The above statement would try to answer the age old question; how is the project manager able to accurately forecast the final cost and scheduled results on the project at any given time during the project, and to successfully manage and complete all the work packages as per the projects critical path within cost.  It is important to expect that if the project inputs are accurate, costed and realistically achievable, the outputs will be able to be measured and controlled with less chance of failure and a higher degree of certainty when we are constantly measuring and controlling project performance against, Cost, Schedule and Scope (triple constraints).

By implementing a fully costed WBS and then analysing it against the projects schedule, allows the project manager to monitor any progress against any changes to the schedule/baseline, this allows the project team to see exactly where the project is at any given time.  It is critical that all changes have been documented and recorded as per the project management plan and it forms part of the controlling the schedule against the WBS and baseline. 

The project management plan implemented will document and analyse any variation to the schedule.  A detailed document schedule management plan will also tell the team how to monitor and control the project.  After updating the change management plan against approved changes, the information is then updated in the schedule baseline plan.  The project manager then measures any variation to the schedule as part of the schedule management plan to provide detailed information on the scheduled performance of the project, and report on (if any) missed timelines or better than expected results as per planned schedule.

The project manager would have fully documented how all future reports are to be measured against the schedule, tools used and what exactly to be monitored.  Is it a percentage of work completed or other types of measurements?  If a project package starts do we assume it is 50% complete?  All this information needs to be documented and agreed on by all working on the project, as to what inputs and outputs need to be measured accurately, and be consistent all the way through with this analysis. 

The change management plan also forms part of the communication plan, to inform need-to-know stakeholders of any changes and then updated and fully referenced along with the rules and regulations and any policy and procedures manual updated and referenced, including the risk management plan.  These documents will clearly spell out what to do if changes to scope/schedule or other change is required, who is authorised to approve any of these changes.

The Project Management Institute references the following three techniques that can be used to measure and analyse the scheduled performance measurement and analysis tools; (refer to table 1 below in relation to Scope/Schedule/Cost and EV terminology)

      1.      Performance measuring techniques are used to calculate the schedule variance (SV) and schedule performance index (SPI);

2.      Variance Analysis monitoring reveals any deviation of the actual start and finish dates of the planned scheduled dates.  This is one of the most crucial analysis tools.  If the project management plan has been fully costed and WBS is accurate, then this technique will allow control of the schedule by taking corrective action to re-align the project as per project baseline.  If this task is not on the critical path, it may not pose a problem in completing the project, but will be documented,  Schedule Variance (SV), Cost Variance (CV);

3.      Visual tools such as bar charts and online dashboards will provide visual check on schedule progress.  Project management software packages then break this down to the individual units and measured against the project baseline.  

diagram from - PMI - Controlling Construction Projects using Earned Value Analysis - Paul Kidston January 2005 Page 4.                 

(Table 2 above)

By reviewing the scheduled performance measurements such as the schedule variance (SV), and schedule performance index (SPI), this allows the project manager to apply corrective actions as required.  Again this information is then documented and updated as part of the communication and schedule management plan.  Stakeholders are notified on any changes, including updated project costing.  Using decent project management software simplifies updating project schedule easier, one of inbuilt features, allow, updated schedules emailed onto suppliers or contractors affected by any changes, and advising them of any delays or updates that may have an impact on their contracted service delivery.  This is then documented as part the project management / communication plan.

Once all information is gathered and communicated to all relevant stakeholders the necessary documentation is then updated, all change requests signed off,  adjustments are then made against the projects scheduled baseline. The next step is controlling and measuring the planned schedule (PV) against any variations (SV / CV) will need to be fully researched and documented against the change management control plan.  Using earned value management techniques will accurately pinpoint what flow on effect across the project will have, if any, changes are made to the schedule.  This is why it is critical in having an thoroughly scoped and fully costed WBS.

Most companies expect to know the true cost against the return on investment (ROI), as well as when and how progress payments are drawn, can the money be invested elsewhere until demanded by suppliers?  Can cost and risk be transferred out to vendors or contractors?  Other inputs to gather is from collecting information such as has this type of work been done before, technologies or services that we can use etc?  From the scope management plan a detailed bottom up WBS has been designed that answers these questions.  The cost per deliverable completed and entered in the schedule, and documented.  To measure this cost against the scope of works we now plan out the fully costed schedule.  This is why the term triple constraint – Scope, Time/Schedule and Cost are deemed as a universal force changing one of these will have an impact on the other.

Measuring and controlling cost will need to be measured as work performed, to determine what is the output or expenditure – This answers what will something cost me to make or buy, proceed with the project or rework it?  If you already use contractors you will know in advance the fixed price as per contract, then assigned within the deliverable.  The contract will state if we give you this much money they will provide us an agreed upon deliverable per agreed schedule, otherwise breach of contract and fines apply.  This is a fully costed measurement of the output of cost per unit.  

According to The Standish Group's report, "CHAOS Summary 2009," "This year's results show a marked decrease in project success rates, with 32% of all projects succeeding which are delivered on time, on budget, with required features and functions" says Jim Johnson, chairman of The Standish Group, "44% were challenged which are late, over budget, and/or with less than the required features and functions and 24% failed which are cancelled prior to completion or delivered and never used." 

It is critical that the project manager implements some type of monitoring system that fits within the organisation and agreed upon by all who are involved in the project.  The importance of getting the triple constraints as accurate as possible is crucial when analysing performance using earned value management techniques.  In monitoring and controlling cost all changes will need to be approved and controlled against the performance baseline.  In cost control and measurement we need to monitor the money budgeted and approved to the money spent including and any variances from the approved baseline refer to table 1.  The project is doomed to fail if changes to expenditure are not authorised nor are recorded against any cost reports.  To minimise failure, all costs should not exceed any pre-budgeted stage nor exceed amount authorised.  If cost creep is to occur or is raised as a potential risk as per the risk register, this risk is immediately escalated to the project manager as well as senior management for corrective action.

Table 4.

Cost cannot be considered separately from scope and schedule/time the same rules apply, all costs must be documented within the project management plan against the cost performance baseline, costs to be directly associated with a deliverable.  All the cost changes must be recorded documented and communicated to all relevant stakeholders, and be measured against the work performed, once approved the project management plan will advise on what to do. 

An example would be during the cost performance measurement you may discover that one particular work unit is costing more than another, even though they are working on exactly the same deliverable but in another area.  The team on the first floor has a better output than the team on the fourth floor.  The output may be that it is taking longer to move materials to the higher floor than the ground floor or one of the site building lifts may be out of action.  Corrective action will be required if it drags on. Refer to table 1 and table 4.

In 1967, when the Department of Defence initially released its thirty-five C/SCS Criteria formally implementing Earned Value, three of these criteria specifically dealt with the requirement to employ a formal scheduling system. Earned Value thus relies on the project schedule to provide a framework for allocating the authorized resources; that is, the authorized budgets.  Now is it is mandatory on most projects that a detailed EVM is incorporated in the project management plan

Planed value (PV), earned value (EV), and actual cost (AC) are the only three monitoring parameters that need to be monitored during the project lifecycle and against the baseline plan, these three parameters need to be monitored closely, documented and entered into the company’s project management software. The total PV of the project is the same as the budget at completion (BAC).  

The following analysis is based on PV, EV and AC and has previously been mentioned:

1.      Cost variance (CV) – is a measure of cost performance on a project, is calculated by subtracting AC from EV.  The cost variance at the end of the project is the difference between the budget at completion (BAC) and actual amount spent.  

2.      Schedule Variance (SV) and Schedule Performance index (SPI) are calculated in terms of cost: EV and PV.  SV =EV – PV

These calculations can be further broken down to predict forecast the project final completion estimate.  The SV and CV values can be converted to efficiency indicators to reflect the cost and schedule performance of any project for comparison against all other projects or within a portfolio of projects. The variances and indices are useful for determining project status and providing a basis for estimating project cost and schedule outcome. Using SPI – schedule performance index and CPI cost performance index.

©2008 Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK® Guide) — Fourth Edition,  pg; 183

 PMIBOK describes “Earned value management (EVM) in its various forms is a commonly used method of performance measurement. It integrates project scope, cost, and schedule measures to help the project management team assess and measure project performance and progress. It is a project management technique that requires the formation of an integrated baseline against which performance can be measured for the duration of the project. The principles of EVM can be applied to all projects, in any industry. EVM develops and monitors three key dimensions for each work package and control account:”. ©2008 Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK® Guide) — Fourth Edition, page 181

One of the primary benefits of employing Earned Value is that it allows for the use of a single management system that can be applied to both projects and production work as a single unit or a deliverable.  The relationship of what work was scheduled versus what work was accomplished provides an accurate early indicator whether the project is meeting the time expectations set by management.  This is one of the most critical relationship of what work was accomplished versus how much money was spent to accomplish the work provides an accurate reflection of the true cost performance.  Refer to table 3.

References