## Control Costs Outputs

The Control Costs process has six outputs:

■ Work performance measurements

■ Budget forecasts

■ Change requests

I've discussed most of these before, or they are self-explanatory. Recap of Formulas

You have a lot of formulas to memorize. Keep in mind that you'll be given a calculator when you take the exam, so you don't have to do the math manually. Variance and trend analysis are part of the project performance reviews tool and technique. Here are the formulas I've covered in this chapter:

■ Performance measurements

Cost variance : CV = EV - AC Schedule variance : SV = EV - PV

■ Performance indexes

Cumulative cost performance index: Cumulative CPI = cumulative EV / cumulative AC Schedule performance index: SPI = EV / PV

Cumulative schedule performance index : Cumulative SPI = cumulative EV / cumulative PV

■ forecasting

EAC formula: EAC = AC + bottom-up ETC

EAC using actual costs to date and assuming ETC uses budgeted rate: EAC = AC + BAC - EV

EAC assuming future performance will behave like past performance: EAC = BAC / cumulative CPI

EAC when cost performance is negative and schedule dates must be met: EAC = AC + [(BAC - EV) / (cumulative CPI * cumulative SPI )]

Bottom-up ETC: Summation of the costs of the remaining work based on estimates from the project team members working on these activities

ETC when future cost variances will be similar to past variances: ETC = (BAC -cumulative EV) / cumulative CPI

ETC when future cost variances are expected to be atypical: ETC = (BAC -cumulative EV)

■ variance analysis

Variance analysis: VAC = BAC - EAC

Problems with costs come about for many reasons, including incorrect estimating techniques, predetermined or fixed budgets with no flexibility, schedule overruns, inadequate WBS development, and so on. Good project management planning techniques during the Planning processes might prevent cost problems later in the project. At a minimum, proper planning will reduce the impact of these problems if they do occur.

Always inform appropriate stakeholders of revised budget or cost estimates and any changes of significant impact to the project. Keep them updated on changes, status, and risk conditions during regularly scheduled project meetings.

Real World Scenario

Mustang Enterprises's New Accounting System

You are a stakeholder of the New Accounting System project for Mustang Enterprises. The existing accounting system resides on a mainframe, and some of the programs used to process data are more than 15 years old. Your company decided to hire a contract software services firm to write a thin-client, browser-based version of the accounting system so that the mainframe programs could be retired. You've also assigned a senior programmer to act as the project manager on behalf of your organization.

The project is in the Monitoring and Controlling process group, and the project manager keeps reporting that everything is OK and on schedule. When you asked him detailed questions and requested performance data, the project manager patted you on the back and said, "Don't worry, I've got everything under control."

You are a little worried because some of the key project team members have come to you confidentially to inform you of the progress of the project.

After further investigation, you discover that the project manager changed the database from SQL to Oracle midway through the project and didn't tell anyone except the project team. The project scope stated specifically that project development required a SQL database. The change in database products changed the project scope and product scope without letting the stakeholders know.

This change has caused schedule delays because the project team members have told you they need training in the new database development tools before they can proceed. Additionally, many of the programs have already been written to interface with SQL, not Oracle, and will have to be modified. To add insult to injury, the database switch will impact the project budget in two ways. First, purchasing the Oracle database involves substantially more money than purchasing the SQL database, and it requires the purchase of new development tools for the programming team. Second, several members of the programming staff will have to attend multiple training sessions on the new database product to fully integrate the programs and system. Training is currently running \$2,200 per session per person.

Since you're a key stakeholder, you decide to bring this information out into the open at the next project status meeting. Additionally, you plan to meet with the project sponsor and the procurement department to determine what alternatives you have to request that the contracting firm realign the project to meet the original contractual requirements. However, you fear that since the project manager is the one who gave the orders to change the database, your organization might not have a lot of recourse. You will also make the project sponsor aware that the project manager doesn't have the skills needed to conduct this project and a new project manager should be hired as soon as possible. The project manager is invaluable to the organization as a programmer, but he doesn't have the project management experience needed to conduct a project of this size and complexity. This might cause further setback to the project, but the project management plan and project schedule will require updates anyway as a result of the existing project manager's decisions. You also determine to document all that has happened as a lesson learned and to set up a change control process to prevent this from happening in the future.