07 project cost management

Project Cost management

BY: OMER ALSAYED OMER

MBA, PMP, B.Sc.(Civil Eng.) : PMO manager EWU-DIU [email protected] +249-1234 94 587

mailto:[email protected]

Control of Construction Projects in Sudanese Contracting companies :university thesis

majority of construction companies

DO NOT have any system in place for

COST controlhttp://www.sustech.edu/sudannewar/thesis.php?serial=611130&collno=9

http://www.sustech.edu/sudannewar/thesis.php?serial=611130&collno=9

Project Management Process Group and Knowledge Area Mapping

Knowledge Area Initiating Planning Executing M& C Closing

4. Project Integration Management4DevelopProject Charter

4.2 Develop ProjectManagement Plan

4.3 Direct & Manage Project Work4.4 Monitor & Control Project Work4.5 Perform Integrated Change Control

4.6 Close Projector Phase

5. Project Scope Management

5Plan Scope Management5.2 Collect Requirements5.3 Define Scope5.4 Create WBS

5.5 Validate Scope5.6 Control Scope

6. Project Time Management

6Plan Schedule Management6.2 Define Activities6.3 Sequence Activities6.4 Estimate Activity Resources6.5 Estimate Activity Durations6.6 Develop Schedule

6.7 Control Schedule

7. Project Cost Management7Plan Cost Management7.2 Estimate Costs7.3 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 Management9.1 Plan Human ResourceManagement

9.2 Acquire Project Team9.3 Develop Project Team9.4 Manage Project Team

10. Project Communications Management 10Plan Communications Management 10.2 Manage Communications 10.3 Control Communications

11. Project Risk Management

11Plan Risk Management11.2 Identify Risks11.3 Perform Qualitative Risk Analysis11.4 Perform Quantitative Risk Analysis11.5 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 Management13IdentifyStakeholders

13.2 Plan StakeholderManagement

13.3 Manage StakeholderEngagement

13.4 Control StakeholderEngagement

OSO OCT 2013

Planning M& C

Cost aspects

acqu

isition

d

ecision

com

mitted

ord

er p

laced

Using Maintainingsupporting 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 includedord

er p

laced

Item

delivered

actual co

st in

curred

Acquired Item

primarily cost of the resources

+ subsequent recurring cost of :

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 APPROXIMATIONof the monetary

resources needed to complete

project activities.

7.3 Determine Budget

AGGREGATINGthe 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.


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.


Data Flow Diagram

Project

charter

4.1develop

Project

charter

7.1 Plan Cost

ManagementProject

M. plan

4.2develop

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

6.2Define Activities

6.3Sequence Activities

11.2Identify Risks

11.4Perform Quantitative

Risk Analysis


7.1.1 Plan Cost Management: Inputs7.1.1.1 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.

7.1.1.2 Project Charter

• provides the summary budget

• approval requirements that will influence the management of the project costs.

7.1.1.3 Enterprise Environmental Factors

• Organizational culture and structure

• Market conditions

• Currency exchange rates

• Published commercial information (resource cost)

• Project management information system.

7.1.1.4 Organizational Process Assets

• Financial controls procedures

• Historical information and lessons learned

• Financial databases

• Existing cost policies, procedures, and guidelines.

7.1.2 Plan Cost Management:

Tools and Techniques

7.1.2.1 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.

7.1.2.2 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

7.1.2.3 Meetings• project manager, sponsor, selected project team members,

selected stakeholders, anyone with responsibility for costs,

others.

7.1.3 Plan Cost Management: Outputs:

7.1.3.1 Cost Management Planhow 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.

Def

ine CA points;

Esta

blis

h EV measurement techniques : fixed-formula, %

Spec

ify tracking

methodologies

EAC forecasts

equation?

7.2 Estimate Costs

Inputs


Human resource management plan

Scope baseline

Project schedule

Risk register

Enterprise environmental factors


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

7.2 Estimate Costs

Data Flow DiagramScope

baseline

5.4CreateWBS

7.2 Estimate Costs

Project

schedule

6.6DevelopSchedule

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

11.2Identify Risks

12.1Plan Procurement

Management

A. cost estimates

9.1Plan HR

Mt

HRM

Plan

11.2Identify

Risks

Risk

register

7.1 Plan Cost

Management


Basis of estimates

Project documents u

7.3 Determine

Budget

6.4Estimate Activity

Resources

Project documents

risk register

7.2 Estimate CostsCost 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%.

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


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.

7.2.2 Estimate Costs: Tools and Techniques7.2.2.1 Expert JudgmentGuided by historical information, provides valuable insight about the environment and INFORMATION from prior similar projects.

Determine whether to combinemethods of estimating and how to reconcile differences between them.

7.2.2 Estimate Costs: Tools and Techniques7.2.2.2 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 information used 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

7.2.2 Estimate Costs: Tools and Techniques7.2.2.3 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:

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.

Analogous vs. Parametric ExampleoYou 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

Analogous vs. Parametric Example

Coordination

Cost: $700parametric estimating - 4 x

$25 x 7Duration: 7 hours analogous

Registration

Cost: $850 analogous Duration: one week analogous

Marketing

Cost: $100 for brochuresparametric estimating 500 x

$0.20Duration: two weeks analogous

7.2.2.4/.5 Estimate Costs: Tools and Techniques4 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

7.2.2 Estimate Costs: 7.2.2.6 Reserve AnalysisCONTINGENCY 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.

7.2.2 Estimate Costs: 7.2.2.6 Reserve Analysis

example

PROJECT ESTIMATE

EST + contingency reserves

COST BASELINE

Management reserves

COST BUDGET 400

100

300

250

100 150

50

7.2.2:7-10 Estimate Costs: T&T7.2.2.7 Cost of Quality

(COQ)• Assumptions about costs of quality

7.2.2.8 Project Management Software

• applications, computerized spreadsheets, simulation, and statistical tools (assist ,simplify ,facilitate rapid consideration of alternatives.

7.2.2.9 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.

7.2.2.10 Group Decision-Making

Techniques

• brainstorming, the Delphi or nominal group techniques improve estimate accuracy and commitment to the emerging estimates.

7.2.3 Estimate Costs: Outputs

7.2.3.1 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.

7.2.3 Estimate Costs: Outputs

7.2.3.2 Basis of Estimatesthe 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

7.3 Determine Budget

Inputs


Scope baseline


Basis of estimates

Project schedule

Resource calendars

Risk register

Agreements


Tools & Techniques

Cost aggregation

Reserve analysis

Expert judgment

Historical relationships

Funding limit reconciliation

Outputs

Cost baseline

Project funding requirements


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

7.3 Determine BudgetData flow diagram


1 Cost Management Plan

• how project costs will be managed and controlled

2 Scope Baseline

• Project scope statement - WBS –WBS dictionary


• 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

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


• Existing policies, procedures, and guidelines; Cost budgeting tools, Reporting methods.

7.3.2 Determine Budget: Tools and Techniques

7.3.2.1 Cost Aggregation

• Cost estimates are aggregated by work packages >>higher component levels (control accounts) >> entire project.

7.3.2.2 Reserve Analysis

• contingency reserves and the management reserves

7.3.2.3 Expert Judgment

• guided by experience in an application area, Knowledge Area, discipline, industry, or similar project

7.3.2 Determine Budget: Tools and Techniques4 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.

7.3.3 Determine Budget: Outputs

7.3.3.1 Cost Baselineapproved 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


7.3.3.2 Project Funding RequirementsTotal 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. 7.3.3.3 Project Documents Updates

Risk register,

Activity cost estimates Project schedule.


7.3.3.2 Project Funding RequirementsFunding 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

7.4 Control Costs

Inputs


Project funding requirements

Work performance data


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


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

7.4 Control CostsData Flow Diagram

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

7.4.1 Control Costs: Inputs

• Cost baseline & Cost management plan.

7.4.1.1 Project Management Plan

• include projected expenditures plus anticipated liabilities.

7.4.1.2 Project Funding Requirements

• includes progress information (started/ finished activities, their progress) ,costs authorized and incurred.

7.4.1.3 Work Performance Data

• Existing policies, procedures, and guidelines;

• Cost control tools;

• Monitoring and reporting methods

7.4.1.4 Organizational Process Assets

7.4.2 Control Costs: Tools and Techniques7.4.2.1 Earned Value Managementmethodology 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.

7.4.2 Control Costs: Tools and Techniques7.4.2.1 Earned Value Management

•SV = EV – PVSchedule variance

•CV= EV − ACCost variance

•SPI = EV/PVSchedule

performance index

•CPI = EV/ACCost

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

7.4.2 Control Costs: Tools and Techniques7.4.2.1 Earned Value Management

PV, 1500

PV, 3600

EV, 1200

AC, 1800

ETC, 5400

0

1000

2000

3000

4000

5000

6000


CU

M C

OST


PV 0 1000 1500 2500 3000 3600

EV 0 800 1200

AC 0 1200 1800

ETC 0 1200 1800 3750 4500 5400

7.4.2 Control Costs: Tools and Techniques7.4.2.2 ForecastingAs 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)]

7.4.2 Control Costs: Tools and Techniques

7.4.2.3 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)

• 7.4.2 Control Costs: Tools and Techniques

7.4.2.4 Performance Reviewscompare 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 .

Table 7-1. Earned Value Calculations Summary Table (PMBOK Page224)

• 7.4.2 Control Costs: Tools and Techniques

7.4.2.5 Project Management Software7.4.2.6 Reserve Analysis

7.4.2.5 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.

7.4.2.6 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.

7.4.3 Control Costs: Outputs

7.4.3.1 Work Performance Information

• The calculated CV, SV, CPI, SPI, TCPI, and VAC values for WBS components (WP, CA) are documented and communicated to stakeholders.

7.4.3.2 Cost Forecasts

• Either a calculated EAC value or a bottom-up EAC value is documented and communicated to stakeholders.

7.4.3.3 Change Requests

• Analysis of project performance may result in a change request to the cost baseline or other components of the project management plan

7.4.3.4 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

7.4.3.5 Project Documents Updates

• Cost estimates, and Basis of estimates.

7.4.3.6 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.

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 ALSAYEDFor 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 / ACSchedule 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)

ProjectedSlippage

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)

AUWOTB

TAB

PBB

NASA Contract / Project Hierarchy

NCC Plus Overrun

Estimate at Completion (EAC) = AC + ETCEAC = Actuals to Date + Work Remaining / Performance Factor EACComposite = ACCum + (BAC – EVCum) / (CPICum x SPICum)EACCPI = BAC / CPICum

Common EAC Calculations

http://evm.nasa.gov/

07 project cost management

Business