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Stage III: Project Execution and Control
Earned Value Analysis
B: Chapter 8: pages 10-13
B: Chapter 12: the entire chapter
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Recitation
What does RAM stand for in the context of HR Management?
What was the name of the guy who categorized all job satisfaction factors into two categories?
What were those two categories?
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Freeze Requirements???
What are the PROS?
What are the CONS?
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Freeze those requirements!!Late-project creeping requirements are the most
common source of cost and schedule overrunsLate-project creeping requirements are a major factor in
project cancellations
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Rather than freezing, use some kind of change control system
Allows for some changes to happen, depending upon contractual considerations
Allows for the system to reject some proposed changes
Use of a CCB is considered a modern BEST PRACTICE
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Forces pushing for late-project requirements change
Competition intros new version of competitive product with unanticipated KILLER features
New work is undiscovered late in the project A “Wouldn’t It be Great if…” scenario happens End-users want changes because they now know more
about their requirements than they did 18 months ago Developers want changes because they have a great
emotional and intellectual investment in all of the system’s details
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Processes utilized in Stage III Integration management:
Project plan execution; integrated change control Scope management:
Scope change control Time management:
Schedule control Cost management:
Cost control Quality management:
Quality control
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Processes utilized in Stage III, Continued
Communication management: Information distribution, Performance reporting
Risk management: Risk monitoring and control
Procurement management: Contract administration
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Controlling Changes to the Project Schedule
Perform reality checks on schedules Allow for contingencies?? Don’t plan for everyone to work at 100%
capacity all the time Hold progress meetings with stakeholders and
be clear and honest in communicating schedule issues
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Execution
Focus and leadership are keys to success in execution
Poor execution leads to losses in the business world just as it does in sports
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Factors leading to poor Execution
Multitasking—doing several things at once
Procrastination (student syndrome)—putting things off until the last minute
Others we will discuss later
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Multitasking
A finishes
A finishes
B finishes
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Cost Control
Project cost control includesmonitoring cost performanceensuring 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 Earned value analysis is an important tool for cost
control
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Earned Value Analysis (EVA)
EVA 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 with EVA
You must enter actual information periodically to use EVA. Figure 6-1 shows a sample form for collecting information
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Figure 6-1. Cost Control Input Form for Business Systems Replacement Project
WBS#: 6.8.1.2 Description: Design Interface Process -Customer Information
Revision: Revision Date:
Assignments ForecastHours per day Effort (in hours) Calculated
Responsible: SMC Role: PA Availability: 6 Optimistic: 20Most Likely: 30 Plan
Effort:30 Hrs
Involved: Role: Availability: Pessimistic: 40
Involved: Role: Availability: PlanDuration
:
5 Days
Involved: Role: Availability: Delay (Days):
Description Assumptions
Results / Deliverables Dependencies Predecessors (WBS#): Successors (WBS#):
4.7
Develop an operational process design for the Customer Informationinterface from the Invoicing System to Oracle Receivables. This task willaccept as input the business/functional requirements developed during thetactical analysis phase and produce as output a physical operational design,which provides the specifications, required for code development.
Process Design Document - Technical - Operation/Physical DFD - Process Specifications - Interface Data Map
- All business rules and issues will be resolved prior to this task.- The ERD & data model for Oracle Receivables & any Oracleextension required will be completed and available prior to this task.- The ERD for the Invoicing System will be completed and availableprior to this task.- Few iterations of the review/modify cycle will be required.- Primarily a documentation task.
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Earned Value Analysis Terms
Budgeted cost of work performed (BCWP), also called earned value, is the percentage of work actually completed multiplied by the budget for the activity
Budgeted cost of work scheduled (BCWS),Budgeted cost of work scheduled (BCWS), also called planned value, is that portion of the approved total cost estimate planned to be spent on an activity during a given period
Actual cost of work performed (ACWP), also called actual cost, are the total direct and indirect costs incurred in accomplishing work on an activity during a given period
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Earned Value analysis--EVA Earned value = Budgeted Cost of Work Performed
(BCWP) Planned value = Budgeted Cost of Work
Scheduled (BCWS), and Actual Cost = Actual Cost of Work Performed
(ACWP) When you complete an activity, you earn the
budgeted value of that activity
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Schedule Variance (SV) Defined as the difference between the budgeted
cost of work performed and the budgeted cost of work scheduled
= BCWP - BCWS Indicates the deviation between the work content
performed and the work content scheduled for the control period
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Cost Variance (CV) Defined as the difference between the budgeted
cost of work performed and the actual cost of work performed
= BCWP - ACWP A positive CV indicates a lower actual cost than
budgeted for the control period, while a negative CV indicates a cost overrun
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Schedule Performance Index (SPI) Defined as the ratio BCWP/BCWS A value close to 1 indicates an activity that is on
schedule Values greater than 1 suggest the activity is
ahead of schedule Values less than 1 indicate a schedule overrun
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Cost Performance Index (CPI) Defined as the ratio BCWP/ACWP A value close to 1 indicates an activity that is on
budget Values greater than 1 suggest the activity is
below budget Values less than 1 indicate a budget overrun
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Table 6-7. Earned Value Formulas
Term Formula Earned Value Budgeted Cost of Work Performed (BCWP) =
budgeted cost of task X % complete Cost Variance CV=BCWP-ACWP (actual cost of work performed) Schedule Variance SV=BCWP-BCWS (budgeted cost of work
scheduled) Cost Performance Index CPI=BCWP/ACWP Schedule Performance Index SPI = BCWP/BCWS
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Table 6-6. Earned Value Calculations for One Activity After Week One
Activity Week 1 Week 2 Total % Complete after Week 1
EarnedValue after Week 1
(BCWP) Purchase web server 10,000 0 10,000 75% 7,500 Weekly Plan (BCWS) 10,000 0 10,000 Weekly Actual (ACWP) 15,000 5,000 20,000 Cost Variance (CV) -7,500 Schedule Variance (SV) -2,500 Cost Performance Index (CPI)
50%
Schedule Performance Index (SPI)
75%
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Rules of Thumb for EVA Numbers Negative numbers for cost and schedule
variance indicate problems in those areas. The project is costing more than planned or taking longer than planned
CPI and SPI less than 100% indicate problems
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Figure 6-2. Earned Value Calculations for a One-Year Project After Five Months
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In the Figure above Budget at Completion = BAC = original budget at the
planned completion date Time at Completion = TAC = original completion time In the figure above, $100,000 in month 12 Estimate at completion = EAC = BAC/CPI Estimate at completion = $100,000/.83 = $120,455 Estimated time to complete = ETAC = TAC/SPI Estimated time to complete = 12/.96 = 12.55 mos.
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Why Earned Value Analysis?? You can’t tell what your true cost variance is
because you don’t know where you are relative to scheduleSuppose you are behind schedule but also you have
spent less than what the schedule has called for. Are you really under budget?
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Updating cost estimates BAC = Budget at completion = total budget of the
project activities based on the original project plan Assuming the original budget (the BAC) was
$200,000 and the CPI is 1.12, what is EAC? EAC = BAC / CPI = $200,000 / 1.12 $178,571
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Updating schedule estimates TAC = Time at completion = total time required to
complete the schedule ETAC = Estimated (revised) time to complete Assuming the TAC was 12 months what is the
ETAC? ETAC = TAC / SPI = 12 / .77 15.6 months Project will be delayed almost 4 months
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Updating, Cont’d WR = Work Remaining = budgeted cost of the
work not yet accomplished by the end of the reporting period
WR = BAC - BCWP ETC = updated estimate of the cost of work
remaining = COST(WR) EAC = updated estimate of the total project cost =
ACWP + ETC
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Figure 6-3. Earned Value Chart for Project After Five Months
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
1 2 3 4 5 6 7 8 9 10 11 12
Month
$
BCWS or Cumulative Plan ACWP or Cumulative Actual BCWP or Cumulative EV
BCWS
ACWP
BWCP
BAC
EAC
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Using Software to Assist in Cost Management
Spreadsheets are a common tool for resource planning, cost estimating, cost budgeting, and cost control
Many companies use more sophisticated and centralized financial applications software for cost information
Project management software has many cost-related features
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Using MS Project for Execution & Control
First, make certain your project plan is complete and final
Second, save it as a baseline Begin entering actual information
Actual costsPercentage complete
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Tracking: MS Project will track—
Task start dates Task finish dates Task duration Task cost work Percentage of task that is complete
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Getting Earned Value Data Visible You can go to view and replace the entry table
with the Earned Value table Or, you can enter the earned value columns into
your existing table through the Insert Column facility.The columns are BCWP, BCWS, ACWP, CV, SC, SPI,
CPI, etc.You can also request the Tracking Gantt Chart off the
LHS side of MS Project
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Entering actual start & Finish dates for a task
On the view bar, click Gantt chart In the task name field select the task to update On the Tools menu, point to tracking and click
Update Tasks Under Actual, type the dates in the Start and
Finish boxes
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Indicating progress on a task as a percentage
In the task name field of the Gantt Chart Double click—this brings up the task information
sheet Select the general tab In the percentage complete box type a whole
number between 0 and 100
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Entering actual costs for a resource assignment
On the Tools menu, click options, then click the calculation tab
Clear the Actual costs are always calculated by MS Project check box
Click OK On the view bar, click Task usage On the view menu, point to the Table, and click Tracking Drag the divider bar to the right to view the Activity Cost field In the activity cost field, type the actual cost for the assignment
for which you want to update costs
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James R. Burns, Texas Tech Univeresity
Earned Value analysis--EV
= Budgeted Cost of WorkPerformed (BCWP)
Also uses Budgeted Cost of WorkScheduled (BCWS), and
Actual Cost of Work Performed(ACWP)
When you complete a milestone,you earn the budgeted value of thatmilestone
James R. Burns, Texas Tech Univeresity
An Example
TIME
Budget
Budget
Actual
Overrun???
James R. Burns, Texas Tech Univeresity
Budgeted Cost of WorkPerformed (BCWP)
Defined as the monetary value ofthe work actually accomplishedwithin the control period.
ACTIVITY BCWP
1 $12,0002 $30,0003 $16,000
$58,.000CUMULATIVE
James R. Burns, Texas Tech Univeresity
Cost Variance (CV)
Defined as the difference betweenthe budgeted cost of workperformed and the actual cost ofwork performed
= BCWP - ACWP A positive CV indicates a lower
actual cost than budgeted for thecontrol period, while a negative CVindicates a cost overrun
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Recitation What are two of the four Myers/Briggs
dimensions? What are the other two? To what Myers/Briggs category do most IT
professionals belong? Who is the motivation guru? What are his five levels? Who gave us Theory X and Theory Y??
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