Project Control

Project Cost Planning and Control

American University in Cairo Egypt Presented By Dr. Hesham A. Aziz

Dr. Hesham A. Aziz

Dr. Hesham A. Aziz

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. 2. 3. 4. Setting a baseline plan. Measuring progress and performance. Comparing plan against actual. Taking actions

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Collecting information for Project Control

Design Project planning

Change orders

Project Plan, Schedule, Budget, Quality Safety

Progress Reports

Indirect & Overhead costs Other Contract costs Lump-sum Contract costs

Project Control

Labor costs

Equipment costs

Material costs Dr. Hesham A. Aziz 4

A typical information filter

MACRO LEVEL

Top management / executive

Project completion date Updated price On completion

MESO LEVEL Money expended So far

Project Manger
Project completion price Programmed status

MICRO LEVEL

Project team

Weekly Site reports Anticipated claims

Changes In scope

Abortive work Future problem Site instructions And variations areas Dr. Hesham A. Aziz

Monthly valuations Percentage completion 5

Project Monitoring System for Control

Information System Structure What data are collected? Current status of project (schedule and cost) Remaining cost to compete project Date that project will be complete Potential problems to be addressed now Out-of-control activities requiring intervention Cost and/or schedule overruns and the reasons for them Forecast of overruns at time of project completion
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Project Monitoring System (contd) Information System Structure (contd)

Collecting data and analysis
Who will collect project data? How will data be collected? When will the data be collected? Who will compile and analyze the data?

Reports and reporting

Who will receive the reports? How will the reports be transmitted? When will the reports be distributed?
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Project Progress Report Format

Progress since last report Current status of project Schedule Cost Scope Cumulative trends Problems and issues since last report Actions and resolution of earlier problems New variances and problems identified Corrective action planned
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Disparity Among Monitoring Systems

Time-Phase Baseline Plan Corrects the failure of most monitoring systems to connect a projects 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.

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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.

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Baseline Data Relationships

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Project Management System Overview

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Integratio n of WBS and OBS

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Direct Labor Budget Rollup (000)

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Baseline and Tracking Gantt Charts

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Project Schedule Control Chart

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Relationships Between Time and Work

* Overall design effort a work/time curve can be developed. Example Illustrative Weight Multipliers for Design Work _________________________________________ Weight Project Design Work Multiplier Timing
_______________________________________________ Review backup material 0.05 0% - 10% Design calculations 0.10 10% - 25% Initial drafting 0.25 15% - 45% Final calculations 0.20 35% - 60% Production drawings 0.30 50% - 90% Drawing approval 0.10 90% - 100% _________ 1.00 ________________________________________________

The slope of each graph is the ratio of the weight multiplier to the time required for the work to be performed.

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Work / Time Relationship (Design Work)

Over Laps

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Over Laps

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Integrated Cost / Schedule / Work Graph.

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Over Cost and Behind Schedule

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Under Cost and Behind Schedule

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Under Cost and Ahead of Schedule

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Over Cost and Ahead of Schedule

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Earned Value Management

Earned Value Management is a methodology used to measure and communicate the real physical progress of a plan taking into account the work complete, the time taken and the costs incurred to complete that work. Earned Value helps evaluate and control risk by measuring the progress in monetary terms. By taking a snap-shot of the projected plan and calculating the Earned Value metrics we can compare the planned with the actual and make a subjective assessment of the progress. By extrapolating the curves and further calculation allows estimate the costs to completion and the probable completion date. The basics of Earned Value can best be shown on the ubiquitous 'S-Curve'.
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Earned value analysis makes use of the following variables: Actual cost of the works performed (ACWP); Budgeted cost of the works performed (BCWP); Budgeted costs of the works specified (BCWS); Scheduled time for work performed (STWP); Actual time for work performed (ATWP); Cost Variance (CV); Schedule variance (SV); Budget at completion (BAC); Estimate at completion (EAC); Variance at completion (VAC).

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Earned value analysis (EVA)

Total work package budgeted cost = 1 000 000 The EVA analysis is taken up to week 6 (week 6 is time now). The actual progress or works performed is 70 per cent. This means: Budgeted cost of the works performed (BCWP) = 1 000 000 70% = 700 000 Actual cost to date = 750 000 Work scheduled to date = 60% Budgeted cost of the works scheduled (BCWS) = 1 000 000 60% = 600 000
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Position at week 6

Sample SV and CV values

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Position at week 7

Comparative positions weeks 6 and 7

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EVM: A Simple Concept

Time Now

Estimate at Completion

Risk
Schedule Delay

$
Actual Cost

Planned Value

Earned Value
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Time

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 The variance of completion (VAC) is the difference between the planned and actual cost. The cost variance is the result of a comparison of how much the work has cost in comparison with what it was budgeted to cost, both in relation to works actually completed. Schedule variance (SV) is the difference between budgeted cost for the works completed and performed and the budgeted cost of the works scheduled The budget at completion (BAC) is the sum of all the individual budgets (BCWS) that make up . It is sometimes known as the baseline. The estimate at completion (EAC) is the estimated total cost . It is the sum of all direct and indirect costs to date plus authorized work remaining. The EAC can also be expressed in terms of a revised estimate. The cost accounting process of the PCCS involves looking at cost variance (CV) and schedule variance (SV) in order to assess the performance of individual packages and groups of packages. This can be done in several ways. The two most common are by direct evaluation of the variances themselves or by conversion of the variances to indices.
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 Scheduled time for work performed (STWP) This is the estimated time required to perform a defined amount of work. Actual time for work performed (ATWP) This is the actual time taken to perform a defined amount of work. Cost Variance (CV) The cost variance is the budgeted cost of work performed (BCWP) minus the actual cost of work performed (ACWP). This is normally abbreviated to the formula:

CV = BCWP ACWP
Cost variance is therefore a comparison of how much the work has cost in relation to what it was budgeted to cost, both figures being in relation to works actually completed. Schedule variance (SV) The schedule variance is the difference between budgeted cost for the works performed (BCWP) and the budgeted cost of the works scheduled (BCWS). This is normally abbreviated to the formula:

SV = BCWP BCWS
Schedule variance is therefore a measure of the performance of the works in relation to budgeted costs.
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 Estimate at completion (EAC) :is the estimated total cost . It is the sum of all direct and indirect costs to date plus authorized work remaining.

EAC = ACWP + estimate to complete (ETC)

and this is the updated estimate of the total cost. EAC can also be expressed in terms of the budget at completion BAC as follows:

EAC = BAC CV
EAC can also be expressed in terms of the cost variance index (CVI) as

EAC = (ACWP/BCWP) BAC

Variance at completion (VAC) The variance at completion (VAC) is the difference between what should have cost (BAC) and what it is expected to actually cost (EAC).

VAC = BAC EAC

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Example EVA distribution

CV = BCWPACWP = 75 00090 000 = 15 000 (i.e. a cost overrun of 15 000) SV = BCWPBCWS = 75 00050 000 = 25 000 (i.e. ahead of schedule by 25 000) TV = STWP ATWP = 3 months 2 month = 1 month (i.e. one month ahead of time schedule) CV ratio =BCWP/ACWP=75 000/90 000= 0.83 SV ratio =BCWP/BCWS=75 000/50 000= 1.5 TV ratio =STWP/ATWP=3/2= 1.5
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Cost/Schedule Graph

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Earned Value Review Exercise

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Example budget and actual costs to end of month 4 Example planned and actual schedule performance Dr. Hesham A. Aziz 43

 The critical ratio can often be used to trigger alarm bells if work performance falls below a certain level. The critical ratio is equivalent to (actual progress / scheduled progress) (budget cost / actual cost) A critical ratio of unity or more is good and means that actual performance is better than planned performance. Conversely, a critical ratio less than unity is poor and is an indication of underperformance.

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Typical variance envelope

cost variance (CV) = BCWP ACWP. Therefore BCWP > ACWP: work performed has cost less. BCWP < ACWP: work performed has cost more. BCWP = ACWP: work on cost plan. .And schedule variance (SV) = BCWP BCWS. Therefore BCWP > BCWS: works ahead of programmed. BCWP < BCWS: works behind programmed. BCWP = BCWS: works on programmed. These values can also be shown as indices: Cost Variance Index (CVI) =BCWP/ACWP
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CVI > 1.0: good CVI < 1.0: bad CVI = 1.0: ok . And Schedule Variance Index (SVI) =BCWP/BCWS so that SVI > 1.0: good SVI < 1.0: bad SVI = 1.0: ok
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 CVI > 1.0, SVI > 1.0 Excellent: the project is under cost and ahead on programmed. CVI > 1.0, SVI = 1.0 Good: the project is under cost and is on schedule. CVI > 1.0, SVI < 1.0 Good/bad: the project is under cost but behind on programmed. CVI = 1.0, SVI > 1.0 Good: the project is on cost and ahead of programmed. CVI = 1.0, SVI = 1.0 Good: this scenario means that the project is on cost and on schedule. CVI = 1.0, SVI < 1.0 Bad: the project is on cost but is behind schedule CVI < 1.0, SVI > 1.0 Good: this scenario is probably caused by faster than expected working practices. CVI < 1.0, SVI = 1.0 Poor: the project has a cost overrun and is on programmed. CVI < 1.0, SVI < 1.0 Very bad: this is the worst case. The project is running over cost and behind on programmed.
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Critical-ratio analysis

Zone A: Take no action Zone C: Act immediately Zone A1: Observe and note

Zone B: Record and monitor Zone D: Emergency response required Zone A2: Investigate and correct
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Budget Cost calculations

Time now = week 45
WBS Code A-37 A-38 A-39 A-40 A-41 A-31 A-32 A-33 A-34 A-35 A-36 A1 A2 A3 A4 A5 A11 A22 A33 A44 A55 A66 CAC Start week 35 35 40 42 44 40 40 40 40 42 44 Finish week 45 50 50 50 50 50 50 50 50 55 55 Target Cost 10,000 12,000 14,000 8,000 6,000 12,000 14,000 18,000 8,000 6,000 10,000 Target Scheduled Performed complete % 50 50 45 45 30 60 60 50 50 50 50 10000 8000 7000 3000 1000 6000 7000 9000 4000 1384.6 909.0 5000 6000 6300 3600 1800 7200 8400 9000 4000 3000 5000 6000 6000 6500 4100 2300 7200 8500 8000 3000 3000 5500 BCWS BCWP ACWP

Duration Complete % 10 15 10 8 6 10 10 10 10 13 11 100 66.67 50 37.5 16.67 50 50 50 50 23.077 9.090

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Cost and Schedule Variance.

WBS
A-37 A-38 A-39 A-40 A-41 A-31 A-32 A-33 A-34 A-35 A-36

CAC
A1 A2 A3 A4 A5 A11 A22 A33 A44 A55 A66

ACWP
6000 6000 6500 4100 2300 7200 8500 8000 3000 3000 5500

BCWP
5000 6000 6300 3600 1800 7200 8400 9000 4000 3000 5000

BCWS
10000 8000 7000 3000 1000 6000 7000 9000 4000 1385 909

CV
-1000 0 -200 -500 -500 0 -100 1000 1000 0 -500

SV
-5000 -2000 -700 600 800 1200 1400 0 0 1615 4091

Comments Very over budget and very late. On cost but very late Over budget and late. Over budget but ahead of schedule Over budget but ahead of schedule On cost and way ahead of schedule. Over cost but way ahead on schedule. Under cost and on schedule. Under cost and on schedule. On cost and way ahead of schedule Over cost but way ahead of schedule Over cost but well ahead.

Total

-800

2006

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Example : Variance Analysis. Assume budget at completion = 579.000

Task. Status 1 2 3 4 5 6 7 8 Total Completed Completed Completed Not started Completed Not started Started Not started ACWP 100 55 40 0 140 0 25 0 360 BCWP 100 50 50 0 90 0 50 0 340 BCWS 100 50 50 70 90 40 50 0 450 -20 -110 CV 0 -5 10 0 -50 0 25 SV 0 0 0 -70 0 -40 0 50 -5.88 CV% 0 -10 20 -55.56 SV% 0 0 0 -100 0 -100 0 -24.44

Estimate at Completion. EAC = (ACWP/BCWP) * BAC

Then: EAC = (360/340) * 579,000 = 613,059 Projected Overrun = 613,059 - 579,000 = 34,059 Cost summary: CV%= CV/ BCWP (from Total row) Costs are running 5.88% above budget. This has been caused by wage rate increases. Schedule summary: SV%= SV/BCWS (from Total row) The project is 24.4% behind schedule as a result of packages 6 and 8 not having started yet. These packages have been delayed because of a lack of material.

Corrective action report ---------------------------------------------------------------------------------------------------------------------------------------Dr. Hesham A. Aziz 52

Cost and schedule variance performance grid

Example variance tracking

CV and SV tracking and corrective monitoring

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CVI and SVI figures for team 2 in weeks 14

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EVA values for the project as a whole 54

Scope Changes to a Baseline

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FIGURE 13.14

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Other Control Issues

Issues In Maintaining Control Of Projects
Baseline Changes Contingency Reserve Costs and Problems of Data Acquisition Scope Creep Managing the Portfolio of Projects
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