are your project consultants creating less value than what youre paying them
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Presentation on finding your consultants\' value compared to what you\'re paying themTRANSCRIPT
Are your project consultants creatingless value than what you're paying them?
By James Hallstrom, PMP on October 22nd, 2009
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?
Are we on budget?
● Cost Performance Index (CPI)● CPI = Budget cost of work performed / Actual
cost work performed or CPI = BCWP / ACWP
Jan Feb Mar Apr May Jun0
0.25
0.5
0.75
1
1.25
1.5
1.75
2
CPI versus Time
Time
CP
I
Under Budget
Over Budget
Fig. 1: CPI
Are we on Schedule?
● Schedule Performance Index (SPI)● SPI = Budget cost of work performed / Budget
cost of work scheduled or SPI = BCWP / BCWS
Jan Feb Mar Apr May Jun0
0.25
0.5
0.75
1
1.25
1.5
1.75
2
SPI versus Time
Time
SP
I
Ahead of Schedule
Behind Schedule
Fig. 2: SPI
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.
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)
Break down consultants' tasks
● View project work for consultants only.
Jan Feb Mar Apr May Jun Jul0
1000
2000
3000
4000
5000
6000
7000
8000
Project Work versus Time
Time
Wor
k C
ompl
eted
in h
rs Ahead of Schedule
Fig. 4: Project Work
Behind Schedule
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.
Jan Feb Mar Apr May Jun Jul0
50100150200250300350400450500550600650700
PV versus Time
Time
Dol
lars
spe
nt in
thou
sand
s
Fig. 5: Planned Value or BCWS(Budgeted Cost of Work Scheduled)
Under Budget
Over Budget
Calculate consultants' EV and AC
● Every reporting period calculate your consultants' EV and AC and plot on their PV chart.
Jan Feb Mar Apr May Jun Jul0
50100150200250300350400450500550600650700
Std EVM chart
PVEVAC
Time
Dol
lars
in th
ousa
nds
Fig. 6: PV, EV and AC
Jan Feb Mar Apr May Jun Jul0
50100150200250300350400450500550600650700
Std EVM chart
PVEVAC
Time
Dol
lars
in th
ousa
nds
Fig. 6: PV, EV and AC
$50k
$60K
1 wk
Schedule variance is 1 week behind or $50k below plan
Cost variance is $60k below work performed
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
Cut task details out of the Project Plan
Paste into spreadsheet
Spreadsheet is located at: http://tinyurl.com/yj52qw3
Spreadsheet calculates PV and EV
Plots PV and EV data
Cut and Paste into weekly presentation
Issues and Concerns1. 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.