Phase III: Execution Phase IV: Monitoring and Control Earned Value Analysis Burns: Chapter 8: pages Burns: Chapter 12: the entire chapter Schwalbe: Chapter 7

Recitation  What does RAM stand for in the context of HR Management?  What was the name of the guy who categorized all job satisfaction factors into two categories?  What were those two categories?

13–3 The Project Control Process  Control  The process of comparing actual performance against plan to identify deviations, evaluate courses of action, and take appropriate corrective action.  Project Control Steps 1. Setting a baseline plan. 2. Measuring progress and performance. 3. Comparing plan against actual. 4. Taking action.  Tools  Tracking and baseline Gantt charts  Control charts

What is a baseline?  It makes the plan difficult to change  It is rather like writing the plan (schedule and cost) on the backside of Moses’ tablets  Its an anchor point for measuring performance against plan  Planned cost  Planned schedule  Planned scope

13–5 Baseline and Tracking Gantt Charts FIGURE 13.1

13–6 Project Schedule Control Chart FIGURE 13.2

13–7 Disparity Among Monitoring Systems  Time-Phase Baseline Plan  Corrects the failure of most monitoring systems to connect a project’s actual performance to its schedule and forecast budget.  Systems that measure only cost variances do not identify resource and project cost problems associated with falling behind or progressing ahead of schedule.  Earned Value Cost/Schedule System  An integrated project management system based on the earned value concept that uses a time-phased budget baseline to compare actual and planned schedule and costs.

Important Concepts during Execution  Leadership  Communication  Focus  Tracking

Questions  Would you use a Cost Reimbursement contract in a situation where the requirements are well known and nonvolatile?  Would you use a Fixed Price contract in a situation where the user does not know exactly what he wants?  If the material requirements are certain, but the time and effort entailed and requirements are uncertain, what type of contract would you use?

Freeze Requirements???  What are the PROS?  What are the CONS?

Freeze those requirements!!  Late-project creeping requirements are the most common source of cost and schedule overruns  Late-project creeping requirements are a major factor in project cancellations

Rather than freezing, use some kind of change control system  Allows for some changes to happen, depending upon contractual considerations  Allows for the system to reject some proposed changes  Use of a CCB is considered a modern BEST PRACTICE

Forces pushing for late-project requirements change  Competition intros new version of competitive product with unanticipated KILLER features  New work is undiscovered late in the project  A “Wouldn’t It be Great if…” scenario happens  End-users want changes because they now know more about their requirements than they did 18 months ago  Developers want changes because they have a great emotional and intellectual investment in all of the system’s details

Processes utilized in Phase III of the lifecycle  Integration management:  Monitor and Control Project Work  Perform Integrated Change Control  Scope management:  Control Scope  Time management:  Control Schedule  Cost management:  Control cost  Quality management:  Perform Quality Control

Processes utilized in Phase III, Continued  Communication management:  Distribute Information  Report Performance  Risk management:  Monitor and Control Risks  Procurement management:  Administer Procurements

Controlling Changes to the Project Schedule  Perform reality checks on schedules  Allow for contingencies??  Don’t plan for everyone to work at 100% capacity all the time  Hold progress meetings with stakeholders and be clear and honest in communicating schedule issues

A Change Control Process

Execution  Focus and leadership are keys to success in execution  Poor execution leads to losses in the business world just as it does in sports

Factors leading to poor Execution  Multitasking—doing several things at once  Procrastination (student syndrome)—putting things off until the last minute  Others we will discuss later

Multitasking A finishes B finishes

Cost Control  Project cost control includes  monitoring cost performance  ensuring that only appropriate project changes are included in a revised cost baseline  informing project stakeholders of authorized changes to the project that will affect costs  Earned value analysis is an important tool for cost control

Earned Value Analysis (EVA)  EVA is a project performance measurement technique that integrates scope, time, and cost data  Given a baseline (original plan plus approved changes), you can determine how well the project is meeting its goals with EVA  You must enter actual information periodically to use EVA. Figure 6-1 shows a sample form for collecting information

13–23 Glossary of Terms TABLE 13.1 EV Earned value for a task is simply the percent complete times its original budget. Stated differently, EV is the percent of the original budget that has been earned by actual work completed. PV The planned time-phased baseline of the value of the work scheduled. An approved cost estimate of the resources scheduled in a time-phased cumulative baseline [BCWS—budgeted cost of the work scheduled]. AC Actual cost of the work completed. The sum of the costs incurred in accomplishing work. [ACWP—actual cost of the work performed]. CV Cost variance is the difference between the earned value and the actual costs for the work completed to date where CV = EV – AC. SV Schedule variance is the difference between the earned value and the baseline line to date where SV = EV – PV. BAC Budgeted cost at completion. Total budgeted cost of the baseline or project cost accounts. EAC Estimated cost at completion. ETC Estimated cost to complete remaining work. VAC Cost variance at completion. VAC indicates expected actual over- or under-run cost at completion.

13–24 Developing an Integrated Cost/Schedule System 1. Define the work using a WBS. a. Scope b. Work packages c. Deliverables d. Organization units e. Resources f. Budgets 2. Develop work and resource schedules. a. Schedule resources to activities b. Time-phase work packages into a network 3. Develop a time-phased budget using work packages included in an activity. Accumulate budgets (PV). 4. At the work package level, collect the actual costs for the work performed (AC). Multiply percent complete times original budget (EV).` 5. Compute the schedule variance (EV-PV) and the cost variance (EV- AC).

Figure 6-1. Cost Control Input Form for Business Systems Replacement Project

Earned Value Analysis Terms  Budgeted cost of work performed (BCWP), also called earned value, is the percentage of work actually completed multiplied by the budget for the activity  Budgeted cost of work scheduled (BCWS),  Budgeted cost of work scheduled (BCWS), also called planned value, is that portion of the approved total cost estimate planned to be spent on an activity during a given period  Actual cost of work performed (ACWP), also called actual cost, are the total direct and indirect costs incurred in accomplishing work on an activity during a given period

Earned Value analysis--EVA  Earned value = Budgeted Cost of Work Performed (BCWP)  Planned value = Budgeted Cost of Work Scheduled (BCWS), and  Actual Cost = Actual Cost of Work Performed (ACWP)  When you complete an activity, you earn the budgeted value of that activity

Schedule Variance (SV)  Defined as the difference between the budgeted cost of work performed and the budgeted cost of work scheduled  = BCWP – BCWS = EV - PV  Indicates the deviation between the work content performed and the work content scheduled for the control period

Cost Variance (CV)  Defined as the difference between the budgeted cost of work performed and the actual cost of work performed  = BCWP – ACWP = EV - AC  A positive CV indicates a lower actual cost than budgeted for the control period, while a negative CV indicates a cost overrun

Schedule Performance Index (SPI)  Defined as the ratio BCWP/BCWS = EV/PV  A value close to 1 indicates an activity that is on schedule  Values greater than 1 suggest the activity is ahead of schedule  Values less than 1 indicate a schedule overrun

Cost Performance Index (CPI)  Defined as the ratio BCWP/ACWP = EV/AC  A value close to 1 indicates an activity that is on budget  Values greater than 1 suggest the activity is below budget  Values less than 1 indicate a budget overrun

Table 6-7. Earned Value Formulas

Table 6-6. Earned Value Calculations for One Activity After Week One

Rules of Thumb for EVA Numbers  Negative numbers for cost and schedule variance indicate problems in those areas. The project is costing more than planned or taking longer than planned  CPI and SPI less than 100% indicate problems

Figure 6-2. Earned Value Calculations for a One-Year Project After Five Months

In the Figure above  Budget at Completion = BAC = original budget at the planned completion date  Time at Completion = TAC = original completion time  In the figure above, $100,000 in month 12  Estimate at completion = EAC = BAC/CPI  Estimate at completion = $100,000/.83 = $120,455  Estimated time to complete = ETAC = TAC/SPI  Estimated time to complete = 12/.96 = mos.

Why Earned Value Analysis??  You can’t tell what your true cost variance is because you don’t know where you are relative to schedule  Suppose you are behind schedule but also you have spent less than what the schedule has called for. Are you really under budget?

Updating cost estimates  BAC = Budget at completion = total budget of the project activities based on the original project plan  Assuming the original budget (the BAC) was $200,000 and the CPI is 1.12, what is EAC?  EAC = BAC / CPI = $200,000 / 1.12  $178,571

Updating schedule estimates  TAC = Time at completion = total time required to complete the schedule, as determined by the CP  ETAC = Estimated (revised) time to complete  Assuming the TAC was 12 months and the SPI =.77, what is the ETAC?  ETAC = TAC / SPI = 12 /.77  15.6 months  Project will be delayed almost 4 months

Updating, Cont’d  WR = Work Remaining = budgeted cost of the work not yet accomplished by the end of the reporting period  WR = BAC - BCWP  EAC = updated estimate of the total project cost = BAC/CPI = BAC/CI  ETAC = updated estimate of the total project duration = TAC/SPI = TAC/SI

Figure 6-3. Earned Value Chart for Project After Five Months EAC

13–42 Cost/Schedule Graph FIGURE 13.4

13–43 Earned-Value Review Exercise FIGURE 13.5

Using Software to Assist in Cost Management  Spreadsheets are a common tool for resource planning, cost estimating, cost budgeting, and cost control  Many companies use more sophisticated and centralized financial applications software for cost information  Project management software has many cost- related features

Using MS Project for Execution & Control  First, make certain your project plan is complete and final  Second, save it as a baseline  Begin entering actual information  Actual costs  Percentage complete

Tracking: MS Project will track—  Task start dates  Task finish dates  Task duration  Task cost work  Percentage of task that is complete

Getting Earned Value Data Visible  You can go to view and replace the entry table with the Earned Value table  Or, you can enter the earned value columns into your existing table through the Insert Column facility.  The columns are BCWP, BCWS, ACWP, CV, SC, SPI, CPI, etc. You can also request the Tracking Gantt Chart off the LHS side of MS Project

Entering actual start & Finish dates for a task  On the view bar, click Gantt chart  In the task name field select the task to update  On the Tools menu, point to tracking and click Update Tasks  Under Actual, type the dates in the Start and Finish boxes

Indicating progress on a task as a percentage  In the task name field of the Gantt Chart  Double click—this brings up the task information sheet  Select the general tab  In the percentage complete box type a whole number between 0 and 100

Entering actual costs for a resource assignment  On the Tools menu, click options, then click the calculation tab  Clear the Actual costs are always calculated by MS Project check box  Click OK  On the view bar, click Task usage  On the view menu, point to the Table, and click Tracking  Drag the divider bar to the right to view the Activity Cost field  In the activity cost field, type the actual cost for the assignment for which you want to update costs

The End…..

Recitation  What are two of the four Myers/Briggs dimensions?  What are the other two?  To what Myers/Briggs category do most IT professionals belong?  Who is the motivation guru?  What are his five levels?  Who gave us Theory X and Theory Y??