Project Management Session 7

Project Management Control

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Preamble

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• How do I manage the following:– The overall health of

the project;– Scope;– Acquisition of goods

and services;– Value.

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Project planning: Milestones Schedule; Human resources; Budget; Responsibilities; Contingencies.

Ownership: Stakeholder input; Conditions for

satisfaction;Stakeholders feel

their interest accommodated.

Project Health

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Expertise: Have expertise; Members understand their

responsibilities; Adequate training for team

members; Top level support:

Project sponsor share responsibility;

TOR agreed; Sponsor and management

support when required; Communication.

Resources: Available HR; Technology available; Task management

effective.

Project Health

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Justifiable case: Project fully costed and

budgeted; Also agreed with sponsor; ROI clear and acceptable; Metrics in place and

methods to measure; Adequate funding;

Specification: Objectives clear; Strategic and business

alignment; Enthusiasm; Adequate documentation –

reports; budget; spec’s; deviations; delegations.

Project Health

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• How do I manage the following:– The overall health of

the project;– Scope;– Acquisition of goods

and services;– Value.

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There are three basic causes There are three basic causes for change in projects:for change in projects: Planners erred in their Planners erred in their

initial assessment about initial assessment about how to achieve a given end how to achieve a given end or erred in their choice of or erred in their choice of the proper goal for the the proper goal for the project;project;

The client/user or project The client/user or project team learns more about the team learns more about the nature of the project nature of the project deliverable or about the deliverable or about the setting in which it is to be setting in which it is to be used;used;

Change in the environment Change in the environment in which the project is being in which the project is being conducted.conducted.

Scope Management

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Scope is defined at various levels: Project charter; Breakdown of deliverables,

tasks etc (this is were the Work Breakdown Structure is important);

The baseline plan and the budget also part of the scope.

Underlying the issue of scope management is change control: Formal system of change

control; Impact of changes should be

motivated; Where it affects scope, client

signoff should be sought and relevant documents updated.

Scope management

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Scope related dilemmas: Scope creep:

Changes that are changing the base plan. Inevitable but the project manager needs to keep these changes “manageable” ;

Hope creep: Falling behind schedule,

with the hope that one could catch up. The project manager needs to be very careful as this can have severe consequences for the project;

Effort creep: Similar to hope creep.

Activity that does not produce results;

Feature creep: Adding features rather than

sticking to the original agreement about deliverables.

Scope management

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• How do I manage the following:– The overall health of

the project;– Scope;– Acquisition of goods

and services;– Value.

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• PMBOK “the processes required to acquire goods and services’;

• Procurement schedule (as such) should only be considered after the network diagram and schedule bar chart has been finalized but before the resource histograms and cash flow statements – thus what, when before how much and how much when….

Procurement

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• How do I manage the following:– The overall health of

the project;– Scope;– Acquisition of goods

and services;– Value.

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Context

• 70% of projects are:•Over budget•Behind schedule

• 52% of all projects finish at 189% of their initial budget

• And some, after huge investments of time and money, are simply never comple

Source: The Standish GroupSource: The Standish Group

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What is Earned Value?

Earned Value is an approach for understanding Earned Value is an approach for understanding and assessing what a project is achieving with and assessing what a project is achieving with

budgeted money.budgeted money.

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What Do You Need for EVA?

100

40

60

1525

30

30

3. Allocate Budgets

1. Define the Work

2. Schedule the WorkR PM Baseline

Contract Budget Base

Time

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Managing Without EVA

Example you budget 100 hours to assemble bridgePillars and at the end of the period you have achieved the 100 hours

Budget Actual Variance

100 hours @ R 300 R 100 hours @ R 300 R 0

Wow we are on budget !

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Managing Without EVA

Does this mean we have achieved 100

hours worth of work ?

Actual cost is not an indication of progress, - Only an indicator of

hours/money spent.

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Important Terms

BCWS - Budgeted Cost of Work Scheduled: Planned cost of the total amount of work

scheduled to be performed by the milestone date; ACWP - Actual Cost of Work Performed:

Cost incurred to accomplish the work that has been done to date;

BCWP - Budgeted Cost of Work Performed: The planned (not actual) cost to complete the

work that has been done.

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Example

49000

55000

0

20000

40000

60000

80000

100000

120000Ja

n-03

Feb

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Apr

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May

-03

Jun-

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Jul-0

3

Aug

-03

Sep

-03

Oct

-03

Nov

-03

Dec

-03

BCWP

BCWS

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Example

•SV - Schedule Variance: (BCWP-BCWS):

•A comparison of amount of work performed during a given period of time to what was scheduled to be performed.•A negative variance means the project is behind schedule

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Example

5500049000

56000

0

20000

40000

60000

80000

100000

120000Ja

n-03

Feb

-03

Mar

-03

Apr

-03

May

-03

Jun-

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Jul-0

3

Aug

-03

Sep

-03

Oct

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Nov

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Dec

-03

BCWS

BCWP

ACWP

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Example

•CV - Cost Variance:• (BCWP-ACWP)

•A comparison of the budgeted cost of work performed with actual cost.•A negative variance means the project is over budget.

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Example

Schedule Variance = BCWP-BCWS:

$49,000- 55,000

SV = - $ 6,000

Cost Variance = BCWP-ACWP:

$49,000 56,000

CV = - $7,000

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Earned Value?

BCWP - Budgeted Cost of Work Performed:

The planned (not actual) cost to complete the work

that has been done.

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In Simple Terms…

0

10

20

30

40

50

60

J F M A M J J A S O N D

Time

Do

llar

s

Actual Cost (26)

Budget Plan (21)

Earned Value (16)

Time Now

Schedule variance

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In Simple Terms…

0

10

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40

50

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J F M A M J J A S O N D

Time

Do

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s

Actual Cost (26)

Budget Plan (21)

Earned Value (16)

Time Now

Cost Variance

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In Simple Terms…

0

10

20

30

40

50

60

J F M A M J J A S O N D

Time

Do

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s

Actual Cost (26)

Budget Plan (21)

Earned Value (16)

Time Now

Time variance

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Important Metrics…

•SPI: Schedule Performance Index:SPI: Schedule Performance Index:SPI=BCWP/BCWSSPI<1 means project is behind schedule

•CPI: Cost Performance Index:CPI: Cost Performance Index:CPI= BCWP/ACWPCPI<1 means project is over budget

•CSI: Cost Schedule Index CSI: Cost Schedule Index ( (CSI=CPI x CSI=CPI x SPI):SPI):

The further CSI is from 1.0, the less likely project recovery becomes.

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Important Metrics…

SPI: BCWP/BCWS:SPI: BCWP/BCWS:

49,000/55,000 = 0.891

CPI: BCWP/ACWP:CPI: BCWP/ACWP:

49,000/56000 = 0.875

CSI: SPI x CPI:CSI: SPI x CPI:

.891 x .875 = 0.780

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Making Projections…

•Once a project is 10% complete, theoverrun at completion will not be less

than the current overrun;

•Once a project is 20% complete,the CPI should not vary from its current

value by morethan 10%.

The CPI and SPI are statistically accurate The CPI and SPI are statistically accurate indicators of final cost results.indicators of final cost results.

Source: Defense Acquisition UniversitySource: Defense Acquisition University

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Summary…

• Know where you are in terms of the Schedule;Schedule;

• Know where you are in terms of the Budget;Budget;

• Know where you are in terms of Work Work Accomplished.Accomplished.

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Summary…

• Earned Value Analysis integrates all three:Earned Value Analysis integrates all three:• It compares the plannedplanned work with what has

actually been completedcompleted, to determine if cost,cost, scheduleschedule and work accomplishedwork accomplished are progressing as planned.

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