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PMP Chap 7 - Project Cost Management - Part 2

Free Video Training on Youtube - PMBOK6th edition:
1. Integration Management: https://youtu.be/NdzADFfoRxA
2. Scope Management: https://youtu.be/9u6f2NXlGnI
3. Quality Management: https://youtu.be/8zteKSxDyt4
4. Stakeholder management: https://youtu.be/Vhjc6T9R4d8

PMBOK6 Slides by process:
https://www.slideshare.net/anandbobade/chap-70-project-cost-management-overview
https://www.slideshare.net/anandbobade/chap-71-plan-cost-management
https://www.slideshare.net/anandbobade/chap-72-estimate-cost
https://www.slideshare.net/anandbobade/chap-73-determine-budget
https://www.slideshare.net/anandbobade/chap-74-control-cost

PMP Chap 7 - Project Cost Management - Part 2

  1. 1. By: Anand Bobade (nmbobade@gmail.com) Plan Cost management Estimate Cost Determine Budget Control cost PMBOK Chapter 7 : Project Cost Management (Part 2) Learn Project Management & prepare for PMP exam: • Learn visually • Detailed coverage of all PMP concepts • Sample Questions Monitoring & Controlling Planning
  2. 2. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.1 Plan Cost Management: Establishes the Policies, procedures, and documentation for planning, managing, expending, controlling project costs. 7.2 Estimate Cost: Developing an APPROXIMATION of the monetary resources needed to complete project activities. 7.3: Determine Budget: AGGREGATING the estimated costs of individual activities or WP to establish cost baseline. 7.4 Control Cost: MONITORING the status to update costs and managing changes to the cost baseline 7. Project Cost Management Processes
  3. 3. By: Anand Bobade (nmbobade@gmail.com) Aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline. Determines the cost baseline against which project performance can be monitored and controlled. 7.3 Determine Budget -> Definition Cost Baseline Aggregation Activity cost estimates Contingency Reserve
  4. 4. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) Input (9) • Cost management plan • Scope baseline • Activity cost estimates • Basis of estimates • Project schedule • Resource calendars • Risk register • Agreements • OPA Tools & Techniques (5) • Cost aggregation • Reserve analysis • Expert judgment • Historical relationships • Funding limit reconciliation Outputs (3) • Cost baseline • Project funding requirements • Project documents updates 7.3 Determine Budget
  5. 5. By: Anand Bobade (nmbobade@gmail.com) Cost Management Plan Scope Baseline Activity cost estimates Basis of estimates Project schedule Resource calendars Risk Register Agreements OPA 7.3 Determine Budget -> Inputs
  6. 6. By: Anand Bobade (nmbobade@gmail.com) Cost Management Plan Define how project costs will be planned, structured, and controlled. Provide information about how to execute determine Budget Process. Specify preferred method or techniques to be used. Provides below key details. Units of Measure Level of Precision Level of Accuracy Process Description Control account 7.3 Determine Budget->Input->Cost Management Plan
  7. 7. By: Anand Bobade (nmbobade@gmail.com) Scope Baseline • Project Scope (Inclusion & exclusions) • Assumptions and constraints. Scope Statement • Activity grouped into deliverables or work packages. • WBS provide framework for cost management. WBS • Control account • List of Deliverables • Resources WBS Dictionary 7.3 Determine Budget->Input->Scope Baseline
  8. 8. By: Anand Bobade (nmbobade@gmail.com) Activity Cost Estimates Cost estimate for each activity Activity Grouping Cost estimate for each Work package Direct Cost Indirect Cost Variable cost Fixed Cost Estimation of the probable costs required to complete project work. (summary form or in detail) 7.3 Determine Budget->Input->Activity Cost Estimate
  9. 9. By: Anand Bobade (nmbobade@gmail.com) Basis of Estimates Documentation consist of : Method of estimations All assumptions Any known constraints Scope of Work The supporting documentation that provide a clear & complete understanding of how cost estimate was derived. 7.3 Determine Budget-> Input-> Basis of Estimate Estimate Cost Determine Budget Basis of Estimates Activity Cost Estimates
  10. 10. By: Anand Bobade (nmbobade@gmail.com) Project Schedule Schedule provide overall timeline with milestones. Cost is always time bound, hence its important to know when these activities are scheduled. Information can be used to determine aggregated cost for specific period & payment milestones. 7.3 Determine Budget->Input->Project schedule
  11. 11. By: Anand Bobade (nmbobade@gmail.com) Risk Register Examine cost & schedule related risks. Reserve should be planned to mitigate & inspect Risks. Potential benefits from the positive risk should be considered. 7.3 Determine Budget-> Input->Risk Register
  12. 12. By: Anand Bobade (nmbobade@gmail.com) Resource Calendars Identifies the working days and shifts on which each specific resource is available. Provides details about when & how long identified project resource will be available. Helps to determine resource cost. 7.3 Determine Budget->Input->Resource Calendar
  13. 13. By: Anand Bobade (nmbobade@gmail.com) Agreements Provide information about contracted resource costs like Human resource cost, equipment costs etc Provide payment milestone of each contractual agreements. Project can have one or more agreements. 7.3 Determine Budget ->Inputs->Agreement
  14. 14. By: Anand Bobade (nmbobade@gmail.com) OPA Existing cost policies, procedures, and guidelines (e.g., Budget approval process) Financial controls procedures. Cost Budgeting tools. Financial reporting methods/templates. 7.3 Determine Budget->Input->OPA
  15. 15. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) How project costs will be managed and controlled Project scope statement , WBS & WBS dictionary Cost estimates for each activity within a work package are aggregated Any basic assumptions dealing with the inclusion or exclusion of indirect or other costs in the project budget Information can be used to aggregate costs to the calendar periods in which the costs are planned to be incurred. 7.3 Determine Budget -> Inputs overview
  16. 16. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) Provide information on which resources are assigned to the project and when they are assigned To consider how to aggregate the risk response costs Applicable agreement information and costs relating to products purchase Existing policies, procedures, and guidelines; Cost budgeting tools, Reporting methods 7.3 Determine Budget -> Inputs overview
  17. 17. By: Anand Bobade (nmbobade@gmail.com) Cost Aggregation Reserve Analysis Expert Judgment Historical Relationships Funding limit Reconciliation 7.3 Determine Budget-> Tools & Techniques
  18. 18. By: Anand Bobade (nmbobade@gmail.com) Cost Aggregation Accumulation of costs based on WBS structure. Considers distribution of payments w.r.t schedule base line. 7.3 Determine Budget->T&T->Cost Aggregation Cost estimates are aggregated by: Work packages Control accounts Entire project. Activity (Level1) Work Package (Level2) Component/control Account (Level3) Project (Level4) 500 K 200 K 100 100 300K 100 150 100 50 50
  19. 19. By: Anand Bobade (nmbobade@gmail.com) Cost Aggregation It is placed at the selected management points in the WBS. It has unique code , which can be linked to accounting system. CRM Project – Cost Baseline (850 K) Call Center upgrade (100 K) Installations (40K) Call center software Customization (60 K) Contact Center setup (250K) Infrastructure setup (200 K) Software implementation (50 K) CRM system implementation (500K) CRM System Cost (400 K) Software Customization & implementation (100 K) Control Account (CA) : It is a management control point where scope, cost and schedule are integrated 7.3 Determine Budget->T&T->Cost Aggregation CA01 CA02 CA03
  20. 20. By: Anand Bobade (nmbobade@gmail.com) Reserve Analysis Management Reserve: • Project budget withheld for management control purposes. • Reserved for unforeseen work that is within scope of the project (unknown unknowns). • Not included in the cost baseline • Part of overall project budget & funding requirements. Contingency Reserve: • Budget within cost baseline • Allocated for identified & accepted risks (known-unknowns) • Contingency should be clearly documented. • Part of the cost baseline & overall funding requirements. 7.3 Determine Budget->T&T->Reserve Analysis
  21. 21. By: Anand Bobade (nmbobade@gmail.com) Reserve Analysis Activity contingency reserve + Activity Estimate + Work Package Estimates Control Accounts +COST BASELINE PROJECT BUDGET 400 70 330 330 20 110 10010 200 18020 7.3 Determine Budget->T&T->Reserve Analysis No reserves
  22. 22. By: Anand Bobade (nmbobade@gmail.com) Expert Judgment Guided by experience in an application area, Knowledge Area, discipline, industry, or similar project PM may apply experience & information from prior similar projects. Consultants, SME or financial experts can provide budgeting expertise. 7.3 Determine Budget->T&T->Expert Judgment
  23. 23. By: Anand Bobade (nmbobade@gmail.com) Historical Relationships • Home construction -> Cost per square meterSimple • Software development Model • Multiple adjustment factors, each of which has numerous points within it. • E.g., Code, integrations, function point, data migration Complex • Accurate Historical information is available • Quantifiable parameters • Scalable models (Can work with Large, small or phases of the projects) Reliable when: Any historical relationships that result in parametric estimates or analogous estimates. It uses project characteristics (parameters) to develop mathematical models to predict total project costs. 7.3 Determine Budget->T&T->Historical Relationship
  24. 24. By: Anand Bobade (nmbobade@gmail.com) Funding limit Reconciliation The expenditure should be reconciled with any funding limits on the commitment of funds for the project. A variance between funding limits and planned expenditures will sometimes necessitate rescheduling of work. This is accomplished by placing imposed date constraints for activities. Q1 Q2 Q3 Q4 Project planned expenditure 100K 100K 100K 100K Actual project cost 110K 115K 7.3 Determine Budget->T&T->Funding limit reconciliation Project is moving fast ahead of schedule & hence spending more than planned. However, management has Imposed Quarterly Funds limit on project. Hence project has to re-schedule & slow down. re-schedule & slow down
  25. 25. By: Anand Bobade (nmbobade@gmail.com) Cost baseline Project funding requirements Project doc. updates 7.3 Determine Budget -> Outputs
  26. 26. By: Anand Bobade (nmbobade@gmail.com) Cost baseline Approved version of time-phased project budget, excluding any management reserves. It is used as a basis for comparison to actual expenditure. 7.3 Determine Budget -> Outputs->Cost Baseline 0 500 1,000 1,500 2,000 2,500 3,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Thousands Monthly Budget Cummulative Budget
  27. 27. By: Anand Bobade (nmbobade@gmail.com) Project funding requirements The total funds required: Cost baseline •Projected expenditures •Contingency Reserves Management reserves (if any). Total funding requirements derived from cost baseline. Funding often occurs in incremental amounts that are not continuous, and may not be evenly distributed. 7.3 Determine Budget->Outputs->Project funding Req. It may also refer to source(s) of the funding.
  28. 28. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) Approved version of the time-phased project budget, excluding any management reserves, used as a basis for comparison to actual results Total funding requirements & periodic funding requirements are derived from the cost baseline. Risk Register, Activity register & Project schedule 7.3 Determine Budget -> Outputs
  29. 29. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.3 Determine Budget->Data Flow Diagram
  30. 30. By: Anand Bobade (nmbobade@gmail.com) 7.3 Determine Budget -> Question1 Which of the following output of Determine Budget process is used as an input in the Control Costs Process? A. Project Funding Requirements B. Cost Baseline C. Project Document D. None A– Project Funding Requirements Refer to ITTO of Determine Budget & Control cost processes
  31. 31. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) To Learn Project Management, Contact Anand Bobade (055 5932004) •nmbobade@gmail.com •https://ae.linkedin.com/in/anandbobade •http://www.slideshare.net/anandbobade •Conduct Online training, Corporate Training, evening & weekend workshops.
  32. 32. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.1 Plan Cost Management: Establishes the Policies, procedures, and documentation for planning, managing, expending, controlling project costs. 7.2 Estimate Cost: Developing an APPROXIMATION of the monetary resources needed to complete project activities. 7.3: Determine Budget: AGGREGATING the estimated costs of individual activities or WP to establish cost baseline. 7.4 Control Cost: MONITORING the status to update costs and managing changes to the cost baseline 7. Project Cost Management Processes
  33. 33. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 0 100 200 300 400 500 600 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 7.4 Control Cost -> Introduction Don’t include unapproved change cost Influence factor affecting cost baselines Manage changes & cost overrun Measure Monitor Control Report
  34. 34. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) • 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 totalEnsuring • 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 7.4 Control Cost
  35. 35. By: Anand Bobade (nmbobade@gmail.com) 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 Monitoring Project status Update project Cost Manage cost baseline changes
  36. 36. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) Input (4) • Project Management Plan • Project Funding Requirements • Work Performance Data • OPA Tools & Techniques (6) • Earned value management • Forecasting • To-complete performance index (TCPI) • Performance reviews • PM Software • Reserve analysis Outputs (6) • Work performance information • Cost forecasts • Change requests • PMP updates • Project documents updates • OPA updates 7.4 Control Cost
  37. 37. By: Anand Bobade (nmbobade@gmail.com) PMP Project funding requirements Work performance data OPA 7.4 Control Cost -> Input
  38. 38. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) Cost baseline & Cost management plan. Include projected expenditures plus anticipated liabilities (Cost baseline with management reserves) It includes progress information (started/ finished activities, their progress) ,costs authorized and incurred. Existing policies, procedures, and guidelines; Cost control tools; Monitoring and reporting methods. 7.4 Control Cost -> Input
  39. 39. By: Anand Bobade (nmbobade@gmail.com) Earned value management Forecasting To-complete performance index (TCPI) Performance reviews Project management software Reserve analysis 7.4 Control Cost -> Tools & Techniques
  40. 40. By: Anand Bobade (nmbobade@gmail.com) Earned value management 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) 7.4 Control Cost -> T&T -> EVM
  41. 41. By: Anand Bobade (nmbobade@gmail.com) Earned value Calculation based on the Percentage completion • 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 Schedule Planned Value (PV) Percentage Complete Actual Cost (AC) Earn Value (EV) Day1 10,000 100% 10,000 Day2 10,000 80% 10,000 7.4 Control Cost -> T&T -> EVM 10,000 8,000 18,000
  42. 42. By: Anand Bobade (nmbobade@gmail.com) EV Calculation based on planned vs actual work done. 7.4 Control Cost -> T&T -> EVM 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. • 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 10,000 9,000
  43. 43. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> 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
  44. 44. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost -> T&T -> 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/PV Schedule performance index • CPI = EV/ACCost performance index • SV = EV –PV Schedule variance • CV= EV − ACCost variance
  45. 45. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost -> T&T -> EVM • = 5,800 –7,000 • = -1,200 Schedule variance SV = EV – PV • = 5,800− 7,700 • = -1,900 Cost variance CV = EV − AC • = 5,800 / 7,000 • = 0.82 Schedule performance Index SPI = EV / PV • = 5,800 / 7,700 • = 0.75 Cost 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
  46. 46. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) Indexes CPI SPI > 1 You are earning more than the spending. In other words, you are under budget. More work has been completed than the planned work. In other words, you are ahead of schedule. < 1 You are earning less than the spending. In other words, you’re over budget Less work is completed than the planned work. In other words, you are behind schedule. = 1 Earning & spending are equal. Or proceeding exactly as per planned budget spending On Schedule 7.4 Control Cost -> T&T -> EVM
  47. 47. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost -> T&T -> 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
  48. 48. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) • 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) 7.4 Control Cost -> T&T -> EVM
  49. 49. By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost -> T&T -> EVM -> Exercise 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 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
  50. 50. By: Anand Bobade (nmbobade@gmail.com) 7.4 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%
  51. 51. By: Anand Bobade (nmbobade@gmail.com) 7.4 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
  52. 52. By: Anand Bobade (nmbobade@gmail.com) Forecasting Prediction of conditions & events in project's future based on information & knowledge available during forecast. 7.4 Control Cost ->T&T-> Forecasting 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.
  53. 53. By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> Forecasting ETC - Estimate to complete EAC - Estimate at completion Remaining Cost Total Cost at end
  54. 54. By: Anand Bobade (nmbobade@gmail.com) 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 7.4 Control Cost ->T&T-> Forecasting
  55. 55. By: Anand Bobade (nmbobade@gmail.com) EAC - Estimate at completion • Expected total cost of completing all work expressed as “sum of actual cost to date” & “estimate to complete”. 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. 7.4 Control Cost ->T&T-> Forecasting
  56. 56. By: Anand Bobade (nmbobade@gmail.com) EAC - Estimate at completion • Expected total cost of completing all work expressed as “sum of actual cost to date” & “estimate to complete”. 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. 7.4 Control Cost ->T&T-> Forecasting
  57. 57. By: Anand Bobade (nmbobade@gmail.com) EAC based on Budgeted Rate: EAC based on Current Progress: EAC - Erroneous scenario: • EAC = AC + (BAC –EV)Based on Budgeted rate • EAC = BAC / CPI Based on CPI. • EAC = AC + [(BAC –EV) / (CPI ×SPI)]Based on SPI & CPI • EAC = AC + re-estimateErroneous scenario: 7.4 Control Cost ->T&T-> Forecasting
  58. 58. By: Anand Bobade (nmbobade@gmail.com) 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. 7.4 Control Cost ->T&T-> Forecasting • 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 are 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) / (CPI ×SPI)] • 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:
  59. 59. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) EAC based on Budgeted Rate: • EAC = AC + (BAC –EV) 7.4 Control Cost ->T&T-> Forecasting 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 as originally planned then it will need 11 Million to complete.
  60. 60. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) EAC based on Current Progress (Based on CPI): EAC = BAC / CPI 7.4 Control Cost ->T&T-> Forecasting 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 project.
  61. 61. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) EAC based on Current Progress (Based on CPI & SPI): EAC = AC + [(BAC –EV) / (CPI ×SPI)] 7.4 Control Cost ->T&T-> Forecasting 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.
  62. 62. By: Anand Bobade (nmbobade@gmail.com) 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 7.4 Control Cost ->T&T-> Exercise
  63. 63. By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost -> T&T -> 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
  64. 64. By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost -> T&T -> 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
  65. 65. By: Anand Bobade (nmbobade@gmail.com) 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) 7.4 Control Cost -> T&T -> Exercise 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
  66. 66. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) EAC - Estimate at completion (Re-estimate) • EAC = AC + ETC (or Re-estimate) 7.4 Control Cost ->T&T-> Forecasting 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=3,00,000, 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
  67. 67. By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost -> T&T -> 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
  68. 68. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) ETC - Estimate to complete • ETC = EAC- AC or (Re-estimate remaining work) 7.4 Control Cost ->T&T-> Forecasting 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
  69. 69. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) VAC (Variance at completion) • Projection of budget difference between BAC & EAC. 7.4 Control Cost ->T&T-> Forecasting VAC shows whether project is forecasted to finish under or over budget. VAC = BAC – EAC VAC % = EAC / BAC
  70. 70. By: Anand Bobade (nmbobade@gmail.com) To-complete performance index (TCPI) TCPI calculation Same Budget Use BAC Revised Budget Use Forecasted EAC If BAC is no longer viable, then forecasted EAC should be approved to use in the TCPI calculation. TCPI is measure of Cost Performance that is required to be achieved in order to meet a specified management goal. Ratio of “cost to finish outstanding work”, to “remaining budget”. 7.4 Control Cost ->T&T-> TCPI
  71. 71. By: Anand Bobade (nmbobade@gmail.com) To-complete performance index (TCPI) To-complete performance index (TCPI) Work Remaining ---------------------- Fund Remaining Ratio of “cost to finish outstanding work” to “remaining budget”. 7.4 Control Cost ->T&T-> TCPI TCPI (based on the BAC): ( BAC – EV ) ---------------- ( BAC – AC ) TCPI (based on the EAC): ( BAC – EV ) ---------------- ( EAC – AC )
  72. 72. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> TCPI->Same Budget 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
  73. 73. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 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. 7.4 Control Cost ->T&T-> TCPI
  74. 74. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> TCPI->Same Budget 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
  75. 75. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 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. 7.4 Control Cost ->T&T-> TCPI
  76. 76. By: Anand Bobade (nmbobade@gmail.com) • 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 7.4 Control Cost ->T&T-> TCPI
  77. 77. By: Anand Bobade (nmbobade@gmail.com) Performance reviews A technique used to measure, compare, & analyse actual performance of work in progress against baseline. Variance Analysis: • A technique for determining cause & degree of difference between baseline & actual performance. Trend Analysis • An analytical technique that uses mathematical models to forecast future outcomes based on historical results. Earned value management: • A methodology that combines scope, schedule, and resource measurements to assess project performance and progress. 7.4 Control Cost ->T&T->Performance review
  78. 78. By: Anand Bobade (nmbobade@gmail.com) Performance reviews Compare cost performance of activities overrunning & under running budget. Determining cause & degree of variance relative to cost baseline. Variance Analysis: • Determining cause & degree of difference between baseline & actual performance. 7.4 Control Cost ->T&T->Performance review • CV = EV –ACCost Variance • SV = EV –PVSchedule Variance • VAC = BAC –EAC Variance at completion
  79. 79. By: Anand Bobade (nmbobade@gmail.com) Performance reviews Uses past performance (historical results) with variance over time Compare future performance goals in the form of BAC versus EAC and completion dates. Examines performance over time is improving or deteriorating. Trend Analysis • Uses mathematical models to forecast future outcomes based on historical data. 7.4 Control Cost ->T&T->Performance review
  80. 80. By: Anand Bobade (nmbobade@gmail.com) Performance reviews Compares the performance measurement baseline to actual schedule and cost performance. If not being used, then the analysis of the cost baseline against actual costs for the work performed is used . Earned value management: • It combines scope, schedule & resource to assess project performance & progress. 7.4 Control Cost ->T&T->Performance review
  81. 81. By: Anand Bobade (nmbobade@gmail.com) Project management software Calculate earn value Display graphical trends & calculate SPI & CPI Show variances Forecast a range of possible final project results 7.4 Control Cost ->Tools & Techniques->PM software
  82. 82. By: Anand Bobade (nmbobade@gmail.com) Reserve analysis Monitor status of contingency & management reserves. Determine, if these reserves are still needed or not. If not then free up the reserves. Determine, if additional reserves need to be requested. 7.4 Control Cost->Tools & Techniques->Reserve Analysis
  83. 83. By: Anand Bobade (nmbobade@gmail.com) Work Performance Information Cost Forecasts Change Requests PMP Updates Project Documents Updates OPA updates 7.4 Control Cost -> Outputs
  84. 84. By: Anand Bobade (nmbobade@gmail.com) Work Performance Information From results of Earn value calculation Variances (CV, SV & VAC) Performance indicators (SPI, CPI) All information to be documented & communicated to stakeholders. The performance data collected from various controlling processes, analysed in context & integrated based on relationships across areas. 7.4 Control Cost->Outputs->Work Performance Information
  85. 85. By: Anand Bobade (nmbobade@gmail.com) Cost Forecasts Calculated EAC value & ETC value is documented and communicated to stakeholders 7.4 Control Cost->Outputs->Cost Forecasts EAC - Estimate at completion ETC - Estimate to complete Total Cost at end Remaining Cost
  86. 86. By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost->Outputs->Change Requests • To improve future performancePreventive CR: • Re-alignment of performanceCorrective CR: Change Requests A formal proposal to modify any document, deliverable, or baseline. Analysis of project performance may result in a CR to cost baseline or other components of PMP. Cost b baseline changes are mainly due to: Behind schedule or Over budget Activity Resource change Change in Cost estimate Risk realization or new risks
  87. 87. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) Cost baseline. :in response to approved changes in scope, activity resources, or cost estimates. Cost management plan. changes to control thresholds or specified levels of accuracy required Cost estimates, and Basis of estimates. Causes of variances, Corrective action chosen and the reasons, Financial databases, and Other types of lessons learned from project cost control. 7.4 Control Cost -> Outputs
  88. 88. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7. Project Cost Management -> Additional Concepts Money – value depends on time • Receiving AED 100 today has different meaning than receiving it after 1 year. Money Value as of Today (PV) Future value (FV)
  89. 89. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7. Project Cost Management -> Additional Concepts Money – value depends on time • Receiving AED 100 today has different meaning than receiving it after 1 year. Money Value as of Today (PV) Future value (FV)
  90. 90. By: Anand Bobade (nmbobade@gmail.com) 7. Project Cost Management -> Additional Concepts • Present Value (PV) = 1,000 • Years : 2 years • Interest: 5% (0.05) • Future Value (FV) = ?? The future value ( FV ) • It refers to a method of calculating how much present value (PV) of an asset or cash will be worth at a specific time in the future FV = PV (1 + R)^N • FV: Future value • PV: Present value • N: time of years • R: Interest rate Above example, FV=?? • = 1,000 (1 + 0.05)^2 ) • = 1,000 * (1.05^2) • = 1,000 * 1.1025 • = 1,102.5
  91. 91. By: Anand Bobade (nmbobade@gmail.com) 7. Project Cost Management -> Additional Concepts Present Value: • The value of an expected income(as of date of valuation) • PV <= FV because money has interest-earning potential • To calculate PV, discount FV by interest rate •Present Value (PV) = ?? •Years : 2 years •Interest: 5% (0.05) •Future Value (FV) = 1,000 PV = FV/ (1 + R)^N • PV: Present value • FV: Future value • N: time of years • R: Interest rate Above example, what is PV?? • PV = 1,000 / (1 + 0.05)^2 ) • PV = 1,000 / (1.05^2) • PV = 1,000 / 1.1025 • PV = 907
  92. 92. By: Anand Bobade (nmbobade@gmail.com) 7. Project Cost Management -> Additional Concepts Net present value (NPV): • The total present value (PV) of a time series of cash flows. • It allows calculating the accurate value of the project. • If NPV > 0; then accept the project otherwise reject it. Initial investment ( Express as negative number) All Present values (PV’s) Example: If project costs 100,000 & generates income as below with discounted rate of 10% Year 1 = 50,000 ; Year 1 = 37,000 ; Year 1 = 43,000 PV1 = 50,000 / (1 + 0.1) ^1 = 45455.54 PV2 = 37,000 / (1 + 0.1) ^2 = 30578.50 PV3 = 43,000 / (1 + 0.1) ^3 = 32306.53 NPV = (-100,000) + 45455.54 + 30578.50 + 32306.53 = 8,339.57
  93. 93. By: Anand Bobade (nmbobade@gmail.com) 7. Project Cost Management -> Questions The project selection board was presented with following project opportunities: Project A has a duration of 5 years and an NPV of 90,000, Project B has a duration of 4 years and an NPV of 80,000, Project C has a duration of 3 years and an NPV of 70,000 Project D has a duration of 2 years and an NPV of 60,000. Which project will be selected by board based on above information? A) Project A B) Project B C) Project C D) Project D Answer : When calculating the NPV of a project, the duration (no. of years) is already factored in the result. So, you can simply select the one with the highest NPV. Hence, answer is A) Project A
  94. 94. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost -> T&T -> Examples & Scenarios Scenarios
  95. 95. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> Examples • = 2,000PV • = 2,000EV • = 2,000AC This is the ideal situation, where everything goes according to plan • = 2,000PV • = 1,500EV • = 1,700AC • = EV – AC = - 200Cost Variance Without Earned Value measurements, it appears project is in good shape. Expenditures are less than planned. Case 1 Case 2 Observation1
  96. 96. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> Examples • = 2,000PV • = 1,500EV • = 1,700AC With EV measurements, we see 500 worth of work is behind schedule; i.e., We are 25% behind our planed work Case 2 Observation 2 • = EV – PV = - 500SV • = (SV / PV) x 100 = -25%SV %
  97. 97. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> Examples • = 2,000PV • = 1,500EV • = 1,700AC We can see “Actuals” exceed “Earned Value” (EV) i.e., 1,500 worth of work was accomplished but money spent was 1,700. We have a 200 cost overrun (13.3% over budget) Case 2 Observation 3 • = EV – AC = - 200CV • = (CV / EV) x 100 = -13.3%CV %
  98. 98. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> Examples • = 2,000PV • = 1,500EV • = 1,700AC This means only 75 cents of work was done for each $1 worth of work planned. Only 88 cents worth of work was actually done for each $1 spent All performance indicators are Negative Case 2 Observation 4 • = EV/PV = 0.75SPI • = EV/AC = 0.88CPI • = EV-PV = -500SV • = EV-AC = -200CV
  99. 99. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> Examples • = 2,500PV • = 2,300EV • = 2,100AC Case 3 Bad News: Project work efficiency is a bit low, we are getting only 92 cents of work done on $1 spent. As a result, we are behind schedule. • = EV-PV = -200SV • = SV / PV x 100 = -8%SV% • = EV/PV = 0.92SPI • = EV-AC = 200CV • = CV/PV X 100 = 8%CV% • = EV/AC = 1.095CPI Good news: Project is running under budget. We’re getting $1.095 worth of work done for each $1 spent.
  100. 100. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> Examples • = 2,000PV • = 1,800EV • = 1,800AC Case 4 Bad News: Project work is not accomplished on Schedule • = EV-PV = -200SV • = SV / PV x 100 = -10%SV% • = EV/PV = 0.9SPI • = EV-AC = 0CV • = CV/PV X 100 = 0%CV% • = EV/AC = 1CPI Good news: Project is running as per our budget. The cost of the work accomplished is as we budgeted.
  101. 101. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost ->T&T-> Examples • = 2,000PV • = 2,200EV • = 2,000AC SPI & CPI =1.1 Project work is getting done at 1.1% efficiency Case 5 • = EV-AC = 200CV • = CV/PV X 100 = 10%CV% • = EV/AC = 1.1CPI • = EV-PV = 200SV • = SV / PV x 100 = 10%SV% • = EV/PV = 1.1SPI Ahead or Schedule & under-running cost: Work is ahead of schedule by 10% & under-running cost by 10%. Management View: Too much Pessimistic planning
  102. 102. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) 7.4 Control Cost -> Data Flow Diagram
  103. 103. By: Anand Bobade (nmbobade@gmail.com)By: Anand Bobade (nmbobade@gmail.com) To Learn Project Management, Contact Anand Bobade (055 5932004) •nmbobade@gmail.com •https://ae.linkedin.com/in/anandbobade •http://www.slideshare.net/anandbobade •Conduct Online training, Corporate Training, evening & weekend workshops.
  104. 104. By: Anand Bobade (nmbobade@gmail.com) Thank You! To Learn Project Management, Contact Anand Bobade (055 5932004) •nmbobade@gmail.com •https://ae.linkedin.com/in/anandbobade •http://www.slideshare.net/anandbobade •Conduct Online training, Corporate Training, evening & weekend workshops. Free learning resources on slide share

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