1. 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

2. If Only the Pharaoh Had the Corps of Engineers

3. 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

4. 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

5. 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)

6. 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 --

7. 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

8. 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

9. 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

10. 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

11. 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 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

12. 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

13. 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

14. 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

15. Graph of Pyramid Completion Project
$000

16. Team Proposal Presentations

17. 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)

18. 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

19. 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%

20. Team AAR Presentations

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. Graphing the Pyramid Project
ACWP
BCWP
BCWS

28. 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

29. 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

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

31. 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