWP = 3 months 2 month = 1 month (i.e. one month ahead of time schedule)

CV ratio =BCWP/ACWP=75 000/90 000= 0.83

SV ratio =BCWP/BCWS=75 000/50 000= 1.5

TV ratio =STWP/ATWP=3/2= 1.5


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Cost/Schedule Graph


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Earned Value Review Exercise


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Example budget and actual costs to end of month 4 Example planned and actual schedule performance


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The critical ratio can often be used to trigger alarm bells

if work performance falls below a certain level.

The critical ratio is equivalent to (actual progress /

scheduled progress) (budget cost / actual cost)

A critical ratio of unity or more is good and means thatactual performance is better than planned performance.

Conversely, a critical ratio less than

unity is poor and is an indication of underperformance.


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Typical variance envelope

cost variance (CV) = BCWP ACWP. Therefore

BCWP > ACWP: work performed has cost less.

BCWP < ACWP: work performed has cost more.

BCWP = ACWP: work on cost plan. .And

schedule variance (SV) = BCWP BCWS. Therefore

BCWP > BCWS: works ahead of programmed.

BCWP < BCWS: works behind programmed.

BCWP = BCWS: works on programmed.

These values can also be shown as indices:

Cost Variance Index (CVI) =BCWP/ACWP

CVI > 1.0: good

CVI < 1.0: bad

CVI = 1.0: ok . And

Schedule Variance Index (SVI)=BCWP/BCWS

so that

SVI > 1.0: good

SVI < 1.0: bad

SVI = 1.0: ok


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CVI > 1.0, SVI > 1.0 Excellent: the project is under cost and ahead on

programmed.

CVI > 1.0, SVI = 1.0 Good: the project is under cost and is on schedule. CVI > 1.0, SVI < 1.0 Good/bad: the project is under cost but behind on

programmed.

CVI = 1.0, SVI > 1.0 Good: the project is on cost and ahead of programmed.

CVI = 1.0, SVI = 1.0 Good: this scenario means that the project is on cost

and on schedule.

CVI = 1.0, SVI < 1.0 Bad: the project is on cost but is behind schedule

CVI < 1.0, SVI > 1.0 Good: this scenario is probably caused by faster than expected

working practices.

CVI < 1.0, SVI = 1.0 Poor: the project has a cost overrun and is on programmed.

CVI < 1.0, SVI < 1.0 Very bad: this is the worst case. The project is

running over cost and behind on programmed.


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Critical-ratio analysis

Zone A: Take no action Zone B: Record and monitor

Zone C: Act immediately Zone D: Emergency response required

Zone A1: Observe and note Zone A2: Investigate and correct


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WBS CAC Start Finish Target Target Scheduled Performed BCWS BCWP ACWP

Code week week Cost Duration Complete%

complete%

A-37 A1 35 45 10,000 10 100 50 10000 5000 6000

A-38 A2 35 50 12,000 15 66.67 50 8000 6000 6000

A-39 A3 40 50 14,000 10 50 45 7000 6300 6500

A-40 A4 42 50 8,000 8 37.5 45 3000 3600 4100

A-41 A5 44 50 6,000 6 16.67 30 1000 1800 2300

A-31 A11 40 50 12,000 10 50 60 6000 7200 7200

A-32 A22 40 50 14,000 10 50 60 7000 8400 8500

A-33 A33 40 50 18,000 10 50 50 9000 9000 8000

A-34 A44 40 50 8,000 10 50 50 4000 4000 3000

A-35 A55 42 55 6,000 13 23.077 50 1384.6 3000 3000

A-36 A66 44 55 10,000 11 9.090 50 909.0 5000 5500

Budget Cost calculations

Time now = week 45

Cost and Schedule Variance


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WBS CAC ACWP BCWP BCWS CV SV Comments

A-37 A1 6000 5000 10000 -1000 -5000 Very over budget and very late.

A-38 A2 6000 6000 8000 0 -2000 On cost but very late

A-39 A3 6500 6300 7000 -200 -700Over budget and late.

A-40 A4 4100 3600 3000 -500 600 Over budget but ahead of schedule

A-41 A5 2300 1800 1000 -500 800 Over budget but ahead of schedule

A-31 A11 7200 7200 6000 0 1200 On cost and way ahead of schedule.

A-32 A22 8500 8400 7000 -100 1400 Over cost but way ahead on schedule.

A-33 A33 8000 9000 9000 1000 0 Under cost and on schedule.

A-34 A44 3000 4000 4000 1000 0 Under cost and on schedule.

A-35 A55 3000 3000 1385 0 1615 On cost and way ahead of schedule

A-36 A66 5500 5000 909 -500 4091 Over cost but way ahead of schedule

Total -800 2006 Over cost but well ahead.

Cost and Schedule Variance.

Example : Variance Analysis


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Estimate at Completion. EAC = (ACWP/BCWP) * BACThen: EAC = (360/340) * 579,000 = 613,059

Projected Overrun = 613,059 - 579,000 = 34,059

Cost summary: CV%= CV/ BCWP (from Total row)Costs are running 5.88% above budget. This has been caused by wage rate increases.Schedule summary: SV%= SV/BCWS (from Total row)The project is 24.4% behind schedule as a result of packages 6 and 8 not having started yet.These packages have been delayed because of a lack of material.

Corrective action report -----------------------------------------------------------------------------------------------------------------------------------------

Example : Variance Analysis.

Assume budget at completion = 579.000Task. Status ACWP BCWP BCWS CV SV CV% SV%

1 Completed 100 100 100 0 0 0 0

2 Completed 55 50 50 -5 0 -10 03 Completed 40 50 50 10 0 20 0

4 Not started 0 0 70 0 -70 - -100

5 Completed 140 90 90 -50 0 -55.56 0

6 Not started 0 0 40 0 -40 - -100

7 Started 25 50 50 25 0 50 0

8 Not started 0 0 0 - -

Total 360 340 450 -20 -110 -5.88 -24.44


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Cost and schedule variance performance grid Example variance tracking

CV and SV tracking and

corrective monitoring


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CVI and SVI figures for team 2 in weeks 14

EVA values for the project as a whole


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Scope Changes to a Baseline

FIGURE 13.14


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Other Control Issues

Issues In Maintaining Control Of ProjectsIssues In Maintaining Control Of Projects

Baseline ChangesBaseline Changes

Contingency ReserveContingency Reserve

Costs and Problems of Data AcquisitionCosts and Problems of Data Acquisition

Scope CreepScope Creep

Managing the Portfolio of ProjectsManaging the Portfolio of Projects


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D H h A A i 57

Documents

Project Control Earned