Control Costs

“PMI” is abbreviation for Project Management Institute as well as trade and

service mark registered in the United States and other nations; “PMBOK”, is
trademarks of the Project Management Institute. Inc.

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 Control Costs Estimate Costs
Determine
Budget
MONITORING &
CONTROLLING PROCESSES

PLANNING
PROCESSES

INITIATING CLOSING
PROCESSES PROCESSES

EXECUTING
PROCESSES

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 Earned Value

• Earned Value represent the amount of budget absorbed that

you can claim representing the complete work (cost, time,
scope)

• Earned Value Analysis / technique is a method of

measuring project performance, by comparing the amount of
work planned with what was actually accomplished to
determine if cost and schedule performance is as planned

• Enable the project manager to detect deviations from plan as

soon as they occur and to take appropriate corrective action.

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 Earned Value Technique

The key Values:

 Planned Value (PV): Estimated value of the work to be done

 Earned value (EV): Estimated value of the work actually accomplished
 Actual Cost (AC): Actual cost incurred
 Budget at Completion (BAC): Budget for total work
 Estimate to Complete (ETC): Current expectation of the remain project
cost to finish the job (at certain point)
 Estimate at Completion (EAC): Current expectation of the total project
cost
 Variance at Completion (VAC): Current expectation of how much over
or under budget at the end of the project

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 Earned Value Technique

The Measurement:

 Cost Variance (CV): EV – AC

 (+) = under budget
 (-) = over budget
 Schedule Variance (SV): EV - PV
 (+) = ahead schedule
 (-) = behind schedule
 Cost Performance Index (CPI): EV/AC
 >1 performance of cost OK
 <1 performance of cost not OK
 Getting Rp xx out of every Rp 1
 Schedule Performance Index (SPI): EV/PV
 >1 performance of schedule OK
 <1 performance of schedule not OK
 Progressing at x% of the rate originally plan

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 Earned Value Technique

• Illustrative graphic

Planned Value
Actual Cost Budget at
Completion
Cumulative Value

(BAC)
Cost Variance

Schedule Variance

Earned Value

Data Date Time

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 Earned Value: Illustration

• Sample case:
• Development 5 modules: A, B, C, D, E
• Modules will be produced per period
• Cost per module = $ 10

• Condition case 1: • Condition case 2:

• In 3 rd period: $ 40 is expended • In 3 rd period: $ 30 is expended
• Module completion: • Module completion:
A = 100 % A = 100 %
B = 100 % B = 100 %
C = 100 % C = 50 %
D = 100 % D= 0%
E = 50 % E= 0%

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 Earned Value: Illustration

• Sample case:
• Development 5 modules: A, B, C, D, E
• Modules will be produced per period
• Cost per module = $ 10 S Curve
E
D D
C C C

B B B B

A A A A A
Period
1 2 3 4 5
Accumulative
Cost (Sched) $ 10 $ 20 $ 30 $ 40 $ 50

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 Earned Value: Illustration (1)

• Condition case 1:
• In 3 rd period: $ 40 is
expended PV
• Module completion: EV
A=100%, B= 100%, C= E AC E
100%, D=100%, E=50%
D D D

C C C
B B B B

A A A A A
Period
Accumulative
1 2 3 4 5
Cost (Sched) $ 10 $ 20 $ 30 $ 40 $ 50 PV

Cost (Act) $ 10 $ 20 $ 40 AC
Value EV
(performed) $ 10 $ 20 $ 45
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 Earned Value: Illustration (2)

1 2 3 4 5
Accumulative
$ 10 $ 20 $ 30 $ 40 $ 50 PV
Cost (Sched)

Cost (Act) $ 10 $ 20 $ 40 AC

Value EV
$ 10 $ 20 $ 45
(performed)

The Measurement:
 Cost Variance (CV) = EV - AC = $45 - $40 = $5
(+) = under budget
 Schedule Variance (SV) = EV - PV = $45 - $30 = $15
(+) = ahead schedule
 Cost Performance Index (CPI) = EV/AC = $45 / $40 = 1.125
 >1 performance of cost OK
 Getting Rp xx out of every Rp 1
 Schedule Performance Index (SPI): EV/PV = $45 / $30 = 1.5
 >1 performance of schedule OK
 Progressing at x% of the rate originally plan

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 Earned Value: Illustration (3)

• Condition case 2:
• In 3 rd period: $ 30 is PV
expended
• Module completion: E
A=100%, B= 100%, C= AC
50%, D=0%, E=0% D D

C EV C C
B B B B

A A A A A
Period
1 2 3 4 5
Accumulative
Cost (Sched) $ 10 $ 20 $ 30 $ 40 $ 50 PV

Cost (Act) $ 10 $ 20 $ 30 AC
Value EV
(performed) $ 10 $ 20 $ 25
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 Earned Value: Illustration (3)

1 2 3 4 5
Accumulative
$ 10 $ 20 $ 30 $ 40 $ 50 PV
Cost (Sched)

Cost (Act) $ 10 $ 20 $ 30 AC

Value EV
$ 10 $ 20 $ 25
(performed)

The Measurement:
 Cost Variance (CV) = EV - AC = $25 - $30 = - $5
(-) = over budget
 Schedule Variance (SV) = EV - PV = $25 - $30 = - $5
(-) = under schedule
 Cost Performance Index (CPI) = EV/AC = $25 / $30 = 0.833
 <1 performance of cost NOT OK
 Getting Rp xx out of every Rp 1
 Schedule Performance Index (SPI): EV/PV = $25 / $30 = 0.833
 <1 performance of schedule NOT OK
 Progressing at x% of the rate originally plan

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 Estimate At Completion (EAC)

• Condition case 2:
Alternative 1 :
EAC = Actual + Remaining Budget = AC + (BAC – EV)
Used when current variances are thought not typical of the future
Sample: = 30 + (50 - 25) = $55

Alternative 2 :
EAC = Actual + New Estimate for Remaining Budget = AC + ETC
Used when original estimate was fundamentally flawed
Sample: = 30 + xxest = $xx

Alternative 3 :
EAC = Actual + Remaining Budget/CPI = AC + ( [BAC–EV] / CPI )
Used when current variances are thought to be typical of the future
Sample: = 30 + ( [50 - 25] / 0.625 ) = $70

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 Estimate At Completion (EAC)

• Condition case 2:

Alternative 4 :
EAC = Actual + Remaining/CPI/SPI =
= 30 + (20/0.625):0.833
= 30 + 38.42 = $68.42

Alternative 5:
EAC = BAC / CPI = 50 / 0.625 = $80
Used when if no variances from the BAC have occurred or will
continue at the same rate of spending

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 End of Slides

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