Welcome to PMCDP 2003

PMP Training at Mumbai

Day - 2
 Program Schedule for PMP Training Course for
Baan Mumbai and AEC, Pune
Time
Day S ession From To Duration S ession title
1 9:00 9:30 0:30 Introduction
2 9:30 11:30 2:00 Introduction to PM concepts and terminologies
11:30 11:45 0:15 Short Break
Day1 3 11:45 13:00 1:15 Organizational Influences on Project M anagement
(24.02.03) 13:00 14:00 1:00 Lunch Break
4 14:00 15:30 1:30 PM Process groups overview
15:30 15:45 0:15 Short Break
5 15:45 17:00 1:15 PM P Role delineation
6 9:30 10:45 1:15 Project Scope management
10:45 11:00 0:15 Short Break
7 11:00 13:00 2:00 Project time M anagement
Day 2
(25.2.03) 13:00 14:00 1:00 Lunch Break
8 14:00 15:00 1:00 Network analysis
15:00 15:15 0:15 Short Break
9 15:15 17:00 1:45 Project cost management and Earned value analysis
Project Scope Management

…….includes the processes required to ensure that the project

includes all the work required and the only work required

■ Initiation

■ Scope planning

■ Scope definition

■ Scope Verification

■ Scope change control

Initiation
Initiating is the process of formally authorizing a new project or that
an existing project should continue in its the next phase

Tools and
Inputs Outputs
techniques
Project selection
Product description Project charter
methods
PM
Strategic plan Expert judgement
identified/assigned
Project selection
Constraints
criteria
Historical information Assumptions
Scope Planning
Scope planning is the process of progressively elaborating and
documenting the project work that produces the product of the project

Inputs Tools and techniques Outputs

Product description Product analysis Scope statement
Project Charter Benefit/cost analysis Supporting details
Alternatives Scope management
Constraints
identification plan
Assumptions Expert judgement
Project Objective

■ The quantifiable criteria that must be met for the

project to be considered successful
– must include atleast Cost, Schedule and Quality measures

■ Each objective should have a measurable attribute

( the above examples)
■ Each attribute shall have a yardstick (units)
– E.g. in US$ for cost, defects/K Loc for quality

■ An absolute or relative value to attached to the

attribute
Scope Definition
……………. involves subdividing the major project
deliverables in to smaller, more manageable components
in order to:
– Improve the accuracy of cost,time and resource estimates
– Define a baseline for performance measurement and control
– Facilitate clear responsibility assignments

Tools and
Inputs Outputs
techniques
Scope statement WBS templates WBS
scope statement
Constraints Decomposition
updates
Assumptions
Other planning outputs
Historical information
WBS -Decomposition
■ Identify the major deliverable

■ Decide if adequate cost and duration estimate can be developed

■ If no - identify constituent components of the deliverable

■ Verify the correctness of the decomposition

– Are the lower level items both necessary and sufficient for the
completion of the deliverable
– Is each item clearly and completely defined
– Can each item be appropriately scheduled? Budgeted? Assigned to a
specific organizational unit?
WBS
■ Helps towards common understanding of the project scope

■ Elements are uniquely identified for hierarchical summation

of costs and resources

■ Program/Project/Task/sub-task/work package/level of effort

■ OBS/RBS – difference

Related reference : Project Management a systems approach to planning, scheduling and controlling – Dr Herold Kerzner – Pages 535 - 554
Scope Verification
Scope verification is the process of obtaining formal
acceptance of project scope by the stakeholders

Inputs Tools and techniques Outputs

Work Results Inspection Formal Acceptance
Product
Documentation
WBS
Scope Statement
Project Plan
Scope change control
 Influencing the factors which create scope changes to ensure
that changes are agreed upon
 Determining that a scope change has occurred

 managing the actual changes when and if they occur

Inputs Tools and techniques Outputs

Scope change control
WBS Scope changes
system
Performance
Performance reports Corrective action
measurement
Change requests Additional planning lessons learned
Scope mgt plan Adjusted Baseline
Project Time Management

Includes the processes required to ensure

timely completion of the project

Key processes:
– Activity definition
– Activity sequencing
– Activity duration estimating
– Schedule development
– Schedule control
Activity Definition
Identifying and documenting the specific activities that must be performed
in-order to produce the deliverables and sub-deliverables identified in
WBS

Inputs Tools and techniques Outputs

WBS Decomposition Activity List
Scope statement Templates Supporting detail
Historical information WBS updates
Constraints
Assumptions
Expert judgement
Activity Sequencing
…………..involves identifying and documenting the interactivity,

Inputs Tools and techniques Outputs

Project network
Activity list PDM
diagram
Product description ADM Activity list updates
Mandatory
CDM
dependencies
Discretionary
Network templates
dependencies
External dependencies
milestones
Types of Dependencies

■ Finish Start (FS): the from activity must finish before the
to activity can start (Testing to verification)
■ Start Start(SS): The from activity must start before the to
activity can start( coding and code reviews)
■ Finish-Finish: The from activity must finish before the to
activity can finish (Completion of coding and functional unit
testing)
■ Start-Finish: The from activity must start before the to
activity can finish(Product launch Vs Product GA/LA)
 Activity Sequencing Techniques
B
A
Arrow C
Diagramming Start
Method D Finish
F
E

Precedence A B
Diagramming
Method
Start Finish
Arrow Diagramming Method (ADM/AOA)
C B
Activity Duration Estimating

…..involves assessing the number of work periods likely needed to complete each identified
activity

Inputs Tools and techniques Outputs

Activity duration
Activity list Expert judgement
estimates
Resource requirements Analogous estimating Basis of estimates
Quantatively based
Resource capabilities Activity list updates
durations
Reserve time
Historical information
(contingency)
Contraints
Assumptions

Identified Risks
Schedule Development
……. involves determining start and finish date of project activities
Inputs Tools and techniques Outputs
Project network
Mathematical analysis Project schedule
diagram
Activity duration
Duration compression Supporting detail
estimates
Resource
Simulation Schedule mgt plan
requirements
Resource pool Resource leveling Resource requirement
description heuristics updates
Project management
Calenders
software
Contraints Coding structure
Assumptions
Leads and Lags
Risk Mgt Plan
Activity Attributes
Tools and Techniques for Schedule
development

■ Mathematical Analysis
– Critical Path Method
– Program Evaluation and Review Technique
– Graphical Evaluation and Review Technique

■ Duration Compression
– Crashing
– Fast tracking
Schedule control

Inputs Tools and techniques Outputs

Schedule change
Project schedule Schedule updates
control system
Performance
Performance reports Corrective action
measurement
Change requests Additional planning Lessons Llearned
Schedule Management Project management
Plan software
Variance analysis
Network Fundamentals

■ Event

■ Activity

testing
Start testing Complete testing
PERT and CPM

■ PERT is probabilistic in nature, uses ■ CPM is based on single time

beta distribution for each activity and estimate and deterministic in nature
normal distribution for expected time
duration. This allows us to calculate
the “risk” in completing the project

■ PERT is used in R&D Projects

■ CPM is used in Construction projects

■ PERT is more event focused where estimates are more accurate

■ CPM is more activity focused and

percentage completion of activity and
customer billing is possible

Both PERT and CPM uses dummy activity to develop the logic
Sample Network

3
2 6
6
2

7
1 7

3
5
3 5
5

Calculate earliest time and latest time for each event

Forward Pass

TE = 2 TE = 5
3
2 6
6
2

TE = 0 7 TE = 14
1 7

3
5
3 5
5

TE = 9
TE = 3

When two or more activities result in to one event

the TE for the resulting event is the maximum of the TE of the activities
Backward Pass

TL = 2 TL = 8
3
2 6
6
2

7 TE = 14
TL = 0 1 7
TL = 14

3
5
3 5
5

TL = 9
TL = 4

When two or more activities branching off from an event

the TE for the start event is the minimum of the TL of the activities that emerge from the event
Critical path

TE = 2 TE = 5
TL = 2 TL = 8
3
2 6
6
2

TE = 0 7 TE = 14
1 7
TL = 0 TL = 14

3
5
3 5
5

TE = 9
TE = 3
TL = 4 TL = 9

The critical Path is the one where TL = TE

PERT – Estimated activity time

■ Most optimistic completion time

– Everything will go according to the plan (1% probability)

■ Most pessimistic completion time

– Everything will not go according to the plan with maximum
difficulties (1% probability )

■ Most likely completion time

– This will be the result often seen and recommended by the
functional manager

■ Expected time
Te = (a+4b+c)/6
PERT – Estimated activity time

Most optimistic time , a

Most likely time , b
Most pessimistic time , c

2, 3, 4 4, 7, 10 3, 5, 7
A B C D
Te = 3 Te = 5
Te = 7

SD = 0.33 SD = 1.0 SD = 0.67

Standard Deviation = (c – a)/6

Estimated Program time

Sigma Limit Percentage Expression Range

1 68 15+/- 1.25 13.75 - 16.25
2 95 15+/- 2.5 12.5 - 17.5
3 99 15+/- 3.75 11.25 - 18.75
Project Cost Management
Processes which ensure that the project is completed within
the approved budget

■ Resource planning

■ Cost estimating

■ Cost budgeting and

■ Cost control
Resource Planning

Determination of what physical resources(people,material and

equipment) and what quantities of each should be used and
when they would be needed to perform the project activities

Inputs Tools and techniques Outputs

Resource
WBS Expert judgement
requirements

Historical Information Alternatives identification

Project Management
Scope statement
Software

Resource pool description

Organisation Policies

Activity duration estimates

Cost Estimating

Developing an approximation of costs of the resources needed to

complete project activities

Inputs Tools and techniques Outputs

WBS Analogous estimating Cost estimates
Resource requirements Parametric modelling Supporting details
Resource rates Bottom up estimating Cost management plan
Activity duration
Computerised tools
estimates
Other cost estimating
Historical information
methods
Chart of accounts
Risks
Cost Budgeting

Allocation of overall cost estimates to individual work items

in order to establish a cost baseline for measuring
project performance

C ost B udgeting
Inputs Tools and techniquesOutputs
C ost estimates Analogous estimating C ost Baseline
W BS Parametric modelling
Project schedule Bottom up estimating
C omputerised tools
Cost Control

■ Monitoring cost performance to detect variances to the

plan

■ To ensure all appropriate changes are recorded

accurately on the cost base line

■ Informing stakeholders of authorized changes

■ Preventing incorrect, inappropriate or unauthorized

changes from being included in the cost base line
Process flow

Cost control
Inputs Tools and techniques Outputs
Cost change control
Cost baseline Revised cost estimates
system
Performance
Performance reports Budget updates
measurement
Earned Value
Change requests Corrective action
Management
Cost management plan Additional planning Estimate at completion
Computerised tools Project Closeout
Lessons learned
Basic Earned Value Management
for
Project/Program Managers
Why use EVMS?

Life without EVMS

■ Given:
– total budget of $100,000
– 12 month effort
– produce 20 units

■ Status:
– spent to date: $64,000
– time elapsed: 6 months
– units produced: 8 complete, 2 partial

■ How are you doing, and how do you know how you are doing?

■ How far along are you? (64%, 50%, >40%)

Why do we need Early Warning?

Course corrections are

easier when you have time
to make small adjustments

It’s too late when you’re

this close to the iceberg!
Why use EVMS?

■ Early and accurate identification of trends and problems

■ Accurate picture of contract status

– cost, schedule, and technical

■ Basis for course correction

■ Supports mutual goals of contractor and customer

– bring project in on schedule and cost
 What is
EVMS?

EVMS is the primary project

management tool...

that integrates the

technical, schedule, and cost
parameters of the contract.

The project manager is the

primary tool in the EVMS toolbox.
What is the process?
■ The contractor establishes a management control system

■ An integrated baseline plan is established

– work is defined, scheduled, and resources are allocated
■ Work and resources are driven down to lowest level for execution

■ A work authorization system is set up that controls changes to the baseline

■ Budgets are “earned” as work is completed = EARNED VALUE

■ Status provided against baseline

– schedule and cost variances are isolated
■ Problem assistance
– early warning
– corrective plans
■ Early insight provided into final estimated cost
Basic EVMS Terms
EVMS measures progress

Progress = Movement Forward

to measure progress,

there must be a standard

against which the forward

movement may be compared

EVMS establishes a baseline

to measure progress
What do we measure progress
against?

■ Performance measurement baseline

– budget that is spread over . . .
– time, to accomplish the scope of
– work
– and against which progress can be measured

■ Earned Value is key concept

– how much progress did I make against my original plan?
baseline
– expressed in dollars or hours
$
earned value

time
Five Basic Elements

BCWS Budgeted Cost of Work

Scheduled
Budget (PV)
BCWP Budgeted Cost of Work
Performed
Earned Value (EV)
ACWP Actual Cost of Work Performed
Actual Cost (AC)

BAC Budget at Completion

EAC Estimate at Completion

Total Budget

It’s my pleasure
to award you
this contract for hmm...5 miles of
a new railroad track, 5 months to do
it all....$5000
track
budget....This
is going to be tough!
Budgeted Cost of Work Scheduled
(BCWS)

Total Budget = $5,000

to be spent over 5 months
I plan to lay 1 section
of track each month at an
estimated cost of $1,000.
Month 1 Month 2 Month 3 BCWS each month = $1,000
BCWS = $1,000 BCWS = $1,000 BCWS = $1,000

Month 4 Month 5
BCWS = $1,000 BCWS = $1,000

each
eachdollar
dollarof
ofBCWS
BCWSrepresents
representsaaspecific
specificdollar
dollarof
ofwork
workscope
scope
Budgeted Cost of Work Scheduled
(BCWS)

Total Budget = $5,000

Total BCWS = $5,000

Month 1 Month 2 Month 3
BCWS = $1,000 BCWS = $1,000 BCWS = $1,000

Month 4 Month 5
BCWS = $1,000 BCWS = $1,000

BCWS
BCWSis isaggregated
aggregatedand
andsummed
summedas
asthe
the
performance
performancemeasurement
measurementbaseline
baseline
Budgeted Cost of Work Performed
(BCWP)

the EARNED VALUE concept

We’re at the end of the

second month, but only
1 section of track is
complete. Value of
work performed = $1,000

You
Youearn
earnvalue
valuethe
thesame
sameway
way
as
asititwas
wasbudgeted
budgetedin inbaseline
baseline
Schedule Variance

BCWS of the work I scheduled to have done,

BUDGET BASED

how much did I budget for it to cost?

BCWP of the work I actually performed,

how much did I budget for it to cost?

SCHEDULE
SCHEDULEVARIANCE
VARIANCEisisthe
thedifference
differencebetween
betweenwork
workscheduled
scheduled
and
andwork
workperformed
performed(expressed
(expressedininterms
termsofofbudget
budgetdollars)
dollars)

formula:
formula: SV
SV$$==BCWP
BCWP--BCWS
BCWS
example:
example: SV
SV==BCWP
BCWP--BCWS
BCWS==$1,000
$1,000--$2,000
$2,000
SV= -$1,000
SV= -$1,000 (negative
(negative==behind
behindschedule)
schedule)
Schedule Variance

5,000

BCWS
“the baseline”
sv
$
BCWP
“earned value”

TIME 5 months
Budget at Completion (BAC)

= BAC
CWS $5,000
$5,000
ll B
$ o fa
m
su

$
$
$ $

$
$
$
time

•• when
whenall
allwork
workhas
hasbeen
beenphased,
phased,cumulative
cumulativeBCWS
BCWS==BAC
BAC
e.g.,
e.g., $5,000
$5,000==$5,000
$5,000
 At the end...
■ At the end of the contract, when all work has been completed:
– I’ve “earned” all of my budget ($5,000)
• BCWP (cumulative) = $5,000
• BCWS (cumulative) = $5,000

• therefore, schedule variance ($) = 0

– Formal schedule will reflect whether milestones were achieved on time

■ Example:

• I finished late, but I did finish

– SV ($) = $ 0
– Formal schedule shows a 5 month actual delay in completing the contract
Actual Cost of Work Performed
(ACWP)

Labor came to $1,300,

and materials cost
$1,100. That first section
of track cost $2,400!

actual
actualexpenditures
expendituresvs.
vs.budget
budget
Cost Variance

PERFORMANCE
BCWP of the work I actually performed,
how much did I budget for it to cost?

BASED
of the work I actually performed,
BCWP how much did it actually cost?

COST
COSTVARIANCE
VARIANCEisisthe
thedifference
differencebetween
betweenbudgeted
budgetedcost
cost
and
andactual
actualcost
cost

formula:
formula: CV
CV$$==BCWP
BCWP--ACWP
ACWP
example:
example: CV
CV==BCWP
BCWP--ACWP
ACWP==$1,000
$1,000--$2,400
$2,400
CV= -$1,400
CV= -$1,400 (negative
(negative==cost
costoverrun)
overrun)
 Cost Variance

5,000

ACWP
“actual cost”
cv

$ BCWP
“earned value”

TIME 5 months
Estimate at Completion
(EAC)

Just a few little glitches….

We should be able to do
the complete job….ack…

let’s see, for about $7,500

 Variance at Completion (VAC)

B AC what the total job is supposed

to cost

E AC what the total job is expected

to cost

VARIANCE
VARIANCEAT
ATCOMPLETION
COMPLETIONisisthe
thedifference
differencebetween
betweenwhat
whatthe
thetotal
total
job
jobisissupposed
supposedto
tocost
costand
andwhat
whatthe
thetotal
totaljob
jobisisnow
nowexpected
expectedto
tocost.
cost.
FORMULA:
FORMULA: VAC
VAC==BAC
BAC--EAC
EAC
Example:
Example: VAC
VAC==$5,000
$5,000--$7,500
$7,500
VAC
VAC==--$2,500
$2,500 (negative
(negative==overrun)
overrun)
Variance at Completion (VAC)

VAC = Budget at Completion - Estimate at

Completion

= BAC - EAC
EAC
VAC

BAC

TIME
 FIVE BASIC PERFORMANCE DATA
QUESTIONS & ANSWERS

QUESTION ANSWER ACRONYM

How much work should Budgeted Cost for BCWS

be done? Work Scheduled PV

How much work is done? Budgeted Cost for BCWP

Work Performed EV

How much did the is done Actual Cost of ACWP

work cost? Work Performed AC

What was the total job Budget at Completion BAC

supposed to cost?

What do we now expect the Estimate at Completion EAC

total job to cost?
BCWP Allows Isolation of
Schedule and Cost Variances

5,000

BCWS

ACWP
cv
$ sv

BCWP

TIME 5 months

schedule variance = BCWP - BCWS = negative number behind

behindschedule,
schedule,
cost variance = BCWP - ACWP = negative number over
overcost
cost
Performance Indices

COST
COSTPERF
PERFINDEX
INDEX(CPI)
(CPI)== BCWP
BCWP
ACWP
ACWP

1.2
SCHED
SCHEDPERF
PERFINDEX
INDEX(SPI)
(SPI)== BCWP
“GOOD”

BCWP
BCWS
BCWS
1.1

TIME
1.0
CPI

.9
“BAD”

SPI
.8
 Schedule Status

TIME NOW

BCWS
% scheduled = BCWS x 100%
BAC
compare BCWP

% completed = BCWP x 100%

BAC
MONTHS BEHIND

Months ahead or behind = SV $

Average monthly BCWS $
Budget Status

budget
budget status
status
%
%spent
spent == ACWP
ACWP xx 100%
100%
BAC
BAC

compare:
compare:

%
% spent
spent vs.
vs. %
% complete
complete

example:
example: 60%
60%spent
spentvs.
vs.50%
50%complete
complete
What will be the final cost?

■ Estimate at Completion (EAC)

– defined as actual cost to date + estimated cost of work remaining
– contractor develops comprehensive EAC at least annually
• reported by WBS in cost performance report
– should examine on monthly basis
– consider the following in EAC generation
• performance to date
• impact of approved corrective action plans
• known/anticipated downstream problems
• best estimate of the cost to complete remaining work
– also called latest revised estimate (LRE), indicated final cost, etc.

ACWP + ETC = EAC

One method: statistical formulae
■ Common EAC Formulae:

EAC = BAC

CPI

= ACWPcum + Budgeted Cost of Work Remaining

CPI3

= ACWPcum + Budgeted Cost of Work Remaining

.8(CPI) +.2(SPI)

= ACWPcum + Budgeted Cost of Work Remaining

CPI * SPI
Other methods of EAC calculation

■ “Grass Roots” or formal EAC

– detailed build-up from the lowest level detail
– hours, rates, bill of material, etc.

■ Average of statistical formulae

■ Show range of EACs (optimistic, most probable,

pessimistic)

■ Complete schedule risk analysis for remaining work,

estimate work remaining
 Why do we need accurate EACs?

■ Variance at Completion vs. Contractor Loss

– Positive VAC:
• EAC < BAC underrun contractor gain

– Negative VAC:
• EAC > BAC share area contractor partial loss
• EAC > ceiling overrun contractor loss (100%)

■ Government develops top level EAC for comparison

– government will limit progress payments if EAC is greater than ceiling
– government needs forecast of fund requirements

■ May still have time to change the final outcome

Key Documents in Understanding EVMS

■ Gary Christle, 22 Jan 94, paper, Implementation of Earned Value - A Model Program
Approach
■ USD(A&T) Letter, 25 Jan 94, Improved Cost and Schedule Performance Management
■ Gary Christle, 15 Sep 94, paper, The Cost/Schedule Control Systems Criteria and Earned
Value Management: A Vision
■ USD(A&T) Letter, 1 Oct 96, Compliance Responsibility for the Cost/Schedule Control
Systems Criteria (C/SCSC)
■ 3 Oct 97, Earned Value Management Implementation Guide (Rev 1)
■ USD(A&T) Letter, 14 Dec 96, Industry Standard “Guidelines for Earned Value
Management Systems”
■ Wayne Abba, article in Jan-Feb 97 Program Manager magazine, Earned Value
Management - Reconciling Government and Commercial Practices
■ ANSI/EIA 748-1998, Earned Value Management Systems

■ Quentin W. Fleming & Joel M. Koppelman, book, Earned Value Project Management

■ Earned Value web page: www.acq.osd.mil/pm