Intermediate Cost Analysis and Management Apply Earned Value Management Principles to Case Study Scenario: Completing the Great Pyramid Intermediate Cost Analysis and Management 11.4

If Only the Pharaoh Had the Corps of Engineers

Terminal Learning Objective Action: Apply Earned Value Management Principles to Case Study Scenario Condition: You are training to become an ACE with access to ICAM course handouts, readings, spreadsheet tools, and awareness of Operational Environment (OE) variables and actors Standard: With at least 80% accuracy: Identify key variables from case study data Calculate BAC, schedule and cost variances, and EAC

Building the Great Pyramid Case A: The Air Force Approach Read the paper “If the Pharaoh Had Only Used an Earned Value System in Building the Pyramids” Using the tools learned: Build and verify the BAC presented in the paper Determine schedule variance at Year 12 Determine the cost variance at Year 12 Calculate EAC at Year 12

Budget at Completion: BAC Year Design Mfg Comp Test Assemble Intg Total Cum 2 1 4 1.5 2.5 3.5 6 7 8 10.5 10 13 12 .5 14.5 14 16 17.5 18 19 20 BAC (Note: your chart may look a little different as there is some ambiguity about start/end dates)

Schedule and Cost Variances: Design at Year 12 BCWS Schedule Variance BCWP Cost Variance ACWP Design 1 Cost per Unit Design 4 Cost for Design --

Schedule and Cost Variances: Manufacture at Year 12 BCWS Schedule Variance BCWP Cost Variance ACWP Blocks 1000 667 Cost per Block .006 .009 Cost for Manufacture 6 (2) 4

Schedule and Cost Variances: Component Test at Year 12 BCWS Schedule Variance BCWP Cost Variance ACWP Component Test 100% 50% Cost per Component Test 4 6 Cost for Component Test (2) 2 (1) 3

Year 12 Results We are now behind schedule and over cost: terrible!! ACWP is 130% of BCWP so EAC can be projected at 130% of BAC: (1.30)20M = 26M BCWS Schedule Variance BCWP Cost Variance ACWP Cost for Design 4 -- Cost for Manufacture 6 (2) Cost for Component Test 2 (1) 3 Cost at end of Year 12 14 (4) 10 (3) 13

Building the Great Pyramid Case B: Corps of Engineers The Pharaoh was quite displeased with the Air Force Pyramid Building Project’s AAR results LTC Neimann was re-assigned to flying carpets and moved to a lovely tent in the Sinai where he soon retired The Pharaoh turned to the Corps of Engineers He asked for project proposals to complete the Great Pyramid within four years The Corps of Engineers tasked six teams to make proposals to complete an enhanced, Army-ized pyramid Engineers lead the way

The U.S. Army Corps of Engineers www.usace.army.mil/about Is the Nation’s number one federal provider of outdoor recreation Owns and operates more than 600 dams Operates and maintains 12,000 miles of commercial inland navigation channels Dredges more than 200 million cubic yards of construction and maintenance dredge material annually Maintains 926 coastal, Great Lakes and inland harbors Restores, creates, enhances or preserves tens of thousands of acres of wetlands annually under the Corps’ Regulatory Program Provides a total water supply storage capacity of 329.2 million acre-feet in major Corps lakes Owns and operates 24 percent of the U.S. hydropower capacity or 3 percent of the total U.S. electric capacity Manages an Army military construction program between 2006 and 2013 totaling approximately $44.6 billion between—the largest construction effort since World War II

Team Design Options: Pick Two from Left and Three from Right Take advantage of Corps’ Core Competencies Army-ize the project in the interests of National Defense Add a dam and lake to provide recreational venue for tourists and pilgrims Divert the Nile River to ease transportation to site Build levees around pyramid to eliminate any flooding threat Build barracks facilities for workers and guests Up to one more of your choice Camouflage the pyramid Add armor Build system of mutually supporting archer nests Build roads for rapid reaction chariot forces Up to two others of your choice

Task 1: Build Your BAC Build your work breakdown structure given your choices from the previous page Assume each task takes two years Don’t ignore need for more blocks and the assembly task You should have seven tasks (blocks, assembly, two corps’ core competency, and three Army-ize) Estimate cost for each task for years 1, 2, 3, 4 (in year 3000 BC shekels) Present your design, work schedule and graph of BCWS to the class Make sure you don’t exceed the $13M the Air Force had estimated for added cost to completion

Budgeted Cost of Work Scheduled: Fill in the Blanks Block Assembly Corps 1 Corps 2 Army 1 Army 2 Army 3 Total Cum Year 1 Year 2 Year 3 Year 4

Graph of Pyramid Completion Project $000

Team Proposal Presentations

Task 2: AAR for the Pharaoh Generate actual cost and schedule per following page’s instructions Present to class Cost and schedule variances for each year until completion (4+ slides) BAC and EAC for the first year (1 slide) Graph of BCWS, BCWP, ACWP (1 slide) A reconciliation of your variance results at completion (1 slide) Suggestions for continuous improvement (1 slide) A view of what your finished pyramid looks like (1 slide)

Task 2: Developing Actual Cost and Schedule Use the randbetween formula in Excel to generate a random number between 1 and 10 for each task: =RANDBETWEEN(1,10) Follow the instructions on the next page to find what happened to the actual cost and schedule for that task Determine the actual results of the project year by year

Task 2: Reality Hits 1 Freak rain storms wash out a year’s progress: add year at same cost 2 Assyrians attack but are easily defeated: however, add 20% to task cost 3 Engineering error: task takes a third year at same average cost per year 4 Outsourcing accelerates progress, raises 1st year cost 50% but completes task 5 Slaves rebel: add 50% to task cost 6 Conquests add slaves to workforce: cut task cost 30% & finish one year early 7 Dust storms disrupt work: add 20% to task cost 8 Hidden Air Force funds discovered: reduce task cost 50% 9 LSS improves process: eliminate 2nd year and its cost 10 Finance Corps ACES assigned to project: reduce cost of all tasks 10%

Team AAR Presentations

Teacher’s Notes: Example Selected tasks 1 2 3 4 total cum block 500 1000 assemble 2000 divert nile 4000 dam and lake 3000 7000 camo 10000 armor 12000 roads 13000 total bcws 4500 5500 Budget for tasks BAC BCWS

Teacher’s Notes: Actual Costs random # impact 1 2 3 4 Total cum 1st +50% no 2nd block 675 20% more cost assemble 540 1080 1755 10 10% less all tasks divert nile 900 1800 3555 add yr at same cost dam and lake 1350 4050 7605 camo 2160 3240 10845 8 50% less cost armor 450 11745 roads 225 12195 total 1215 3465 4635 2880

Teacher’s Notes: Example 1st Year Results bcws schedulevariance bcwp cost variance acwp units completed 166.5 333 block cost per unit 3 2 cost at point in time 500 1000 325 675 0.5 assbly 1080 (40) 540 year 1 total 1500 285 1215 acwp/bcwp 81% bac 13000 eac 10530

Teacher’s Notes: 2nd Year Results schedule cost bcws variance bcwp acwp units completed 166.5 block cost per unit 3 cost at point in time 500 (500) 0.5 assbly 1000 1080 (40) 540 nile 2000 1800 100 900 0.67 0.44 lake 3000 3941 (667) 1333 (467) road 450 275 225 year 2 total 4500 (1167) 3333 (132) 3465 after 2 years 5500 4833 153 4680

Teacher’s Notes: 3rd Year Results schedule cost bcws variance bcwp acwp units completed 0.5 nile cost per unit 2000 1800 cost at point in time 1000 100 900 0.33 0.22 lake 3000 4050 (333) 667 (233) 0.67 camo 3240 (160) 2160 0.50 armor 550 450 road 500 275 225 year 3 total 5500 5167 532 4635 after 3 years 11000 (1000) 10000 685 9315

Teacher’s Notes: 4th Year Results schedule cost bcws variance bcwp acwp units completed 0.00 0.33 lake cost per unit 000 0/ 3000 4050 cost at point in time 0/ 1000 (1350)/ (350) 1350 camo 3000 3240 1000 (80) 1080 0.50 armor 2000 900 550 450 year 4 total 2000/ 3000 (880)/ 120 2880 after 4 years 13000 805 12195

Graphing the Pyramid Project ACWP BCWP BCWS

Teacher’s Notes: Reconciliation Budgeted at Completion 13000 Actual Cost at Completion 12195 Cost Variance 805 Reconciliation: Army audit agency discovered hidden Air Force funds 1500 Added ACES to project 1300 Block outsourcing continuous improvement 250 Engineering error on dam task (1500) Disruption from Assyrian attacks (800) Miscellaneous rounding effects 55 Total Explained

Teacher’s Notes: Continuous Improvement Suggestions Get more ACES and involve them more Check Engineering designs before they create major cost overruns Double check Engineering designs Look for more outsourcing opportunities

Camouflaged Pyramid on Lake: Excellent Camouflage, Isn’t It?! © Dale R. Geiger 2011

TLO Summary Action: Apply Earned Value Management Principles to Case Study Scenario Condition: You are training to become an ACE with access to ICAM course handouts, readings, spreadsheet tools, and awareness of Operational Environment (OE) variables and actors Standard: With at least 80% accuracy: Identify key variables from case study data Calculate BAC, schedule and cost variances, and EAC