Cost Schedule Interactions

It should be obvious from the discussion of the previous two sections that budget data by itself or schedule data by itself cannot tell the complete story on the general health of the project. The two metrics must be combined. Figure 4.1 is a graphic display that combines cost and schedule data and that tells the whole story.

The following metrics are measured on the report date or update date, which is shown as the vertical line in Figure 4.1. The planned value (PV) (also known as budgeted cost of work scheduled) is the cumulative curve of the planned progress for the project or some significant part of the project. Progress can be measured in terms of planned expenditures or planned work days. Either metric is a good surrogate for progress. The actual cost (AC) curve (also known as actual cost of work performed) measures what was actually expended over the cumulative life of the project as of the report date. The third curve, the earned value (EV) (also known as the budgeted cost of work performed) measures the value (in terms of planned cost or labor) that accrues to the project for completing the work that was completed as of the report date.

Perhaps the most discussed aspect of C/SC is how to measure value. There are basically four approaches. First, credit 100% of the value (budgeted cost not actual cost) when the task is first opened for work; second, credit 100% of the value when the task is 100% complete; and third, credit 50% when the task is first opened for work and the remaining 50% when the task is complete. The fourth method, which is the one I prefer to use, is based on the number of sub-tasks that make up the task. The EV is based on the proportion of subtasks complete on the report date. Multiply that proportion by the budgeted cost of the task and that is the accrued value for that task. Whichever method you use, the important thing is that EV is clearly defined—there can be no argument about it.

Figure 4.1 The whole cost/schedule control story.

It may be subjective and it may not be theoretically sound, but it is consistent across the life of the project and that is what counts.

Let us get back to the example. In the example the work performed was less than the work scheduled, giving rise to the schedule variance. The budgeted cost of the work performed was less than the actual cost of the work performed, giving rise to the cost variance. In other words the project is over budget and behind schedule—the worst of all possible cases. Less work than was planned was actually accomplished and what was accomplished cost more than was budgeted.

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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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