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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