Monitoring and ControllingProject Management Monitoring and Controlling: Earned Value AnalysisMonitoring and Information SystemsSlide 4The Earned Value ChartSlide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Variance Analysis QuestionsExampleCost varianceSchedule varianceCPI (cost performance index)SPI (schedule performance index)ETC and EACSlide 20Slide 21Slide 22Slide 23Slide 24Slide 25MEM 612 Project ManagementMonitoring and ControllingMEM 612 Project ManagementProject Management Monitoring and Controlling: Earned Value AnalysisMEM 612 Project ManagementMonitoring and Information Systems•Evaluation and control of projects are the opposite sides of project selection and planning•Logic of selection dictates the components to be evaluated•The details of the planning expose the elements to be controlled•Monitoring is the collecting, recording, and reporting information concerning any and all aspects of project performanceMEM 612 Project ManagementMEM 612 Project ManagementThe Earned Value Chart•One way of measuring overall performance is by using an aggregate performance measure called earned value•A serious difficulty with comparing actual expenditures against budgeted or baseline is that the comparison fails to take into account the amount of work accomplished relative to the cost incurredMEM 612 Project ManagementThe Earned Value Chart•The earned value of work performed (value completed) for those tasks in progress is found by multiplying the estimated percent completion for each task by the planned cost for that task•The result is the amount that should have been spent on the task so far•The concept of earned value combines cost reporting and aggregate performance reporting into one comprehensive chartMEM 612 Project ManagementThe Earned Value ChartGraph to evaluate cost and performance to date:MEM 612 Project ManagementMEM 612 Project ManagementThe Earned Value Chart•Variances on the earned value chart follow two primary guidelines:–1. A negative is means there is a deviation from plan—not good–2. The cost variances are calculated as the earned value minus some other measure•EV - Earned Value: budgeted cost of work performed•AC - actual cost of work performed•PV - Planned Value: budgeted cost of work scheduled•ST - scheduled time for work performed•AT - actual time of work performedMEM 612 Project ManagementThe Earned Value ChartEV - AC = cost variance (CV, overrun is negative)EV - PV = schedule variance (SV, late is negative)ST - AT = time variance (TV, delay is negative)If the earned value chart shows a cost overrun or performance underrun, the project manager must figure out what to do to get the system back on targetOptions may include borrowing resources, or holding a meeting of project team members to suggest solutions, or notifying the client that the project may be late or over budgetMEM 612 Project ManagementThe Earned Value Chart•Variances are also formulated as ratios rather than differences–Cost Performance Index (CPI) = EV/AC–Schedule Performance Index (SPI) = EV/PV–Time Performance Index (TPI) = ST/AT•Use of ratios is particularly helpful when comparing the performance of several projectsMEM 612 Project ManagementMEM 612 Project ManagementVariance 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?MEM 612 Project ManagementExamplePlanned $1500 to complete work package.Scheduled to have been finished today.Actual expenditure to date is $1350.Estimate work is 2/3 complete.What are cost and schedule variances?MEM 612 Project ManagementCost varianceCost variance = EV – AC= $1500(2/3) - $1350= $1000 - $1350= -$350MEM 612 Project ManagementSchedule varianceSchedule variance = EV – PV= $1500(2/3) - $1500= -$500MEM 612 Project ManagementCPI (cost performance index)CPI = EV/AC=($1500/(2/3) / $1350)= 1000/1350= 0.74MEM 612 Project ManagementSPI (schedule performance index)SPI = EV/PV= ($1500(2/3))/$1500= $1000/$1500= 0.67MEM 612 Project ManagementETC and EACEstimate to complete = (BAC-EV)/CPI=(1500-1000)/.74 = $676Estimate at completion = ETC + AC= $676 + $1350 = $2026MEM 612 Project ManagementMEM 612 Project ManagementMEM 612 Project ManagementMEM 612 Project ManagementMEM 612 Project ManagementMEM 612 Project