Injibara University

College of Engineering and Technology

Department of Software Engineering
Course: Software Project
Managment

Instructor: Esabet M. (MSc in SWE)

Target Group: SE 3rd Year BSc

SPM
Course Description
◦ The course introduces the key issues associated
with managing software projects. It explains the
key phases of the project management cycle and
describe the various tools and methods used in each
of those phases.
◦ Management is critical to ensure that a project is
properly managed using formal project
management frameworks;
◦ Integration, scope, time, cost, quality, human resource,
communication, risk, and procurement management.

SPM
Course Objective
◦ A student completing this course will be able
to understand and apply
◦ Formal software project management approach
◦ Tools and techniques
◦ Principles and theories
◦ Project management framework, and
◦ Development of software project management plan

SPM
 Course Content Chapter 2 (Part B)
Chapterto1
Introduction Chapter 2 Part A Software Project
Software Project Project Planning - 10
Management
Management Framework

Project Management Framework

SPM
References
◦ Cotterell, B. H. (1999). Software Project Management. (2nd, Ed.)

London: McGrawHill.

◦ Schewalbe, K. (2011). Information Technology Project

Management. USA.

◦ Institute, P. M. (2000). Project Management Body of Knowledge

(PMBOK). Pennsylvania: Project Management Institute.

◦ Pressman, R. S. (2001). Software Engineering: A Practitioner’s

Approach. (5th, Ed.) Boston: McGrawHill .

SPM
Introduction to
Software
Project
Management
CHAPTER 1

SPM
Why need to manage SW
projects?
Failure of many IT Projects. For instance,

◦ The United States Internal Revenue System was to

abandon its tax system modernization program
after having spent $4 billion;
◦ The state of California spent $1 billion on its non-
functional welfare
SPMdatabase system;
 … why
◦ The €339 million United Kingdom air traffic control
system was reported as being two years behind schedule;
◦ A 1995 Standish Group study (CHAOS) found that only
16.2% of IS projects were successful and over 31% were
canceled before completion, costing over $81 B in the
U.S. alone

SPM
 …why

The reasons for the increase in successful projects vary.

First, the average cost of a project has been more than cut
in half. Better tools have been created to monitor and
control progress and better skilled project managers
with better management processes are being used. The
fact that there are processes is significant in itself.”

Worldwide cost of IT failure (revisited): $3 trillion

SPM
Causes of Project
Management Failure
◦ Bad Communications
◦ Poor schedule or resource Management
(mismanagement)
◦ Weak requirements definitions (leads to inadequate
planning)
◦ Inadequate planning, assumptions, risks, or resources
◦ Use of new or unproven technologies/methods

SPM
… Causes of PM Failure
◦ Ineffective (or nonexistent) quality controls
◦ Managing multiple projects at once or multi-tasking
resources
◦ Supply chain failures
◦ Scope creep or poor impact analysis
◦ Lack of qualified resources

SPM
 Advantages of Using
Formal SPM
◦ Better control of financial, ◦ Higher quality and

physical, and human increased reliability

resources ◦ Higher profit margins

◦ Improved customer relations ◦ Improved productivity

◦ Better internal
◦ Shorter development times
coordination
◦ Lower costs
◦ Higher worker morale

SPM
What is project?
◦ A project is a temporary endeavor undertaken
to create a unique product or service.
◦ IT projects involve using hardware,software,
and networks to create a product, service, or
result.

SPM
 Attributes of projects

◦ Unique purpose
◦ Temporariness
◦ Developed using progressive elaboration
◦ Require resources, often from various areas
◦ Should have a primary sponsor and/or customer
◦ Involve uncertainty
SPM
 The Triple Constraint
◦ Every project is constrained in different ways by its

◦ Scope goals: What is the project trying to

accomplish?
◦ Time goals: How long should it take to complete?

◦ Cost goals: What should it cost?

◦ It is the project manager’s duty to balance these three
often competing goals

SPM
The Triple Constraint of Project
Management

SPM
 What is project
management?
◦ Project Management is the discipline of planning,
organizing, and managing resources to bring about the
successful completion of specific project goals and
objectives.
◦ Project management is “the application of knowledge,
skills, tools, and techniques to project activities in order to
meet project requirements.” (PMI*)
*The Project Management Institute (PMI) is an international professional society that provides
certification as a Project Management Professional (PMP) and upholds a code of ethics.

SPM
Project Management
Framework
A framework for PM includes:
◦ The project stakeholders, knowledge areas, and tools and
techniques.

SPM
Project Management
Framework
Project Stakeholders
◦ Stakeholders are the people involved
in or affected by project activities.
◦ Stakeholders include:
◦ the project sponsor and project team
◦ support staff
◦ customers
◦ users
◦ suppliers
◦ opponents to the project
SPM
 Project Management Framework
9 Project Management Knowledge
Areas
 PM knowledge areas describe the key competencies that project
managers must develop:
◦ Scope
4 core knowledge
◦ Time areas lead to specific
project objectives
◦ Cost
4 facilitating
◦ Quality knowledge areas are
◦ Human resources management the means through
which the project
◦ Communication management objectives are achieved
◦ Risk management
◦ Procurement management affects and is affected by
all of the other
◦ Project integration management knowledge areas

SPM
 Project Management
Framework
Tools and Techniques
Project management tools and techniques assist project
managers and their teams in various aspects of project
management

Some specific ones include

◦ Project Charter and WBS (scope)
◦ Gantt charts, network diagrams, critical path analysis, critical chain
scheduling (time)
◦ Cost estimates and earned value management (cost)

SPM
Suggested Skills for a
Project Manager
◦ Communication skills: listening, persuading people

◦ Organizational skills: planning, goal-setting, analyzing

◦ Team building skills: empathy, motivation, ‘esprit de corps’

◦ Leadership skills: set example, energetic, vision (big

picture), delegates, positive
◦ Coping skills: flexibility, creativity, patience, persistence

◦ Technological skills: experience, project knowledge

SPM
Ethics in Project
Management
◦ The PMI Code of Ethics and Professional Conduct
includes addressing
◦ vision
◦ applicability
◦ responsibility
◦ respect
◦ fairness
◦ honesty

SPM
Project Planning
& Integration
Management
CHAPTER 2

SPM
SPM
The Key to Overall Project
Success: Good Project
Integration Management
Good project managers involves coordinating all of
the other project management knowledge areas
throughout a project’s life cycle.
The process groups includes:
1. Initiating
2. Planning
3. Executing
4. Controlling
5. Closing
SPM
Project Integration
Management Process

SPM
Overlapping of Process Groups
in a Phase (PMBOK Guide, 2000,
p. 31)

SPM
 Framework for Project
Integration Management

Focus on pulling everything together to reach project success!

SPM
 Project Plan
Development
• A project plan is a document used to coordinate all
project planning documents
• Its main purpose is to guide project execution
• Project plans assist the project manager in leading the
project team and assessing project status
• Project performance should be measured against a
baseline project plan
SPM
Project Plan Development
Attributes of Project Plans
Just as projects are unique, so are project plans
• Plans should be dynamic - make quick decisions when
opportunities and challenges suddenly arise

• Plans should be flexible

• Plans should be updated as changes occur
• Plans should first and foremost guide project
execution
SPM
Project Plan Development
Common Elements of a Project
Plan

◦ Introduction or overview of the project

◦ Description of how the project is organized

◦ Management and technical processes used on

the project
◦ Work to be done, schedule, and budget
information
SPM
 Project Plan Development
Sample Outline for a
SPMP
Project Management Plan Sections
Introduction Project Managerial Technical Work
Organization Process Process Packages,
Schedule, and
Budget
Section Project Process model; Management Methods, tools, Work
of overview; organizational objectives and and packages;
Topics project structure; priorities; techniques; Dependencies;
deliverables; organizational assumptions, software resource
evolution of boundaries and dependencies, documentation; requirements;
the SPMP; interfaces; and and project budget and
reference project constraints; support resource
materials; responsibilities risk functions allocation;
definitions and management; and schedule
acronyms monitoring
and
controlling
mechanisms;
and staffing
plan
IEEE Std 10581-1987

SPM
Project Plan
Execution
• Project plan execution involves managing and performing
the work described in the project plan
• The majority of time and money is usually spent on
execution
• The application area or the project directly affects project
execution
• because the products of the project are produced during
execution

SPM
Project Plan Execution
Important Skills for Project Execution

◦ General management skills like leadership,

communication, and political skills

◦ Product skills and knowledge

◦ Use of specialized tools and techniques

SPM
 Project Plan Execution
Tools and Techniques for Plan
Execution

• Work Authorization System: a method for ensuring

that qualified people do work at the right time and in
the proper sequence
• Status Review Meetings: regularly scheduled
meetings used to exchange project information
• Project Management Software: special software to
assist in managing projects
SPM
Integrated Change
Control
• Integrated change control involves identifying, evaluating,
and managing changes throughout the project life cycle
• Three main objectives of change control:
• Determine that a change has occurred
• Influence the factors that create changes to ensure they are
beneficial
• Manage actual changes when and as they occur

SPM
Integrated Change Control
Its Process

SPM
Project Scope
Management
Chapter Three

SPM
What is Project Scope
Management?
◦ Scope refers to all the work involved in
creating the products of the project and the
processes used to create them
◦ Project scope management includes the
processes involved in defining and controlling
what is or is not included in the project
◦ The project team and stakeholders must have
the same understanding of what products will
be produced as a result of a project and what
processes will be used in producing them

SPM
Project Scope
Management
Processes
1) Initiation: authorizing the project or phase
2) Scope planning: developing documents to provide the
basis for future project decisions
3) Scope definition: defining the project scope statement
and updates to project documents
4) WBS: subdividing the major project deliverables into
smaller, more manageable components
5) Scope verification: formalizing acceptance of the project
scope
6) Scope change control: controlling changes to project
scope
SPM
Project Initiation: Strategic
Planning and
Project Selection
◦ Many organizations follow a planning
process for selecting IT projects
◦ First develop an IT strategic plan based on
the organization’s overall strategic plan
◦ Then perform a business area analysis
◦ Then define potential projects
◦ Then select IT projects and assign
resources

SPM
Project Charters
◦ A project charter is a document that
formally recognizes the existence of a
project and
◦ It provides direction on the project’s
objectives and management.
◦ Key project stakeholders should sign a
project charter to acknowledge agreement
on the need and intent of the project

SPM
 Project Charter
Helpful inputs of Project
Charter
◦ A project statement of work
◦ A business case
◦ Agreements
◦ Enterprise environmental factors
◦ Organizational process assets

The main tools and techniques for developing a project charter

are expert judgment and facilitation techniques, such as
brainstorming and meeting management.

SPM
Output Project Charter
Process: Project Charter
should include at least
◦ The project’s title and date of authorization
◦ The project manager’s name and contact information
◦ A summary schedule, such as the planned start and finish dates
◦ A summary of the project’s
◦ A brief description of the project objectives
◦ Project success criteria, including project approval requirements
◦ A summary of the planned approach for managing the project
◦ A roles and responsibilities matrix
◦ A sign-off section for signatures of key project stakeholders.
◦ A comments section

SPM
Work Breakdown
Structure (WBS)
◦ After completing scope planning, the next
step is to further define the work by breaking
it into manageable pieces
◦ Good scope definition
◦ helps improve the accuracy of time, cost,
and resource estimates
◦ defines a baseline for performance
measurement and project control
◦ aids in communicating clear work
responsibilities
SPM
The Work Breakdown Structure
(WBS)
◦ A work breakdown structure (WBS) is a
deliverable oriented grouping of the work
involved in a project that defines the total
scope of the project.

◦ The WBS is a foundation document in project

management because it provides the basis for
planning and managing project schedules,
costs, resources, and changes

SPM
Sample Intranet WBS Organized
by Product

SPM
Intranet Project … Level-2
WBS
1. Website design
1.1. Site map
1.2. Graphic design
2. Home page design
2.1. Text
2.2. Images
2.3. Hyperlinks
3. Marketing pages
4. Sales pages

SPM
Sample Intranet WBS Organized
by Phase

SPM
Approaches to
Developing WBSs
◦ Using guidelines: Some organizations, provide
guidelines for preparing WBSs.

◦ The top-down approach: Start with the largest

items of the project and keep breaking them
down.

◦ The bottom-up approach: Start with the

detailed tasks and roll them up.

SPM
Scope Verification and Scope
Change Control
It is very difficult to create a good scope statement and
WBS for a project
It is even more difficult to verify project scope and
minimize scope changes
Many Software projects suffer from scope creep and
poor scope verification
◦ FoxMeyer Drug filed for bankruptcy after scope creep on a
robotic warehouse
◦ Engineers at Grumman called a system “Naziware” and
refused to use it

SPM
Project Time
Management
CHAPTER 4

SPM
Project Time Management
Processes
Project time management involves the processes
required to ensure timely completion of a project.
Processes include:
1. Planning schedule management
2. Activity definition
3. Activity sequencing
4. Activity resource estimation
5. Activity duration estimation
6. Schedule development
7. Schedule control
SPM
Project Time Management
Processes

SPM
Project Time Management
Processes
1. Planning schedule
management
The first step in project time management is planning how
the schedule will be managed throughout the life of the
project.
Project schedules grow out of the basic document that initiate a
project
• Project charter includes start and end dates and budget information
• Scope statement and WBS help define what will be done

SPM
Project Time Management
Processes
1. Planning schedule
management
In general, a schedule management plan includes the
following information:
◦ Project schedule model development
◦ The scheduling methodology and the scheduling tool to use
when developing the project schedule model
◦ Level of accuracy and units of measure
◦ Control thresholds: Variance thresholds, such as ±10%
◦ Rules of performance measurement
◦ Reporting formats
◦ Process descriptions

SPM
Project Time Management
Processes
2. Defining Activities
Defining activities involves identifying the specific
activities that must be performed to produce the various
project deliverables in enough detail to determine resource
and schedule estimates.
Outputs of this process include an activity list, activity
attributes, a milestone list, and project management plan
updates.
The activity list is a tabulation of activities to be included on a
project schedule. It includes activity name, activity identifier or
number, and a brief description of the activity.

SPM
Project Time Management
Processes
3. Sequencing Activities
Involves reviewing activities and sequencing them and/or
determining dependencies
◦ Mandatory dependencies: inherent in the nature of the
work; hard logic.
◦ E.g. can’t test code with no written code.
◦ Discretionary dependencies: defined by the project
management team; soft logic.
◦ E.g. not start the detailed design of a new information system until the
users sign off on all of the analysis work
◦ External dependencies: involve relationships between
project and non-project activities.
◦ E.g. the installation of a new operating system and other software may
depend on delivery of new hardware from an external supplier.
SPM
Project Time Management
Processes
3. Sequencing Activities

SPM
Project Time Management
Processes
3. Sequencing Activities:
Project Network Diagram

Project network diagrams are the preferred technique for

showing activity sequencing. It is a schematic display of the
logical relationships among, or sequencing of, project
activities

SPM
Project Time Management
Processes
4. Estimating Activity
Resources

Before you can estimate the duration for each activity, you
must have a good idea of the quantity and type of resources
(people, equipment, and materials) that will be assigned to
each activity.

SPM
Project Time Management
Processes
5. Estimating Activity
Durations
After working with key stakeholders to define activities,
determine their dependencies, and estimate their resources,
the next process in project time management is to estimate
the duration of activities.
Duration includes the actual amount of time worked on an
activity plus elapsed time.

SPM
Project Time Management
Processes
6. Developing the Schedule
Schedule development uses results of the other time
management processes to determine the start and end date of
the project and its activities
Its ultimate goal is to create a realistic project schedule that
provides a basis for monitoring project progress for the time
dimension of the project
Important tools and techniques include Gantt charts, PERT
analysis, critical path analysis, and critical chain scheduling

SPM
Project Time Management
Processes
6. Developing the Schedule:
Gantt chart
Gantt charts provide a standard format for displaying project
schedule information by listing project activities and their
corresponding start and finish dates in a calendar format
Symbols include:
◦ A black diamond: milestones or significant events on a project
with zero duration
◦ Thick black bars: summary tasks
◦ Lighter horizontal bars: tasks
◦ Arrows: dependencies between tasks

SPM
Project Time Management
Processes
6. Developing the Schedule:
Gantt chart

SPM
 Project Time Management
Processes
6. Developing the Schedule:
Gantt chart

white diamond: slipped milestone

two bars: planned and actual times
SPM
Project Time Management
Processes
6. Developing the Schedule:
Critical Path Method

Critical Path Method(CPM) is a project network analysis

technique used to predict total project duration.
A critical path for a project is the series of activities that
determines the earliest time by which the project can be
completed.
The critical path is the longest path through the network
diagram and has the least amount of slack or float
◦ Free float is measured by subtracting the early finish (EF) of the activity from the
early start (ES) of the successor activity.
◦ Free Slack contains the amount of time that a task can be delayed without
delaying any successor tasks.

SPM
Project Time Management
Processes
6. Developing the Schedule:
Critical Path Method

Finding Critical Path

◦ First develop a good project network diagram

◦ Add the durations for all activities on each path through the
project network diagram
◦ The longest path is the critical path

SPM
Project Time Management
Processes
6. Developing the Schedule:
Critical Path Method

SPM
Project Time Management
Processes
7. Controlling the Schedule
◦ Perform reality checks on schedules

◦ Allow for contingencies

◦ Don’t plan for everyone to work at 100% capacity all the time

◦ Hold progress meetings with stakeholders and be clear and

honest in communicating schedule issues

SPM
Project Time Management
Processes
7. Controlling the Schedule
◦ Goals are to know the status of the schedule, influence factors
that cause schedule changes, determine that the schedule has
changed, and manage changes when they occur
◦ Tools and techniques include:
◦ Progress reports
◦ A schedule change control system
◦ Project management software, including schedule comparison charts like
the tracking Gantt chart
◦ Variance analysis, such as analyzing float or slack
◦ Performance management
SPM
Project Time Management
Processes
7. Controlling the Schedule

Reality Checks on Schedule

◦ First review the draft schedule or estimated completion date in the
project charter
◦ Prepare a more detailed schedule with the project team

◦ Make sure the schedule is realistic and followed

◦ Alert top management well in advance if there are schedule

problems
◦ Verify schedule progress – just because a team member says a
task was completed on time doesn’t always mean that it was
SPM
Project Cost
Management
CHAPTER 5

SPM
 What is Cost and Project Cost
Management?
 Cost is a resource sacrificed or fore-gone to achieve a
specific objective or something given up in exchange
Costs are usually measured in monetary units like birr,
dollar, etc.
 Project cost management includes the processes required
to ensure that the project is completed within an approved
budget.
Project managers must make sure their projects are well
defined, have accurate time and cost estimates and have a
realistic budget that they were involved in approving.
The goal of cost management is minimize budget overrun

SPM
 Reasons for Cost Overruns
Not emphasizing the importance of realistic
project cost estimates from the outset
Many of the original cost estimates for IT
projects are low to begin with and based on
very unclear project requirements
Many software professionals think preparing
cost estimates is a job for accountants when in
fact it is a very demanding and important skill
that project managers need to acquire
Many software projects involve new technology
or business processes which involve untested
products and inherent risks
SPM
 Project Cost Management
Processes
1. Resource planning: determining what resources and
quantities of them should be used

2. Cost estimating: developing an estimate of the costs

and resources needed to complete a project

3. Cost budgeting: allocating the overall cost estimate to

individual work items to establish a baseline for
measuring performance

4. Cost control: controlling changes to the project budget

SPM
 Basic Principles of Cost
Management
1. Planning Cost
Management
 Life cycle costing is estimating the cost of a
project over its entire life
Cash flow analysis is determining the estimated
annual costs and benefits for a project
Sunk cost are retrospective (past) costs that have
already been incurred and cannot be recovered
 Sunk costs should not be a criteria in project

selection

SPM
Project Cost Management
Processes
1. Planning Cost
Management
A cost management plan can include many different
elements, such as:
◦ Measurement units: Such as labor hours or days
◦ Precision levels: Activity cost estimates normally have
rounding guidelines, such as rounding to the nearest
$100. There may also be guidelines for the amount of
contingency funds to include, such as 10 or 20 percent.
◦ Control thresholds: ± 10 percent of the baseline cost
◦ Performance measurement rules: Will you use earned value
management or the percentage of completion method?
◦ Reporting formats: Determine how you will report your
project progress and how often.

SPM
 Project Cost Management
Processes
2. Cost Estimating
 An important output of project cost management is
a cost estimate
There are several types of cost estimates, and tools
and techniques to help create them
It is also important to develop a cost management
plan that describes how cost variances will be
managed on the project

SPM
 Project Cost Management
Processes
2. Cost Estimating: Types
1. A rough order of magnitude (ROM) estimate provides an
estimate of what a project will cost.
◦ A ROM estimate’s accuracy is typically -50 percent to +100
percent
2. A budgetary estimate is used to allocate money into an
organization’s budget.
◦ The accuracy of budgetary estimates is typically -10 percent to
+25 percent
3. A definitive estimate provides an accurate estimate of project
costs.
◦ The accuracy of this type of estimate is normally -5 percent to
+10 percent
SPM
Project Cost Management
Processes
2. Cost Estimating: Types

SPM
 Project Cost Management
Processes
2. Cost Estimating: Tools &
Techniques
3 basic tools and techniques for cost estimates:

◦ Analogous or top-down: use the actual cost of a

previous, similar project as the basis for the new
estimate
◦ Bottom-up: estimate individual work items and sum
them to get a total estimate
◦ Parametric: use project characteristics in a
mathematical model to estimate costs
SPM
 Project Cost Management
Processes
2. Cost Estimating: Typical
Problems
 Developing an estimate for a large software project is a complex
task requiring a significant amount of effort.
◦ Remember that estimates are done at various stages of the project
 Many people doing estimates have little experience doing them.
◦ Try to provide training and mentoring
 People have a bias toward underestimation.
◦ Review estimates and ask important questions to make sure estimates
are not biased
 Management wants a number for a bid, not a real estimate.
◦ Project managers must negotiate with project sponsors to create
realistic cost estimates

SPM
 Project Cost Management
Processes
3. Determining the Budget
 Cost budget involves allocating the project cost estimate to
individual work items and providing a cost baseline

SCHOOL OF COMPUTING | WOLDIA INSTITUTE OF TECHNOLOGY | WOLDIA UNIVERSITY

 Project Cost Management
Processes
4. Controlling Costs
 Project cost control includes
 monitoring cost performance
 ensuring that only appropriate project changes are
included in a revised cost baseline
 informing project stakeholders of authorized changes to
the project that will affect costs
Earned value management (EVM) is an important
tool for cost control

SPM
 Project Cost Management
Processes
4. Controlling Costs: Earned
Value (EV)
EVM is a project performance measurement
technique that integrates scope, time, and cost data
Given a baseline (original plan plus approved
changes), you can determine how well the project
is meeting its goals
You must enter actual information periodically to
use EVM.

SPM
 Project Cost Management
Processes
4. Controlling Costs: Earned
Value (EV)

Earned Value Analysis is an industry standard way to:

◦ measure a project’s progress,

◦ forecast its completion date and final cost, and
◦ provide schedule and budget variances along the
way.
By integrating three measurements, it provides consistent,

numerical indicators with which you can evaluate and

compare projects.
SPM
 Project Cost Management
Processes
4. Controlling Costs: Earned
Value (EV)

Earned Value Management (EVM) enables:

◦ Knowing where you are on schedule?

◦ Knowing where you are on budget?
◦ Knowing where you are on work accomplished?

SPM
 Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 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.
PV = Percent Complete (planned) x Task Budget
 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.
EV = Percent Complete (actual) x Task Budget
 Actual cost (AC): Also known as Actual Cost of Work Performed
(ACWP), Actual Cost is the actual to-date cost of the task.
AC = Actual Cost of the Task

SPM
 Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 Schedule Variance (SV): 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.

 Schedule Performance Index (SPI

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

SPM
 Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 Schedule Variance (SV): 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.

 Schedule Performance Index (SPI)

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

SPM
 Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 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
 Cost Performance Index (CPI)
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

SPM
 Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 Example
◦ Suppose you have a software project which is planned
to be completed in 9 months with a budget of Birr
900,000.
◦ After a month,10% of the project is completed at a total
expense of Birr 100,000, but the planned completion
was 15%.
◦ Given:
◦ Budget At Complete (BAC) = Birr 900,000
◦ AC = Birr 100,000

SPM
 Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 Compute
◦ PV
◦ EV
◦ CV - interpretation
◦ SV - interpretation
◦ CPI - interpretation
◦ SPI - interpretation
◦ Forecast -Budget at complete
◦ Forecast - Time at complete
◦ Overall project’s traffic light status

SPM
 Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 Solution
◦ Planned Value = Planned Completion (%) * BAC
= 15% * Birr 900,000
= Birr 135,000
◦ Earned Value = Percent Completed (%) * BAC
= 10% * Birr 900,000
= Birr 90,000
◦ Cost Variance = EV – AC
= 90,000 – 100,000
= -10,000
◦ Schedule Variance = EV – PV
= 90,000 – 135,000
◦ = - 45,000
SPM
 Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 Solution
◦ Cost Performance Index = EV / AC
= 90,000 / 100,000
= 0.90
◦ Schedule Performance Index = EV/PV
= 90,000 / 135,000
= 0.67

SPM
 Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 Forecasting Cost
◦ If the project continues at the current performance, what
is the true cost of the project?
Estimate at Complete = Budget at Complete (BAC) /
CPI
= Birr 900,000 / 0.90
= Birr 1,000,000
◦ At the end of the project, the total project cost will be
Birr 1,000,000

SPM
 Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 Forecasting Time
◦ If the project continues at the current performance, what
is the true time of the project?
Estimate at Complete = Original Time Estimate / SPI
= 9 months / 0.67
= 13.43 months
◦ The project will be completed by the end of 13.34
months.

SPM
Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 Establish Ranges to Guide Traffic Light Status
◦ Traffic light status is useful in conveying overall project’s
status with one color.
◦ Establish objective SPI and CPI ranges to determine the
true project color.
◦ Average of CPI & SPI i.e. (CPI+SPI)/2

Green [1.0 - 0.95] Good

Warning
Yellow [0.94 - 0.85] Bad
Red [0.84 - 0]
SPM
Project Cost Management
Processes
4. Controlling Costs: Terms
Used
 Establish Ranges to Guide Traffic Light Status
◦ Therefore, for the above example, overall project’s traffic
light status is
= (CPI+SPI)/2
= (0.90+0.67)/2
= 0.78
Bad

SPM
Many Thanks!!!

SPM