Lecture 3
Lecture 3
Maha Syed
PROJECT MONITORING & CONTROL LECTURE 3
QUIZ & ASSIGNMENT REVIEW
THE PROJECT LIFECYCLE WITH MONITORING AND
CONTROLLING AS CRITICAL STAGES.
Project Control
LECTURE OVERVIEW
✓ Recap of Lecture 2
✓ Topics to be covered:
✓Tools for Monitoring
✓Techniques for Controlling
✓Scope Creep and its Impact
✓Change Management in Scope Monitoring
✓Scope Baseline and its Importance
✓Work Breakdown Structure (WBS) and its Role in
Monitoring
EARNED VALUE MANAGEMENT
Earned Value is a method of calculating project
status. It does this from two perspectives: Time
(schedule) and Cost.
After applying the earned value method the project
manager will know whether the project is:
behind or ahead of schedule.
over or under budget.
PLANNED VALUE (PV)
Also known as Budgeted Cost of Work Scheduled (BCWS), Planned Value is the
amount of the task that is supposed to have been completed, in terms of the task
budget. It is calculated from the project budget.
For example, if it’s Feb. 12 today, and the task is supposed to last from Feb. 10 to
Feb. 20, it should be 20% complete. If the task budget is $10,000, PV = 20% x
$10,000 = $2,000.
EARNED VALUE (EV)
Also known as Budgeted Cost of Work Performed (BCWP), Earned Value is the
amount of the task that is actually completed. It is also calculated from the project
budget.
For example, if the actual percent complete is 25% and the task budget is $10,000,
EV = 25% x $10,000 = $2,500.
ACTUAL COST (AC)
Also known as Actual Cost of Work Performed (ACWP), Actual Cost is the actual to-
date cost of the task.
In this, the first output calculated in the earned value analysis, the project manager
obtains a value which tells you the amount that the task is ahead or behind schedule.
SV = EV – PV
If SV is negative, the task is behind schedule.
If SV is zero, the task is on schedule
If SV is positive, the task is ahead of schedule.
In our example, SV = $2,500 – $2,000 = $500. This task is ahead of schedule.
SCHEDULE PERFORMANCE INDEX (SPI)
The SPI, similar to the SV, also indicates ahead or behind schedule but gives
the project manager a sense of the relative amount of the variance. If you
told me your project had a $500 schedule variance, this would mean
drastically different things if your project was for building a backyard fence
versus constructing a high-rise building.
SPI = EV / PV
If SPI < 1, the task is behind schedule
If SPI = 1, the task is on schedule
If SPI > 1, the task is ahead of schedule
In our example, SPI = $2,500 / $2,000 = 1.25. Therefore, the task is 25%
ahead of schedule.
SV OR SPI?
❖ SV gives you a raw number in dollars (or other currency), but it doesn’t
provide context. The significance of SV depends on the overall scale
of the project.
❖ SPI helps normalize this by giving you a ratio that indicates efficiency.
It tells you the extent of the variance relative to the project size,
giving a better sense of how far ahead or behind the project is.
❖ This is why SPI is often more informative than SV alone.
COST VARIANCE (CV)
Similar to the schedule variance, the Cost Variance tells the project manager how far
the task is over or under budget.
CV = EV – AC
If CV is negative, the task is over budget
If CV is zero, the project is on budget
If CV is positive, the project is under budget
In our example, CV = $2,500 – $3,500 = -$1,000. The task is over budget. Note
that the task can be ahead of schedule but over budget. Too much money has been
spent compared to the amount of work that is currently complete.
COST PERFORMANCE INDEX (CPI)
The CPI, similar to the CV, also indicates over or under budget but gives the
project manager a sense of the relative amount of the variance.
CPI = EV / AC
If CPI < 1, the task is over budget
If CPI = 1, the task is on budget
If CPI > 1, the task is under budget
In our example, CPI = $2,500 / $3,500 = 0.71. Therefore, the task is 29%
over budget.
BUDGET AT COMPLETION (BAC)
This one is easy. It is simply the total project budget, which is the aggregate of all of
the task budgets.
•Why this method: This method extrapolates the project's future performance based entirely on
the current efficiency. If your project is currently underperforming and you think this trend will
continue, you use this formula to adjust the EAC accordingly.
ESTIMATE AT COMPLETION (EAC)
2. EAC = AC + (BAC – EV)
•When to use: Use this when the variance is temporary or caused by an event that is not
expected to continue. Once this event is resolved, you expect the project to go back to the
original plan.
•Formula:
•Why this method: This formula assumes the issue that caused the current cost variance (e.g.,
snowstorm, supply delay) is resolved, and the project will get back on track. Essentially, you just
add the actual cost so far (AC) to the remaining budget (BAC – EV).
ESTIMATE AT COMPLETION (EAC)
3. EAC = AC + [(BAC – EV) / (CPI x SPI)]
•When to use: Use this formula when you believe that both cost and schedule performance are
likely to impact the future performance of the project. It assumes that your project’s future cost
performance will be influenced by both cost inefficiency (CPI) and delays (SPI).
•Formula:
•Explanation:
• This combines both cost (CPI) and schedule (SPI) performance to account for the fact that the project might be
behind schedule and over budget.
•Why this method: This hybrid approach is more cautious. It accounts for the fact that not only are
you over or under-spending, but you're also ahead or behind schedule, which will further affect
future costs.
ESTIMATE AT COMPLETION (EAC)
4. EAC = AC + ETC
•When to use: Use this formula when the original assumptions were wrong, and you need to re-
estimate the remaining work completely. This is used when there has been a significant change in
scope or when unforeseen factors require a revised estimate for completion.
•Formula:
•Explanation:
• ETC (Estimate to Complete): The new estimate for the cost required to complete the remaining work.
•Why this method: Sometimes the situation has changed so drastically that previous cost or
schedule estimates are no longer relevant. This formula allows you to start fresh by adding the
actual cost to a completely new estimate for the remaining work.
SUMMARY OF DIFFERENCES
•BAC / CPI: Use when the current performance (CPI) is expected to continue for the rest of the
project.
•AC + (BAC – EV): Use when the variance is caused by a temporary issue, and performance will
return to normal.
•AC + [(BAC – EV) / (CPI x SPI)]: Use when both cost and schedule performance will impact the
remainder of the project.
•AC + ETC: Use when the project has significantly changed or initial assumptions were wrong,
requiring a fresh estimate.
Each method offers a different perspective based on how you expect the project to perform
moving forward. The choice of which formula to use depends on whether the issues causing the
variance are ongoing or temporary, and whether cost or schedule performance (or both) will
affect future performance.
ESTIMATE TO COMPLETE (ETC)
This value tells the project manager how much money must be spent from this point
forward, to complete the project. Sometimes the project assumptions have changed
and a new estimate must be produced instead of old performance metrics assumed.
•The project is expected to continue with the same performance in the future as the
past.
ETC = EAC – AC
•The past project performance cannot be expected to continue. A new estimate is
required.
ETC = new estimate
VARIANCE AT COMPLETION (VAC)
This value tells the project manager the forecasted cost variance (CV) at the completion
of the project. It is the extrapolation of the current project status, using the EAC method
chosen.
VAC = BAC – EAC
•If VAC is negative, you need that much more money to complete the project.
•If VAC is positive, you will finish the project with that much of a surplus.
In our example, VAC = $10,000 – $11,000 = -$1,000. You will need an additional
$1,000 to complete the project.
TO COMPLETE PERFORMANCE INDEX (TCPI)
This value tells the project manager what CPI would be necessary to finish the
project on budget. It gives an indication of how much efficiency needs to be found
in the remainder of the project to make up for past negative variances.
If the project is required to finish within the original budget:
TCPI = (BAC – EV) / (BAC – AC)
If the project budget is flexible to accommodate the past variance:
TCPI = (BAC – EV) / (EAC – AC)
In our example, let’s assume there is no new money. The original budget is fixed
and the project must make up the current negative cost variance. TCPI =
($10,000 – $2,500) / ($10,000 – $3,500) = 1.15. This means the project needs to
find 15% efficiencies for the remainder to finish on budget.
SUMMARY
SUMMARY
SUMMARY
LEADING VS LAGGING INDICATORS
Leading Indicators Lagging Indicators
Definition Leading indicators are predictive Lagging indicators measure the outcomes or
measures. They signal future results after the fact. They reflect past
performance and are used to performance and help assess whether the
anticipate potential issues or project met its goals.
successes in the project before
they occur.
Timing Predict future performance Measure past performance
Proactive/Rea Proactive: Allow for course
Proactive: Allow for course correction
ctive correction
Anticipate issues and adjust
Usage Evaluate project success or failure
before they occur
Examples PV, SV, SPI, EAC, ETC, TCPI EV, CV, CPI, VAC
BREAK
INTRODUCTION TO MONITORING
TOOLS
INTRODUCTION TO MONITORING TOOLS
Tracking project progress in real-time is crucial to ensure timely completion
and avoid potential risks or pitfalls that could jeopardize the project's
success.
•Key Tools:
• Gantt Charts: Visualizes the project timeline.
• WBS: Breaks down the project into manageable
tasks.
• Progress Reports: Regular reports showing how
work aligns with the scope baseline.
WHAT IS SCOPE CONTROL?
•Definition: Scope Control is the process of managing changes to
the project scope to ensure they don't negatively impact the
project's objectives.
•Purpose: It ensures any modifications to scope are justified,
approved, and documented.
•Example: A software development project where additional
features requested by the client are assessed and controlled for
potential delays or cost overruns
SCOPE CONTROL TECHNIQUES
•Key Techniques:
• Variance Analysis: Compares actual project
progress with the scope baseline.
• Change Control Board: A group of stakeholders
who approve or reject changes to the scope.
SCOPE BASELINE
•Definition: The approved version of
the project scope that includes the
scope statement, WBS, and scope
management plan.
•Importance: Acts as the benchmark
to compare actual project outcomes
with planned scope.
•Example: In a marketing campaign
project, the scope baseline ensures
that all deliverables (e.g., website,
ads) are completed as planned.
COMPONENTS OF SCOPE BASELINE
•Components:
• Scope Statement: Defines the work to be completed.
• WBS: Breaks the project into manageable pieces.
• WBS Dictionary: Provides detailed explanations for each
element in the WBS.
•Real-World Example: For a building project, the WBS
might include elements like foundation, electrical, plumbing,
etc.
THE ROLE OF WORK BREAKDOWN STRUCTURE
(WBS)
•Definition: A hierarchical breakdown of the
project into smaller, manageable work
packages.
•Purpose: Helps ensure all deliverables are
accounted for and nothing beyond the
agreed scope is added.
•Example: In a product launch project, the
WBS might include market research,
advertising, product design, etc.
CREATING A WBS
•Steps:
• Identify all project deliverables.
• Break down each deliverable into tasks
and sub-tasks.
• Assign responsibilities and timelines to
each task.
4. WBS Dictionary
KEY RULES FOR CREATING A WORK BREAKDOWN
STRUCTURE (WBS)
1. 100% Rule
Ensure all deliverables and work are captured.
The WBS must include 100% of the project scope and account for all
deliverables and activities.
2. Deliverable-Oriented
Focus on deliverables rather than activities or tasks.
Each component of the WBS should represent a tangible outcome, not
just actions.
3. Mutually Exclusive Elements
Avoid overlapping tasks or deliverables.
Every element should be unique and non-redundant.
4. Hierarchical Structure
Break down the project into smaller, manageable parts.
Ensure higher-level elements are decomposed into smaller deliverables in a parent-child
relationship.
5. Consistent Levels of Detail
Ensure that similar levels of the WBS have consistent detail across work packages.
Avoid overly detailed sections in one area and vague ones in others.
6. Decomposition to Work Package Level
Continue breaking down tasks until you reach work packages that can be clearly assigned
and measured.
Work packages should be detailed enough to estimate costs and time accurately.
7. Define Scope for Each Element
Clarify the scope of each work package.
Include objectives, deliverables, and acceptance criteria to avoid misunderstandings.
8. Responsibility Assignment
Each work package should be assigned to a team or individual.
Use a Responsibility Assignment Matrix (RAM) to link tasks with responsible parties
SCOPE CREEP TOWER CHALLENGE
Instructions:
1.Form Teams: Divide the class into groups of 3-5 students.
2.Project Goal: Each team’s goal is to build the tallest tower they can using the provided blocks within a 3-
minute time frame.
3.Round 1 (Initial Project):
1. Teams start building their tower.
2. After 1 minute, introduce a scope change
Round 2 (Further Scope Changes):
1. After 2 minutes, introduce another scope change or multiple changes.
Debrief
•What challenges did you face with the scope changes?
•How did adding more requirements (scope creep) impact your ability to finish the tower on time?
•What strategies did your team use to manage the changes?
•How does this relate to real-life project management?
Reading and Assignment for Next Week
•Reading:
➢ PMBOK Guide: Chapter 5 - Project Scope Management
•Assignment:
Prepare Gantt Charts, WBS and change management plan for the project
discussed in Assignment 1
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