Project Control

Planning puts the team in a position to launch a project. However, rarely does everything go according to plan. As soon as the project begins, deviations start to occur. Thus, once the project is launched, conforming to the plan becomes a principal function of project management.

It is up to the project control system to keep the project manager apprised of how all components of the project are progressing, and highlight significant problems and deviations from plan, so that corrective action can be taken. Without a control system, the project manager has little influence over the project, and it will meander to completion in some form or fashion.

An effective project control system combines a cost accounting function and a cost control function with appropriate mechanisms for monitoring progress against schedule and technical performance targets. The cost accounting function accumulates actual costs, ensures costs are properly allocated, and verifies work is carried out and billed correctly. The cost control function provides the information to support cost analysis, prediction, and reporting. Costs are maintained within budget by taking corrective action wherever predicted costs exceed the budget.

Among the most critical requirements of a project control system is providing a capability to compare budgeted costs to actual costs, and then conduct variance analyses which lead to corrective action. The earned value approach to variance analysis is widely used. It compares the budgeted cost of work performed (BCWP), or earned value, with the actual cost of work performed (ACWP) to determine the cost variance (CV). It compares the BCWP with the budgeted cost of work scheduled (BCWS), or planned earned value, to determine the schedule variance (SV).

ACWP and BCWS are fairly straightforward to obtain. On the other hand, it may be difficult to obtain an accurate representation of BCWP. One approach is to use standard dollar expenditures for the project, so that x% of the costs are booked for x% of the time. Another is the 50/50 rule, wherein half the budget is recorded when an activity is scheduled to begin and the other half when the activity is scheduled to complete. Other alternative approaches may depend on percentage of man hours expended, parts installed, programs written/tested, etc. There are many other possible approaches; however the object is to somehow measure the percentage complete for project activities (or earned value). On some projects the time, trouble, and expense to obtain an accurate BCWP may not be cost effective.

Figure 17.7.4 gives a graphic presentation of the earned value approach and summarizes some quantitative indices useful to project managers conducting variance analysis. Once identified, each critical variance must be investigated to determine the cause and the appropriate corrective action. Such an investigation should begin at the lowest organizational level by the supervisor involved. It then progresses upward to the project manager, who reviews variance causes and approves corrective actions. Normally the project manager will review these results with upper-level management prior to preparing the contractually required reports to the customer.

BCWP = BUDGETED COST OF WORK PERFORMED = EARNED VALUE BCWS = BUDGETED COST OF WORK SCHEDULED = PLANNED EARNED VALUE ACWP = ACTUAL COST OF WORK PERFORMED

CV = COST VARIANCE = BCWP - ACWP SV = SCHEDULE VARIANCE = BCWP -BCWS CV% = COST VARIANCE PERCENTAGE = CV/BCWP SV% = SCHEDULE VARIANCE PERCENTAGE = SV/BCWS EAC = ESTIMATE AT COMPLETION = (ACWP/BCWP)*(TOTAL BUDGET) (NEGATIVE IS UNFAVORABLE)

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.

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