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The Basics
Disadvantages
Time consuming and requires experienced effort to measure and analyse performance. Forecasts depend on reliable measurements that can be difficult to achieve for some cost types
Efficiency provides performance indices Past performance is not necessarily an identifying areas under of ever performing and indication of future performance requiring corrective action Estimating accuracy provides feedback of Does not take into account risks and actual performance against baseline estimates uncertainties Provides triggers for escalating problems and Requires a compatible cost collection system highlighting successes
AC
PV EV
By integrating three measurements - EV, AC & TIME : Key performance indicators are produced to evaluate the health of the project.
COST
TIME
EV Management Terms
Budget at Completion Total budget for the work to be carried out Original Duration planned overall duration Planned Value Budgeted Cost of the Work Scheduled (BCWS) Data Date reference point used to measure and evaluate the current status aka Time Now Actual Cost Cumulative cost incurred at the Data Date. Also called the Actual Cost of Work Performed (ACWP) Earned Value Value of planned work done at Data Date. Also called the Budgeted Cost of Work Performed (BCWP) Estimated Cost at Completion (EAC) The predicted outturn in cost terms
EV Management Terms
COST
Forecast Time Overrun Estimated Cost at Completion Forecast Forecast Cost Overrun
Budget at Completion
PV
OD
Forecast Duration
TIME
EV
Formulae
EV=%Complete x Budget SV=EV-PV CV=EV-AC SPI= CPI= EAC= FD= EV PV EV AC BAC CPI OD SPI ; if <1 = behind, ; if <1 = overspent,
if >1 = ahead of schedule
Ev Cost Ac Pv Schedule
After two weeks (Time Now aka Data Date) the work package manager reviews the progress The manager is expecting 25% of the work to be completed at Data Date. This is based on the estimated spend over two weeks. Since the budget for all of the work is 100k, the value for 25% of the work is 25k assuming a linear rate of spend for simplicity. At Data Date the manager also check the account and finds that 30k has been charged to the work package (actual cost). However, also at Data Date, the manager checks the surveyor's report which shows that 20% has been achieved.
The manager can now complete the analysis. The first task is to calculate the SV. This will indicate how much the project is off-spec in terms of time. SV = EV PV = 20k - 25k = -5k The next task is to calculate the cost variance. This will show how much the project is off target in terms of cost. CV = EV AC = 20k - 30k = -10k From above calculation we can see that the project is behind schedule and overspending. Further analysis will provide predictions of the time and cost.
Performance Indicators
EV = 20k Ev Cost Ac AC = 30k Pv PV = 25k Schedule
The performance indices are calculated as follows: SPI = EV/PV = 20/25 = 0.8 CPI = EV/AC = 20/30 = 0.67 Thus, Forecast Duration = OD/SPI = 8/0.8 = 10weeks EAC = BAC/CPI = 100/0.67 = 150k
100
Budget at Completion
COST (1000s)
ha nd
30 25 20
AC CV
Dr a
in
by
PV
SV
2 EV
10
Weeks
Exercise 1
A project has a budget o 200k and a completion date of 12 months. The progress for the first four months is shown in the table below All values are in k
Month 1 PV AC EV
1. 2. 3.
Month 2 85 70 55
Month 3 80 95 75
40 30 35
Calculate the forecast duration and the estimate at completion (EAC) for this project based on this information. Explain how the cost efficiency has changed of the first four months What will the EAC be if the CPI changes to 0.9 for all remaining work?
COST (1000s)
Months
Exercise 1 - Answers
1. At Month 4 (latest Data Date): SPI = EV/PV = 95/110 = 0.86 Forecast Duration = OD/SPI = 12/0.86 = 13.95 = 14months CPI = EV/AC = 95/115 = 0.83 EAC = BAC/CPI = 200/0.83 = 241k Cost efficiency can be represented by CPI 2.
Month 1 2 3 4
CPI
Months
Exercise 1
260 220 200 180
COST (1000s)
CPI
10
11
12
13
14
14
240
241
Months