sharif mba project management session 9gsme.sharif.edu/~projectmanagement/pmsession9.pdf1 sharif mba...
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Sharif MBAProject ManagementSession 9
Resource PlanningProject AccountsEarned Value
Burke Ch. 13, 14, 16
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Resource Table
Example/Exercise
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Bar-chart & Resource Histogram
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Cumulative Resource S Curve
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Bar-chart & Smoothed Histogram
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Resource Smoothed Bar-chart
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Resource ConstraintsWorking OvertimeWorking ShiftsIncrease ProductivityJob and KnockLearning CurveSub-contractorsScope of WorkDuration Deadline
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Cost Distribution
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Schedule of Work
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Cash-Flow Imposed on Bar-chart
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Expenses Bar-chart (showing expenses per day)
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S-Curve(accumulated expenses per day)
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Cost ManagementCost Management: processes required to ensure that the project is completed within the approved budget (PMBOK)
• Financial Accounting• Management Accounting• Project Accounting
D
Due to limited class time,Cost Management will bediscussed at the end, astime permits. Only someconcepts and Earnedvalue are explained here.
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Cash-Flow Statement
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Cost Estimating –Techniques & Tools
Analogous estimates / top-down estimatesBottom-up estimatingParametric modelingComputerized tools, spread sheets, MS Project
Useful tips for creating more precise estimatesHave the person doing the work create the estimate.Use task information from another project.Use the PERT techniqueBe sure to estimate all tasks for all resources:
people, equipment, and materials.
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Influence / Cost Change of Curve
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Project Control
If anything seems to be going well, you obviously do not know what’s going on!
Murphy’ Law
If the project is off course, then control in the form of corrective action must be applied.
It is essential for effective project control that performance is measured while there is still time to take corrective action.
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Project Progress Against Time
PlannedProgress
=> Project Behind schedule & Over-spent
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Earned Value
False assumption: Input == OutputExample: Projects 99% complete for a year
Expenses & Progress reported separately
The Earned Value technique measures the performance of project as it is completed. It also allows to forecast future performance based on the past performance (PMBOK)
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Input vs. Output vs. Plan
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Project Man-hours
Planned Man-hours: Estimates of how you intendto perform the work
Actual Man-hours:Recorded on the clock cards
Earned Man-hours:Measure of work done
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Over Optimistic Reporting
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Project Values
1. The planned value (PV), also the budgeted cost of work schedule (BCWS), or the budget, is portion of the approved total cost estimate planned to be spent on an activity during a given period.
2. The actual cost (AC), also the actual cost of work performed (ACWP), is the total direct and indirect costs incurred in accomplishing work on an activity during a given period.
3. The earned value (EV), also the budgeted cost of work performed (BCWP), is the percentage of work actually completed multiplied by the planned value.
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Earned Value Curve
BAC:Budget At Completion
BCWS (budget):Budgeted Cost ofWork Scheduled
ACWP (actual):Actual Cost ofWork Performed
BCWP (earned):Budgeted Cost ofWork Performed
EAC:Estimate at Completion
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Earned Value
EV = PV * (% Complete)
• Expert Opinion
• % of Production
• Using WBS(Data Capture Proforma)
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Data Capture Proforma
PipeErectionActivity
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Cost Control –Earned Value Management
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Cost Control Calculations- Earned Value Management
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Cost VarianceCalculation
CV = BCWP - ACWP
A negative variance indicates a cost overrun
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Schedule Variance Calculation
SV = BCWP - BCWS
A negative variance indicatesa behind schedule condition
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Variance percents
SCHEDULE VARIANCE % =(SVP)
COST VARIANCE % =(CVP)
SVBCWS X 100
CVBCWP X 100
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Estimate at completion (EAC)
EAC = ACWPBCWP X Budget at completion
(BAC)
The estimate at completion is the best estimate of the total cost at the completion of the project.
The EAC is a periodic evaluation of the status of the project - usually on a monthly basis or until a significant change has been identified.
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Exercise Template
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Solution to Number 4
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Solution to Number 7
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Solution to Number 13
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Project Variance Analysis
R&D QUALIFICATION DEVELOPMENTPHASE I PHASE II PHASE III
VARIANCE LOWER BOUNDARY
ACTUAL COST VARIANCE
PROJECTED COST
VARIANCE UPPER BOUNDARY
TIME
$
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Management Reserve
CONTRACTED COST
RELEASED BUDGET
ACTUAL COST
TIME
MANAGEMENTRESERVE
$
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Variance Analysis Questions
What is the problem causing the variance?
What is the impact on time, cost, and performance?
What is the impact on other efforts, if any?
What corrective action is planned or under way?
What are the expected results of the corrective action?
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Variance Reporting
Variance reporting is accomplished at each reporting interval. However, the variance threshold reports are exception reports and occur only when the variances exceed the upper and lower boundaries of the project variances envelope.
Reporting Intervals
Depends on the type of organization and characteristics of the projects.Project-driven organization - weekly.Non-project-driven organization - monthly
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Cost Account Variance Analysis Report
Cost account no/camWBS/Description
Cost performance data Variance
Reporting levelAs of
At completionBudget EAC Var.BCWS BCWP ACWP SCHED COST
Month to date ($)Contract todate ($k)
Problem cause and impact
Corrective action (including expected recovery date)
Cost account Date Cost center Date WBS element Date DateMgr. Mgr. Mgr.
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The 50/50 rule
Half of the budget for each element is recorded at the time that the work is scheduled to begin and the other half at the time the work is scheduled to be completed.
For a project with a large number of elements the amount of distortion from such a procedure is minimal.
43J F M A M J J A S O N D
AnalysisBudgeted cost for work Scheduled (BCWS)
Performed (BCWP)
Budget - 6
814
12
10
12
812
10
8
Work packages
Cost account budget = 100(thousands)
BCWS = 38BCWP = 49SCHED. VARIANCE = +11
50-50 rule used for work in process
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Using The 50-50 Rule
4,000
10,000
12,000
4,000
6,000
6,000
10,000
TIME
TIME LINE
COMPLETED
NOT COMPLETED
LEGEND
BCWS = 34,000BCWP = 33,000BAC = 52,000
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Earned Value Status Reporting
SV
CV
BCWS
BCWP
ACWP
TIME LINE
CU
MM
ULA
TIVE
CO
ST, $
TIME
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Monthly Project Report 1. VARIANCE ANALYSIS (Cost in Thousands) 1 June 1997
Budgeted Budgeted Cost Milestone Cost Work Work Actual Variance, %
Subtask Status Scheduled Performed Cost Schedule Cost1 Completed 100 100 100 0 02 Completed 50 50 55 0 -103 Completed 50 50 40 0 204 Not Started 70 0 0 -100 --5 Completed 90 90 140 0 -55.56 Not started 40 0 0 -100 --7 Started 50 50 25 0 508 Not started 0 0 0 -- --
Total 450 340 360 -24.4 -5.9
2. ESTIMATE AT COMPLETION (EAC)EAC = (360/340) X 579,000 = $613,059Overrun = 613,059 - 579,000 = $34,059
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3. COST SUMMARYCosts are running approximately 5.9% over budget due to higher salaried labor.
4. SCHEDULE SUMMARYThe 24.4% behind schedule condition is due to subtasks 4 and 6 which have not yet begun due to lack of raw materials and the 50/50 method for booking costs. Overtime will get us back on schedule but at an additional cost of 2.5% of direct labor costs.
5. MILESTONE REPORTMilestone/ Scheduled Projected Actual Subtask Completion Completion Completion
1 4/1/97 4/1/972 5/1/97 5/1/973 5/1/97 4/23/974 7/1/97 7/1/975 6/1/97 6/1/976 8/1/97 8/1/977 9/1/97 9/1/978 10/1/97 10/1/97
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6. ACTIVITY REPORTCurrent Potential CorrectiveProblem Impact Action
(a) Lack of raw Cost overruns and Overtime is scheduled. materials. behind schedule We will try to use lower
condition. salaried staff. Rawmaterials are expectedto be on dock next week.
(b) Customer un- May need add- Customer will providehappy with test itional planning. us with revised statementresults. of work on 6/15/97.