time and cost integration and control

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281BE Project Management

Project Control

Time and Cost Integration


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Outline

The need for project control

Traditional project control need to

integrate expenses and progressEarned value analysis

EVA application to project scenarios

Earned value reporting


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Project Control System

Project Objectives, Corporation Management Decisions,Operating Policies Influences

PlanningSchedule

CostResource

Authorisation forImplementation

Update the

Plan

Measurement

EvaluationDecision

Implementation/

Execution

External Factor Influences

Planning

Control


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Why do we need project control?

Collecting information, making decisions and

taking (corrective) actions based on this

information

while there is still enough time!!

Controlling project to discover:

What has happened?

What is happening? What should have happened?

What should be happening?


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How can we exercise project control?


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S-Curve

Draw S-curve based on:

Early start for all activities

Late start for all activities


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S-Curve


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S-Curve


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Consider.


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Traditional Project Control

Often based on a single measure

Rely on variance analysis (e.g. cost or

time variance)

The difference between planand actual

at a particular point of time

No information about how much workcompleted/progress

Insufficient measure of control


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Why integrate expenses and progress?


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Earned Value Analysis

Planned Value (PV)baseline

Budgeted Cost of Work Scheduled (BCWS) to be completed on

an activity

What I plan to do

Earned Value (EV)

Budgeted Cost of Work Performed (BCWP) on the schedule

activity

What I did

Actual Cost (AC)

Actual Cost of Work Performed (ACWP) on the schedule activity

What I paid for


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Earned Value Graph


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Variance

Cost Variance (CV)

CV = EV AC

Cost Performance Index (CPI) = EV/AC

Schedule Variance (SV) SV = EV PV

Schedule Performance Index (SPI) = EV/PV

Threshold Variance To flag problem areas

Set as a percentage (e.g. +/- 5%)


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Other Terminology

Budget at Completion (BAC)

Original estimate/ budget/ quotation

Not including profit

Estimate at Completion (EAC)

Revised budget based on current productivity

Estimate-to-Complete (ETC)

ETC = EAC ACWP

Compare with Cost-to-Complete

Percentage Complete (PC)

Measure of progress up to timenow


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Forecasting EAC

PC

ACWPEAC

BAC

BACPC

ACWPEAC

therefore

BACPCBCWPas

BACBCWP

ACWPEAC


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Forecasting Estimated Time toCompletion

Assuming unchanged productivity

Actual Time Expended (ATE)

Time from project start until timenow Original Duration (OD)

SPISPI)(ATE-ODATECTimeE


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Percentage Complete

50 50 estimate

50% assumed when the task starts, and remaining 50% when

completed

0 100 percent rule

No credit until the task is completed

Critical input use

E.g. skilled labour, equipment/machine

Proportionality rule Actual task time divided by total scheduled task time, or

Actual cost divided by total budgeted task cost


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Earned Value Table

Act BAC BCWS PC BCWP ACWP SV CV EAC

100 2000 1000 40 800 1200 -200 -400 3000

200

300

Total


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Example

Activity BAC BCWS PC BCWP Status

100 2000 1000 60% 1200 Ahead

200 1000 900 80% 800 Behind

300 1500 1000 67% 1000 On time

Total 2900 3000


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Extrapolation


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Scenario: the project is running late and thecosts are over budget


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Scenario: the progress is ahead of plannedand the costs are under budget


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Scenario: the project is ahead, but the costsare over budget


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Earned Value Reporting

EV graph provides overview of status; tables providedetailed information

Management response:

SV(+), ahead of schedule

SV(-), behind schedule

CV(+), costs less than budget

CV(-), costs greater than budget

EVA should not be used in isolation, e.g. with float

EV is only useful if the different between planned and

actual is 10 to 15%

EVA is also influenced by (overoptimistic) estimate!!


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References

Burke R., (2003) Project management

planning and control techniques,4th ed. John Wiley & Sons, Chichester.

Burke, R. (2007) Introduction to project management: one small step for the

project manager. Burke Publishing.

Hamilton, A. (2001) Managing projects for success: a trilogy. Thomas

Telford Publishing, London. Lockyer, K. and Gordon, J. (2005) Project management and project network

techniques, 7th ed. Pearson Education Ltd., Harlow, England.

Meredith, J.R. and Mantel, S.J. (2006) Project management: a managerial

approach, 6th ed. John Wiley & Sons, Inc., Hoboken, New Jersey.

PMI (2004) A guide to the Project Management Body of Knowledge, 3rd ed.Project Management Institute, Pennsylvania.

Popescu, C. and Charoenngam, C. (1995) Project planning, scheduling,

and control in construction: an encyclopedia of terms and applications. John

Wiley & Sons, Inc, New York.

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