Transcript Stage 4: Termination and Closure

Stages 3 and 4:
Execution and Control
Earned Value Analysis
MS Project and EVA
Goldratt’s Critical Chain
This is the third and
fourth stages
• Of the….
• What were the first two stages?
What were the deliverables
of the first stage?
•
•
•
•
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Project manager selected
Requirements document
Project charter
Project team selected
Signature signoffs by the
stakeholders
What were the deliverables
of the second stage?
• Project plan
• Project budget
– The whole point of the plan and
budget is to GUIDE EXECUTION
• Signature signoffs by the
stakeholders attached to the
project plan and budget
Now what happens?
THIRD STAGE BEGINS!!
• Project ramps up (begins)
• Project executes in
conformance to plan and budget
• Execution is tracked relative to
plan and
Here is where ______
___________comes into
play
Freeze Requirements???
• What are the PROS?
• What are the CONS?
Freeze those
requirements!!
– Late-project creeping requirements
are the most common source of
cost and schedule overruns
– Late-project creeping requirements
are a major factor in project
cancellations
Rather than freezing,
use some kind of
change control system
• Allows for some changes to
happen, depending upon
contractual considerations
• Allows for the system to reject
some proposed changes
• Use of a CCB (Change Control
Board) is considered a modern
BEST PRACTICE
Forces pushing for lateproject requirements
change
• Competition intros new version of
competitive product with unanticipated
KILLER features
• New work is discovered late in the project
• “Wouldn’t It be Great if…” scenarios
happen
• End-users want changes because they
now know more about their requirements
than they did 18 months ago
• Developers want changes because they
have a great emotional and intellectual
investment in all of the system’s details
In the face of all of the
change requests, what
is the PM’s
responsibility?
• Let the CCB do its work
• Make sure the impact in terms
of additional cost and duration
gets communicated to all
stakeholders
Knowledge Areas and
Processes used in Stage III
• Integration management:
– Direct and manage project execution;
Perform integrated change control;
Monitor and control project work
• Scope management:
– Control scope
• Time management:
– Control schedule
• Cost management:
– Control costs
• Quality management:
– Perform quality control
Processes utilized in
Stage III, Continued
• Communication management:
– Distribute information; Report
performance
• Risk management:
– Monitor and control risks
• Procurement management:
– Administer procurements
Controlling Changes to
the Project Schedule
• Perform reality checks on
schedules
• Allow for contingencies
• Don’t plan for everyone to work at
100% capacity all the time
• Hold progress meetings with
stakeholders and be clear and
honest in communicating
schedule issues
Cost Control
• Project cost control includes
– monitoring cost performance
– informing project stakeholders of
authorized changes to the project
that will affect costs
• Earned value analysis is an
important tool for cost control
Earned Value Analysis-EVA
• When you complete an activity, you
earn the budgeted value of that
activity
• Earned Value (EV) = Budgeted Cost
of Work Performed (BCWP)
Why Earned Value
Analysis??
• You can’t tell what your true
cost variance is because you
don’t know where you are
relative to schedule
– Suppose you are behind schedule
but also you have spent less than
what the schedule has called for.
Are you really under budget?
Budgeted Cost of Work
Performed (BCWP) =
Earned Value = EV
• Defined as the monetary value
of the work actually
accomplished within the control
period.
BCWP
• Suppose $100,000 has been
budgeted for a task and the task
is 50% complete
– Then its earned value is ?
Budgeted Cost of Work
Scheduled (BCWS) =
Planned Value = PV
• Defined as the value of the work
scheduled to be accomplished in a
given period of time
• This will vary with the current
time.
BCWS (also called
Planned Value, PV)
• What is the BCWS of a $10,000 task
whose start date is still in the future?
• What is the BCWS of a $10,000 task
whose stop date is in the past?
• What is the BCWS of a $10,000 task
whose duration is 10 days and five
days have already passed?
BCWS, Cont’d
• The BCWS of a $10,000 task
whose start date is in the future
is 0 (goose egg)
BCWS, Cont’d
• The BCWS of a $10,000 task
whose stop date is in the past is
$10,000
BCWS, Cont’d
• The BCWS of a $10,000 task
whose duration is 10 days and
five days have already passed is
$5,000.
Actual Cost of Work
Performed (ACWP)
• Defined as the cost actually
incurred and recorded in
accomplishing the work
performed within the control
period
• = Actual Cost = AC = ACWP
Schedule Variance (SV)
• Defined as the difference between
the budgeted cost of work performed
and the budgeted cost of work
scheduled
• = BCWP - BCWS
• Indicates the deviation between the
work content performed and the
work content scheduled for the
control period
• = EV – PV
Schedule Variance SV =
EV - PV
• If EV > PV, then project is ahead
of schedule
• If EV = PV, then project is on
schedule
• If EV < PV, then project is
behind schedule
If EV = PV,
• Then what is the relationship of
BCWP to BCWS?
Cost Variance (CV)
• Defined as the difference between
the budgeted cost of work performed
and the actual cost of work
performed
• = BCWP – ACWP = EV - AC
• A positive CV indicates a lower
actual cost than budgeted for the
control period, while a negative CV
indicates a cost overrun
Schedule Index (SI)
• Defined as the ratio BCWP/BCWS
= EV/PV
• A value close to 1 indicates an
activity that is on schedule
• Values greater than 1 suggest
the activity is ahead of schedule
• Values less than 1 indicate a
schedule overrun (behind
schedule)
Cost Index (CI)
• Defined as the ratio BCWP/ACWP
= EV/AC
• A value close to 1 indicates an
activity that is on budget
• Values greater than 1 suggest
the activity is below budget
• Values less than 1 indicate a
budget overrun
Updating cost and
schedule estimates
• BAC = Budget at Completion = total
budget of the project activities based
on the original project plan
• TAC = Time at Completion = total
project duration as determined from
the project network or schedule =
duration of the critical path
Estimate at Completion,
EAC
• A forecast of the total project
cost at completion
• EAC = BAC/CI
• Not very accurate until the
project is 60% complete
Estimated Time at
Completion, ETAC
• A forecast of the project
completion time, based on the
TAC, Time At Completion (=
length of the critical path)
= TAC/SI
• Not very accurate until the
project is 60% complete
Recall….
• Earned value = EV = BCWP
• Planned value = PV = BCWS
• Actual Cost = AC = ACWP
Assumptions of EVA
• The critical path doesn’t disturb
things
• The past is a good indication of
what will happen in the future
Using MS Project for
Earned Value Analysis
• Before entering any actual cost or
schedule information
• YOU MUST FIRST SAVE YOUR
PROJECT PLAN AS A BASELINE
• Then you enter your actual costs
• Then you enter your percentages
complete
• Now MS Project will do earned value
analysis
To Enter Your Actual Costs
into MS Project
•
1.
On the Tools menu, click
Options, and then click the
Calculation tab.
2.
Clear the Actual costs are
always calculated by Microsoft
Project check box.
3.
Click OK.
4.
On the View Bar, click Task
Usage.
5.
On the View menu, point to
Table, and then click tracking.
More on Entering Your
Actual Costs into MS
Project
6.
Drag the divider bar to the right to
view the Act. Cost field
7.
In the Act. Cost field, type the
actual cost for the assignment for
which you want to update costs.
Goldratt’s rules
regarding execution
• The project manager must stay
focused
– On what?
• What about safety?
• How does Goldratt maintain a
static critical path?
• Communicate and Inform
Safety
• The extra time a project professional
puts into his or her time estimate to
do a particular task
• {It is customary to assign tasks to
project personnel and then to ask
them how long it will take them to do
the task, knowing full well that they
will then be required to finish their
task within their estimated time.}
Solutions
• Take the safety out of the
individual tasks and put it at the
end of the critical path in the
time buffer, called a project
buffer
• This means making the tasks
roughly 50-60% as long as they
would otherwise be.
More solutions
• At the point where each feeding path
intersects with the critical path, place
another time buffer, called a feeding
buffer. The feeding buffer protects the
critical path from delays occurring in the
corresponding non-critical paths.
• When resources are needed on the
critical path, these resources are advised
ahead of time exactly when they must
make themselves available. When that
time comes, they must drop everything
else and do the required critical tasks.
Measurement solutions
• Measure progress only on the critical
path; what percent of the critical
path we have already completed,
taken in relation to where we should
be according to the plan. This is all
we care about!!
• Have project leader measure
progress on non critical paths in
terms of unused buffer days
Shrinking the task time:
Effects
• There is less procrastination
• There is much more focus
• There is less multitasking
What are the ramifications
of a delayed software
product, intended for
commercial sale?
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Less market share
Less profit; maybe no profit
Lower analyst profit expectations
Declining share price
Out of business?
How many firms has Microsoft driven
out of business?
– Ask the founder of Borland what the
implications of a late product are
Earned Value analysis--EV
Budgeted Cost of Work
Performed (BCWP)
 Also uses Budgeted Cost of Work
Scheduled (BCWS), and
 Actual Cost of Work Performed
(ACWP)
 When you complete a milestone,
you earn the budgeted value of that
milestone
An Example
=
Budget
Overrun???
Actual
Budget
TIME
James R. Burns, Texas Tech Univeresity
James R. Burns, Texas Tech Univeresity
Budgeted Cost of Work
Performed (BCWP)
Cost Variance (CV)
 Defined
 Defined
as the monetary value of
the work actually accomplished
within the control period.
ACTIVITY
1
2
3
CUMULATIVE
James R. Burns, Texas Tech Univeresity
BCWP
$12,000
$30,000
$16,000
$58,.000
as the difference between
the budgeted cost of work
performed and the actual cost of
work performed
 = BCWP - ACWP
 A positive CV indicates a lower
actual cost than budgeted for the
control period, while a negative CV
indicates a cost overrun
James R. Burns, Texas Tech Univeresity
Updating, Cont’d
• WR = Work Remaining = budgeted
cost of the work not yet
accomplished by the end of the
reporting period
• WR = BAC - BCWP
• ETC = updated estimate of the cost
of work remaining = COST(WR)
• EAC = updated estimate of the total
project cost = ACWP + ETC
Goldratt’s rules
regarding execution
• The project manager must stay
focused
– On what?
• What about safety?
• How does Goldratt maintain a
static critical path?
• Communicate and Inform
An Example
Budget
Overrun???
Actual
Budget
TIME