Stages 3 and 4: Execution Stages 3 and 4: Execution and Controland Control

Earned Value AnalysisEarned Value Analysis

MS Project and EVAMS Project and EVA

Goldratt’s Critical ChainGoldratt’s Critical Chain

This is the third and fourth This is the third and fourth stagesstages

• Of the….Of the….• What were the first two stages?What were the first two stages?

What were the deliverables What were the deliverables of the first stage?of the first stage?

• Project manager selectedProject manager selected• Requirements documentRequirements document• Project charterProject charter• Project team selectedProject team selected• Signature signoffs by the Signature signoffs by the

stakeholdersstakeholders

What were the deliverables of What were the deliverables of the second stage?the second stage?

• Project planProject plan• Project budgetProject budget

– The whole point of the plan and The whole point of the plan and budget is to GUIDE EXECUTIONbudget is to GUIDE EXECUTION

• Signature signoffs by the Signature signoffs by the stakeholders attached to the stakeholders attached to the project plan and budgetproject plan and budget

Now what happens? Now what happens? THIRD STAGE BEGINS!!THIRD STAGE BEGINS!!

• Project ramps up (begins)Project ramps up (begins)• Project executes in conformance to Project executes in conformance to

plan and budgetplan and budget• Execution is tracked relative to Execution is tracked relative to

plan and plan and

Here is where ______ Here is where ______ ___________comes into play___________comes into play

Freeze Requirements???Freeze Requirements???

• What are the PROS?What are the PROS?

• What are the CONS?What are the CONS?

Freeze those Freeze those requirements!!requirements!!

– Late-project creeping requirements Late-project creeping requirements are the most common source of cost are the most common source of cost and schedule overrunsand schedule overruns

– Late-project creeping requirements Late-project creeping requirements are a major factor in project are a major factor in project cancellationscancellations

Rather than freezing, use Rather than freezing, use some kind of change some kind of change control systemcontrol system• Allows for some changes to Allows for some changes to

happen, depending upon happen, depending upon contractual considerationscontractual considerations

• Allows for the system to reject Allows for the system to reject some proposed changessome proposed changes

• Use of a CCB (Change Control Use of a CCB (Change Control Board) is considered a modern Board) is considered a modern BEST PRACTICEBEST PRACTICE

Forces pushing for late-Forces pushing for late-project requirements project requirements changechange

• Competition intros new version of competitive Competition intros new version of competitive product with unanticipated KILLER featuresproduct with unanticipated KILLER features

• New work is discovered late in the New work is discovered late in the projectproject

• ““Wouldn’t It be Great if…” scenarios happenWouldn’t It be Great if…” scenarios happen• End-users want changes because they now End-users want changes because they now

know more about their requirements than know more about their requirements than they did 18 months agothey did 18 months ago

• Developers want changes because they have Developers want changes because they have a great emotional and intellectual investment a great emotional and intellectual investment in all of the system’s detailsin all of the system’s details

In the face of all of the In the face of all of the change requests, what is change requests, what is the PM’s responsibility?the PM’s responsibility?

• Let the CCB do its workLet the CCB do its work• Make sure the impact in terms of Make sure the impact in terms of

additional cost and duration gets additional cost and duration gets communicated to all stakeholderscommunicated to all stakeholders

Knowledge Areas and Knowledge Areas and Processes used in Stage IIIProcesses used in Stage III

• Integration management: Integration management: – Direct and manage project execution; Perform Direct and manage project execution; Perform

integrated change control; Monitor and control integrated change control; Monitor and control project workproject work

• Scope management: Scope management: – Control scopeControl scope

• Time management: Time management: – Control scheduleControl schedule

• Cost management: Cost management: – Control costsControl costs

• Quality management: Quality management: – Perform quality controlPerform quality control

Processes utilized in Stage Processes utilized in Stage III, ContinuedIII, Continued

• Communication management: Communication management: – Distribute information; Report Distribute information; Report

performanceperformance

• Risk management: Risk management: – Monitor and control risks Monitor and control risks

• Procurement management: Procurement management: – Administer procurementsAdminister procurements

Controlling Changes to the Controlling Changes to the Project ScheduleProject Schedule

• Perform reality checks on schedulesPerform reality checks on schedules• Allow for contingenciesAllow for contingencies• Don’t plan for everyone to work at Don’t plan for everyone to work at

100% capacity all the time100% capacity all the time• Hold progress meetings with Hold progress meetings with

stakeholders and be clear and stakeholders and be clear and honest in communicating schedule honest in communicating schedule issuesissues

Cost ControlCost Control

• Project cost control includesProject cost control includes– monitoring cost performancemonitoring cost performance– informing project stakeholders of informing project stakeholders of

authorized changes to the project that authorized changes to the project that will affect costswill affect costs

• Earned value analysis is an Earned value analysis is an important tool for cost controlimportant tool for cost control

Earned Value Analysis--Earned Value Analysis--EVAEVA

• When you complete an activity, you When you complete an activity, you earn the budgeted value of that earn the budgeted value of that activityactivity

• Earned Value (EV) = Budgeted Cost of Earned Value (EV) = Budgeted Cost of Work Performed (BCWP)Work Performed (BCWP)

Why Earned Value Why Earned Value Analysis??Analysis??

• You can’t tell what your true cost You can’t tell what your true cost variance is because you don’t know variance is because you don’t know where you are relative to schedulewhere you are relative to schedule– Suppose you are behind schedule but Suppose you are behind schedule but

also you have spent less than what also you have spent less than what the schedule has called for. Are you the schedule has called for. Are you really under budget?really under budget?

Budgeted Cost of Work Budgeted Cost of Work Performed (BCWP) = Earned Performed (BCWP) = Earned Value = EVValue = EV

• Defined as the monetary value of Defined as the monetary value of the work actually accomplished the work actually accomplished within the control period.within the control period.

BCWPBCWP

• Suppose $100,000 has been Suppose $100,000 has been budgeted for a task and the task is budgeted for a task and the task is 50% complete50% complete– Then its earned value is ?Then its earned value is ?

Budgeted Cost of Work Budgeted Cost of Work Scheduled (BCWS) = Scheduled (BCWS) = Planned Value = PVPlanned Value = PV

• Defined as the value of the work Defined as the value of the work scheduled to be accomplished in a scheduled to be accomplished in a given period of timegiven period of time

• This will vary with the current time.This will vary with the current time.

BCWS (also called Planned BCWS (also called Planned Value, PV)Value, PV)

• What is the BCWS of a $10,000 task What is the BCWS of a $10,000 task whose start date is still in the future?whose start date is still in the future?

• What is the BCWS of a $10,000 task What is the BCWS of a $10,000 task whose stop date is in the past?whose stop date is in the past?

• What is the BCWS of a $10,000 task What is the BCWS of a $10,000 task whose duration is 10 days and five days whose duration is 10 days and five days have already passed?have already passed?

BCWS, Cont’dBCWS, Cont’d

• The BCWS of a $10,000 task whose The BCWS of a $10,000 task whose start date is in the future is 0 start date is in the future is 0 (goose egg)(goose egg)

BCWS, Cont’dBCWS, Cont’d

• The BCWS of a $10,000 task whose The BCWS of a $10,000 task whose stop date is in the past is $10,000stop date is in the past is $10,000

BCWS, Cont’dBCWS, Cont’d

• The BCWS of a $10,000 task whose The BCWS of a $10,000 task whose duration is 10 days and five days duration is 10 days and five days have already passed is $5,000.have already passed is $5,000.

Actual Cost of Work Actual Cost of Work Performed (ACWP)Performed (ACWP)

• Defined as the cost actually Defined as the cost actually incurred and recorded in incurred and recorded in accomplishing the work performed accomplishing the work performed within the control periodwithin the control period

• = Actual Cost = AC = ACWP= Actual Cost = AC = ACWP

Schedule Variance (SV)Schedule Variance (SV)

• Defined as the difference between the Defined as the difference between the budgeted cost of work performed and budgeted cost of work performed and the budgeted cost of work scheduledthe budgeted cost of work scheduled

• = BCWP - BCWS= BCWP - BCWS• Indicates the deviation between the Indicates the deviation between the

work content performed and the work work content performed and the work content scheduled for the control periodcontent scheduled for the control period

• = EV – PV= EV – PV

Schedule Variance SV = Schedule Variance SV = EV - PVEV - PV

• If EV > PV, then project is ahead of If EV > PV, then project is ahead of scheduleschedule

• If EV = PV, then project is on If EV = PV, then project is on scheduleschedule

• If EV < PV, then project is behind If EV < PV, then project is behind scheduleschedule

If EV = PV, If EV = PV,

• Then what is the relationship of Then what is the relationship of BCWP to BCWS?BCWP to BCWS?

Cost Variance (CV)Cost Variance (CV)

• Defined as the difference between the Defined as the difference between the budgeted cost of work performed and budgeted cost of work performed and the actual cost of work performedthe actual cost of work performed

• = BCWP – ACWP = EV - AC= BCWP – ACWP = EV - AC• A positive CV indicates a lower actual A positive CV indicates a lower actual

cost than budgeted for the control cost than budgeted for the control period, while a negative CV indicates a period, while a negative CV indicates a cost overruncost overrun

Schedule Index (SI)Schedule Index (SI)

• Defined as the ratio BCWP/BCWS = Defined as the ratio BCWP/BCWS = EV/PVEV/PV

• A value close to 1 indicates an A value close to 1 indicates an activity that is on scheduleactivity that is on schedule

• Values greater than 1 suggest the Values greater than 1 suggest the activity is ahead of scheduleactivity is ahead of schedule

• Values less than 1 indicate a Values less than 1 indicate a schedule overrun (behind schedule)schedule overrun (behind schedule)

Cost Index (CI)Cost Index (CI)

• Defined as the ratio Defined as the ratio BCWP/ACWP = EV/ACBCWP/ACWP = EV/AC

• A value close to 1 indicates an A value close to 1 indicates an activity that is on budgetactivity that is on budget

• Values greater than 1 suggest Values greater than 1 suggest the activity is below budgetthe activity is below budget

• Values less than 1 indicate a Values less than 1 indicate a budget overrunbudget overrun

Updating cost and Updating cost and schedule estimatesschedule estimates

• BAC = Budget at Completion = total BAC = Budget at Completion = total budget of the project activities based on budget of the project activities based on the original project planthe original project plan

• TAC = Time at Completion = total TAC = Time at Completion = total project duration as determined from the project duration as determined from the project network or schedule = duration project network or schedule = duration of the critical pathof the critical path

Estimate at Completion, Estimate at Completion, EACEAC

• A forecast of the total project cost A forecast of the total project cost at completionat completion

• EAC = BAC/CIEAC = BAC/CI• Not very accurate until the project Not very accurate until the project

is 60% completeis 60% complete

Estimated Time at Estimated Time at Completion, ETACCompletion, ETAC

• A forecast of the project A forecast of the project completion time, based on the TAC, completion time, based on the TAC, Time At Completion (= length of Time At Completion (= length of the critical path)the critical path)

= TAC/SI= TAC/SI• Not very accurate until the project Not very accurate until the project

is 60% completeis 60% complete

Recall….Recall….

• Earned value = EV = BCWP Earned value = EV = BCWP • Planned value = PV = BCWSPlanned value = PV = BCWS• Actual Cost = AC = ACWPActual Cost = AC = ACWP

Assumptions of EVAAssumptions of EVA

• The critical path doesn’t disturb The critical path doesn’t disturb thingsthings

• The past is a good indication of The past is a good indication of what will happen in the futurewhat will happen in the future

Using MS Project for Using MS Project for Earned Value AnalysisEarned Value Analysis

• Before entering any actual cost or Before entering any actual cost or schedule informationschedule information

• YOU MUST FIRST SAVE YOUR PROJECT YOU MUST FIRST SAVE YOUR PROJECT PLAN AS A BASELINEPLAN AS A BASELINE

• Then you enter your actual costsThen you enter your actual costs• Then you enter your percentages Then you enter your percentages

completecomplete• Now MS Project will do earned value Now MS Project will do earned value

analysisanalysis

To Enter Your Actual Costs To Enter Your Actual Costs into MS Projectinto MS Project

•   1.1.            On the On the ToolsTools menu, click menu, click OptionsOptions, , and then click the and then click the CalculationCalculation tab. tab.2.2.            Clear the Clear the Actual costs are always Actual costs are always calculated by Microsoft Projectcalculated by Microsoft Project check check box.box.3.3.            Click Click OKOK..4.4.            On the On the View BarView Bar, click , click Task UsageTask Usage..5.5.            On the On the ViewView menu, point to menu, point to TableTable, , and then click and then click trackingtracking..

More on Entering Your More on Entering Your Actual Costs into MS Actual Costs into MS ProjectProject

6.6.            Drag the divider bar to the right to Drag the divider bar to the right to view the view the Act. CostAct. Cost field field

7.7.            In the In the Act. CostAct. Cost field, type the actual field, type the actual cost for the assignment for which you cost for the assignment for which you want to update costs.want to update costs.  

Goldratt’s rules regarding Goldratt’s rules regarding executionexecution

• The project manager must stay The project manager must stay focusedfocused– On what?On what?

• What about safety?What about safety?• How does Goldratt maintain a How does Goldratt maintain a

static critical path?static critical path?• Communicate and InformCommunicate and Inform

SafetySafety

• The extra time a project professional The extra time a project professional puts into his or her time estimate to do a puts into his or her time estimate to do a particular taskparticular task

• {It is customary to assign tasks to {It is customary to assign tasks to project personnel and then to ask them project personnel and then to ask them how long it will take them to do the task, how long it will take them to do the task, knowing full well that they will then be knowing full well that they will then be required to finish their task within their required to finish their task within their estimated time.}estimated time.}

SolutionsSolutions

• Take the safety out of the Take the safety out of the individual tasks and put it at the individual tasks and put it at the end of the critical path in the time end of the critical path in the time buffer, called a project bufferbuffer, called a project buffer

• This means making the tasks This means making the tasks roughly 50-60% as long as they roughly 50-60% as long as they would otherwise be.would otherwise be.

More solutionsMore solutions

• At the point where each feeding path intersects At the point where each feeding path intersects with the critical path, place another time buffer, with the critical path, place another time buffer, called a feeding buffer. The feeding buffer called a feeding buffer. The feeding buffer protects the critical path from delays occurring protects the critical path from delays occurring in the corresponding non-critical paths. in the corresponding non-critical paths.

• When resources are needed on the critical path, When resources are needed on the critical path, these resources are advised ahead of time these resources are advised ahead of time exactly when they must make themselves exactly when they must make themselves available. When that time comes, they must available. When that time comes, they must drop everything else and do the required critical drop everything else and do the required critical tasks.tasks.

Measurement solutionsMeasurement solutions

• Measure progress only on the critical Measure progress only on the critical path; path; what percent of the critical what percent of the critical path we have already completed, path we have already completed, taken in relation to where we taken in relation to where we should be according to the planshould be according to the plan. . This is all we care about!!This is all we care about!!

• Have project leader measure progress Have project leader measure progress on non critical paths in terms of unused on non critical paths in terms of unused buffer daysbuffer days

Shrinking the task time: Shrinking the task time: EffectsEffects

• There is less procrastinationThere is less procrastination• There is much more focusThere is much more focus• There is less multitaskingThere is less multitasking

What are the ramifications of What are the ramifications of a delayed software product, a delayed software product, intended for commercial sale?intended for commercial sale?

• Less market shareLess market share• Less profit; maybe no profitLess profit; maybe no profit• Lower analyst profit expectationsLower analyst profit expectations• Declining share priceDeclining share price• Out of business?Out of business?• How many firms has Microsoft driven out How many firms has Microsoft driven out

of business?of business?– Ask the founder of Borland what the Ask the founder of Borland what the

implications of a late product areimplications of a late product are

James R. Burns, Texas Tech Univeresity

Earned Value analysis--EV

= Budgeted Cost of WorkPerformed (BCWP)

Also uses Budgeted Cost of WorkScheduled (BCWS), and

Actual Cost of Work Performed(ACWP)

When you complete a milestone,you earn the budgeted value of thatmilestone

James R. Burns, Texas Tech Univeresity

An Example

TIME

Budget

Budget

Actual

Overrun???

James R. Burns, Texas Tech Univeresity

Budgeted Cost of WorkPerformed (BCWP)

Defined as the monetary value ofthe work actually accomplishedwithin the control period.

ACTIVITY BCWP

1 $12,0002 $30,0003 $16,000

$58,.000CUMULATIVE

James R. Burns, Texas Tech Univeresity

Cost Variance (CV)

Defined as the difference betweenthe budgeted cost of workperformed and the actual cost ofwork performed

= BCWP - ACWP A positive CV indicates a lower

actual cost than budgeted for thecontrol period, while a negative CVindicates a cost overrun

Updating, Cont’dUpdating, Cont’d

• WR = Work Remaining = budgeted cost WR = Work Remaining = budgeted cost of the work not yet accomplished by the of the work not yet accomplished by the end of the reporting periodend of the reporting period

• WR = BAC - BCWPWR = BAC - BCWP• ETC = updated estimate of the cost of ETC = updated estimate of the cost of

work remaining = COST(WR)work remaining = COST(WR)• EAC = updated estimate of the total EAC = updated estimate of the total

project cost = ACWP + ETC project cost = ACWP + ETC

Goldratt’s rules regarding Goldratt’s rules regarding executionexecution

• The project manager must stay The project manager must stay focusedfocused– On what?On what?

• What about safety?What about safety?• How does Goldratt maintain a How does Goldratt maintain a

static critical path?static critical path?• Communicate and InformCommunicate and Inform

An ExampleAn Example

TIME

Budget

Budget

Actual

Overrun???