# Introducing Project Cost Management - Measuring Project Performance

## 15 important questions on Introducing Project Cost Management - Measuring Project Performance

### What is the basic feature of Earned Value Management?

### What three formulas are important for EVM?

- Planned Value - the work scheduled and the budget allocated for to accomplish that work (aka performance measurement baseline)
- Earned Value - the work completed to date and the authorized budget for that work (EV= % complete * BAC)
- Actual Cost - the actual amount of monies the project has required to date

### How do we know whether there will be a budget variance at the end of the project?

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### How do we calculate cost variance (CV)?

### How do we calculate schedule variance (SV)?

### What is the CPI and how do we calculate the CPI?

- It shows the amount of work the project is completing per dolar spent on the project. CPI = EV / AC
- It shows how the project costs are performing.

### What is the EAC? And how do we calculate the EAC?

EAC = BAC / CPI

(EAC = BAC/ CPI = BAC / (EV/AC) = BAC * AC / EV = BAC * AC / BAC * % Compl = AC / % Compl. )

### What is a different way of calculating the EAC, beyond the CPI?

- By looking at the actual costs, the budget at completion and the earned value
- EAC = AC + BAC - EV , where BAC - EV is the expected costs for the remainder of the project

### When the project has large swings on the cost and schedule variances, what would be the best way to calculate the EAC?

- By the windy formula EAC = AC + (BAC - EV) / (CPI x SPI)
- Incorporating both the SPI and CPI to calculate the EAC

### What value do we use for accounting for flawed estimates?

### What do we mean with sunk costs?

### What value do we use for ETC when accounting for anomalies?

- When events happen for which we don't expect them to happen again, the ETC should be calculated by ETC = BAC - EV

### What value do we use for ETC when accounting for typical variances?

- When existing variances in the project are expected to be typical of the remaining variances in the project
- ETC in these instances needs to be calculated by:
- ETC = (BAV - EV) / CPI

### What do we mean with the TCPI? what is the formula?

- The To Complete Performance Index
- It forecasts the likelihood of a project to achieve it's goals based on what's happening in the project right now
- If you want to check whether your project can meet the budget at completion: TCPI = (BAC - EV) / (BAC - AC)
- If you want to check whether your project can meet the newly created estimate at completion: TCPI = (BAC - EV) / (EAC -AC)
- Any result greater than 1 means that you have to more efficient than you planned to achieve the BAC or EAC.
- <1 is good
- > 1 is worriesome

### What are the 5 EVM formula rules?

- Always start with the EVM
- Variance means subtraction
- Index means division
- Less than 1 is bad in an index (apart from the TCPI)
- Negative is bad in a variance

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