![Earned Value Analysis
• Methods for estimating percent completion
• The 50-50 estimate. 50% is assumed when task is begun,
and remaining 50% when work completed.
• 0-100% rule. This rule allows no credit for work until task
is complete, highly conservative rule, project always seem
late until the very end of project when everything appears to
suddenly catch up
• Critical input rule. This rule assigns progress according to
amount of critical input that has been used. Labor or skilled
dependent, machine critical input – buy machine complete
task – may be misinformation
• Proportional rule. This rule divides planned (or actual) time-
to-date by total scheduled time(or budgeted (or actual ) cost-
to-date by total budgeted cost] to calculate percent
complete. This is commonly used rule.](https://image.slidesharecdn.com/lecture5-monitoringandcontrollingprojects-240429161025-ba689f43/85/Lecture-5-Monitoring-and-Controlling-Projects-ppt-18-320.jpg)
Lecture 5- Monitoring and Controlling Projects.ppt
- 1. Project Management From 22nd March 2024
- 2. Lecture 5– Monitoring and Controlling Projects Lecture: Vitumbiko Khoswe
- 3. Project Monitoring and Control Why do we monitor? What do we monitor? When to we monitor? How do we monitor?
- 4. Project monitoring involves the following : Establishing indicators Set up systems to collect information relating to the indicators Collecting and recording information Analysis of the information Use of information to inform management on day to day basis
- 5. Why do we monitor? • Simply because we know that things don’t always go according to plan (no matter how much we prepare) • To detect and react appropriately to deviations and changes to plans
- 6. Men (human resources) Machines Materials Money Space Time Tasks Quality/Technical Performance What do we monitor?
- 7. What do we monitor? • Inputs • Time • Money • Resources • Material Usage • Tasks • Quality/Technical Performance • Outputs • Progress • Costs • Job starts • Job completion • Engineering / Design changes • Variation order (VO)
- 8. When do we monitor? • End of the project • Continuously • Regularly • Logically • While there is still time to react • As soon as possible • At task completion • At pre-planned decision points (milestones)
- 9. Where do we monitor? • At head office? • At the site office? • On the spot? • Depends on situation and the ‘whats’
- 10. How do we monitor • Through meetings with clients, parties involved in project (Contractor, supplier,etc.) • For schedule – Update CPA, PERT Charts, Update Gantt Charts • Using Earned Value Analysis • Calculate Critical Ratios • Milestones • Reports • Tests and inspections • Delivery or staggered delivery • PMIS (Project Management Info. Sys.) Updating
- 11. Meetings – Some monitoring issues • What problems do you have and what is being done to correct them? • What problems do you anticipate in the future? • Do you need any resources you do not yet have? • Do you need information you do not have yet? • Do you know anything that will give you schedule difficulties? • Any possibility your task will finish early/late? • Will your task be completed under/over/on budget?
- 12. • Evaluation involves the following • Looking at what the project or organization intended to achieve (what difference did the project want to achieve ? What impact did it want to make? • Assessing its progress towards what it wanted to achieve , its impact and targets • Looking at how the project worked (was there efficiency in the use of resources )
- 13. • Project Evaluation Project monitoring and Evaluation has the following benefits : • Helps to identify the problems and their causes during implementation • Suggest possible solution to problems • Raises questions about assumptions and strategies • Provides information for progress of the project • Encourages to act on information and insights • Helps to track changes in the project
- 15. Project Control • Control – process and activities needed to correct deviations from plan • Control the triple constraints • time (schedule) • cost (budget, expenses, etc) • performance (specifications, testing results, etc.)
- 16. Techniques for monitoring and control • Earned Value Analysis (EVA) • Critical Ratio (CR)
- 17. Earned Value Analysis • A way of measuring overall performance (not individual task) is using an aggregate performance measure - Earned Value • Earned value of work performed (value completed) for those tasks in progress found by multiplying the estimated percent physical completion of work for each task by the planned cost for those tasks. The result is amount that should be spent on the task so far. This can be compared with actual amount spent.
- 18. Earned Value Analysis • Methods for estimating percent completion • The 50-50 estimate. 50% is assumed when task is begun, and remaining 50% when work completed. • 0-100% rule. This rule allows no credit for work until task is complete, highly conservative rule, project always seem late until the very end of project when everything appears to suddenly catch up • Critical input rule. This rule assigns progress according to amount of critical input that has been used. Labor or skilled dependent, machine critical input – buy machine complete task – may be misinformation • Proportional rule. This rule divides planned (or actual) time- to-date by total scheduled time(or budgeted (or actual ) cost- to-date by total budgeted cost] to calculate percent complete. This is commonly used rule.
- 19. Earned Value Analysis • Refer to earned value chart – basis for evaluating cost and performance to date • If total value of the work accomplished is in balance with the planned (baseline) cost, and actual cost then top mgmt has no particular need for a detailed analysis of individual tasks • Earned value concept – combines cost reporting & aggregate performance reporting into one comprehensive chart
- 20. Earned Value Analysis • Baseline cost to completion – referred to as budget at completion (BAC) • Actual cost to date – referred to as estimated cost at completion (EAC) • Identify several variances according to two guidelines • A negative variance is ‘bad’ • Cost and schedule variances are calculated as earned value minus some other measure
- 21. Earned Value Analysis-Variances • 3 types of variances; • Cost (spending) variance (CV) – difference between budgeted cost of work performed (earned value) (BCWP) and actual cost of that work (ACWP) • Schedule variance (SV) – difference between budgeted cost of work performed (earned value) (BCWP) and budgeted cost of work scheduled to perform to date (BCWS) • Time variance (TV) –difference between time scheduled for work performed (STWP) and actual time to perform it (ATWP)
- 22. Earned Value Analysis-- Formula • Cost (spending) variance CV = BCWP – ACWP (negative value - cost overrun) • Schedule variance SV = BCWP – BCWS (negative value - behind schedule) • Time variance TV = STWP – ATWP (negative value - delay) • Index (Ratios) • Cost Performance Index (CPI) = BCWP/ACWP • Schedule Performance Index (SPI) = BCWP/BCWS • Time Performance Index (TPI) = STWP/ATWP
- 23. Earned Value Chart – basis for evaluating cost & performance to date
- 24. EXAMPLE • Assume that operations on a Work Package ~(The Pond?) cost $ 1,500 to complete. They were originally scheduled to finish today. At this point, we actually spent $1,350. And we estimate that we have completed two thirds (2/3) of the work. What are the cost and schedule variances? • CV = BCWP – ACWP = 1500 (2/3) – 1350 = - 350 • SV = BCWP – BCWS = 1500 (2/3) – 1500 = - 500 • CPI = BCWP/ACWP = 1500(2/3)/1350 = 0.74 • SPI = BCWP/BCWS = 1500(2/3)/1500 = 0.67 • Spending is higher than the budget, and given what we have spent, we are not as far along as we should be (we spent too much and have not completed as much work as we should have)
- 25. Possible to have one of the indicators to be favorable while the other unfavorable Might be ahead of schedule and behind costs Activity – Task 1, Six possibilities
- 26. 6 Possibilities Earned Value Analysis
- 27. EXERCISE A project to develop a country park has an actual cost in month 17 of $350,000, a planned cost of $475,000, and a value completed of $300,000. Find the cost and schedule variances and the three indexes.
- 28. Solution • BCWS = 475,000 • BCWP = 300,000 • ACWP = 350,000 • CV = 300,000 – 350,000 = -50,000 (negative value - cost overrun) • SV = 300,000 – 475,000 = -175,000 (negative value - behind schedule)
- 29. You may also work out the following • 1. Cost Performance Index (CPI) = BCWP/ACWP = 300,ooo/350,ooo = 0.86 • 2. Schedule Performance Index (SPI) = BCWP/BCWS = 300,000/475 ,000= 0.63 • 3. Scheduled Time Work Performed (STWP) can be estimated • Time (t) = Schedule Variance/Slope of Planned costs = • -175,000/ (475,000/17) = - 6.26 months • Time Difference= 17- 6.26 = 10.74 months • TV = 10.74/17 = 0.63
- 30. Critical ratio – Communal Garden • Sometimes, especially with large projects, it may be worthwhile calculating a set of critical ratios for all project activities • The critical ratio is • actual progress x budgeted cost • scheduled progress actual cost • If ratio is 1 everything is probably on target • The further away from 1 the ratio is, the more we may need to investigate
- 31. Activity • Complete task 2 on your worksheet!
- 32. Critical ratio example • Calculate the critical ratios for the following activities and indicate which are probably on target and need to be investigated.
- 33. Critical ratio example • Can be on schedule and below budget (Act A) Why so good? Cutting corners? • Can be behind schedule but below budget (Act C) • Can be on budget but physical progress lagging (Act E) • Can be on schedule but cost running higher than budget (Act D) • On budget ahead of schedule (Act B)
- 34. Summary • Need proper project monitoring and control mechanisms • Tools available to help in monitoring and controlling activities • There are human control and management aspects