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“PMP® Certification Readiness” Training Program
Module:Module:Earned Value and Budget ForecastingEarned Value and Budget ForecastingEarned Value and Budget ForecastingEarned Value and Budget Forecasting
Ravikumar Kalose N, PMP®
http://www.propmacademy.com
1ProPM Academy - 2011
"PMP® Exam Prep Course"
� Understanding –• Measurements - Subjective Vs Objective
• What is Earned Value (EV)
• Work Performance MeasurementsWork Performance Measurements
• Budget Forecasts
• Performance measurement parameters
• Various formulae and their interpretation
2ProPM Academy - 2011
"PMP® Exam Prep Course"
GreenOR Red
?
What IF…??
?
Can defend the current Project Status Assertive
Relies on assumptions, interpretations based on high level work status
Lack of any measured data and facts
Project Health (Red/Amber/Green) is debatable and subjective
Relies on measured values derived from triple constraints – Scope, Time and Cost
Project Status reported based on defined matrix
Unambiguous, No Assumptions
Easily understandable by Stakeholders
ProPM Academy - 2011 "PMP® Exam Prep Course" 3
� An objective method to measure project progress based on triple constraints (Scope, Time, Cost)
� EV measurements helps to determine if a project is on track
� EV is an indicator of current project performance
� Provides early warnings and trends on any cost, schedule over runs
Earned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value CharacteristicsEarned Value Characteristics
� Earned value indicates how much of “value” you have “earned” on the project at any given point of time.
� Helps determine variance against Planned Value (PV).
ProPM Academy - 2011 "PMP® Exam Prep Course" 4
Let us consider the following example to understand the concepts better
An ERP implementation project for ABC company is estimated to cost $500,000 with an estimated duration of 40 weeks. At the end of 10 weeks the project is 20% complete with the end of 10 weeks the project is 20% complete with $150,000 being already spent on the project.
BAC =500,000, AC = 150,000
PV = 10/40*500,000 = 125,000
EV = 20/100*500,000 = 100,000
ProPM Academy - 2011 "PMP® Exam Prep Course" 5
ProPM Academy - 2011 "PMP® Exam Prep Course" 6
BAC = 500,000BAC = 500,000BAC = 500,000BAC = 500,000 PV = 125,000PV = 125,000PV = 125,000PV = 125,000 EV = 100,000EV = 100,000EV = 100,000EV = 100,000 AC = 150,000AC = 150,000AC = 150,000AC = 150,000
MetricMetricMetricMetric FormulaFormulaFormulaFormula ValueValueValueValue AnalysisAnalysisAnalysisAnalysis
CV EV-AC -50,000 This indicates $50,000 has already been
additionally spent in excess of the project worth of
work up-to this point
ProPM Academy - 2011 "PMP® Exam Prep Course" 7
SV EV-PV -25000 The negative value indicates the project is lagging
behind its planned schedule.
CPI EV/AC 0.67 A value less than 1 indicates over utilization of
funds against the actual work. In this case the
project is earning $0.67 worth value for every $
spent, not a good sign.
SPI EV/PV 0.80 A value less than 1 indicates that the project is
behind planned schedule and progress has only
been at 80% .
SVCV
ProPM Academy - 2011 "PMP® Exam Prep Course" 8
MetricMetricMetricMetric FormulaFormulaFormulaFormula ValueValueValueValue AnalysisAnalysisAnalysisAnalysis
EAC BAC/CPI 746,268.65 The revised estimates now for project
completion based on current performance is
$746,268.65 as against planned $500,000.
BAC = 500,000BAC = 500,000BAC = 500,000BAC = 500,000 PV = 125,000PV = 125,000PV = 125,000PV = 125,000 EV = 100,000EV = 100,000EV = 100,000EV = 100,000 AC = 150,000AC = 150,000AC = 150,000AC = 150,000
CV = -50,000 SV = -25,000 CPI = 0.67 SPI = 0.80
ETC EAC-AC 596,268.65 The project would now require $596,268.65
to complete
VAC BAC-EAC -246,268.65 There is an additional $246,268.65 required
to complete the project compared to original
estimates
TCPI (BAC-EV)/(BAC-AC)
(WORK LEFT TO
DO)/ MONEY
REMAINING)
1.14 The project need to now perform at 1.14 times
in order to stay within the estimated budget
ProPM Academy - 2011 "PMP® Exam Prep Course" 9
Terminology Description Formula
Budget At Completion Budget At Completion Budget At Completion Budget At Completion
(BAC)(BAC)(BAC)(BAC)
The original estimated (planned) project CostThe original estimated (planned) project CostThe original estimated (planned) project CostThe original estimated (planned) project Cost NoneNoneNoneNone
Planned Value (PV)Planned Value (PV)Planned Value (PV)Planned Value (PV) Indicates amount of work which “SHOULD have Indicates amount of work which “SHOULD have Indicates amount of work which “SHOULD have Indicates amount of work which “SHOULD have
been completed” or “Authorized work for been completed” or “Authorized work for been completed” or “Authorized work for been completed” or “Authorized work for
completion” as per plan at any pointcompletion” as per plan at any pointcompletion” as per plan at any pointcompletion” as per plan at any point
PV=Planned % PV=Planned % PV=Planned % PV=Planned %
complete X BACcomplete X BACcomplete X BACcomplete X BAC
Earned Value (EV)Earned Value (EV)Earned Value (EV)Earned Value (EV) Actual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any point EV= Actual % EV= Actual % EV= Actual % EV= Actual %
ProPM Academy - 2011 "PMP® Exam Prep Course" 10
Earned Value (EV)Earned Value (EV)Earned Value (EV)Earned Value (EV) Actual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any pointActual work that is accomplished at any point EV= Actual % EV= Actual % EV= Actual % EV= Actual %
complete X BACcomplete X BACcomplete X BACcomplete X BAC
Actual Cost (AC)Actual Cost (AC)Actual Cost (AC)Actual Cost (AC) The actual money spent at any point of timeThe actual money spent at any point of timeThe actual money spent at any point of timeThe actual money spent at any point of time AC= Cumulative AC= Cumulative AC= Cumulative AC= Cumulative
money spent till datemoney spent till datemoney spent till datemoney spent till date
Cost Variance (CV)Cost Variance (CV)Cost Variance (CV)Cost Variance (CV) The difference between howThe difference between howThe difference between howThe difference between how much was actually much was actually much was actually much was actually
Earned Earned Earned Earned and how muchand how muchand how muchand how much was awas awas awas actually spentctually spentctually spentctually spent
CV=EVCV=EVCV=EVCV=EV----ACACACAC
ScheduleScheduleScheduleSchedule Variance (SV)Variance (SV)Variance (SV)Variance (SV) The difference between plannedThe difference between plannedThe difference between plannedThe difference between planned schedule Vs schedule Vs schedule Vs schedule Vs
Actual ScheduleActual ScheduleActual ScheduleActual Schedule
SV = EVSV = EVSV = EVSV = EV----PVPVPVPV
TerminologyTerminologyTerminologyTerminology DescriptionDescriptionDescriptionDescription FormulaFormulaFormulaFormula
CostCostCostCost Performance Index Performance Index Performance Index Performance Index
(CPI)(CPI)(CPI)(CPI)
Indicates the projectIndicates the projectIndicates the projectIndicates the project performance for every $ performance for every $ performance for every $ performance for every $
spentspentspentspent
CPCPCPCPI = EV / ACI = EV / ACI = EV / ACI = EV / AC
Schedule PerformanceSchedule PerformanceSchedule PerformanceSchedule Performance
Index (SPI)Index (SPI)Index (SPI)Index (SPI)
Indicate actualIndicate actualIndicate actualIndicate actual schedule progress of the schedule progress of the schedule progress of the schedule progress of the
against the planned scheduleagainst the planned scheduleagainst the planned scheduleagainst the planned schedule
SPI = EV / PVSPI = EV / PVSPI = EV / PVSPI = EV / PV
Estimate At Completion Estimate At Completion Estimate At Completion Estimate At Completion
(EAC)(EAC)(EAC)(EAC)
TheTheTheThe revised project Budget for completion revised project Budget for completion revised project Budget for completion revised project Budget for completion
based on current performance indicatorsbased on current performance indicatorsbased on current performance indicatorsbased on current performance indicators
EAC = BAC / EAC = BAC / EAC = BAC / EAC = BAC /
Cumulative CPICumulative CPICumulative CPICumulative CPI
Estimate To Complete Estimate To Complete Estimate To Complete Estimate To Complete
(ETC)(ETC)(ETC)(ETC)
How much more (cost)How much more (cost)How much more (cost)How much more (cost) would be needed to would be needed to would be needed to would be needed to
complete the project based on current complete the project based on current complete the project based on current complete the project based on current
performance indicatorsperformance indicatorsperformance indicatorsperformance indicators
ETC = EAC ETC = EAC ETC = EAC ETC = EAC –––– ACACACAC
Variance At Completion Variance At Completion Variance At Completion Variance At Completion
(VAC)(VAC)(VAC)(VAC)
TheTheTheThe difference between the budgeted cost difference between the budgeted cost difference between the budgeted cost difference between the budgeted cost
and revised estimates based on current and revised estimates based on current and revised estimates based on current and revised estimates based on current
performance indicatorsperformance indicatorsperformance indicatorsperformance indicators
VAC = BAC VAC = BAC VAC = BAC VAC = BAC –––– EACEACEACEAC
ToToToTo----Complete Complete Complete Complete
Performance Index (TCPI)Performance Index (TCPI)Performance Index (TCPI)Performance Index (TCPI)
ProjectProjectProjectProject Performance required to be achieved Performance required to be achieved Performance required to be achieved Performance required to be achieved
in order to stay within the original budget in order to stay within the original budget in order to stay within the original budget in order to stay within the original budget
using the remaining fundsusing the remaining fundsusing the remaining fundsusing the remaining funds
TCPI = (BACTCPI = (BACTCPI = (BACTCPI = (BAC----EV) / EV) / EV) / EV) /
(BAC(BAC(BAC(BAC----AC)AC)AC)AC)
ProPM Academy - 2011 "PMP® Exam Prep Course" 11
Variance Value (SV, CV, VAC) : Variance Value (SV, CV, VAC) : Variance Value (SV, CV, VAC) : Variance Value (SV, CV, VAC) : If Negative, it is below planned performance,
If Positive, it is above planned performance
If Zero, it is exactly meeting the planned performance
Performance Index (CPI,SPI):Performance Index (CPI,SPI):Performance Index (CPI,SPI):Performance Index (CPI,SPI): If the Value is less than 1, it is below planned performance
If the Value is more than 1, it is above planned performance
ProPM Academy - 2011 "PMP® Exam Prep Course" 12
planned performance
If the Value is equal to 1, it is exactly meeting the planned performance
TCPI:TCPI:TCPI:TCPI: If the Value is Less than 1, it is above planned performanceIf the Value is more than 1, it is below planned performanceIf the Value is Equal to 1, it is exactly meeting the planned performance
ProPM Academy - 2011 "PMP® Exam Prep Course" 13
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ProPM Academy - 2011 "PMP® Exam Prep Course" 14
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