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Chap 7.4 Control Cost
1. By: Anand Bobade (nmbobade@gmail.com)
Chapter 7 –
Project Cost Management
PMP
Trainer: Anand BobadePMBOK 6th Edition, 2019, All rights reserved.
Control Cost
SIXTH EDITION
2. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost Definition
Control Cost : ITTO
What is EVM?
What is cost & schedule performance index?
What is forecasting?
What is TCPI?
Data flow diagram
Review
7.4 Control Cost
3. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Cost Management processes
Plan Cost
management
Estimate Cost
Determine Budget Control Cost
PP
MCP
4. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
7.4 Control Cost ->Introduction
0
200
400
600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Thousands
Planned Actuals
Frequency of
measurement
Activity cost
WBS
components
(Control
accounts)
Total project
cost
Don’t include unapproved change cost
Influence factor affecting cost baselines
Manage changes & cost overrunMeasure
Monitor
Control
Report
5. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost ->Introduction
•The factors that create changes to baselineInfluencing
•All change requests are acted on in a timely mannerEnsuring
•The actual changes when and as they occurManaging
•That cost expenditures do not exceed the authorized funding
by period, WBS ,activity, in total
Ensuring
•Cost performance to isolate and understand variancesMonitoring
•Work performance against funds expendedMonitoring
•Unapproved changes reported or resource usage;Preventing
•Appropriate stakeholders of all approved changes and
associated cost;
Informing
•Expected cost overruns within acceptable limitsBringing
6. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Monitoring the status of the project to update the project costs & managing
changes to the cost baseline.
Provides the means to recognize variance from the plan
in order to take corrective action and minimize risk.
7.4 Control Cost ->Definition
Monitoring Project
status
Update project
Cost
Manage cost
baseline changes
7. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
7.4 Control Cost -> ITTO
Expert Judgment
Data Analysis
To-Complete Performance
Index (TCPI)
PMIS
Project Management
Plan
Project Documents
Project Funding
Requirements
WPD
OPA
Work Performance
Information
Cost Forecasts
Change Requests
PMP updates
Project doc. updates
Inputs Tools & Techniques Outputs
8. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Project Management
Plan
Project Documents
Project Funding
Requirements
Work Performance
data
OPA
Control Cost -> Input
9. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Project
Management Plan
Cost Management Plan
• Define how project costs will be planned, structured, and
controlled.
• Define how each Cost Management Process is executed.
• Specify preferred method or techniques to be used.
Cost baseline
• It is an approved time phased budget.
Performance measurement baseline:
• Used in earned value analysis
• It takes the three constraints scope, schedule and cost
and combines them to create a baseline.
• It is compared with Actual results (CPI & CV)
Control Cost ->Input->Project Management Plan
10. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Project Documents
Lessons learned register
• May updated to see if there are any procedures done by the
project team that improve cost control.
Control Cost ->Input->Project Documents
11. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
WPD
The data include the actual costs that have authorized, incurred, invoiced and
paid for activities/milestone completed on the project.
Control Cost >Input->Work performance data
12. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
OPA
Existing cost policies, procedures, and guidelines (e.g., invoicing
process)
Financial controls procedures.
Historical information and lessons learned (e.g., past cost escalation
issues)
Financial databases (Old project finance details)
Control Cost ->Input->OPA
13. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> Tools & Techniques
Expert Judgment Data Analysis
To-Complete
Performance Index
PMIS
14. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Data Analysis
Control Cost -> T&T -> Data analysis
Earned value
management
Forecasting Variance Analysis:
Trend Analysis Reserve analysis
Following data analysis techniques can be used:
15. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Earned value
management
Control Cost -> T&T -> Data analysis -> EVM
It combines SCOPE, SCHEDULE, & RESOURCE measurements to assess project
performance and progress.
It integrates the scope ,cost & schedule baselines, to form the performance baseline
• It is authorized budget planned for work to be
accomplished.
Planned
Value (PV)
• Realized cost incurred for the work performed on an
activity during a specific time period.
Actual cost
(AC)
• A measure of work performed expressed in terms of
the budget authorized.
Earned
value (EV)
16. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> EVM
Earned value Calculation based on the Percentage completion
Schedule Planned Value (PV)
Percentage
Complete
Actual Cost (AC)
Earn Value
(EV)
Day1 10,000 100% 10,000
Day2 10,000 80% 10,000
10,000
8,000
18,000
•100% of work completed
•EV = 100% of 10,000
•EV = 10,000
Day1
•Only 80% of work completed
•EV = 80% of 10,000
•EV = 8,000
Day2
•EV = EV of Day1 + EV of Day2
•EV = 10,000 + 8,000
•EV = 18,000
Combined
EV
17. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> EVM
EV Calculation based on planned vs actual work done.
Schedule
Planned
Work
Planned
Value (PV)
Actual
work
Actual Cost
(AC)
Earn Value
(EV)
Day1 10 computer 10,000 9 computers 10,000
Day2 10 computer 10,000 10 computers 10,000
Plan : Install 10 computers each day costing 10,00 per day.
10,000
9,000
•Only 9 computer installed on Day1
•Hence, EV of spending 10,000 is only 9,000
Day1
•10 computer installed on Day 2
•Hence, EV of spending 10,000 is 10,000
Day2
18. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> EVM
Task/Days Day1 Day2 Day3 Day4 Day5 Day6 Day7
Setup Setup
Installation 10 comp 10 comp 10 comp 10 comp 10 comp
Training & Handover Handover
Project : Install 50 computers for school Lab.
• Assumption:
• Resource cost is 1000/day. One resource first & last day.
• Two resources during execution (Day 2 to Day6)
Planned cost(Cumulative) 1,000 3,000 5,000 7,000 9,000 11,000 12,000
Planned cost 1,000 2,000 2,000 2,000 2,000 2,000 1,000
We could not get resource with 1,000/per day, hence hired resource with 1100 per day
Actual cost (Cumulative) 1,100 3,300 5,500 7,700
Actual cost 1,100 2,200 2,200 2,200
Earn Value 1,000 1,600 1,600 1,600
Earn Value (Cumulative) 1,000 2,600 4,200 5,800
Only 8 computer
installed on each day,
so 80% earn value
8 / 10 8 / 10 8 / 10
19. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> EVM
PV: 7,000
BAC: 12,000
AC: 7,700
EV: 5,800
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Day1 Day2 Day3 Day4 Day5 Day6 Day7
Cost Variance
Schedule Variance
Hints about Formula:
Always start with “EV”
Variance uses “-”
Index uses “/”
Only AC is used for Cost
•SPI = EV/PVSchedule performance index
•CPI = EV/ACCost performance index
•SV = EV –PVSchedule variance
•CV= EV − ACCost variance
20. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> EVM
•= 5,800 –7,000 = -1,200Schedule variance ( SV = EV – PV)
•= 5,800− 7,700 = -1,900Cost variance (CV = EV − AC)
•= 5,800 / 7,000 = 0.82Schedule performance Index (SPI = EV / PV)
•= 5,800 / 7,700 = 0.75Cost performance Index (CPI = EV / AC)
Indexes
CPI
SPI
> 1
Under
budget
Ahead of
schedule
< 1
Over
Budget
Behind
schedule
= 1
On Budget
(planned
cost)
On
Schedule
Project is over budget &
behind Schedule
21. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> EVM
•Slowdown with
spending to try
to reach
optimal level
•Try to move to
optimal
otherwise re-
baseline.
•Continue as it is•Spend more to
catch up
Under Budget
but behind
schedule
Optimal –
Under Budget
& ahead of
Schedule
Over Budget
but ahead of
schedule
Worst case:
Over Budget &
behind
schedule
CPI >1
[Ahead of
Schedule]
CPI < 1
CPI >1
[Behind
Schedule]
CPI < 1
SPI < 1 [Under Budget] SPI >1
SPI < 1 [Over Budget] SPI >1
22. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> EVM
• SV is a measure of schedule performance on a
project.
Schedule
variance (SV)
• It measure of cost performance on a project.
• It indicates relationship of performance to costs
spent.
Cost variance
(CV)
• SPI is a measure of progress achieved compared to
progress planned.
Schedule
performance
index (SPI)
• CPI is a measure of value of work completed
compared to actual cost.
Cost
performance
index (CPI)
23. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> EVM -> Exercise
A) The project is ahead of schedule and on budget
B) The project is on schedule and below budget
C) The EAC is incorrect
D) The project is behind schedule and on budget
Answer : The project is behind schedule because as PV is 110,000 & EV is only
90,000. We are 20,000 behind schedule.
We are on budget because both our Actual Cost and Earned Value are 90,000. Hence
answer is D) The project is behind schedule and on budget
Your earned value analysis shows the following values. Which of the following
is true?
- PV = 110,000,
- AC = 90,000
- EV = 90,000,
- BAC = 200,000
24. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> EVM -> Exercise
Task Duration Planned
Value
Actual Jan Feb Mar Apr May Jun
Analysis 20 1,000 1,400
Design 40 2,000 1,000
Development 60 10,000 4,000
Testing 10 2,000 -
Go-live 10 1,000 -
closure 0 - -
Below graph shows the Project schedule & current performance of the IT project managed by Anand. What is the current SPI of
the project.
A: -1
B: 0.58
C: 1.21
D: 1
100%
75%
50%
A: SPI>1 & CPI>1
B: SPI<1 & CPI<1
C: SPI>1 & CPI<1
D: SPI<1 & CPI>1
Other possible options:
A: Project is performing good
B: Project is performing bad
C: Slowdown with spending to try to reach optimal level
D: Spend more to catch up
25. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> EVM -> Exercise
Calculate PV of completed or in progress activities
•= Activity1(PV)+ Activity2(PV)+ Activity3(PV)
•= 1,000+2,000+10,000
•= 13,000
Calculate EV of completed or in progress activities
•= Activity1(PV * % complete)+ Activity2(PV * % complete)+ Activity3(PV * %
complete)
•= (1,000* 100%) + (2,000 * 75%) + (10,000 * 50%)
•= 1,000+1,500+5,000
•= 7,500
SPI = EV / PV
•= 7,500 /13,000
•= 0.5769
•(SPI <1 means project is behind schedule)
Answer- B: 0.58
26. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> EVM -> Exercise
Exercise: Calculate CPI?
Calculate AC of completed or in progress activities
•= Activity1(AC)+ Activity2(AC)+ Activity3(AC)
•= 1,400+1,000+4,000
•= 6,400
Calculate EV of completed or in progress activities
•= Activity1(PV * % complete)+ Activity2(PV * % complete)+ Activity3(PV * % complete)
•= (1,000* 100%) + (2,000 * 75%) + (10,000 * 50%)
•= 1,000+1,500+5,000
•= 7,500
CPI = EV / AC
•= 7,500 /6,400
•= 1.17
CPI >1 means project under budget.
27. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Forecasting
Control Cost -> T&T -> Data analysis -> Forecasting
Prediction of conditions & events in project's future based on information & knowledge
available during forecast.
ETC - Estimate to complete:
• Expected cost to finish all remaining project work.
EAC - Estimate at completion:
• Expected total cost of completing all work expressed as
“sum of actual cost to date” & “estimate to complete”.
• Forecasted estimate for total cost of the Project.
28. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Forecasting
Control Cost -> T&T -> Data analysis -> Forecasting
ETC - Estimate
to complete
EAC - Estimate
at completion
Remaining
Cost
Total Cost
at end
29. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Forecasting
Control Cost -> T&T -> Data analysis -> Forecasting
EAC - Estimate at
completion
ETC - Estimate to
complete
The information is derived from:
Project's past performance
Information that could impact project in future
Expected future performance
30. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Forecasting Consider forecasted EAC, If BAC is no longer viable.
EAC involves projections of project’s future based on current
performance.
Key input is work performance data.
EAC - Estimate at completion
• Expected total cost of completing all work expressed as “sum of
actual cost to date” & “estimate to complete”.
Control Cost -> T&T -> Data analysis -> Forecasting
Total Cost
at end
31. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Forecasting
EAC - Estimate at completion
• Expected total cost of completing all work expressed as “sum of
actual cost to date” & “estimate to complete”.
Control Cost -> T&T -> Data analysis -> Forecasting
Total Cost
at end
EAC based on Budgeted Rate:
•Absorb the Variance (originally planed budgeted rate)
EAC based on Current Progress:
•Take the ongoing project trend (CPI & SPI or only CPI)
EAC - Erroneous scenario:
•Re-estimate the remaining portion
•Original estimates were fundamentally flowed.
32. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Forecasting
EAC - Estimate at completion
• Expected total cost of completing all work expressed as “sum of
actual cost to date” & “estimate to complete”.
Control Cost -> T&T -> Data analysis -> Forecasting
Total Cost
at end
• EAC = AC + (BAC –EV)
Based on Budgeted
rate
• EAC = BAC / CPIBased on CPI.
• EAC = AC + [(BAC –EV) / (CPI ×SPI)]Based on SPI & CPI
• EAC = AC + re-estimateErroneous scenario:
33. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> Forecasting
There are many ways to calculate EAC based on project progress.
Questions about the EAC will always contain some information about the current “health” (or
progression) of the project. There are certain keywords that you can look for to pick correct formula.
• EAC = AC + (BAC –EV)
• Current variances are
thought to be
atypical in the future.
• Note: atypical means
unusual or abnormal.
EAC based on Budgeted
Rate:
• EAC = BAC / CPI
• No variances from
the BAC have
occurred or
• Progress expected to
continue at the same
rate of spending.
•This is most often
required on the exam.
EAC based on Current
Cost Progress
• EAC=AC+ BAC –EV
• Current variances
are thought to be
typical in the future.
EAC based on Current
cost & schedule
Progress
• EAC = AC+ETC
• Original estimate was
fundamentally
flawed or conditions
have changed and
invalidated original
estimating
assumptions.
EAC - Erroneous
scenario:
34. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> Forecasting -> Example
Task Duration Planned
Value
Actual Jan Feb Mar Apr May Jun
Initial infrastructure 1 month 1 million 1 ml
Pillar 1 & slab 2 months 2 million 2 ml
Pillar 2 & slab 2 months 2 million .25 ml
Pillar 3 & slab 2 months 2 million -
Pillar 4 & slab 2 months 2 million -
Pillar 5 & slab 2 months 2 million -
Finalize & handover 1 month 1 million
Bridge construction project.
100%
100%
25%
Bridge construction Project: Duration : 12 months, Cost of the Project: 10,000,000
Current status at end of month 3.5: The pillar was collapsed & hence progress was slowed.
Actual cost: 3,250,000
35. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
EAC based on Budgeted Rate:
•EAC = AC + (BAC –EV)
Bridge construction Project:
•Duration : 12 months
•Cost of the Project: 10,000,000
•Current status at end of month 3:
•The pillar was collapsed & hence progress was
slowed.
•Work completed: only 20% of complete project
•Actual cost: 3,000,000
BAC = 10,000,000
AC = 3,000,000
EV = 20% of 10,,000,000 = 2,000,000
(0nly 20% work done)
EAC = AC + (BAC – EV)
EAC = 3,000,000 + (10,000,000 – 2,000,000) = 11,000,000
EAC = 11 Million
Considering this as rare incident. Project will continues
progressing as originally planned, then it will need 11
Million to complete.
Control Cost -> T&T -> Data analysis -> Forecasting -> Example
36. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> Forecasting -> Example
EAC based on Current Progress (Based on CPI):
EAC = BAC / CPI
Bridge construction Project:
• Duration : 12 months
• Cost of the Project: 10,000,000
• Current status at end of month 6:
• Work completed: only 40% of complete
project
• Actual cost: 6,000,000
BAC = 10,000,000
AC = 6,000,000
EV = 40% of 10,000,000 = 4,000,000
(0nly 40% work done)
CPI = EV / AC = 4,000,000 / 6,000,000 = 0.66
EAC = BAC/CPI = 10,000,000/0.66 = 15,151,515
EAC = 15,151,515
If project continues to progress CPI 0.66 until end,
you have to spend 15.15 Million to complete the
project.
37. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> Forecasting -> Example
EAC based on Current Progress (Based on CPI & SPI):
EAC = AC + [(BAC –EV) / (CPI ×SPI)]
Bridge construction Project:
Duration : 12 months
Cost of the Project: 10,000,000
Current status at end of month 6:
Work completed: only 40% of complete project
Actual cost: 6,000,000
BAC = 10,000,000 & AC = 6,000,000
PV = 50% of 10,000,000 = 5,000,000
(six months completed)
EV = 40% of 10,000,000 = 4,000,000
(0nly 40% work done)
CPI = EV / AC = 4,000,000 / 6,000,000 = 0.66
SPI = EV / PV = 4,000,000 / 5,000,000 = 0.8
EAC = 6,000,000 + [ (10,000,000–4,000,000)/
(0.66 * 0.8) ]
EAC = 6,000,000 + [6,000,000 / 0.528 ] = 17,363,636
If project continues with similar CPI & SPI, you have
to spend 17.36 Million to complete project.
38. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> Data analysis -> Forecasting -> Example
Bridge construction Project:
Duration : 12 months, Cost of the Project: 10,000,000
Current status at end of month 6: Work completed: only 55% of complete project.
Actual cost: 5,000,000
EAC based on Budgeted Rate:
•EAC = AC + (BAC –EV)
•BAC = 10,000,000
•AC = 5,000,000
•EV = 55%10,000,000 = 5,500,000
•EAC = 5,000,000 + ( 10,000,000 –
5,500,000)
•EAC = 5,000,000 + 4,500,000
•EAC = 9,500,000
EAC based on Current Progress
(Based on CPI):
•EAC = BAC / CPI
•BAC = 10,000,000
•AC = 5,000,000
•EV= 55%10,000,000
•EV =5,500,000
•CPI = EV / AC
•CPI = 5,500,000 / 5,000,00= 1.1
•EAC = 10,000,000 / 1.1
•EAC = 9,090,909
EAC based on Current Progress
(Based on CPI & SPI):
•EAC = AC + [(BAC –EV) / (CPI
×SPI)]
•PV = 50% of 10,000,000 =
5,000,000 (six months
completed)
•EV & CPI calculation is same.
•SPI = EV / PV
•SPI = 5,500,000 / 5,000,000 = 1.1
•EAC = 5,000,000 + [(10,000,000 –
5,500,000) / (1.1 * 1.1)]
•EAC = 5,000,000 +( 4,500,000 /
1.21)
•EAC = 5,000,000 + 3,719,008.26
•EAC = 8,719,008.26
39. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> EVM -> Exercise
You presenting project status to Steering committee at the end of first Quarter in
one year project. The project is progressing as planned and you expect no major
problems in the foreseeable future.
Your PMIS is showing following data:
BAC = 500,000, SPI = 1.1, CPI = 1.05, EV = 173,000, AC = 164,761.
What you should report about EAC in the meeting?
A) 491,761
B) 454,545
C) 189,761
D) 476,190
Answer: Highlighted information indicates there were no variances after atypical
situation & expect to continue at same rate.
Hence, we will use second formula EAC= BAC/CPI =500,00/1.05 = 476,190; Hence,
answer is D) 476,190
40. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> EVM -> Exercise
Task Duration Planned
Value
Actual Jan Feb Mar Apr May Jun
Analysis 20 1,000 1,400
Design 40 2,000 2,000
Development 60 10,000 -
Testing 10 2,000 -
Go-live 10 1,000 -
closure 0 - -
Below schedule depicts the CRM Project schedule managed by Project managed Anand. As of today first two activities should
have been 100% completed and third 50%. However PM reported 100% completion of first two, and remaining activities are not
yet started. Assuming projects future performance will be at budgeted rate, what will be the projects EAC (Estimate at
completion)?
100%
100%
A: 3,400
B: 16,000
C: 16,400
D: 3,000
41. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> EVM -> Exercise
Even though project is not performing as expected, we expect project to performed at the planned rate
(budgeted rate). The formula used in this scenario is EAC = AC + (BAC – EV)
Calculate Actual Cost (AC) of completed or in progress activities.
• = Activity1(AC)+ Activity2(AC) = 1,400+2,000 = 3,400
Calculate BAC (Total of all the activities)
• BAC = 1,000 + 2,000 + 10,000 + 2,000 + 1,000 = 16,000
Calculate EV of completed or in progress activities
• = Activity1(PV * % complete)+ Activity2(PV * % complete)
• = (1,000* 100%) + (2,000 * 100%) = 1,000+2,000 = 3,000
EAC=AC+(BAC-EV)
• =3,400 + (16,000 – 3,000) = 3,400 + 13,000 = 16,400
Answer – C: 16,400
42. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Forecasting
Control Cost -> T&T -> Data analysis -> Forecasting
Total Cost
at end
EAC - Estimate at completion (Re-estimate)
• EAC = AC + ETC (or Re-estimate)
Software Project:
• Project is to implement CRM Software for
government department for 5,000,000.
• To date project has spent 1,100,000.
• However, during execution, it was noticed
that present cost estimation were
fundamentally flawed & need to re-
calculate budget for remaining part of the
project.
You discuss with your team & re-estimate
the cost of the remaining work.
Your new estimates: Design = 1,000,000,
Development=3,000,000,
testing=1,500,500
Re-estimated cost = Design +
Development + testing
Re-estimated cost = 1,000,000 +
3,000,000 + 1,500,500 = 5,500,500
EAC = AC + Re-estimate
EAC = 1,100,000 + 5,500,500 = 6,500,500
43. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Forecasting
Control Cost -> T&T -> Data analysis -> Forecasting
ETC - Estimate to complete
•ETC = EAC- AC or (Re-estimate remaining work)
Cost to
complete House construction Project:
• You have a construction project to be
completed in 12 months with cost of
1,000,000.
• Six months passed & project have spent
600,000.
• In meeting PM reported that only 40% of
work is completed & project is expected to
perform with same cost performance.
• Management is interested to know what is
Estimate to complete?
BAC = 1,000,000, AC = 600,000
PV= 50% of 1,000,000 = 500,000
(six months completed)
EV= 40% of 1,000,000 = 400,000
(0nly 40% work done)
CPI= EV / AC = 400,000 / 600,000 =
0.66
EAC = BAC/CPI = 1,000,000/0.66 =
1,515,151
ETC = EAC- AC
ETC = 1,515,151 – 600,000
ETC = 915, 151
44. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> EVM -> Exercise
Your Team Lead, who was leading the estimation team, tells you that he had missed several
key project components in estimation. So, his original cost estimations were completely
wrong. At the end of this meeting, he assured to provide new estimate in 2 days. Based on
the new estimates, your PMIS shows below:
BAC: 5,000,000. AC= 1,100,000, CPI = 1.05, SPI = 1.05, EV = 1,000,000.
How much project will cost, if the new estimate to complete that you received from your
Team Lead is 5,500,500?
A) 5,500,500
B) 6,500,500
C) 6,600,500
D) 6,100,000
Answer: Highlighted information indicates there were fundamental flows in the estimates.
Hence, we will use fourth formula EAC= AC + ETC = 1,100,000 +5,500,500 = 6,600,500;
Hence, answer is C) 6,600,500
45. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Forecasting
Control Cost -> T&T -> Data analysis -> Forecasting
VAC (Variance at completion)
• Projection of budget difference between BAC & EAC.
VAC shows whether project is forecasted to finish under or
over budget.
VAC = BAC – EAC
VAC % = EAC / BAC
46. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
TCPI
TCPI
calculation
Same Budget Use BAC
Revised
Budget
Use Forecasted
EAC
TCPI is measure of Cost Performance that is required to be achieved in order to meet a specified
management goal.
Ratio of “work remaining”, to “funds remaining”.
Control Cost -> T&T -> To Complete Performance Index (TCPI)
If BAC is no longer viable, then forecasted EAC should be approved to use in the
TCPI calculation.
Work Remaining
----------------------
Fund Remaining
( BAC – EV )
----------------
( BAC – AC )
( BAC – EV )
----------------
( EAC – AC )
47. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> TCPI -> Example
300,000
BAC:600,000
315,000
270,000
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Month1 Month2 Month3 Month4 Month5 Month6
Planned Budget (PV) Actual Cost (AC) Earned Value (EV)
Fund Remaining
= BAC-AC
= 600,000-315,000
= 285,000
Work Remaining
= BAC-EV
= 600,000-270,000
= 330,000
Case1: Same
Budget
Project with current status BAC=600,000 PV=300,000 AC=315,000 EV=270,000
48. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> TCPI -> Example
TCPI (based on BAC)
Work Remaining = BAC-EV = 600,000-
270,000 = 330,000
Fund Remaining = BAC-AC = 600,000-
315,000 = 285,000
TCPI = Work Remaining / Fund Remaining
= 330,000 / 285,000
= 1.15
You have to get output of 1.15 AED of every
1 AED spent.
•Project is in a comfortable position.
If TCPI
< 1
•Project have to perform with better
cost performance than past.
If TCPI
> 1
•Project can continue with same cost
performance.
if TCPI
= 1
49. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> TCPI -> Example
300,000
BAC:600,000
315,000
270,000
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Month1 Month2 Month3 Month4 Month5 Month6
Planned Budget (PV) Actual Cost (AC) Earned Value (EV)
Fund Remaining
= EAC-AC
= 650,000-315,000
= 335,000
Work Remaining
= BAC-EV
= 600,000-270,000
= 330,000
Case1: Revised
Budget
Project with current status BAC=600,000 PV=300,000 AC=315,000 EV=270,000
EAC = 650,000
50. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> T&T -> TCPI -> Example
TCPI (based on BAC)
Work Remaining = BAC-EV = 600,000-270,000 =
330,000
Fund Remaining = BAC-AC = 600,000-315,000 =
285,000
TCPI = Work Remaining / Fund Remaining
= 330,000 / 285,000
= 1.15
You have to get output of 1.15 AED of every 1 AED
spent.
TCPI (Based on EAC)
Work Remaining = BAC-EV = 600,000-270,000 =
330,000
Fund Remaining = EAC-AC = 650,000-315,000 =
335,000
TCPI = Work Remaining / Fund Remaining
= 330,000/335,000
=0.98
You have to get output of 0.98 AED of every 1 AED
spent.
51. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
PMIS
Control Cost ->T&T-> Project Management Information System (PMIS)
Calculate earn value
Display graphical trends & calculate SPI & CPI
Show variances
Forecast a range of possible final project results
52. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> Output
Work Performance
Information
Cost Forecasts Change Requests
PMP updates Project doc. updates
53. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
Control Cost -> Data flow diagram
54. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .
How to control cost?
What is EVM?
What is cost & schedule variance?
What is cost & schedule performance index?
What is forecasting?
What is TCPI?
What do you mean by Performance review?
Control Cost -> Review
55. By: Anand Bobade (nmbobade@gmail.com)PMBOK 6edition @ All rights reserved .