Project Management

1. CE 447 - PROJECT MANAGEMENT Project Management Monitoring and Information Systems Project Control Project Auditing Project Execution L-11

2. Executing Process Executing consists of the processes used to complete the work defined in the project plan to accomplish the project's requirements. This process involves coordinating people and resources, as well as integrating and performing the activities of the project in accordance with the project management plan. The deliverables are produced as outputs from the processes performed as defined in the project management plan and other frameworks that might be applicable to the type of project at hand.

3. Executing Process Activities in this group are: • Direct and Manage Project Execution • Perform Quality Assurance • Acquire Project team • Develop Project Team • Information Distribution • Request Seller Responses • Select Sellers

4. PM Responsibility in Executing Process • The Project Manager needs to provide managerial guidance to human resources, subordinates, and others ( including subcontractors) that will result in their effective, timely work

5. What is Project Monitor & Control Process? • These consists of those processes(managing time, cost, quality, change, risks, issues, suppliers, customers and communication) performed to observe project execution so that potential problems can be identified in a timely manner and corrective action can be taken, when necessary, to control the execution of the project.

6. Monitoring and controlling tasks • Measuring the ongoing project activities ('where we are). • *Monitoring the project variables (cost, effort, scope, etc.) • against the project management plan and the project • performance baseline (where we should be). • Identify corrective actions to address issues and risks • properly (How can we get on track again). • Influencing the factors that could circumvent integrated • change control so only approved changes are implemented

7. Definition:Corrective Action Steps taken to align future project direction with the stakeholders’ success measures.

8. PM Responsibility in Project Monitoring/Controlling Process • The Project Manager needs to measure performance to find out how progress differs from plan in time to initiate corrective action. The controlling activity often cause a redefinition of project objectives

9. CE 447 - PROJECT MANAGEMENT Project Management Monitoring and Controlling L-11

10. Project Monitoring and Control • Monitoring – collecting, recording, and reporting information concerning project performance that project manager and others wish to know • Controlling – uses data from monitor activity to bring actual performance to planned performance Chapter10 Project Monitoring & Control

11. Project Monitoring and Control • Why do we monitor? • What do we monitor? • When do we monitor? • How do we monitor? Chapter10 Project Monitoring & Control

12. Why do we monitor? • Simply because we know that things don’t always go according to plan (no matter how much we prepare) • To detect and react appropriately to deviations and changes to plans Chapter10 Project Monitoring & Control

13. Men (human resources) Machines Materials Money Space Time Tasks Quality/Technical Performance What do we monitor? Chapter10 Project Monitoring & Control

14. What do we monitor? Inputs • Time • Money • Resources • Material Usage • Tasks • Quality/Technical Performance • Outputs • Progress • Costs • Job starts • Job completion • Engineering / Design changes • Variation order (VO) Chapter10 Project Monitoring & Control

15. When do we monitor? • Till the end of the project • Continuously • Regularly • Logically • While there is still time to react • As soon as possible • At task completion • At pre-planned decision points (milestones) Chapter10 Project Monitoring & Control

16. Where do we monitor? • At head office? • At the site office? • On the spot? • Depends on situation and the ‘whats’ Chapter10 Project Monitoring & Control

17. How do we monitor • Through meetings with clients, parties involved in project (Contractor, supplier,etc.) • For schedule – Update CPA, PERT Charts, Update Gantt Charts • Using Earned Value Analysis • Calculate Critical Ratios • Milestones • Reports • Tests and inspections • Delivery or staggered delivery • PMIS (Project Management Info Sys) Updating

18. Meetings – Some monitoring issues • What problems do you have and what is being done to correct them? • What problems do you anticipate in the future? • Do you need any resources you do not yet have? • Do you need information you do not have yet? • Do you know anything that will give you schedule difficulties? • Any possibility your task will finish early/late? • Will your task be completed under/over/on budget?

19. Project Control Cycle PLAN Specifications Project Schedule Project budget Resource plan Vendor contracts ACTION Correct deviations from plan RE-PLAN as necessary MONITOR Record status Report progress Report cost • COMPARE • Actual status against plan • Schedule • Cost

20. Project Control • Control – process and activities needed to correct deviations from plan • Control the triple constraints • time (schedule) • cost (budget, expenses, etc) • performance (specifications, testing results, etc.)

21. Basic Concepts • Baselining • (values at t1, all values at t2, …) • Planned versus real Values • (Planned Start, Planned Effort, Planned End, …) • (Actual Start, Actual Effort, Actual End, …)

22. Baseline and Tracking Gantt Charts

23. BAC PV(t) t Planned Value • The cumulative cost of the approved costs • PV(t) = planned value at time t • BAC = Budget at completion PlannedEnd

24. Actual Cost • The actual cumulative cost of the work done so far + estimation to end AC(t) t ActualEnd

25. Earned Value • Measures real achieved results (in terms on earnings) • The sum of the approved cost estimates for activities completed up to a specified date • At the end of the project, EV = PV t

26. Computing Earned Value • Rule 1. Earned value should be determined by physically examining products • Rule 2. • Finished activities: • Planned Value • Unstarted activities • 0 • For unfinished activities earned value is usually just a guess • 50/50 Rule (50 at start and 100 at end) • 20/80 Rule (20 at start and 100 at end) • 0/100 Rule (0 at start and 100 at end)

27. Example

28. Expresses project progress (in terms on monetary values) Used to compute performances Some simple values CV = EV - AC SV = EV - PV a = T - Ta b = T - Tb c Analysis at date, some values BAC C PV c AC a b EV Tb Ta T

29. Cost Performance Index (CPI) • Compares budgeted cost of work performed to actual cost • Indicated the efficiency of the project • CPI = EV/AC How much we are actually getting for each euro we thought we would spend.

30. Schedule Performance Index (SPI) • Compares work performed to work planned • SPI = EV/PV • How fast does the project progress w.r.t. how fast we expected it to be?

31. Interpreting EV-indicators • Typically indicators are stable after 20% of the project • CPI > 1 project is on budget • CPI < 1 project is over budget • SPI > 1 project is ahead of time • SPI < 1 project is behind schedule

32. To Complete Performance Index • The efficiency that must be achieved to complete the remaining work with the remaining money • TCPI = (BAC - EV) / (BAC - AC)

33. Techniques for monitoring and control • Earned Value Analysis • Critical Ratio

34. Earned Value Analysis • A way of measuring overall performance (not individual task) is using an aggregate performance measure - Earned Value • Earned value of work performed (value completed) for those tasks in progress found by multiplying the estimated percent physical completion of work for each task by the planned cost for those tasks. The result is amount that should be spent on the task so far. This can be compared with actual amount spent.

35. Earned Value Analysis • Methods for estimating percent completion • The 50-50 estimate. 50% is assumed when task is begun, and remaining 50% when work completed. • 0-100% rule. This rule allows no credit for work until task is complete, highly conservative rule, project always seem late until the very end of project when everything appears to suddenly catch up • Critical input rule. This rule assigns progress according to amount of critical input that has been used. Labor or skilled dependent, machine critical input – buy machine complete task – may be misinformation • Proportional rule. This rule divides planned (or actual) time-to-date by total scheduled time(or budgeted (or actual ) cost-to-date by total budgeted cast] to calculate percent complete. This is commonly used rule.

36. Earned Value Analysis • Refer to earned value chart – basis for evaluating cost and performance to date • If total value of the work accomplished is in balance with the planned (baseline) cost, and actual cost then top mgmt has no particular need for a detailed analysis of individual tasks • Earned value concept – combines cost reporting & aggregate performance reporting into one comprehensive chart

37. Earned Value Analysis • Baseline cost to completion – referred to as budget at completion (BAC) • Actual cost to date – referred to as estimated cost at completion (EAC) • Identify several variances according to two guidelines • A negative variance is ‘bad’ • Cost and schedule variances are calculated as earned value minus some other measure

38. Earned Value Chart – basis for evaluating cost & performance to date

39. Earned Value Analysis - Variances • 4 types of variances; • Cost (spending) variance (CV) – difference between budgeted cost of work performed (earned value) (BCWP) and actual cost of that work (ACWP) • Schedule variance (SV) – difference between earned value (BCWP) and cost of work we scheduled to perform to date (BCWS) • Time variance (TV) –difference between time scheduled for work performed (STWP) and actual time to perform it (ATWP)

40. Earned Value Variance - Formula CV = BCWP – ACWP (negative value - cost overrun) SV = BCWP – BCWS (negative value - behind schedule) TV = STWP – ATWP (negative value - delay) Index (Ratios) Cost Performance Index (CPI) = BCWP/ACWP Schedule Performance Index (SPI) = BCWP/BCWS Time Performance Index (TPI) = STWP/ATWP

41. EXAMPLE Assume that operations on a Work Package cost RM 1,500 to complete. They were originally scheduled to finish today. At this point, we actually spent RM1,350. And we estimate that we have completed two thirds (2/3) of the work. What are the cost and schedule variances? CV = BCWP – ACWP = 1500 (2/3) – 1350 = - 350 SV = BCWP – BCWS = 1500 (2/3) – 1500 = - 500 CPI = BCWP/ACWP = 1500(2/3)/1350 = 0.74 SPI = BCWP/BCWS = 1500(2/3)/1500 = 0.67 Spending higher than budget, and given what we have spent, we are not as far along as we should be (have not completed as much work as we should have)

42. Possible to have one of indicators to be favorable while the other unfavorable • Might be ahead of schedule and behind costs • Six possibilities (see figure next slide)

43. 6 Possibilities Earned Value Analysis

44. EXERCISE ( A project to develop a country park has an actual cost in month 17 of $350,000, a planned cost of $475,000, and a value completed of $300,000. Find the cost and schedule variances and the three indexes. BCWS $ Planned (Baseline) – 475,000 ACWP Actual cost – 350,000 Value completed – 300,000 BCWP Time t Month 17

45. Solution BCWS = 475,000 BCWP = 300,000 ACWP = 350,000 CV = 300,000 – 350,000 = -50,000 (negative value - cost overrun) SV = 300,000 – 475,000 = -175,000 (negative value - behind schedule) Cost Performance Index (CPI) = BCWP/ACWP = 300/350 = 0.86 Schedule Performance Index (SPI) = BCWP/BCWS = 300/475 = 0.63 Time Performance Index (TPI) = STWP/ATWP Scheduled Time Work Performed (STWP) can be estimated Time t = Schedule Variance/Slope of Planned costs = -175,000/ (475,000/17) = - 6.26 months  Time Difference= 17- 6.26 = 10.74 TV = 10.74/17 = 0.63 CV = BCWP – ACWP SV = BCWP – BCWS

46. Critical ratio • Sometimes, especially large projects, it may be worthwhile calculating a set of critical ratios for all project activities • The critical ratio is actual progress x budgeted cost scheduled progress actual cost • If ratio is 1 everything is probably on target • The further away form 1 the ratio is, the more we may need to investigate

47. Critical ratio example Calculate the critical ratios for the following activities and indicate which are probably on target and need to be investigated.

48. Critical ratio example • Can be on schedule and below budget (Act A) Why so good? Cutting corners? • Can be behind schedule but below budget (Act C) • Can be on budget but physical progress lagging (Act E) • Can be on schedule but cost running higher than budget (Act D) • On budget ahead of schedule (Act B)

49. Summary • Need proper project monitoring and control mechanisms • Tools available to help in monitoring and controlling activities • There are human control and management aspects not covered here

50. Glossary of Terms TABLE 13.1