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07 project cost management

  1. 1. Project Cost management BY: OMER ALSAYED OMER MBA, PMP, B.Sc.(Civil Eng.) : PMO manager EWU-DIU omeralsayed@yahoo.com +249-1234 94 587
  2. 2. Control of Construction Projects in Sudanese Contracting companies :university thesis majority of construction companies DO NOT have any system in place for COST control http://www.sustech.edu/sudannewar/thesis.php?serial=611130&collno=9
  3. 3. Project Management Process Group and Knowledge Area Mapping Knowledge Area Initiating Planning Executing M& C Closing 4. Project Integration Management 4Develop Project Charter 4.2 Develop Project Management Plan 4.3 Direct & Manage Project Work 4.4 Monitor & Control Project Work 4.5 Perform Integrated Change Control 4.6 Close Project or Phase 5. Project Scope Management 5Plan Scope Management 5.2 Collect Requirements 5.3 Define Scope 5.4 Create WBS 5.5 Validate Scope 5.6 Control Scope 6. Project Time Management 6Plan Schedule Management 6.2 Define Activities 6.3 Sequence Activities 6.4 Estimate Activity Resources 6.5 Estimate Activity Durations 6.6 Develop Schedule 6.7 Control Schedule 7. Project Cost Management 7Plan Cost Management 7.2 Estimate Costs 7.3 Determine Budget 7.4 Control Costs 8. Project Quality Management 8Plan Quality Management 8.2 Perform Quality Assurance 8.3 Control Quality 9. Project Human Resource Management 9.1 Plan Human Resource Management 9.2 Acquire Project Team 9.3 Develop Project Team 9.4 Manage Project Team 10. Project Communications Management 10Plan Communications Management 10.2 Manage Communications 10.3 Control Communications 11. Project Risk Management 11Plan Risk Management 11.2 Identify Risks 11.3 Perform Qualitative Risk Analysis 11.4 Perform Quantitative Risk Analysis 11.5 Plan Risk Responses 11.6 Control Risks 12. Project Procurement Management 12Plan Procurement Management 12.2 Conduct Procurements 12.3 Control Procurements 12.4 Close Procurements 13. Project Stakeholder Management 13Identify Stakeholders 13.2 Plan Stakeholder Management 13.3 Manage Stakeholder Engagement 13.4 Control Stakeholder Engagement OSO OCT 2013 Planning M& C
  4. 4. Cost aspectsacquisition decision committed order placed Using Maintaining supporting the product limiting the number of design reviews >> reduce the cost of the project >> could increase the resulting product’s operating costs Numerous Financial Techniques ROI, discounted cash flow, investment payback analysis additional processes IF FINANCIAL predictions and analyses included order placed Item delivered actualcost incurred Acquired Item primarily cost of the resources + subsequent recurring cost of :
  5. 5. Project Cost Processes 7.1 Plan Cost Management policies, procedures, and documentation for planning, managing, expending, controlling project costs. 7.2 Estimate Costs developing an APPROXIMATION of the monetary resources needed to complete project activities. 7.3 Determine Budget AGGREGATING the estimated costs of individual activities or WP to establish cost baseline. 7.4 Control Costs MONITORING the status to update costs and managing changes to the cost baseline.
  6. 6. 7.1 Plan Cost Management Inputs Project management plan Project charter Enterprise environmental factors Organizational process assets 2. Tools & Techniques Expert judgment Analytical techniques Meetings .3 Outputs Cost management plan establishes the policies, procedures, &documentation for PLANNING, MANAGING, EXPENDING, and CONTROLLING project costs.
  7. 7. 7.1 Plan Cost Management Data Flow Diagram Project charter 4.1 develop Project charter 7.1 Plan Cost Management Project M. plan 4.2 develop Project M.P. OPA EEF 4 Integration 5 Scope 6 Time 7 Cost 8 Quality 9 H. Resource 10 Commn. 11 Risk 12 Procurement 13 S/holders Enterprise/ Organization 6.2 Define Activities 6.3 Sequence Activities 11.2 Identify Risks 11.4 Perform Quantitative Risk Analysis Cost management plan
  8. 8. 7.1.1 Plan Cost Management: Inputs Project Management Plan • Scope baseline. scope statement and WBS detail. • Schedule baseline. when the project costs will be incurred. • Other information. scheduling, risk, and communications decisions. Project Charter • provides the summary budget • approval requirements that will influence the management of the project costs. Enterprise Environmental Factors • Organizational culture and structure • Market conditions • Currency exchange rates • Published commercial information (resource cost) • Project management information system. Organizational Process Assets • Financial controls procedures • Historical information and lessons learned • Financial databases • Existing cost policies, procedures, and guidelines.
  9. 9. 7.1.2 Plan Cost Management: Tools and Techniques Expert Judgment • provides valuable insight about the environment and information from prior similar projects. • suggest whether to combine methods and how to reconcile differences between them. Analytical Techniques • CMP may involve choosing strategic options to fund (self- funding, funding with equity, or funding with debt). • may also detail ways to finance resources (making, purchasing, renting, or leasing). • Techniques :payback period, ROI, IRR, discounted cash flow, &NPV Meetings • project manager, sponsor, selected project team members, selected stakeholders, anyone with responsibility for costs, others.
  10. 10. 7.1.3 Plan Cost Management: Outputs: Cost Management Plan how the project costs will be planned, structured, and controlled. Units of measure. •staff hours/days ,meters, liters, tons, kilometers, or lump sum in Level of precision. •The degree to which activity cost estimates will be rounded up or down Level of accuracy. •e.g., ±10% ,may include an amount for contingencies; Organizational procedures links. •WBS, consistency with the estimates, budgets, and control. •organization’s accounting system. Control thresholds. •variation to be allowed before some action needs to be taken. Rules of performance measurement. •EVM rules of performance measurement are set. Define CA points; Establish EV measurement techniques : fixed-formula, % Specify tracking methodologies EAC forecasts equation?
  11. 11. 7.2 Estimate Costs Inputs Cost management plan Human resource management plan Scope baseline Project schedule Risk register Enterprise environmental factors Organizational process assets 2. Tools & Techniques Expert judgment Analogous estimating Parametric estimating Bottom-up estimating Three-point estimating Reserve analysis Cost of quality Project management software Vendor bid analysis Group decision-making techniques .3 Outputs Activity cost estimates Basis of estimates Project documents updates developing an APPROXIMATION of the monetary resources needed to complete project activities. it determines the amount of cost required to complete project work
  12. 12. 7.2 Estimate Costs Data Flow Diagram Scope baseline 5.4 Create WBS 7.2 Estimate Costs Project schedule 6.6 Develop Schedule OPA EEF 4 Integration 5 Scope 6 Time 7 Cost 8 Quality 9 H. Resource 10 Commn. 11 Risk 12 Procurement 13 S/holders Enterprise/ Organization 11.2 Identify Risks 12.1 Plan Procurement Management A. cost estimates 9.1 Plan HR Mt HRM Plan 11.2 Identify Risks Risk register 7.1 Plan Cost Management Cost management plan Basis of estimates Project documents u 7.3 Determine Budget 6.4 Estimate Activity Resources Project documents  risk register
  13. 13. 7.2 Estimate Costs Cost estimates a prediction • based on the information known at a given point in time. alternatives - • Cost tradeoffs and risks should be considered (make or buy, buy or lease. expressed • in units of currency or man- hours reviewed and refined • to reflect additional detail, assumptions changes. accuracy • will increase as the project progresses. initiation phase >>rough order of magnitude (ROM) estimate in the range of −25% to +75%. Later, definitive estimates range to -5% to +10%.
  14. 14. 7.2.1 Estimate Costs: Inputs 1 Cost Management Plan • how project costs will be managed and controlled 2 Human Resource Management Plan • project staffing attributes, personnel rates, rewards/recognition 3 Scope Baseline • Project scope statement - WBS – WBS dictionary 4 Project Schedule • type and quantity of resources , durations
  15. 15. 7.2.1 Estimate Costs: Inputs 5 Risk Register • typically have an impact on both activity and overall project costs. • negative risk >> COST increase, • potential opportunities >> reducing activity costs or by accelerating the schedule. 6 Enterprise Environmental Factors • Market conditions -Published commercial information 7 Organizational Process Assets • Cost estimating policies, Cost estimating templates, Historical information, and Lessons learned.
  16. 16. 7.2.2 Estimate Costs: Tools and Techniques Expert Judgment Guided by historical information, provides valuable insight about the environment and INFORMATION from prior similar projects. Determine whether to combine methods of estimating and how to reconcile differences between them.
  17. 17. 7.2.2 Estimate Costs: Tools and Techniques Analogous Estimating • Cost, budget or measures (size, weight), and complexityuses the values: • the actual cost of previous, similar projectsrelies on • known differences in project complexity.adjusted for • there is a limited amount of detailed informationused when • and expert judgment.Uses historical information • and less time consuming, but less accurate.less costly • a total project or to segments of a projectcan be applied to
  18. 18. 7.2.2 Estimate Costs: Tools and Techniques Parametric Estimating • between relevant historical data and other variables (building m2) . statistical relationship • the sophistication • underlying data built into the model. produce higher levels of accuracy depending upon: • a total project or to segments of a project, in conjunction with other estimating methods can be applied to:
  19. 19. Analogous vs. Parametric SIMILARITIES Can be used for both duration and cost estimating Essentially a combination of historical information (leveraging past projects/activities) and expert judgment DIFFERENCES •Analogous : • top-down and • less accurate • comparing a past similar project to your current project. •Parametric • more accurate, • uses a relationship between variables (a unit cost/duration and the number of units) to develop the estimate.
  20. 20. Analogous vs. Parametric Example oYou are the project manager for the annual Earth Day 5k road race, with three primary components: marketing, registration, and race-day coordination. oFor marketing, there will be 500 flyers printed up at a cost $0.20 each. It took two weeks for the flyers to be printed for last year event, so you estimate two weeks for the printing of the brochures for this event. oLast year it took one week to design the on-line registration form and the cost to host the registration website was $850.00 You estimate the same this year. oThere will be four people used to coordinate the race. Each resource will be paid $25 per hour and they will be working an estimated seven hours, based on the race last year. Marketing: • 500 flyers • cost $0.20 each • 2 weeks printing Registration • website • $850.00 • one week Coordination • 4 people • $25 per hour • seven hours
  21. 21. Analogous vs. Parametric Example Coordination Cost: $700 parametric estimating - 4 x $25 x 7 Duration: 7 hours analogous Registration Cost: $850 analogous Duration: one week analogous Marketing Cost: $100 for brochures parametric estimating 500 x $0.20 Duration: two weeks analogous
  22. 22. Estimate Costs: Tools and Techniques 4 BOTTOM-UP ESTIMATING WP/activities is estimated (to the greatest level of specified detail). then summarized or “rolled up” to higher levels . accuracy influenced by the size and complexity of the individual activity /WP 5 THREE-POINT ESTIMATING accuracy improved by considering estimation uncertainty and risk using three estimates to define an approximate range for an activity’s cost: Most likely (cM). ◦ based on realistic effort assessment for the required work and any predicted expenses. Optimistic (cO). ◦ based on analysis of the best-case scenario. Pessimistic (cP). ◦ based on analysis of the worst-case scenario. cE = (cO + cM + cP) / 3 cE = (cO + 4cM + cP) / 6 Beta DistributionTriangular Distribution
  23. 23. 7.2.2 Estimate Costs: Reserve Analysis CONTINGENCY RESERVES (CONTINGENCY ALLOWANCES) • budget within the cost baseline that is allocated for identified & accepted risks • often viewed to address the “known-unknowns”. • provide for a specific activity/ whole project, or both. • percentage of the estimated cost, a fixed number, or may be developed by using quantitative analysis methods. • As more precise information about the project becomes available, the contingency reserve may be used, reduced, or eliminated. • Contingency should be clearly identified in cost documentation. • Contingency reserves are part of the cost baseline and the overall funding requirements for the project. MANAGEMENT RESERVES • amount of the project budget withheld for management control purposes and are reserved for unforeseen work that is within scope of the project. • to address the “unknown unknowns” that can affect a project. • not included in the cost baseline but is part of the overall project budget and funding requirements. • When an amount of management reserves is used to fund unforeseen work, the amount of management reserve used is added to the cost baseline, thus requiring an approved change to the cost baseline.
  24. 24. 7.2.2 Estimate Costs: Reserve Analysis example PROJECT ESTIMATE EST + contingency reserves COST BASELINE Management reserves COST BUDGET 400 100 300 250 100 150 50
  25. 25. 7.2.2:7-10 Estimate Costs: T&T Cost of Quality (COQ) • Assumptions about costs of quality Project Management Software • applications, computerized spreadsheets, simulation, and statistical tools (assist ,simplify ,facilitate rapid consideration of alternatives. Vendor Bid Analysis • analysis of what the project should cost, based on the responsive bids from qualified vendors. • additional cost estimating work to: • examine the price of individual deliverables • supports the final total project cost. Group Decision-Making Techniques • brainstorming, the Delphi or nominal group techniques improve estimate accuracy and commitment to the emerging estimates.
  26. 26. 7.2.3 Estimate Costs: Outputs Activity Cost Estimates • quantitative assessments of the probable costs required to complete project work. • presented in summary form or in detail. • Including all resources • direct labor, materials, equipment, services, facilities, information technology, • special categories :cost of financing (including interest charges), • inflation allowance, exchange rates, • cost contingency reserve. • Indirect costs, (if they) can be included at the activity level or at higher levels.
  27. 27. 7.2.3 Estimate Costs: Outputs Basis of Estimates the supporting documentation should provide a clear and complete understanding of how the cost estimate was derived. Supporting detail for activity cost estimates may include: Documentation of : the basis of the estimate all assumptions made, any known constraints, Indication of : the range of possible estimates (e.g., €10,000 (±10%) confidence level of the final estimate
  28. 28. 7.3 Determine Budget Inputs Cost management plan Scope baseline Activity cost estimates Basis of estimates Project schedule Resource calendars Risk register Agreements Organizational process assets Tools & Techniques Cost aggregation Reserve analysis Expert judgment Historical relationships Funding limit reconciliation Outputs Cost baseline Project funding requirements Project documents updates aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline. determines the cost baseline against which project performance can be monitored and controlled
  29. 29. 7.3 Determine Budget Data flow diagram
  30. 30. 7.2.1 Estimate Costs: Inputs 1 Cost Management Plan • how project costs will be managed and controlled 2 Scope Baseline • Project scope statement - WBS –WBS dictionary Activity cost estimates • Cost estimates for each activity within a work package are aggregated Basis of estimates • any basic assumptions dealing with the inclusion or exclusion of indirect or other costs in the project budget
  31. 31. 7.3.1 Determine Budget: Inputs Project schedule •information can be used to aggregate costs to the calendar periods in which the costs are planned to be incurred. Resource calendars •provide information on which resources are assigned to the project and when they are assigned Risk register •to consider how to aggregate the risk response costs Agreements •Applicable agreement information and costs relating to products purchase Organizational process assets •Existing policies, procedures, and guidelines; Cost budgeting tools, Reporting methods.
  32. 32. 7.3.2 Determine Budget: Tools and Techniques Cost Aggregation • Cost estimates are aggregated by work packages >>higher component levels (control accounts) >> entire project. Reserve Analysis • contingency reserves and the management reserves Expert Judgment • guided by experience in an application area, Knowledge Area, discipline, industry, or similar project
  33. 33. 7.3.2 Determine Budget: Tools and Techniques 4 HISTORICAL RELATIONSHIPS ◦ Any historical relationships that result in parametric estimates or analogous estimates involve the use of project characteristics (parameters) to develop mathematical models to predict total project costs. ◦ home construction >>cost per square meter ◦ one model of software development >>multiple separate adjustment factors, each of which has numerous points within it 5 FUNDING LIMIT RECONCILIATION ◦ The expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project. ◦ A variance between the funding limits and the planned expenditures will sometimes necessitate the rescheduling of work to level out the rate of expenditures. ◦ This is accomplished by placing imposed date constraints for work into the project schedule.
  34. 34. 7.3.3 Determine Budget: Outputs Cost Baseline approved version of the time-phased project budget, excluding any management reserves, used as a basis for comparison to actual results. Activity Estimates + Activity Contingency Reserve WP Estimates + Contingency Reserve Control Accounts COST BASELINE + Management reserves COST BUDGET 400 300 100 300 50 100 80 20 150 25 125
  35. 35. 7.3.3 Determine Budget: Outputs Project Funding Requirements Total funding requirements & periodic funding requirements • are derived from the cost baseline. The cost baseline will include • projected expenditures + anticipated liabilities. Funding often occurs in incremental amounts • that are not continuous, and may not be evenly distributed, The total funds required are • cost baseline + management reserves, if any. • may include the source(s) of the funding. Project Documents Updates  Risk register,  Activity cost estimates  Project schedule.
  36. 36. 7.3.3 Determine Budget: Outputs Project Funding Requirements Funding Requirements, 3300 Cost Baseline, 3000 Expenditures, 3200 0 500 1000 1500 2000 2500 3000 3500 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 MR=3300-3000
  37. 37. 7.4 Control Costs Inputs Cost management plan Project funding requirements Work performance data Organizational process assets Tools & Techniques Earned value management Forecasting To-complete performance index (TCPI) Performance reviews Project management software Reserve analysis Outputs Work performance information Cost forecasts Change requests Project management plan updates Project documents updates Organizational process assets updates of monitoring the status of the project to update the project costs and managing changes to the cost baseline. provides the means to recognize variance from the plan in order to take corrective action and minimize risk
  38. 38. 7.4 Control Costs Data Flow Diagram
  39. 39. 7.4 Control Costs Project cost control includes: Influencing •the factors that create changes to baseline; Ensuring •all change requests are acted on in a timely manner; Managing • the actual changes when and as they occur; Ensuring •that cost expenditures do not exceed the authorized funding by period, WBS ,activity, in total Monitoring •cost performance to isolate and understand variances Monitoring •work performance against funds expended; Preventing •unapproved changes reported or resource usage; Informing •appropriate stakeholders of all approved changes and associated cost; Bringing •expected cost overruns within acceptable limits
  40. 40. 7.4.1 Control Costs: Inputs • Cost baseline & Cost management plan. Project Management Plan • include projected expenditures plus anticipated liabilities. Project Funding Requirements • includes progress information (started/ finished activities, their progress) ,costs authorized and incurred. Work Performance Data • Existing policies, procedures, and guidelines; • Cost control tools; • Monitoring and reporting methods Organizational Process Assets
  41. 41. 7.4.2 Control Costs: Tools and Techniques Earned Value Management methodology that combines SCOPE, SCHEDULE, & RESOURCE measurements to assess project performance and progress. It integrates the scope ,cost & schedule baselines, to form the performance baseline • authorized budget planned for the work to be accomplished for an activity or WP/CA. • The total of the PV (performance measurement baseline PMB ,also known as budget at completion BAC). Planned value. • a measure of work performed expressed in terms of the budget authorized for that work. Earned value. • realized cost incurred for the work performed on an activity during a specific time period. Actual cost.
  42. 42. 7.4.2 Control Costs: Tools and Techniques Earned Value Management •SV = EV – PVSchedule variance •CV= EV − ACCost variance •SPI = EV/PV Schedule performance index •CPI = EV/AC Cost performance index PV EV AC Jan-13 0 0 0 Feb-13 1000 800 1200 Mar-13 1500 1200 1800 Apr-13 2500 May-13 3000 Jun-13 3600
  43. 43. 7.4.2 Control Costs: Tools and Techniques Earned Value Management PV, 1500 PV, 3600 EV, 1200 AC, 1800 ETC, 5400 0 1000 2000 3000 4000 5000 6000 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 CUMCOST Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 PV 0 1000 1500 2500 3000 3600 EV 0 800 1200 AC 0 1200 1800 ETC 0 1200 1800 3750 4500 5400
  44. 44. 7.4.2 Control Costs: Tools and Techniques Forecasting As the project progresses, forecast for the estimate at completion (EAC) may develop based on the project performance. If BAC is no longer viable, forecasted EAC should be considered. Forecasting the EAC involves making projections of conditions and events in the project’s future based on current performance information and other knowledge available. Forecasts are generated, updated, and reissued based on work performance data. EVM method works well in conjunction with manual forecasts of the required EAC costs. EAC = AC + Bottom-up ETC. work performed @budgeted rate • EAC = AC + (BAC – EV) @ the present CPI. • EAC = BAC / CPI considering both SPI &CPI • EAC = AC + [(BAC – EV) / (CPI × SPI)]
  45. 45. 7.4.2 Control Costs: Tools and Techniques To-Complete Performance Index (TCPI) • measure of the cost performance that is required to be achieved in order to meet a specified management goal (cost to finish / remaining budget). • If BAC is no longer viable, forecasted EAC should be approved, use in the TCPI calculation. • TCPI (based on the BAC): (BAC – EV) / (BAC – AC). • If the cumulative CPI falls below the baseline, all future work of the project will need to be performed immediately in the range of the TCPI (BAC) to stay within the authorized BAC. • Whether this level of performance is achievable is a judgment call based on a number of considerations, including risk, schedule, and technical performance. • This level of performance is displayed as the TCPI (EAC) line. • TCPI (based on the EAC): (BAC – EV) / (EAC – AC) based on the BAC TCPI = (BAC – EV) / (BAC – AC) based on the EAC TCPI = (BAC – EV) / (EAC – AC)
  46. 46. • 7.4.2 Control Costs: Tools and Techniques Performance Reviews compare cost performance over time, schedule activities or work packages overrunning and underrunning the budget, and estimated funds needed to complete work in progress. • Variance analysis. • explanation (cause, impact, and corrective actions) • for cost (CV = EV – AC), • schedule (SV = EV – PV), • variance at completion (VAC = BAC – EAC) • An important aspect of project cost control includes determining the cause and degree of variance relative to the cost baseline and deciding whether corrective or preventive action is required. • Trend analysis. • examines performance over time improving or deteriorating. • Graphical analysis techniques are valuable for understanding performance to date and for comparison to future performance goals in the form of BAC versus EAC and completion dates. • Earned value performance. • compares the performance measurement baseline to actual schedule and cost performance. • If not being used, then the analysis of the cost baseline against actual costs for the work performed is used .
  47. 47. Table 7-1. Earned Value Calculations Summary Table (PMBOK Page224)
  48. 48. • 7.4.2 Control Costs: Tools and Techniques Project Management Software Reserve Analysis PROJECT MANAGEMENT SOFTWARE used to monitor the three EVM dimensions (PV, EV, and AC), to display graphical trends, and to forecast a range of possible final project results. RESERVE ANALYSIS used to monitor the status of contingency and management reserves to determine if these reserves are still needed or if additional reserves need to be requested. As work progresses, reserves may be used as planned to cover the cost of risk mitigation or other contingencies. Or, if the probable risk events do not occur, the unused contingency reserves may be removed from the project budget to free up resources for other projects or operations. Additional risk analysis during the project may reveal a need to request that additional reserves be added to the project budget.
  49. 49. 7.4.3 Control Costs: Outputs Work Performance Information • The calculated CV, SV, CPI, SPI, TCPI, and VAC values for WBS components (WP, CA) are documented and communicated to stakeholders. Cost Forecasts • Either a calculated EAC value or a bottom-up EAC value is documented and communicated to stakeholders. Change Requests • Analysis of project performance may result in a change request to the cost baseline or other components of the project management plan Project Management Plan Updates • Cost baseline. :in response to approved changes in scope, activity resources, or cost estimates. • Cost management plan. changes to control thresholds or specified levels of accuracy required Project Documents Updates • Cost estimates, and Basis of estimates. Organizational Process Assets Updates • Causes of variances, Corrective action chosen and the reasons, Financial databases, and Other types of lessons learned from project cost control.
  50. 50. Earned Value Management (EVM) Reference Card EVM Terminology AC Actual Cost of Work Performed (Actual cost incurred for work accomplished during a given period) AUW Authorized Un-priced Work (Work contractually approved, but not yet negotiated) BAC Budget At Completion (Total planned value for the project) PV Budgeted Cost for Work Scheduled (Planned Value - budget assigned to the planned scheduled work to be accomplished) EV Budgeted Cost for Work Performed (Earned Value - budget value for the physical work accomplished) CA Control Account (Management control point to plan and control scope, schedule, and budget) CBB Contract Budget Baseline (Total negotiated cost plus AUW) EAC Estimate At Completion (Expected total cost of the project when the scope of work will be completed) ETC Estimate To Complete (Expected cost needed to complete all remaining work) MR Management Reserve (Budget withheld for unknowns / risk management) NCC Negotiated Contract Cost (Contract price minus profit or fees or project value for in-house work) OTB Over Target Baseline (Sum of CBB and recognized overrun) PBB Project Budget Baseline (Same as CBB for in-house projects) PMB Performance Measurement Baseline (Time-phased budget plan) PP Planning Package (Far term effort within a CA not yet defined into WPs) TAB Total Allocated Budget (Sum of all budgets for work on contract = NCC, CBB/PBB, or OTB) TCPI To Complete Performance Index (Efficiency needed from ‘status date’ to achieve an EAC or BAC) UB Undistributed Budget (Broadly defined effort not distributed into CAs) WP Work Package (Near term effort detailed planned within a CA) Revised May 2012 EDITTED BY OMER ALSAYED For NASA in-house programs/projects and contract policies and requirements for the application of EVM, please refer to the NASA EVM Website: http://evm.nasa.gov. Performance Indices: (Favorable is > 1.0, Unfavorable is < 1.0) Cost Performance Index (Efficiency): CPI = EV / AC Schedule Performance Index (Efficiency): SPI = EV / PV To Complete Performance Index (TCPI) TCPIEAC = Work Remaining / Cost Remaining = (BAC – EVCum) / (EAC – ACCum) TCPIBAC = Work Remaining / Budget Remaining = (BAC – EVCum) / (BAC – ACCum) Status Percentage % Complete = EVCum / BAC x 100 % Spent = ACCum / BAC x 100 % Schedule = PVCum / BAC x 100 CV SV Actual Costs (AC) Earned Value (EV) Planned Value (PV) $ EAC Time Now Performance Measurement Baseline (PMB) BAC Time Management Reserve (MR) TAB (CBB or PBB) Projected Slippage VAC ETC Variances: (Favorable is Positive, Unfavorable is Negative) Cost Variance (CV): CV = EV – AC CV% = CV / EV x 100 Schedule Variance (SV): SV = EV – PV SV% = SV / PV x 100 Variance at Completion (VAC): VAC = BAC – EAC VAC% = VAC / BAC x 100 UB WPs PPs CAs PMB MR CBB Fee/Profit (no Project analogy) Contract Price (Project Price) AUW OTB TAB PBB NASA Contract / Project Hierarchy NCC Plus Overrun Estimate at Completion (EAC) = AC + ETC EAC = Actuals to Date + Work Remaining / Performance Factor EACComposite = ACCum + (BAC – EVCum) / (CPICum x SPICum) EACCPI = BAC / CPICum Common EAC Calculations