5 days



Actual cost of work performed = $400 AC=$400 Actual cost variance = ($100)

Figure 10.10 Cost/performance indicators.

Cost/Schedule Control Terminology

For those who are familiar with the older cost/schedule control terminology, we have used the new terminology as defined in PMBOK 2000. The old terminology compares to the new terminology as follows:

Management might react positively to the news shown in Figure 10.8, but they might also be misled by such a conclusion. The full story is told by comparing both budget variance and schedule variance, shown in Figure 10.11.

To correctly interpret the data shown in Figure 10.9, you need to add the EV data that was given in Figure 10.10 to produce Figure 10.11. Comparing the EV curve with the PV curve, you see that you have underspent because all of the work that was scheduled has not been completed. Comparing the EV curve to the AC curve also indicates that you overspent for the work that was done. Clearly, management would have been misled by Figure 10.8 had they ignored the data in Figure 10.10. Either one by itself may be telling a half-truth.


Figure 10.11 The full story.


Figure 10.11 The full story.

In addition to measuring and reporting history, CSC can be used to predict the future status of a project. Take a look at Figure 10.12. By cutting the PV curve at the height from the horizontal axis, which has been achieved by the EV, and then pasting this curve onto the end of the EV curve, you can extrapolate the completion of the project. Note that this is based on using the original estimates for the remaining work to be completed. If you continue at the rate at which you have been progressing, you will finish beyond the planned completion date. Doing the same thing for the AC shows that you will finish over budget. This is the simplest method of attempting to "estimate to completion," but it clearly illustrates that a significant change needs to occur in the way this project is running.

The three basic indicators yield one additional level of analysis for us. Schedule performance index (SPI) and cost performance index (CPI) are a further refinement. They are computed as follows:

Figure 10.12 PV, EV, and AC curves.

Figure 10.12 PV, EV, and AC curves.

Schedule performance index. The schedule performance index is a measure of how close the project is to performing work as it was actually scheduled. If we are ahead of schedule, EV will be greater than PV, and therefore the SPI will be greater than 1. Obviously, this is desirable. On the other hand, an SPI below 1 would indicate that the work performed was less than the work scheduled. Not a good thing.

Cost performance index. The cost performance index is a measure of how close the project is to spending on the work performed to what was planned to have been spent. If you are spending less on the work performed than was budgeted, the CPI will be greater than 1. If not, and you are spending more than was budgeted for the work performed, then the CPI will be less than 1.

Some managers prefer this type of analysis because it is intuitive and quite simple to equate each index to a baseline of 1. Any value less than 1 is undesirable; any value over 1 is good. These indices are displayed graphically as trends compared against the baseline value of 1.

Was this article helpful?

0 0
Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

Get My Free Ebook

Post a comment