Chapter 13

1. Understand the nature of the control cycle and

four key steps in a general project control
model.
2. Recognize the strengths and weaknesses of
common project evaluation and control
methods.
3. Understand how Earned Value Management can
assist project tracking and evaluation.
4. Use Earned Value Management for project
portfolio analysis.
5. Understand behavioral concepts and other
human issues in evaluation and control.
2
Projects are often defined by their constraints
It is vital to make sure projects are controlled
as carefully as possible. Are we:
on time?
on budget?
getting results?
satisfied?
What clues will tell us when we are not
meeting our goals?
These clues need to be timely and accurate
3
4
1. Setting a Goal
4. Corrective
Action and
Recycling the
Process
2. Measuring
Progress
3. Gap Analysis of Actual vs.
Planned Performance

5
Duration (in weeks)
Work Package
5

10

15

20

25

30

35

40

45

Total

Design

6

2

8
Engineer

4

8

8

8 28
Install

4

20

6

30
Test

2

6

4

2

14
Total $

6

6

8

12

28

8

6

4

2

Cumulative $

6

12

20

32

60

68

74

78

80

80

$ in thousands
C
u
m
u
l
a
t
i
v
e

C
o
s
t

(
$

i
n

t
h
o
u
s
a
n
d
s
)

6
Elapsed Time (in weeks)
10 5 45 40 35 30 25 20 15 50
20
60
40
Cumulative
Budgeted Cost
Cumulative
Actual Cost
$10,000 Negative Variance
Is this variance a
good or bad factor?
Week 23
Actual spend $40k
Significant events or deliverables
Major project happenings
Funding points (30% of budget expended)
Key dates (April 15)
Activities of zero duration
Take no time; consume no resources
Serve as reminders to check on overall project
status at key points
7
Milestones are events or stages of the project
that represent a significant accomplishment.
8
Milestones are control devices that
signal the completion of important steps
can motivate the team
offer reevaluation points
help coordinate schedules
identify key review gates
signal when the next steps should begin
delineate various deliverables



9

10
11
Project status is updated by
linking task completion to the
schedule baseline

12
Earned Value Management (EVM) is a project
management system that combines schedule
performance and cost performance to
answer the question, What did we get for the
money we spent?
Recognizes that it is necessary to jointly
consider the impact of
Time (schedule)
Cost
Project performance
on current project status.
13
Cost
Performance Schedule
Earned
Value
All project steps earn value as work is
completed.
The Earned Value (EV) can then be compared to
actual costs and planned costs to determine
project performance and predict future
performance trends.
Physical progress is measured in dollars, so
schedule performance and cost performance can
be analyzed in the same terms.
Based on a list of 32 criteria (revised 1996)
http://www.acq.osd.mil/evm/
a.k.a ANSI/EIA -748 EVMS 32 Guidelines

14
Info from http://www.earnedvaluemanagement.com/benefits.html
Basis for Earned Value Analysis:

Budgeted cost at completion (BAC)
Overall approved budget for a task.
Actual cost of work performed (AC)
Total amount spent on a task up to the current
date.
Percent Complete
= Earned Value / BAC = EV / BAC
Task progress, simply the physical progress shown
by the fill of the task bar.
15
Once basis have been established, the
following calculations can be performed:

Planned value (PV)
The point along the time-phased budget that
crosses the current date.
Shows the budgeted cost of scheduled work as of
the current date.
Earned value (EV) =BAC x Percent Complete.
The budgeted cost of completed work as of the
current date.

16
Variance Calculations:
Schedule Variance (SV)
= Earned Value Planned Value = EV PV
The difference between what was planned to be
completed and what has actually been completed as
of the current date.
Cost (Budget) Variance (CV)
= Earned Value Actual Costs = EV - AC
The difference between the work that has been
accomplished (in dollars) and how much was spent
to accomplish it.
17
18
PV
EV
AC
Slip
SV
Overspend
CV
Scheduled
Performed
Actual
Budget
Schedule
Cost
The Schedule Performance and Cost Performance Indices
(CPI) not only monitor current project performance, they
can be used to predict future performance trends.

To-Complete Performance Index (TCPI)
= (BAC-EV) / (BAC-AC).
Indicates the CPI required throughout the remainder of the project
to stay within the stated budget.
Estimate at Completion (EAC)
= AC + ((BAC-EV)/CPI).
A forecast of total costs that will be accrued by project completion
based on past cost performance trends.
Variance at Completion (VAC)
= EAC BAC.
The difference between the new Estimate at Completion and the
original Budget at Completion.

19
In a typical spend plan analysis, physical
progress is not taken into account when
analyzing cost performance.
Instead, a projects actual costs to date are
simply compared to planned costs, often with
misleading results.
20
A task has a planned
value (PV) of $1000,
and actual costs (AC)
of $1000.
It appears this task
has perfect cost
performance, and is
in good shape to
finish on-budget.

21
If physical progress is
taken into account, the
results may differ.
The project has spent
$1000 in actual costs,
but is behind schedule
and has only achieved
$750 of Earned Value.
This is called a cost
overrun, and this
project would have a
Cost Variance (CV) of
-$250.

22
The team spent $1000 but are only 75% complete.
Duration (weeks)
Work
Package

5

10

15

20

25

30

35

40

45
% Comp.

Design

6

2














100

Engineer

4

8

8

8










100

Install






4

20

6






50

Test










2

6

4

2

0

Total

10

10

8

12

20

8

6

4

2


Cumul.

10

20

28

40

60

68

74

78

80


Lets relook at our project and see how
we are doing in Week 30
23
$ in thousands


Planned @
Week 30

%
Comp.

Earned
Value

Design

8

100

8

Engineer

28

100

28

Install

30

50

15

Test

2

0

0

Cumul.
Earned Value




51




What is the earned
value of the project
work done to date?

24
$ in thousands
As of Week
30, what is
the status of
this project
in terms of
Budget?
Schedule?
Performance?
How does
this compare
to slide 6
S-Curve?
25
Cumulative Budgeted Cost
Cumulative Actual Cost
$17k
Shortfall
in Value Earned
(PV)
(EV)
26
1. Clearly define each activity including its
resource needs and budget
2. Create usage schedules for activities and
resources
3. Develop a time-phased budget that shows
expenditures across the projects life (PV)
4. Total the actual costs of doing each task (AC)
5. Calculate both the budget variance (CV) and
schedule variance (SV)
Schedule performance index (SPI)
=Earned Value / Planned Value = EV / PV
Schedule variance related as a ratio instead of a dollar
amount.
A ratio less than 1.0 indicates that work is being
completed slower than planned.
Cost performance index (CPI)
=Earned Value / Actual Costs = EV / AC
Cost variance related as a ratio instead of a dollar
amount.
A ratio less than 1.0 indicates the value of the work that
has been accomplished is less than the amount of
money spent.

27
Activity Jan Feb Mar Apr May Jun Jul Plan % C
Earned
Value
Staffing 8 7 15 100 15
Blueprinting 4 6 10 80 8
Prototype Development 2 8 10 60 6
Full Design 3 8 10 21 33 7
Construction 2 30 32 25 8
Transfer 10 10 0 0
Punch List 15 5 20 0 0
= 118 44

Monthly Plan 8 7 6 17 10 55 15
Cumulative Plan 8 15 21 38 48 103 118
Monthly Actual 8 11 8 11 10 30
Cumulative Actual 8 19 27 38 48 78
28
$ in thousands
Schedule Variances for June

Planned Value (PV) 103

Earned Value (EV) 44

Schedule Performance Index (SPI)
= EV/PV = 44/103 = .43

Estimated Time to Completion
= SPI X Original Time Frame =
(1/.43 x 7) = 16.3 months

29
Cost Variances for June

Actual Cost of Work (AC) 78

Earned Value (EV) 44

Cost Performance Index (CPI)
= EV/AC = 44/78 = .56

Estimated Cost to Completion
= CPI X Original Budget =
(1/.56 x $118,000) = $210,714

30
31
Accurate and up-to-date information is
critical in the use of EVM
0/100 Rule
50/50 Rule
0/25/50/75/100 Rule
Percentage Complete Rule

See Table 13.8, page 429 for an example
Optimistic progress reports
Level of detail
Process evaluation
Non-technical performance measurement
32
33
1. Project mission
The purpose of the project is clear and understood by all
2. Top management support
3. Project plans & schedules
A detailed plan of the required stages on the implementation
process
4. Client consultation
A key stakeholder and defines value and satisfaction
5. Client acceptance
6. Personnel
Right team members with the right skill sets
7. Technical tasks
Team with right skill sets
8. Monitoring & feedback of progress vs. initial projections
9. Communication channels
10. Troubleshooting and corrective action
1. Why is the generic four-stage control cycle useful for
understanding how to monitor and control projects?
2. Why was one of the earliest project tracking devices referred to as
an S-curve? Do you see value in the desire to link budget and
schedule to view project performance?
3. What are some of the key drawbacks with S-curve analysis?
4. What are the benefits and drawbacks with the use of milestone
analysis as a monitoring device?
5. It has been said that Earned Value Management (EVM) came about
because the Federal Government often used Cost plus
contractors with project organizations. Cost plus contracting
allows the contractor to recover full project development costs
plus accumulate profit from these contracts. Why would requiring
contractor firms to employ earned value management help the
government hold the line against project cost overruns?
34
6. What are the major advantages of using EVM as a project
control mechanism? What do you perceive are its
disadvantages?
7. Consider the major findings of the research on human factors
in project implementation. What common themes seem to
emerge from the research of Baker, Morris, and Pinto?
8. The ten critical success factors have been applied in a variety
of settings and project types. Consider a project with which
you were involved. Did any sub-set of these factors emerge as
clearly the most important for project success? Why?
9. Identify the following terms: PV, EV, and AC. Why are these
terms important? How do they relate to each other?
10. What do the schedule performance index and budget
performance index demonstrate? How can a project manager
use this information to estimate future project performance?
11. Suppose the SPI is calculated as less than 1.0. Is this good
news for the project or bad news? Why?
35
You have evaluated your project and have developed
the following earned value table from your analysis:








1. Determine the project status by calculating CV, CPI,
SV, and SPI for each task and for the project overall.
2. What is the analysis of how the project is doing
from these indicators?
36
Tasks EV PV AC CV CPI SV SPI
Task A 10,000 10,000 11,000 -1000 .91 0 1.00
Task B 12,000 11,000 13,000 -1000 .92 1000 1.09
Task C 9,000 8,000 8,500 500 1.06 1000 1.13
Overall 31,000 29,000 32,500 -1500 .95 2000 1.07
EV-AC EV/AC EV-PV EV/PV