Are Your Project Consultants Creating Less Value Than What Youre Paying Them

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Are Your Project Consultants Creating Less Value Than What Youre Paying Them

  1. 1. Are your project consultants creating less value than what you're paying them? By James Hallstrom, PMP on October 22nd, 2009
  2. 2. Common Sponsor questions ● Are we on budget? ● Are we on schedule? ● Why do we need to spend X dollars every month on the project consultants? What are they doing?
  3. 3. Are we on budget? ● Cost Performance Index (CPI) ● CPI = Budget cost of work performed / Actual cost work performed or CPI = BCWP / ACWP CPI versus Time 2 1.75 Under Budget 1.5 1.25 CPI 1 0.75 0.5 Over Budget 0.25 0 Jan Feb Mar Apr May Jun Time Fig. 1: CPI
  4. 4. Are we on Schedule? ● Schedule Performance Index (SPI) ● SPI = Budget cost of work performed / Budget cost of work scheduled or SPI = BCWP / BCWS SPI versus Time 2 1.75 1.5 Ahead of Schedule 1.25 SPI 1 0.75 0.5 Behind Schedule 0.25 0 Jan Feb Mar Apr May Jun Time Fig. 2: SPI
  5. 5. Why do we need to spend X dollars every month on the project consultants? What are they doing? ● Earned Value Management can answer this along with the first two questions.
  6. 6. Why do we need to spend X dollars every month on the project consultants? What are they doing? ● Find the consultants' PV, EV and AC ● PV = Planned Value. It's the value of work planned (BCWS) ● EV = Earned Value. It's the value of work performed to date (BCWP) ● AC = Actual Cost of the work performed (ACWP)
  7. 7. Break down consultants' tasks ● View project work for consultants only. Project Work versus Time 8000 7000 Ahead of Schedule Work Completed in hrs 6000 5000 4000 3000 Behind Schedule 2000 1000 0 Jan Feb Mar Apr May Jun Jul Time Fig. 4: Project Work
  8. 8. Break down project ● Change this to BCWS by multiplying the hours by the consultants' rate. Use blended rate if you have manager consultants that are not included in the WBS. This is the consultants' PV. PV versus Time 700 650 Dollars spent in thousands 600 550 500 450 Over Budget 400 350 300 250 200 150 Under Budget 100 50 0 Jan Feb Mar Apr May Jun Jul Time Fig. 5: Planned Value or BCWS (Budgeted Cost of Work Scheduled)
  9. 9. Calculate consultants' EV and AC ● Every reporting period calculate your consultants' EV and AC and plot on their PV chart. Std EVM chart 700 650 600 550 Dollars in thousands 500 450 400 PV 350 EV 300 AC 250 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Time Fig. 6: PV, EV and AC
  10. 10. Std EVM chart 700 650 1 wk 600 550 Dollars in thousands $50k 500 $60K 450 400 PV 350 EV 300 AC 250 200 150 Schedule variance is 1 week behind or $50k below plan 100 Cost variance is $60k below work performed 50 0 Jan Feb Mar Apr May Jun Jul Time Fig. 6: PV, EV and AC
  11. 11. How do you create/capture this data? ● Many software programs can calculate PV, EV and AC values for the project plan OR ● Use a spreadsheet, as I used in my last project
  12. 12. Cut task details out of the Project Plan
  13. 13. Paste into spreadsheet Spreadsheet is located at: http://tinyurl.com/yj52qw3
  14. 14. Spreadsheet calculates PV and EV
  15. 15. Plots PV and EV data
  16. 16. Cut and Paste into weekly presentation
  17. 17. Issues and Concerns 1. Overhead costs (PM and leadership) need to be included. Normally these aren't tasks on the project plan. 2. Task estimates need to be as accurate as possible. Under-estimating will cause resources to appear over-paid. 3. Scope changes will change the PV curve and descoping completed work will cause EV to decrease. The spreadsheet will recreate the PV curve but not the EV curve. Any descoping of completed or partially completed work will make resources appear to be over- paid. 4. Calculating work accomplished based on percent complete or using start/finish/current date both work but accuracy is the key.

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