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Project Management Professionals Hot Topics & Challenges - Cost Management Presenter: Sohel Akhter, PMP, CCNA,ISMS PMP and Six Sigma instructor, Netcom Learning Adjunct Professor , MBA program, CUNY PMP Bootcamp , Sohel Akhter (PMP, ISMS, CCNA) - sohel_akhter_pm@yahoo.com, 347-536-2811 1 Project Management Professionals Hot Topics & Challenges - Cost Management 1. PV 2. EV 3. AC Variance Formulas: 4. SV = EV – PV 5. CV = EV - AC Index Formulas: 6. SPI =EV/PV 7. CPI = EV/AC Forecasting Formulas: 8. BAC 9. EAC = BAC/CPI 10. ETC = EAC - AC 11. VAC = BAC - EAC 12. TCPI = (BAC – EV) / (BAC – AC) or (BAC – EV)/ (EAC – AC) PMP Bootcamp , Sohel Akhter (PMP, ISMS, CCNA) - sohel_akhter_pm@yahoo.com, 347-536-2811 2 Project Management Professionals Hot Topics & Challenges - Cost Management New Name Old Name Planned Value Earned Value Actual Cost Budgeted Cost of Work Scheduled Budgeted Cost of Work Performed Actual Cost of Work Performed PMP Bootcamp , Sohel Akhter (PMP, ISMS, CCNA) - sohel_akhter_pm@yahoo.com, 347-536-2811 3 PV or BCWS Planned Value or Budgeted Cost of Work Scheduled BAC x (Time Passed /Total Scheduled Time) or BAC x Planned % Complete EV or BCWP Earned Value or Budgeted Cost of Work Performed BAC x (Work Completed /Total Work Required) or BAC x Actual % Complete AC or ACWP Actual Cost or Actual Cost of Work Performed What is the estimated value of the work planned to be done? Project Cost Management – Formula What is the estimated value of the work actually accomplished? What is the actual cost incurred for the work accomplished? SV Schedule Variance SV = EV- PV CV Cost Variance CV = EV – AC CPI Cost Performance Index CPI= EV/AC Cumulative CPI = / SPI Schedule Performance Index SPI= EV/PV Cumulative SPI = / BAC Budget at Completion EAC Estimate at Completion A comparison of amount of work performed during a given period of time to what was scheduled to be performed. Negative = behind schedule Neutral = on schedule Positive = ahead of schedule A comparison of the budgeted cost of work performed with actual cost. Negative= over budget Neutral = on budget Positive= under budget It measures the value of the work completed against actual cost. CPI<1=over budget CPI >1= under budget CPI= 1= on budget It represents the cumulative CPI of the project at the point the measurement is taken. It measures the progress to date against the planned progress. SPI<1 = behind schedule SPI > 1= ahead of schedule SPI = 1 = on schedule It represents the cumulative SPI of the project at the point the measurement is taken. How much did we BUDGET for the TOTAL project effort? If CPI is expected to be the same EAC= BAC/CPI What do we currently expect the TOTAL project to cost? If current variances are thought to be atypical of the future EAC = AC+ (BAC-EV) If both CPI and SPI influence the remaining work EAC = AC+[ (BAC-EV)/ (CPI x SPI)] ETC Estimate to Complete ETC= EAC - AC VAC Variance at Completion VAC= BAC - EAC TCPI To Complete Performance Index If targeting the current plan TCPI= (BACEV)/ BAC – AC PMP Bootcamp , Sohel Akhter (PMP, ISMS, CCNA) If targeting the current EAC From this point on, how much MORE do we expect it to cost to finish the project? How much over or under budget do we expect to be at the end of the project? Performance that must be achieved in order to meet financial or schedule goals. sohel_akhter_pm@yahoo.com, 347-536-2811 4 TCPI >1 = harder to complete TCPI<1 = easier to complete Project Management Professionals Hot Topics & Challenges - Cost Management Project Planned End Date Corporate Training Project End of 4th week Planned Budget $10,500 for total project $2625 for each module Actual Amount Spent by week Three $9000 Planned Completion by week three 3 out of 4 modules Actual Completion 2 out of 4 modules PV Planned Value BAC x ( Time Passed /Total Scheduled Time) = $10,500 x (3/4) = $10,500 x .75 = $7875 EV Earned Value BAC x (Work Completed /Total Work Required) = $10,500 x (2/4) = $10,500 x .5 = $5250 PMP Bootcamp , Sohel Akhter (PMP, ISMS, CCNA) - sohel_akhter_pm@yahoo.com, 347-536-2811 5 Project Management Professionals Hot Topics & Challenges - Cost Management You have a project to build a new fence. The fence is four sided as shown. Each side is to take one day to build and is budgeted for #1000 per side. The sides are planned to be completed one after another. Today is the end of day three. Using the project status chart below calculate the formulas. Activity Status End of day 3 Side 1 Complete, Spent $1000 Side 2 Side 3 Complete, Spent $1200 50% done, Spent $600 PV 3000 EV 2500 AC 2800 BAC 4000 CV -300 .893 CPI SV Side 4 Net yet started SPI -500 .833 ETC 4479 1679 VAC -479 TCPI 1.25 EAC PMP Bootcamp , Sohel Akhter (PMP, ISMS, CCNA) - sohel_akhter_pm@yahoo.com, 347-536-2811 6 Project Management Professionals Hot Topics & Challenges- Cost Management You have a project to build a new fence. The fence is four sided as shown. Each side is to take one day to build and is budgeted for $1000 per side. The sides are planned to be completed one after another. Today is the end of day three. In this case, assume that the sides have a finish-to-finish relationship instead of a finish-to-start relationship. Using the project status chart below calculate the formulas. What is Answer Activity Status End of day 3 Side 1 Complete, Spent $1000 Side 2 Complete, Spent $900 Side 3 50% done, Spent $1000 Side 4 75% done, Spent $300 Key S= Actual Start, F = Actual Finish, PS = Planned Start, PF = Planned Finish PV 3000 EV 3250 AC 3200 BAC 4000 CV 50 CPI SV 1.016 250 SPI 1.083 EAC 3937 ETC VAC TCPI PMP Bootcamp , Sohel Akhter (PMP, ISMS, CCNA) - sohel_akhter_pm@yahoo.com, 347-536-2811 737 63 .937 7 Project Management Professionals Hot Topics & Challenges - Cost Management Your project is running well. In the latest earned value report, you see the CPI=1.2, the SPI= 0.8, the PV= $600,000 and the SV = -$120,000. You can’t find the CV in the report, so you calculate it based on the info given. What is the CV? Key S= Actual Start, F = Actual Finish, PS = Planned Start, PF = Planned Finish PMP Bootcamp , Sohel Akhter (PMP, ISMS, CCNA) - sohel_akhter_pm@yahoo.com, 347-536-2811 8