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MEC310 - Lecture 09 - 251

The document discusses project control and monitoring in engineering project management, focusing on key performance indicators such as cost variance, schedule variance, cost performance index (CPI), and schedule performance index (SPI). It provides examples of calculations for a project with a budget of $30 million and a software installation project, illustrating how to assess project status and forecast completion costs. The document emphasizes the importance of tracking budgeted and actual costs to manage project performance effectively.

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27 views15 pages

MEC310 - Lecture 09 - 251

The document discusses project control and monitoring in engineering project management, focusing on key performance indicators such as cost variance, schedule variance, cost performance index (CPI), and schedule performance index (SPI). It provides examples of calculations for a project with a budget of $30 million and a software installation project, illustrating how to assess project status and forecast completion costs. The document emphasizes the importance of tracking budgeted and actual costs to manage project performance effectively.

Uploaded by

mn7884541
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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MECHANICAL ENGINEERING

DEPARTMENT
3rd Year

Engineering Project Management


MEC310

Lecture #09
Project control and
Monitoring (Cont.)

Prepared By: Dr. Sayed Ali Zayan


Forecast completion date and budget at completion
Another formula:
Example:
A project has a budget of $30,000,000 and is scheduled to
complete in a period of 80 weeks. A review of the project at the
end of 50 weeks gave the following addition details:
 Budgeted cost of work performed: $20,400,000
 Actual cost of work performed: $21,600,000
 Budgeted cost of work scheduled: $22,440,000
Find the following:
(i) Cost variance
(ii) Schedule variance in cost terms
(iii) CPI
(iv) SPI
(v) Cost of completion
(vi) Time of completion
Solution:
in Lecture
Example:
Given the following project network, baseline, and status information,
develop status reports for periods 2, 4, 6, 8 and complete the
performance indexes table. Calculate the EACf and the VACf. Based on
your data, what is your assessment of the current status of the project?
At completion? baseline
project network

BAC
status
information
Solution:

EV=%Complete
x Budget
AC= given

PV= planned
Value at
period

CV=EV-AC

SV=EV-PV
Solution:

SPI=EV/PV
CPI=EV/AC
PCIB=EV/BAC
Solution:
Forecast Costs at Completion

VACf = BAC - EACf = 206 – 175 = 31


 At the end of the 8th period three-quarters of the project has
been completed at a savings of $23,000.
 If the project continues to get $1.18 worth of work for each dollar
spent the project will be $31,000 under budget at completion.
 The project appears to be slightly behind of schedule.
Example:
A BB software company has obtained a fixed cost contract for the supply, installation,
testing and commissioning of 3,000 desktop computers of the same specification at a cost
of $3,600,000. The company had estimated that it could supply, install, test and
commission 100 computers per day so that the entire work can be completed in 30 days.
The project status was reviewed after the completion of 20 days. It was noted at the time
of review that 1,800 computers have been installed and the cost incurred was $2,280,000.
It was estimated at the time of the review that a sum of $1,560,000 would be required for
completion of the pending work, i.e., installation of the remaining 1,200 computers. Find
the following:
i. Budgeted cost of work scheduled at the end of 20 days, which is the review period.
ii. Budgeted cost of work performed till the review period, and Actual cost of work
performed.
iii. Cost variance and Schedule variance in cost terms
iv. Cost performance index, and Schedule performance index
v. Additional cost for completing the project
Solution:
Project:
 Project duration is 30 days.
 Number of install computer = 100 computer/day x 30 days = 3000 computer
 Budgeted Cost for Total Work (BCTW), this is simply the total budgeted cost for
the entire project work: BAC = $3,600,000
 Computer cost = total budgeted cost / number of computer
 Review period: After 20 days.
(i) Budgeted cost of work scheduled at the end of 20 days, which is the review period.
PV = 20 days x100 computers/day x 1200 $/computer = $2,400,000
It is the budgeted cost of work to be completed till given date if the project runs on
schedule.
Solution:
(ii) Budgeted cost of work performed till the review period, and Actual cost
of work performed.
EV = 1,800 computers x 1200 $/computer = $2,160,000
And Actual Cost of work performed: AC= $2,280,000
(iii) Cost variance and Schedule variance in cost terms
Cost Variance (CV) = EV – AC = $2,160,000 - $2,280,000 = $-120,000
Note: When CV is negative, it indicates cost overrun. If CV is positive, then it
means the project is within the budget. In this case, there is a cost overrun.
Schedule variance (SV) (in cost terms):
SV = EV – PV = $2,160,000 - $2,400,000 = $-240,000
Note: When SV is negative, it indicates that the project is behind the schedule; if it
is positive, then the project is ahead of the schedule.
Solution:
(iv) Cost performance index, and Schedule performance index
Cost performance index (CPI):

This means that for every one dollar spent, we have done 95 cent worth of the work, or for
every one dollar spent, we received $0.95 worth of cost performance. A value > 1 indicates
that the work is being completed better than planned, whereas a value <1 indicates that
work is costing more than planned.
Schedule performance index:

A SPI value less than 1.0 indicates behind schedule. The schedule index indicates $.90 worth
of work has been accomplished for each $1.00 worth of scheduled work to date
v) Additional cost for completing the project
Estimate of cost for remaining work:
(3,000 - 1,800) * 1200 $/computer = $1,440,000
END
Lecture
You can win, if you want

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