Project Management Professionals Hot Topics & Challenges - Cost Management Presenter: Sohel Akhter, PMP, CCNA,ISMS PMP and Six Sigma instructor, Netcom Learning Adjunct Professor , MBA program, CUNY

Project Management Professionals Hot Topics & Challenges - Cost Management 1. PV 2. EV 3. AC Variance Formulas: 4. SV = EV – PV 5. CV = EV - AC Index Formulas: 6. SPI =EV/PV 7. CPI = EV/AC Forecasting Formulas: 8. BAC 9. EAC = BAC/CPI 10. ETC = EAC - AC 11. VAC = BAC - EAC 12. TCPI = (BAC – EV) / (BAC – AC) or (BAC – EV)/ (EAC – AC)

Project Management Professionals Hot Topics & Challenges - Cost Management Planned Value Earned Value Actual Cost Budgeted Cost of Work Scheduled Performed Actual New Name The rest of the presentation will use the new names, but the instructor should urge students to memorize both, since both old and new are currently used on the PMP exam. Old Name

Project Cost Management – Formula Acronym Term Formula Interpretation PV or BCWS Planned Value Budgeted Cost of Work Scheduled BAC x (Time Passed /Total Scheduled Time) BAC x Planned % Complete What is the estimated value of the work planned to be done? EV BCWP Earned Value Budgeted Cost of Work Performed BAC x (Work Completed /Total Work Required) BAC x Actual % Complete What is the estimated value of the work actually accomplished? AC ACWP Actual Cost Actual Cost of Work Performed What is the actual cost incurred for the work accomplished? SV Schedule Variance SV = EV- PV A comparison of amount of work performed during a given period of time to what was scheduled to be performed. Negative = behind schedule Neutral = on schedule Positive = ahead of schedule CV Cost Variance CV = EV – AC A comparison of the budgeted cost of work performed with actual cost. Negative= over budget Neutral = on budget Positive= under budget CPI Cost Performance Index CPI= EV/AC It measures the value of the work completed against actual cost. CPI<1=over budget CPI >1= under budget CPI= 1= on budget 𝐂𝐏𝐈 𝐜 Cumulative CPI 𝐂𝐏𝐈 𝐜 = 𝐄𝐕 𝐜 / 𝐀𝐂 𝐜 It represents the cumulative CPI of the project at the point the measurement is taken. SPI Schedule Performance Index SPI= EV/PV It measures the progress to date against the planned progress. SPI<1 = behind schedule SPI > 1= ahead of schedule SPI = 1 = on schedule 𝐒𝐏𝐈 𝐜 Cumulative SPI 𝐒𝐏𝐈 𝐜 = 𝐄𝐕 𝐜 / 𝐏𝐕 𝐜 It represents the cumulative SPI of the project at the point the measurement is taken. BAC Budget at Completion How much did we BUDGET for the TOTAL project effort? EAC Estimate at Completion If CPI is expected to be the same EAC= BAC/CPI   If current variances are thought to be atypical of the future EAC = AC+ (BAC-EV) If both CPI and SPI influence the remaining work EAC = AC+[ (BAC-EV)/ (CPI x SPI)] What do we currently expect the TOTAL project to cost? ETC Estimate to Complete ETC= EAC - AC From this point on, how much MORE do we expect it to cost to finish the project? VAC Variance at Completion VAC= BAC - EAC How much over or under budget do we expect to be at the end of the project? TCPI To Complete Performance Index If targeting the current plan TCPI= (BAC- EV)/ BAC – AC If targeting the current EAC TCPI= (BAC- EV)/ EAC – AC Performance that must be achieved in order to meet financial or schedule goals. TCPI >1 = harder to complete TCPI<1 = easier to complete Project Cost Management – Formula

Actual Amount Spent by week Three Planned Completion by week three Project Management Professionals Hot Topics & Challenges - Cost Management Project Planned End Date Planned Budget Actual Amount Spent by week Three Planned Completion by week three Actual Completion Corporate Training Project End of 4th week $10,500 for total project $2625 for each module $9000 3 out of 4 modules 2 out of 4 modules PV Planned Value BAC x ( Time Passed /Total Scheduled Time) = $10,500 x (3/4) = $10,500 x .75 = $7875 EV Earned Value BAC x (Work Completed /Total Work Required) = $10,500 x (2/4) = $10,500 x .5 = $5250

Project Management Professionals Hot Topics & Challenges - Cost Management You have a project to build a new fence. The fence is four sided as shown. Each side is to take one day to build and is budgeted for #1000 per side. The sides are planned to be completed one after another. Today is the end of day three. Using the project status chart below calculate the formulas. Activity Status End of day 3 Side 1 Complete, Spent $1000 Side 2 Complete, Spent $1200 Side 3 50% done, Spent $600 Side 4 Net yet started PV EV AC BAC CV 3000 2500 2800 4000 -300 CPI SV SPI EAC ETC VAC TCPI .893 -500 .833 4479 1679 -479 1.25

Project Management Professionals Hot Topics & Challenges- Cost Management You have a project to build a new fence. The fence is four sided as shown. Each side is to take one day to build and is budgeted for $1000 per side. The sides are planned to be completed one after another. Today is the end of day three. In this case, assume that the sides have a finish-to-finish relationship instead of a finish-to-start relationship. Using the project status chart below calculate the formulas. What is Answer PV EV AC BAC CV CPI SV SPI EAC ETC VAC TCPI 3000 Activity Status End of day 3 Side 1 Complete, Spent $1000 Side 2 Complete, Spent $900 Side 3 50% done, Spent $1000 Side 4 75% done, Spent $300 3250 3200 4000 50 1.016 250 1.083 3937 Key S= Actual Start, F = Actual Finish, PS = Planned Start, PF = Planned Finish 737 63 .937

Project Management Professionals Hot Topics & Challenges - Cost Management Your project is running well. In the latest earned value report, you see the CPI=1.2, the SPI= 0.8, the PV= $600,000 and the SV = -$120,000. You can’t find the CV in the report, so you calculate it based on the info given. What is the CV? Key S= Actual Start, F = Actual Finish, PS = Planned Start, PF = Planned Finish