Critical Path Method & Evm

CRITICAL PATH METHOD & EVM
CPM Special Attention

CPM Basics
• Critical Path:
– Critical Path is both the longest and the shortest – the
longest path in terms of accumulated durations through
the network diagram; and it is the shortest period of
time in which all project activities can be completed.
– Activities on the Critical Path must happen on time – the
delay of any activity on the Critical Path affects the
whole schedule.
– A project can have more than one Critical Path but they
will have the same duration.
Float
• Float (or Slack) is:
– How long an activity can be delayed or extended
• Types of Float:
– Total Float – Time an activity may be delayed or
extended without affecting the total project
duration, or violating a target finish date.
– Free Float – Time an activity may be delayed or
extended without affecting the start of any
succeeding activity.
– Project Float – The amount of time a project can be
delayed without impacting an imposed deadline.
Network Diagram Conventions
DURATION
The estimated time to
EARLY START (ES) undertake the activity EARLY FINISH (EF)
The earliest time that The earliest time that an
an activity can start Early Early activity can finish
Duration
according to the logical start finish according to the logical
constraints. constraints.
Name of activity
LATE START (LS) Late Total float Late LATE FINISH (LF)
The latest time that an start finish The latest time that an
activity can start according activity can finish
to the logical constraints, TOTAL FLOAT according to the logical
and without affecting the The time by which an activity constraints, and without
overall project duration. may be delayed without affecting the overall
affecting the overall project project duration.
duration.
Path Convergence ─ Forward Pass
Path Convergence − Forward
(Left to Right / ES and EF):
B and E flow Forward to C
Forward with More: Choice of Predecessor Early Finish
is between 3 and 9 − 9 is more. Therefore, Early Start of Successor is 10.
1 2 2 3 1 3 10 3 12
A B C
START FINISH
1 6 6 7 3 9 10 5 14
D E F
Path Convergence ─ Backward Pass
Path Convergence − Backward
(Right to Left / LS and LF):
C and F flow Backward to E
Backward with Less: Choice of Successor Late Start
is between 10 and 12 − 10 is less. Therefore, Late Finish of Predecessor is 9.
1 2 2 3 1 3 10 3 12
9
A 10 11
B 11 12 C 14
START FINISH
1 6 6 7 3 9 10 5 14
1 D 6 7 E 9 10 F 14
The Five-Step Approach ─ Summary
1. Determine the number of paths in the
network diagram.
2. Determine the Critical Path.
3. Complete the Critical Path.
4. For non-Critical Paths and activities,
do a Forward Pass and a Backward Pass.
5. For non-Critical Paths and activities,
determine Total Float and Free Float.
The Five-Step Approach ─ Detailed
1. Determine the number of paths in the
network diagram.
2. Determine the Critical Path.
– Add the durations of each path.
– Path with the highest number is the Critical
Path.
3. Complete the Critical Path.

– Do a Forward Pass, do a Backward Pass, and
determine Float.
Forward Pass
To Establish ES and EF
Activity
Early Early
Duration
Start (ES) (AD)
Finish (EF)
Activity F
Late Late
Float
Start (LS) Finish (LF)
Backward Pass
To Establish LS and LF
– How do you calculate the Forward Pass?

a. For the first activity on the Critical Path:
1) The Early Start (ES) is 1.
2) For the Early Finish (EF), add the activity
duration (AD), then subtract 1:
EF = ES + AD - 1
b. For all following activities:
1) The Early Start (ES) of each Successor Activity
is “the next number up” from the EF of
Predecessor Activity: S P
ES = EF + 1
2) For the Early Finish (EF), simply do as above ─

add the ES and the activity duration, then
EF = ES + AD - 1
subtract 1:
– How do you calculate the Backward Pass?
a. On the Critical Path, the LS and LF dates are the
same as the ES and EF dates.
b. In other words:
ES = LS and EF = LF
─ How do you determine Float on the Critical

Path? Normally, the Critical Path has zero float.
Critical Path (CP) Float = 0

CPM: The Five-Step Approach ─ Detailed
4. Do a Forward Pass – Non-Critical Paths.
a. First, begin with 1, add the duration of the
activity, and then subtract 1 to arrive at the EF:
EF = ES + AD - 1
b. And remember: The ES of the Successor

Activity is “the next number up” from the
EF of the Predecessor Activity:
ESS = EFP + 1
Do a Backward Pass – Non-Critical Paths.

a.Start with the Late Finish (LF) of the last activity, and remember: the
LF of the last non-critical activity is the same as the Finish (Early or
Late) of the last activity on the Critical Path:
Finish of Last CP Activity
= Late Finish of Last Non-CP Activity
b.For the activity’s Late Start (LS), subtract the activity’s duration from
the activity’s Late Finish, and then add 1:
LS = LF - AD + 1
c.And remember: The LF of each Predecessor activity is the “next

number down” from the LS of the Successor:
LFP = LSS - 1
CPM: The Five-Step Approach ─ Detailed
5. For non-Critical Paths and activities, determine

Float.
a. Subtract the EF from the LF:
Non-CP Float = LF - EF
b. But Remember:
1) For each activity not on Critical Path, LF ─ EF = Float,
as shown above.
2) But for all activities on the Critical Path, there is
normally zero Float.
c. Determine if you have Free Float.

1) All Float is Total Float, which is: The time an
activity may be delayed or extended without
affecting the total project duration.
2) Some Total Float is Free Float, which is: The time
an activity may be delayed or extended without
affecting the start of any Successor activity.
Free Float is “the gap minus 1” between the ES
of the Successor activity and the EF of the
Predecessor activity.
Free Float = ESS - EFP - 1
Control Costs
Tools & Techs
EVM Special Attention
• Forecasting
– An Estimate at Completion (EAC) may be calculated
that differs from the Budget at Completion (BAC).
– EACs are of four types, and may:
1. Assume that future work will conform to the
budgeted rate.
2. Assume past performance will continue to the end.
3. Combine past performance with a Bottom-Up
Estimate for the remaining work.
4. Combine CPI and SPI values.
─ Forecasting is covered in Special Attention section.
Control Costs
Tools & Techs
• To-Complete Performance Indexes
– In essence, the ratio of the cost to do the work that
remains to the Cost Baseline that remains.
– A measure of the cost performance necessary to
attain, with existing resources, a management goal,
either the:
 BAC – the original Cost Baseline (with approved
changes, of course), or
 EAC – in essence, a new Cost Baseline.
─ To-Complete Performance Indexes are covered in
the Special Attention section of this process.
Control Costs
Tools & Techs
• Performance Reviews
– Performance Reviews measure, compare, and
analyze cost performance over time. If EVM is used,
the information below is derived:
 Variance Analysis, with focus on Cost Variance (CV),
Schedule Variance (SV), Variance at Completion (VAC).
 Trend Analysis, to examine project performance over

time to determine whether performance is improving
or deteriorating.
 Earned Value Performance, to compare the
Performance Measurement Baseline to actual
schedule and cost performance
Control Costs
Tools & Techs
• Project Management Software

─ In which process did this first appear as a
Tool/Technique?
─ Name one example of a “Project Management
Software” application.
• Reserve Analysis
─ What are the two types of “reserves”?
─ Which is for “known unknown,” and which is for
“unknown unknowns”?
─ Which may be included in the Cost Baseline, and
which in the Project Budget?
Control Costs
Outputs
• Work Performance Information
─ The data that, first, has been collected from the
Monitor & Control Process Group processes,
analyzed in context – and then integrated, based
on relationships, across all areas of the project:
Work Performance Data – but transformed into
Work Performance Information!
─ Work Performance Information may be “a sound
foundation for project decisions” – Work
Performance Data cannot.
Control Costs
Outputs – Work Performance Information
─ Examples include: deliverables status,
implementation status (as related to Change
Requests), forecasted Estimates to Complete
(ETC).
─ KEEP IN MIND: The difference between Work
Performance Information ─ and Work
Performance Data and Work Performance
Reports. See PMBOK 467
Control Costs
Outputs
• Cost Forecasts
─ A calculated EAC estimate or a Bottom-Up
estimate – documented and communicated to
Stakeholders!
• Change Requests
─ Who can submit a Change Request?
─ How must they be submitted?
─ A Change Request might lead to a Corrective
Action. How might you define a Corrective
Action?
Control Costs
Outputs
• PMP Updates
─ In this process, updates may be made to:
 Cost Baseline and the Cost Management Plan
• Project Document Updates
 Activity Cost Estimates, Basis of Estimates (BOE).
• OPA Updates
 Financial Databases; Causes of Variances;
Corrective Actions selected – and the reasons for
selecting them; and Other Lessons Learned.
Control Costs
Outputs
• OPA Updates
 Financial Databases; Causes of Variances;
Corrective Actions selected – and the reasons for
selecting them; and Other Lessons Learned.
EVM─ In a Nutshell
• Four Data Points.

• Three Variance Calculations.
• Two past-oriented Performance Indices.
• Two Forecasting Calculations…
─ …that is, Two Default Forecasting Calculations,
and six “variations on a theme”!
• Two future-oriented Performance Indices
29
EVM ─ In a Nutshell
– Do you remember…
EV – PV – AC – BAC ?
– You must know at least two of these Data Points
to solve any EVM problem.
– Which ones you must know depend on the EVM
calculation being asked.
30
31
Four Data Points
• Earned Value (EV)
– Budgeted Cost of Work Performed (BCWP).
– You can easily figure this out from the facts of the
situation.
– EV/BCWP is the money value of where you really
are at this date on your schedule – the money
value of the scheduled Activities you have really
completed.
– Not necessarily the scheduled Activities you had
planned to be completed up to this date.
32
Four Data Points
• Earned Value (EV)
– EV = BCWP. How to Remember: “E” for Earned.
“P” for Performed. Earned and Performed are
closely related in meaning.
– EV answers the question: What is the money
value of where I really am on this date?
33
Four Data Points
• Planned Value (PV)
– Budgeted Cost of Work Scheduled (BCWS).
– You already know the PV from your planning
documents.
– PV/BCWS is the money value of where you
planned to be at this date on your schedule – the
money value of the scheduled Activities you had
planned to be completed by this date.
34
Four Data Points
• Planned Value (PV)

– PV = BCWS. How to Remember: “P” for Planned.
“S” for Scheduled. Planned and Scheduled –
closely related in meaning.
– PV answers the question: What is the money
value of where I planned to be on this date?
35
Four Data Points
• Actual Cost (AC)

– Actual Cost of Work Performed (ACWP).
– You already know the AC from your cost
accounting system.
– AC/ACWP is how much my team has spent to date
on the work that has been performed.
– Not necessarily how much money you planned to
have spent up to this date on the schedule.
36
Four Data Points
• Actual Cost (AC)

– AC = ACWP. How to Remember: “A” for Actual (in AC)
and “A” for Actual (in ACWP).
– AC answers the question: How much of the original,
planned Cost Baseline have I spent to date?
• Budget at Completion (BAC)
– Your Cost Baseline!
– Your Cost Performance Baseline.
– BAC answers the question: How much is the original,
planned Cost Baseline?
37
Four Data Points
• Budget At Completion (BAC)
– How much was originally planned for this project
to cost – including approved changes.
– Known by many names:
 Cost Performance Baseline
 Cost Baseline
 Performance Measurement Baseline (PMB)
 Budget at Completion (BAC)
38
Variance Calculations
1. Cost Variance (CV)

─ Answers the question: At this point in time, am I
under the Cost Baseline, or over?
─ The difference between the value of the work we have
performed and the money we have actually spent.
CV = EV – AC
CV > 0 = Under baseline.

CV < 0 = Over baseline.
39
CV = EV ─ AC
CV = 3,750 ─ 5,000
CV = ─ 250
Version 0.1 40
2. Schedule Variance (SV)

─ Answers the question: At this point in time, am I
ahead of schedule, or behind? SV is the
difference between the value of the work we’ve
completed and the value of the work we had
planned to be completed.
SV = EV – PV
SV > 0 = Ahead of schedule.
SV < 0 = Behind schedule.
41
SV = EV ─ PV
SV = 3,750 ─ 2,500
SV = +1,250
Version 0.1 42
3. Variance at Completion (VAC)

─ Answers the question: At the end of the project, will I
be under the Cost Baseline, or over it?
─ VAC is the difference between our original Cost
Baseline and the “new baseline.”
VAC = BAC – EAC
VAC > 0 = Under baseline.

VAC < 0 = Over baseline. 43
An Estimate at Completion (EAC) may be calculated that differs
from the Budget at Completion (BAC).
EACs are of four types, and may:
1. Assume that future work will conform to the budgeted
rate.
2. Assume past performance will continue to the end.
3. Combine past performance with a Bottom-Up Estimate
for the remaining work.
4. Combine CPI and SPI values.
Performance Indexes ─ Past
1. Cost Performance Index (CPI)
– Answers the question: How well is the project
using money?
CPI = EV / AC
CPI > 1 = Under baseline.

CPI < 1 = Over baseline.
45
CPI = EV / AC
CPI = 3,750 / 5,000
CPI = 0.75
Version 0.1 46
2. Schedule Performance Index (SPI)

– Answers the question: How well is the project
using time?
SPI = EV / PV
SPI > 1 = Ahead of schedule.

SPI < 1 = Behind schedule.
47
SPI = EV / PV
SPI = 3,750 / 2,500
SPI = 1.5
Version 0.1 48
Forecast Calculations: EAC and ETC
REPORTING
Good News − Bad News How much the team will
Day need to complete the
project from this day to
the end.
EAC and ETC,

the forecast calculations
Estimate to Complete (ETC)
Estimate at Completion (EAC)
Project Project
Start Finish
What the new

Cost Baseline is.
Version 0.1 49
Forecast Calculation: ETC
1. Estimate to Complete (ETC)

─ ETC answers the question: How much money do
I need to complete the project from this point to
the end of the project?
─ ETC forecasts remaining project costs based on
the BAC (BUDGET AT COMPLETION) (ETC1) or…
1
ETC = (BAC – EV) / CPI
─ …on an EAC (ETC2), a new Cost Baseline.
50
ETC1 = (BAC – EV) / CPI

ETC = (8,500 – 3,750) / 0.75
1
= 4,750 / 0.75
= 3,947
Version 0.1 51
─ If the ETC is based on a new Cost Baseline…
2 ?
ETC = EAC – AC
─ …the decision is: Which EAC is to be used?
Version 0.1 52
Forecast Calculation: EAC
2. Estimate at Completion (EAC)

─ EAC forecasts final project cost total. (EAC is
really your new Cost Baseline.)
─ EAC answers the questions: How much will the
entire project cost now? What is my new Cost
Baseline?
There are four EAC calculations in PMBOK.
─ Use depends on scenario.
53
EAC1:
─ Accepts performance up to this point in the
project – as indicated by the AC – but assumes
performance will be at the original BAC-
budgeted rate from this point to the end.
1
EAC = AC + (BAC – EV)
54
EAC1 = AC + (BAC – EV)
EAC = 5,000 + (8,500 – 3,750)

1
= 5,000 + 4,750
= 9,750
Version 0.1 55
EAC2:
─ Assumes that the performance up to this point
in the project – as indicated by the CPI – will
continue through project to the end.
2
EAC = BAC / CPI
56
EAC2 = BAC / CPI

(The default formula.)
EAC = 8,500 / 0.75

2
= 11,333
Version 0.1 57
EAC3:
─ Accepts negative cost performance up to this
point in the project but insists that project hit a
firm completion date.
3 (BAC – EV)
EAC = AC +
CPI x SPI
58
EAC3 = AC +
( [BAC – EV] ÷ [CPI x SPI] )
3
EAC = 5,000 +
( [8,500 – 3,750] ÷ [0.75 x 1.5] )
EAC3 = 5,000 + (4,750 ÷ 1.125)
= 9,222
Version 0.1 59
EAC4:
─ Requires a complete redo of ETC.
─ Builds on actuals costs and team’s experience up
to this point.
─ Therefore, accurate and most common ─ but
expensive and time-consuming!
4
EAC = AC + Bottom-Up ETC
60
Performance Indexes ─ Future
1. To-Complete Performance Index1 (TCPI1)

– TCPI based on BAC.
– The forecast of how efficient future project
performance must be in order to conform to the
planned BAC for the project.
1
TCPI = (BAC – EV) / (BAC – AC)
61
2. To-Complete Performance Index2 (TCPI2)

– TCPI based on EAC.
– The forecast of how efficient future project
performance must be in order to conform to the
new EAC for the project.
2
TCPI = (BAC – EV) / (EAC – AC)
– Result depends on which EAC is used.
62
• TCPI1 and TCPI2 – When To Use

– TCPI1: Use this TCPI calculation if your Project
Sponsor wants you to continue using the planned
BAC as the Cost Baseline.
– TCPI2: Use this TCPI calculation if your Project
Sponsor wants you to stop using the BAC as the
Cost Baseline and, instead, start using the new
EAC as the Cost Baseline.
63

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CRITICAL PATH METHOD & EVM

CPM Special Attention

3. Complete the Critical Path.

– How do you calculate the Forward Pass?

2) For the Early Finish (EF), simply do as above ─

─ How do you determine Float on the Critical

Critical Path (CP) Float = 0

b. And remember: The ES of the Successor

Do a Backward Pass – Non-Critical Paths.

c.And remember: The LF of each Predecessor activity is the “next

5. For non-Critical Paths and activities, determine

c. Determine if you have Free Float.

 Trend Analysis, to examine project performance over

• Project Management Software

• Four Data Points.

• Planned Value (PV)

• Actual Cost (AC)

• Actual Cost (AC)

1. Cost Variance (CV)

CV > 0 = Under baseline.

2. Schedule Variance (SV)

3. Variance at Completion (VAC)

VAC = BAC – EAC

VAC > 0 = Under baseline.

CPI > 1 = Under baseline.

2. Schedule Performance Index (SPI)

SPI > 1 = Ahead of schedule.

EAC and ETC,

Estimate at Completion (EAC)

What the new

1. Estimate to Complete (ETC)

ETC1 = (BAC – EV) / CPI

─ …the decision is: Which EAC is to be used?

2. Estimate at Completion (EAC)

EAC1 = AC + (BAC – EV)

EAC = 5,000 + (8,500 – 3,750)

EAC2 = BAC / CPI

EAC = 8,500 / 0.75

1. To-Complete Performance Index1 (TCPI1)

2. To-Complete Performance Index2 (TCPI2)

• TCPI1 and TCPI2 – When To Use

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