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Figuring out where you are and does your contractor agree?

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Roger Warburton, Associate Professor in the Department of Administrative Sciences at Boston University’s Metropolitan College

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Figuring out where you are and does your contractor agree?

  1. 1. Figuring Out: Where Are You? &Does your Contractor Agree?Roger D. H. Warburton, PhD, PMP Associate Professor, Metropolitan College, Boston University
  2. 2. The “How ya doin?” ProblemContractor: We’re a little behind, but it’s not a problem. We’ll make it up.What do you say?
  3. 3. Route 93 Re-Paving Problem
  4. 4. We Have a PlanFrom 128/I93 to I90-I93 is 7.7 miles.Plan: 0.77 miles each monthSchedule: 10 months.Cost: $1,470,000.
  5. 5. What Actually Happened?Month 1:Contractor: We’re a little behind, but it’s not a problem. We’ll make it up.
  6. 6. What Actually Happened?Month 2:Contractor: We’re a little behind, but it’s not a problem. We’ll make it up.
  7. 7. What Actually Happened?Month 3: We’re a little behind, but it’s not a problem. We’ll make it up. Enough Already!
  8. 8. Here’s the bill! Month 11 Budget Actual$1,470,000 $1,869,000There is a better way!
  9. 9. How Do We Measure “Progress?”Against the plan ….. Planned 0.77 miles Actual 0.66 miles You can always measure something!
  10. 10. What Was Accomplished? Miles of Roadway Lines of code designed, written, tested Drawings completed WBS: Reports delivered Deliverable Units delivered Oriented Square Meters of Paint Hierarchy Feet of Steel Erected Cubic Yards of Tunnel Dug Out
  11. 11. You Already Have The DataYou are the PM.The Mayor wants to know thestatus of the project. Monthly Reports: What was planned? What was accomplished? What did it cost?
  12. 12. End of Month 21) Measure Progress: Planned 1.54 miles Actual 1.49 miles2) Report Costs: Planned $294,000 Actual $329,000
  13. 13. The “Value” of a MilePlan: 7.7 milesCost: $1,470,000Planned Cost / Mile = $190,909Complete ½ mile: “Value” = $190,909 ÷ 2 = $95,455
  14. 14. The “Value” of a MilePlan: 7.7 milesCost: $1,470,000Planned Cost / Mile = $190,909Complete ½ mile: “Value” = $190,909 / 2 Earned = $95,455 Value
  15. 15. Glossary Planned Value, PV  The sum of the value of the work planned Earned Value, EV  The sum of the value of work performed Actual Cost, AC  The sum of the costs incurred
  16. 16. Glossary Budget At Completion, BAC Estimated At Completion, EAC Estimate To Complete, ETC EAC Time Now Budget, BAC Estimate To Complete ETC $ Actual Costs To Date
  17. 17. Glossary Cost Performance Index, CPI Schedule Performance Index, SPI
  18. 18. CPI: Cost Efficiency Planned 1.54 miles Cost / Mile = $190,909 Actual 1.43 miles
  19. 19. SPI: Schedule Efficiency Schedule Performance Index, SPI Planned 1.54 miles Actual 1.43 miles You are behind schedule
  20. 20. How Much Behind? Schedule Variance, SV Planned 1.54 miles Actual 1.43 miles You are $21,000 behind schedule!
  21. 21. Route 93 Status: Month 4You are the PM.The Mayor wants to know the status ofthe project. (Miles Completed) CostMonth Planned Completed Planned Actual 1 0.77 0.77 $147,000 $181,000 2 0.77 0.66 $147,000 $161,000 3 0.77 0.62 $147,000 $187,000 4 0.77 0.58 $147,000 $177,000 Plot Everything!
  22. 22. What actually happened? Months
  23. 23. Add the Cost Months
  24. 24. Cumulative Costs Months
  25. 25. Efficiency Months
  26. 26. Graphs vs. Tables Month CPI 1 0.81 2 0.80 3 0.74 4 0.71 Months
  27. 27. Typical CPI & SPI CPI falls & Levels off SPI falls & rises → 1.0
  28. 28. How Much Will It Cost?Estimate atCompletionBAC = $1,470,000CPI = 0.8 → EAC = $1,838,000
  29. 29. Estimate at Completion #2 #1: EAC = $1,838,000
  30. 30. Plot EAC (t)
  31. 31. Earned Value Management (EVM) Provides early warning of trouble EAC reliable ~ 20% into a project Christensen & Heise, 1992  DOD experience >400 programs since 1977  Without exception:  The cumulative CPI does not significantly improve during the period of 15% through 85% of the contract  In fact it tends to decline!
  32. 32. “I did not use EVM because …” “Not needed on small projects” “Hard to apply” (Kim, 2000) “The implementation requirements, terminology, and the countless Contractor rules and interpretations, are perceived as Excuses overly restrictive” (Fleming & Koppelman, 2005) It is difficult to find a balance between the utility of the EV technique . . . versus the effort it takes to implement (Quentin & Koppelman, 2005)
  33. 33. From Earned Value to TCPI
  34. 34. PMBOK 4th EditionThe to-complete performance index(TCPI) is the calculated projection ofcost performance that must beachieved on the remaining work tomeet a specified management goal,such as the BAC or the EAC.
  35. 35. TCPIA simple formula to change the world! “Once our customers start calculating TCPI, we will nolonger be able to fudge project cost!”
  36. 36. What is TCPI?
  37. 37. TCPI: Month 4 Work Remaining:  BAC – EV(t) = $1,470,000 – $546,000 Funds Remaining:  BAC – AC(t) = $1,470,000 – $681,000
  38. 38. You:You need a 17% improvement.Contractor:No problem!Trust me, we’ll make it up.Everything will be OK.
  39. 39. Really?!Your current efficiency is 80%Your TCPI is 117% You need a 37% improvement!
  40. 40. It’s Getting Worse! 37%You need a 37% improvement!
  41. 41. You Can’t Win! You need to be here! TCPI → ∞!
  42. 42. Admit it, You’re here
  43. 43. The “Modus” Project
  44. 44. Cumulative Doesn’t Help
  45. 45. Modus: CPI & SPI
  46. 46. We Know the Cost
  47. 47. Guidance
  48. 48. Conclusion Earned Value is thePublic Sector Manager’s Friend
  49. 49. Thank Yourwarb@bu.edu
  50. 50. PMBOK to the Rescue!If it becomes obvious that the BACis no longer viable, the EACsupersedes the BAC
  51. 51. TCPI with EACRequired efficiency is just the CPI!
  52. 52. Admit it, You’re here
  53. 53. Schedule Prediction

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