YRahmawati-MP-MB ITS-W11 PDF

4/20/2017
Department of Business Management

Institut Teknologi Sepuluh Nopember
11th week course material:

“Project Control: Measurement & Evaluation”
Dr. Yani Rahmawati

yanirahmawati@mb.its.ac.id
Contents
A. Project control process

B. Monitoring time performance
C. Earned value cost/schedule system
D. Status report
E. Indexes to monitor progress
F. Forecasting final project cost
YRahmawati/ProjectManagement-11thWeekLecture/MB-ITS 2017
YRahmawati/ProjectManagement
11thWeekLecture/MB-ITS 2017 1
4/20/2017
Introduction:
Why monitoring the project is necessary...
Some questions appear...

 What is the current status of the project in terms of schedule and
cost?
 How much will it cost to complete the project?
 Are there potential problems that need to be addressed now?
 What, who, and where are the causes of schedule overruns?
 What did we get for the dollar spent?
 If there is a cost overrun midway in the project, can we forecast the
overrun at completion?
A. Project Control Process

1. Definition  Control is the process of comparing actual
2. The Process performance against plan to identify deviations,
evaluate possible alternative courses of actions, and
take appropriate corrective action.
Controlling Project  No changes from customer

Comparing the activities’  No lateness of works
 Resources (people, materi-
performances with the als, equipments) are
project plans (project’s available as scheduled
schedule and budget)
Continue activities
Comparing the plan Finding MATCH (Compatibility)
as project plans
with the realization
Take actions to adjust
(actual conditions) Finding INCOMPATIBILITY with schedule:
 Changes from customer a. Add more well-
 Lateness of works suited resources
 Unavailability of resources (extra budget)
(people, materials, b. Extend the project
equipments) duration
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A. Project Control Process

1. Definition 1. Setting Baseline Plan
2. The Process  Equips the performance measurement.
 The baseline plan contains cost, duration, time-sequence,
resource scheduling decisions.
Controlling Project 2. Measuring Progress & Performance

 Qualitative measurement: meets customer technical specifi-
cation & product function (determined on-site inspection)
 Quantitative measurement: measures time performance
(schedule) and performance against budget
3. Comparing Plan Against Actual

 Monitor & measure project status  identify (early detect)
deviations from plan unsuitable budget & schedule of works (late/lead) deter-
mine supportive actions to bring project activities on track.
corrective actions 4. Taking Action

 Realize/implement actions plans to take back the project in
line (on track).
B. Monitoring Time Performance

1. Comprehension  Major goal of progress reporting is to catch any
2. Tracking Gantt Chart negative variances from plan as early as possible to
determine if corrective action is necessary.
3. Control Chart
 Monitoring time performance is relatively easy
comparing the actual performance with

project network schedule
 Gantt Charts (bar charts) and Control Charts are the

typical tools used for communicating project
schedule status.
Easy-to-understand visual
formats make them favorable to
be used to communicate project
schedule status
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1. Comprehension The figure presents baseline Gantt chart and
2. Tracking Gantt Chart tracking Gantt chart for project at the end of
period 6.
3. Control Chart
The solid bar below the original schedule bar
represents the actual start and finish times
for completed activities or any portion of an
activity completed (see activities A, B, C, D, and
E).
For example, the actual start time for activity C
is period 2; the actual finish time is period 5; the
actual duration is three time units, rather than
four scheduled time periods.
Activities in process show the actual start time;
the extended bar represents the expected
remaining duration (see activities D and E).
The remaining duration for activities D and E
are shown with the hatched bar. Activity F,
Example of baseline Gantt Chart which has not started, shows a revised
Taken from Larson & Gray (2014), pp. 460 estimated actual start (9) and finish time (13).

1. Comprehension Note how activities can have durations that
2. Tracking Gantt Chart differ from the original schedule, as in
activities C, D, and E.
3. Control Chart
 Either the activity is complete and the actual is
known, or new information suggests the
estimate of time be revised and reflected in the
status report.
Activity D’s revised duration results in an
expected delay in the start of activity F.
The project is now estimated to be completed
one period later than planned.
Although sometimes the Gantt chart does not
show dependencies, when it is used with a
network, the dependencies are easily identified
if tracing is needed.
Example of baseline Gantt Chart

Taken from Larson & Gray (2014), pp. 460
4/20/2017

1. Comprehension  This chart is another tool used to monitor past pro-
ject schedule performance and current performance
2. Tracking Gantt Chart and to estimate future schedule trends.
3. Control Chart  The figure illustrates project control chart.
 The chart is used to plot the difference between the
scheduled time on the critical path at the report
date with the actual point on the critical path.
 Although the figure shows the project was behind
early in the project, the plot suggests corrective
action brought the project back on track.
 If the trend is sustained, the project will come in
ahead of schedule. Because the activity scheduled
times represent average durations, four observations
trending in one direction indicate there is a very high
probability that there is an identifiable cause.
 Control chart trends are very useful for giving
warning of potential problems so appropriate action
can be taken if necessary.

1. Comprehension  Control charts are also frequently used to monitor
progress toward milestones, which mark events and
2. Tracking Gantt Chart as such have zero duration.
3. Control Chart  Milestones are significant project events that mark
major accomplishments.
 To be effective, milestones need to be concrete,
specific, measurable events.
 Milestones must be easily identifiable by all project
stakeholders.
 Critical merge activities are good candidates for
milestones.
 Control charts very similar to the example shown in
the figure are often used to record and communicate
project progress toward a milestone.

4/20/2017

1. Comprehension  Schedule slippage of one day seldom receives a
great deal of attention. However, one day here and
2. Tracking Gantt Chart another there soon add up to large delay problems. It
3. Control Chart is well known that once work gets behind, it has a
tendency to stay behind because it is difficult to
make up.
 Examples of causes of schedule slippage are
unreliable time estimates, minor redesign, scope
creep, and unavailable resources.
 Using slack early in a path may create a problem for
someone responsible for a later activity; because
flexibility and potential opportunities are reduced.
 For these reasons, having frequent and clearly defined
monitoring points for work packages can significantly
improve the chances of catching schedule slippage
early. Early detection reduces the chance of small
delays growing to large ones and thereby reducing
opportunities for corrective action to get back on
schedule.
C. Earned Value Cost/Schedule System

1. Description  The main purpose is to track project, in which not only
2. Steps for Integrated focus on the project time.
System  The earned value system starts with the time-phased
3. Percent Complete costs that provide the project budget baseline, which is
Rule called the planned budgeted value of the work scheduled
4. Cost Included in (PV).
Baseline  Given this time-phased baseline, comparisons are made
5. Methods of Variance with actual and planned schedule and costs using earned
Analysis value.
6. EV Rules  The earned value approach provides the missing links not
found in conventional cost-budget systems. At any point
in time, a status report can be developed for the project
4/20/2017

1. Description
2. Steps for Integrated
System
3. Percent Complete
Rule
4. Cost Included in
Baseline
5. Methods of Variance
Analysis
6. EV Rules
Glossary of terms (acronyms)


1. Description
System
1 2 3 4 5
•Scope •Schedule • Using work •Actual costs for •Schedule
Collect actual costs
Define the work using WBS
Develop a time-phase budget

Develop work & resource schedule
Compute schedule variance & Cost Variance
•Work packages resources to packages the work variance (SV =

•Deliverables activities included in an performed EV - PV)
•Time-phase activity •These costs will •cost variance
•Organization
units work packages • The be called actual (CV = EV - AC)
into a network cumulative cost of the •Prepare
•Resources
values of these work hierarchical
•Budgets for budgets will completed status reports
each work become the (AC). for each level
package baseline and •Collect percent of
will be called complete & management
PV multiply with •Reports should
original budget include project
for value of the rollups by
work actually organization
completed unit &
(earned value) deliverables
Involves developing actual time performance should be checked

documents against the project network schedule
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1. Description
System
3. Percent Complete
Rule
4. Cost Included in
Baseline
Analysis
6. EV Rules
 Control data can be traced
backward to specific deliverables
and organization unit responsible.
 The major reasons for creating a Examples of integrated information system
baseline are to monitor and report Taken from Larson & Gray (2014), pp. 464
progress and to estimate cash
flow.
 Therefore, it is crucial to integrate
the baseline with the performance
measurement system YRahmawati/ProjectManagement-11thWeekLecture/MB-ITS 2017

1. Description
System
3. Percent Complete
Rule
4. Cost Included in
Baseline
Analysis
6. EV Rules
 Costs are placed (time-phased) in
the baseline exactly as managers
expect them to be “earned.”
 This approach facilitates tracking Examples of integrated information system
costs to their point of origin. Taken from Larson & Gray (2014), pp. 464
 In practice, the integration is
accomplished by using the same
rules in assigning costs to the
baseline as those used to measure
progress using earned value
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1. Description PERCENT COMPLETE RULE
2. Steps for Integrated  This rule is the heart of any earned value system.
System
 The best method for assigning costs to the baseline under
3. Percent Complete this rule is to establish frequent checkpoints over the
Rule duration of the work package and assign completion
4. Cost Included in percentages in dollar terms.
Baseline
Analysis
6. EV Rules

1. Description  The baseline (PV) is the sum of the cost accounts, and
2. Steps for Integrated each cost account is the sum of the work packages in the
System cost account.
3. Percent Complete  Three direct costs are typically included in baselines: labor,
Rule equipment, and materials.
4. Cost Included in  The reason: these are direct costs the project manager can
Baseline control.
5. Methods of Variance  Overhead costs and profit are typically added later by
Analysis accounting processes.
6. EV Rules  Most work packages should be discrete, of short time span,
and have measurable outputs.
 If materials and/or equipment are a significant portion of
the cost of work packages, they can be budgeted in
separate work packages and cost accounts.
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1. Description  Generally the method for measuring accomplishments
2. Steps for Integrated centers on two key computations:
System 1. Comparing earned value (EV) with the expected
3. Percent Complete schedule value (PV).
Rule  Scheduling Performance Index (SPI)
4. Cost Included in 2. Comparing earned value (EV) with the actual costs (AC).
Baseline
 Cost Performance Index (CPI)
Analysis  Assessing the current status of a project using the earned
6. EV Rules value cost/schedule system requires three data elements—
planned cost of the work scheduled (PV), budgeted cost of
the work completed (EV), and actual cost of the work
completed (AC).
 From these data the schedule variance (SV) and cost
variance (CV) are computed each reporting period.
 A positive variance indicates a desirable condition, while a
negative variance suggests problems or changes that
have taken place.

1. Description COST VARIANCE (CV)
2. Steps for Integrated  Cost variance tells us if the work accomplished costs
System more or less than was planned at any point over the life of
3. Percent Complete the project.
Rule  Positive CV shows that the actual project cost (particular-
4. Cost Included in ly in each period of project monitoring) is not exceeded
Baseline the budget plan.
5. Methods of Variance  Negative CV shows that the actual project cost is beyond
Analysis or larger than the budget plan.
6. EV Rules
 Equation:
CV = EV – AC
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1. Description SCHEDULE VARIANCE (SV)
2. Steps for Integrated  Schedule variance presents an overall assessment of all
System work packages in the project scheduled to date.
3. Percent Complete  It is important to note schedule variance contains no
Rule critical path information. Schedule variance measures
4. Cost Included in progress in dollars rather than time units. Therefore, it is
Baseline unlikely that any translation of dollars to time will yield
5. Methods of Variance accurate information telling if any milestone or critical path
Analysis is early, on time, or late (even if the project occurs exactly
as planned).
6. EV Rules
 The only accurate method for determining the true time
progress of the project is to compare the project
network schedule against the actual network schedule
to measure if the project is on time.
 Equation:
SV = EV – PV

Taken from Larson & Gray (2014)
1. Description
System  The “today” label
3. Percent Complete marks the report date
(time period 25) of
Rule
where the project has
4. Cost Included in been and where it is
Baseline going.
5. Methods of Variance  Because our system is
hierarchical, graphs of
Analysis the same form can be
6. EV Rules developed for different
levels of management.
Interpretation:
 The top line represents the actual costs (AC) incurred for the project work to date.
 The middle line is the baseline (PV) and ends at the scheduled project duration (45).
 The bottom line is the budgeted value of the work actually completed to date (EV) or the earned value.
 The dotted line extending the actual costs from the report date to the new estimated completion date
represents revised estimates of expected actual costs; that is, additional information suggests the costs at
completion of the project will differ from what was planned. Note that the project duration has been
extended and the variance at completion (VAC) is negative (VAC = BAC – EAC).
4/20/2017

1. Description Cost Variance and Schedule Variance at Any Given Data
2. Steps for Integrated of AC, PV, EV
System
3. Percent Complete
Rule
4. Cost Included in
Baseline
Analysis
6. EV Rules

1. Description ADDITIONAL EARNED VALUE RULES
2. Steps for Integrated  Although the percent complete rule is the most-used
System method of assigning budgets to baselines and for cost
3. Percent Complete control, there are additional rules that are very useful for
Rule reducing the overhead costs of collecting detailed data on
4. Cost Included in percent complete of individual work packages.
Baseline  An additional advantage of these rules, of course, is that
5. Methods of Variance they remove the often subjective judgments of the
Analysis contractors or estimators as to how much work has actually
been completed.
6. EV Rules
 The first two rules are typically used for short-duration
activities and/or small-cost activities. The third rule uses
gates before the total budgeted value of an activity can be
claimed.
4/20/2017

1. Description THE EARNED VALUE RULES
2. Steps for Integrated 1. 0/100 rule
System
This rule assumes credit is earned for having performed the
3. Percent Complete
work once it is completed. Hence, 100 percent of the
Rule budget is earned when the work package is completed.
4. Cost Included in This rule is used for work packages having very short
Baseline durations.
Analysis 2. 50/50 rule
6. EV Rules This approach allows 50 percent of the value of the work
package budget to be earned when it is started and 50
percent to be earned when the package is completed. This
rule is popular for work packages of short duration and
small total costs.

1. Description THE EARNED VALUE RULES
2. Steps for Integrated 3. Percent complete with weighted monitoring
System gates
3. Percent Complete
Rule  This more recent rule uses subjective estimated percent
complete in combination with hard, tangible
4. Cost Included in
monitoring points.
Baseline
5. Methods of Variance  This method works well on long-duration activities that
can be broken into short, discrete work packages of no
Analysis
more than one or two report periods. These discrete
6. EV Rules packages limit the subjective estimated values.
 For example, assume a long-duration activity with a
total budget of $500. The activity is cut into three
sequentially discrete packages with monitoring gates
representing 30, 50, and 100 percent of the total
budget. The earned amount at each monitoring gate
cannot exceed $150, $250, and $500. These hard
monitoring points serve as a check on overly optimistic
estimates.
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D. Status Report
Report Models Model 1: WBS with Cost Accounts
D. Status Report
Report Models
Model 2:
Project Baseline Gantt
Chart
Model 3:
Project Baseline Budget
($000)
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D. Status Report
Report Models
Model 4:
Status Report (Period 1-7)
D. Status Report
Report Models
Model 5:
Summary Graph
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D. Status Report
Report Models
Model 6:
Gantt Chart Showing Status
E. Indexes to Monitor Progress

1. Performance Indexes 1. COST PERFORMANCE INDEX (CPI)
2. Project Percent  Its purpose is to measure cost efficiency of the work
Compete Indexes accomplished to date.
 Equation:
Interpretation of indexes: CPI = EV/AC

2. SCHEDULING PERFORMANCE INDEX (SPI)
 Its purpose is to measure of scheduling efficiency to
date.
 Equation:
SPI = EV/PV
4/20/2017
E. Indexes to Monitor Progress

1. Performance Indexes 1. PERCENT COMPETE INDEX (PCIB)
2. Project Percent  Indicates the work accomplished percentage of the
Compete Indexes total budgeted (BAC) dollars to date.
 Equation:
Note:
PCIB = EV/BAC
BAC = Budgeted cost of
completion (total budget/ 2. SCHEDULING PERFORMANCE INDEX (SPI)
cost of project)
EAC = Estimated Cost at  Views percent complete in terms of actual dollars
Completion spent to accomplish the work to date and the actual
expected dollars for the completed project (EAC).
 Equation:
PCIC = AC/EAC
F. Forecasting Final Project Cost

Methods for Forecasting  The first method allows experts in the field to change
original baseline durations and costs because new
information tells them the original estimates are not
There are basically two accurate.
methods used to revise
 EACre is used to represent revisions made by experts and
estimates of future project
practitioners associated with the project. The revisions
costs. In many cases both
from project experts are almost always used on smaller
methods are used on specific
projects.
segments of the project.
 Equations:
EACre = AC + ETCre
Note:
 EACre = revised estimated cost at completion
 AC = cumulative actual cost of work completed to date.
 ETCre = revised estimated cost to complete remaining work
4/20/2017

Methods for Forecasting  A second method is used in large projects where the
original budget is less reliable.
 This method uses the actual costs to date plus an
There are basically two
efficiency index (CPI = EV/AC) applied to the remaining
project work.
costs. In many cases both  When the estimate for completion uses the CPI as the basis
methods are used on specific for forecasting cost at completion, the acronym EACf is
segments of the project. used.
 Equations:
Note:
 EACf = estimated total cost at completion
 ETC = estimated cost to complete remaining work
 AC = cumulative actual cost of work completed to date
 CPI = cumulative cost index to date
 BAC = total budget of the baseline
 EV = cumulative budgeted cost of work completed to date

Methods for Forecasting  Another popular index is the To Complete Performance
Index (TCPI), which is useful as a supplement to the
estimate at complete (EACf) computation.
There are basically two
 This ratio measures the amount of value each remaining
dollar in the budget must earn to stay within the budget.
costs. In many cases both
methods are used on specific  Equations:
segments of the project.
Note:
 TCPI = to complete performance index
 AC = cumulative actual cost of work completed to date
 BAC = total budget of the baseline
 EV = cumulative budgeted cost of work completed to date
4/20/2017
References
Most of materials in this lecture are adopted from:

 Larson, E.W., and Gray, C.F., (2014), Project Management: The
Managerial Process, 6th Ed., New York: McGraw-Hill Education.

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4/20/2017

Department of Business Management

11th week course material:

Dr. Yani Rahmawati

A. Project control process

Some questions appear...

A. Project Control Process

Controlling Project  No changes from customer

A. Project Control Process

Controlling Project 2. Measuring Progress & Performance

3. Comparing Plan Against Actual

corrective actions 4. Taking Action

B. Monitoring Time Performance

comparing the actual performance with

 Gantt Charts (bar charts) and Control Charts are the

B. Monitoring Time Performance

B. Monitoring Time Performance

Example of baseline Gantt Chart

B. Monitoring Time Performance

B. Monitoring Time Performance

Example of baseline Gantt Chart

B. Monitoring Time Performance

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

Glossary of terms (acronyms)

C. Earned Value Cost/Schedule System

Develop a time-phase budget

Compute schedule variance & Cost Variance

•Work packages resources to packages the work variance (SV =

Involves developing actual time performance should be checked

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

Taken from Larson & Gray (2014), pp. 467

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

C. Earned Value Cost/Schedule System

Taken from Larson & Gray (2014), pp. 468

E. Indexes to Monitor Progress

Interpretation of indexes: CPI = EV/AC

E. Indexes to Monitor Progress

F. Forecasting Final Project Cost

F. Forecasting Final Project Cost

F. Forecasting Final Project Cost

Most of materials in this lecture are adopted from:

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