Slides 11 3 calculate schedule and cost variances with earne

Calculate Schedule and Cost Variances with Earned Value Analysis © Dale R Geiger 2011 How Can We Better Manage Large, Complex, Non Repetitive Projects? © Dale R Geiger 2011 Terminal Learning Objective • Task: Calculate Schedule and Cost Variances with Earned Value Analysis • Condition: You are training to become an ACE with access to ICAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors • Standard: with at least 80% accuracy: • Describe theory of Earned Value Analysis • Explain the concept of schedule and cost variances in context of Earned Value Analysis • Prepare AAR reconciliation using Earned Value Analysis © Dale R Geiger 2011 Introduction • In subsequent lessons we will be dealing with • Organization based control • Role based control • Output based control • Here we would like to start with a simpler concept • Project management and control • The question is “how can we perform better in completing tasks or projects?” © Dale R Geiger 2011 Definition of Project • Projects are • Discrete tasks rather than continuous operations • Often one-time or infrequent rather than repeated • Frequently complex, ambiguous, or pioneering • Tasks that require a significant length of time © Dale R Geiger 2011 Risk • The nature of projects results in a high degree of risk • There are two types of risk: • Risk that the project will not be completed in the timeframe expected: schedule variance • Risk that the project will not be completed within the budget allotted: cost variance © Dale R Geiger 2011 Consider the Possibilities at any Given Point During the Project Possibilities Matrix cost schedule Ahead Of Right On Behind More than Expected As Expected Perfect Less than Expected • Being right on schedule and at the expected cost is perfect (but rarely happens) © Dale R Geiger 2011 Consider the Possibilities at any Given Point During the Project Possibilities Matrix cost schedule Ahead Of Right On Behind More than Expected As Expected Great! Less than Expected Terrific!! Great! • Being ahead of or on schedule and at or less than expected cost is a good thing © Dale R Geiger 2011 Consider the Possibilities at any Given Point During the Project Possibilities Matrix cost schedule Ahead Of More than Expected As Expected Right On Behind Not Good! Terrible!! Not Good! Less than Expected • Being behind or on schedule and at or more than expected cost is not a good thing © Dale R Geiger 2011 Consider the Possibilities at any Given Point During the Project Possibilities Matrix cost More than Expected schedule Ahead Of Right On Behind ?? As Expected Less than Expected ?? • Can’t really tell if this is good news or bad without further analysis © Dale R Geiger 2011 10 Classroom Exercise – Semester rd © Dale R Geiger 2011 49 Semester Results rd • We are now back on schedule but over cost: not good! Cost after 2nd Semester BCWS Schedule Variance BCWP Cost Variance ACWP 6000 (2000) 4000 (200) 4200 Courses Taken – 3rd Semester Cost per Unit – 3rd Semester 2000 Cost of 3rd Semester 4000 Cost after 3rd Semester 10000 • ACWP is 114% of BCWP so EAC can be projected at 105% of BAC: (1.14)36K = 41.0K © Dale R Geiger 2011 50 Semester Results rd • We are now back on schedule but over cost: not good! Cost after 2nd Semester BCWS Schedule Variance BCWP Cost Variance ACWP 6000 (2000) 4000 (200) 4200 Courses Taken – 3rd Semester Cost per Unit – 3rd Semester 2000 2400 Cost of 3rd Semester 4000 7200 Cost after 3rd Semester 10000 11400 • ACWP is 114% of BCWP so EAC can be projected at 105% of BAC: (1.14)36K = 41.0K © Dale R Geiger 2011 51 Semester Results rd • We are now back on schedule but over cost: not good! Cost after 2nd Semester BCWS Schedule Variance BCWP Cost Variance ACWP 6000 (2000) 4000 (200) 4200 Courses Taken – 3rd Semester 3 Cost per Unit – 3rd Semester 2000 2000 2400 Cost of 3rd Semester 4000 6000 7200 Cost after 3rd Semester 10000 10000 11400 • ACWP is 114% of BCWP so EAC can be projected at 105% of BAC: (1.14)36K = 41.0K © Dale R Geiger 2011 52 Semester Results rd • We are now back on schedule but over cost: not good! © Dale R Geiger 2011 53 Semester Results rd • We are now back on schedule but over cost: not good! © Dale R Geiger 2011 54 Semester Results rd • We are now back on schedule but over cost: not good! Cost after 2nd Semester BCWS Schedule Variance BCWP Cost Variance ACWP 6000 (2000) 4000 (200) 4200 Courses Taken – 3rd Semester 3 Cost per Unit – 3rd Semester 2000 2000 2400 Cost of 3rd Semester 4000 2000 6000 (1200) 7200 Cost after 3rd Semester 10000 10000 (1400) 11400 • ACWP is 114% of BCWP so EAC can be projected at 114% of BAC: (1.14)36K = 41.0K © Dale R Geiger 2011 55 Individual Exercise: Semester th © Dale R Geiger 2011 56 4th Semester Results • We are now back on schedule but over cost: not good! BCWS Schedule Variance BCWP Cost Variance ACWP Cost after 3nd Semester Courses Taken – 4th Semester Cost per Unit – 4th Semester Cost of 4th Semester Cost after 4th Semester • ACWP is 114% of BCWP so EAC can be projected at 114% of BAC: (1.14)36K = 41.0K © Dale R Geiger 2011 57 4th Semester Results • We are now ahead of schedule but over cost: not good! Cost after 3nd Semester BCWS Schedule Variance BCWP Cost Variance ACWP 10000 10000 (1400) 11400 Courses Taken – 4th Semester 3 Cost per Unit – 4th Semester 2000 2000 2600 Cost of 4th Semester 4000 2000 6000 (1800) 7800 Cost after 4th Semester 14000 2000 16000 (3200) 19200 • ACWP is 120% of BCWP so EAC can be projected at 120% of BAC: (1.20)36K = 43.2K © Dale R Geiger 2011 58 MBA Project Graph after 4th Semester BAC BCWS $ Semesters © Dale R Geiger 2011 59 MBA Project Graph after 4th Semester EAC BAC ACWP BCWS $ BCWP Semesters © Dale R Geiger 2011 60 Conclusions • Projects offer many important opportunities for cost management and control • The requirements for success are identical to other cost management and control effort • The major difference is that project management requires attention to both • Schedule variance • Cost variance • Another difference is that AARs might be scheduled at logical project milestones rather than fixed time intervals © Dale R Geiger 2011 61 Teacher’s Note cost reconciliation BCWS ACWP variance continuous improvement 14000 19200 (5200) cost variance (3200) extra course taken (2000) acwp/bcwp bac eac 120% 36000 43200 transfer apply for scholarship grade papers as part time job petition to avoid courses accelerate to avoid tuition hikes don’t drop any courses This is like a performance variance This is like a volume variance © Dale R Geiger 2011 62 Teacher’s Note: MBA Exercise schedule cost bcws variance bcwp variance units completed 1 1st semester cost per unit 2000 2000 cost at point in time 2000 2000 acwp 2000 2000 units completed 2nd semester cost per unit cost at point in time 2000 4000 2000 (2000) 2000 2200 (200) 2200 units completed 3rd semester cost per unit cost at point in time 2000 4000 2000 2000 6000 2400 (1200) 7200 units completed 4th semester cost per unit cost at point in time 2000 4000 2000 2000 6000 2600 (1800) 7800 14000 2000 16000 (3200) 19200 © Dale R Geiger 2011 63 ... Geiger 2 011 Terminal Learning Objective • Task: Calculate Schedule and Cost Variances with Earned Value Analysis • Condition: You are training to become an ACE with access to ICAM course handouts,... accountable subordinates explain costs and schedules and ways to improve both • Measurement: schedule and cost variances as provided by the EVA © Dale R Geiger 2 011 14 What Does Earned Value Mean? • Since... of Earned Value Analysis • Explain the concept of schedule and cost variances in context of Earned Value Analysis • Prepare AAR reconciliation using Earned Value Analysis © Dale R Geiger 2011