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Project Management Professional (PMP®)

– PMBOK Guide 6th Edition

DAY 4

Schedule Formulas

• Schedule Variance (SV): EV-PV

– Greater than zero indicates ahead of schedule

– Less than zero indicates behind schedule

SV = -

Cost Formulas

• Cost Variance (CV): EV-AC

– Greater than zero indicates under budget

– Less than zero indicates over budget

CV = -

Schedule Formulas

• Schedule Performance Index (SPI): EV/PV

– Greater than 1 indicates ahead of schedule

– Less than 1 indicates behind schedule

SPI = /

Cost Formulas

• Cost Performance Index (CPI): EV/AC

– Greater than 1 indicates under budget

– Less than 1 indicates over budget

CPI = /

CAPS

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Lab Exercise - EVM

• A project manager performs Earned

Value Analysis and finds the following

results:

• AC: 220,000, PV: 250,000, EV: 220,000.

CV = 0.

CV = 30,000.

CV = -30,000.

CV = 1

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Lab Exercise - EVM

• A project manager performs Earned

Value Analysis and finds the following

results:

• AC: 220,000, PV: 250,000, EV: 220,000.

CV = 0.

CV = 30,000.

CV = -30,000.

CV = 1

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Lab Exercise - EVM

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Lab Exercise - EVM

EV = AC – CV

EV = 4M – 500K

EV = 3.5 M

Earned Value Forecast Measures

and Formulas

• Estimate To Completion (ETC)

– The amount of money expected to be spent to complete the remaining work

– Management ETC: a new, detailed, bottom-up estimate for the remaining work (most accurate)

– Calculated/Statistical ETC: uses efficiencies to date: (BAC-EV)/CPI (or EAC-AC)

• Note: calculated ETC should be used to validate, but not replace, more detailed and accurate bottom up methods.

Estimate At Completion (EAC)

• Estimate At Completion (EAC) – The forecasted amount of money estimated to be spent

on the entire project

– Equals BAC before the work begins, but changes as actual spending varies from planned

– Several different calculations based on the assumptions of the project management team

1. EAC = AC + ETC – Most common and accurate. Add the costs to date (AC)

plus new bottom-up estimates for remaining work (ETC).

– Useful when the initial plan is no longer valid: when ETC is expected to be noticeably higher or lower than originally planned

Estimate At Completion (EAC)

Formulas

2. EAC = BAC/CPI – When past and current cost performance (good or

bad) is expected to continue for the rest of the work; a linear relationship between past and future is expected

3. EAC = AC + (BAC-EV) – When past and current cost performance (good or

bad) differed from planned, but future cost performance is expected to align with planned

4. EAC = AC + [(BAC-EV) / (CPI X SPI)] – When the schedule is a factor impacting ETC: (BAC-

EV) / (CPI X SPI)

– CPI and SPI can be assigned different weights such as 50/50, 20/80, etc.

Variance at Completion

• VAC = BAC – EAC

• The expected difference in money between what the project was originally expected to spend and what the project is currently expected to spend

• Greater than 0 indicates the project is expected to spend (or if completed, did spend) less money than originally anticipated

• Less than 0 indicates the project is expected to spend (or if completed, did spend) more money than originally anticipated

To-Complete Performance Index

(TCPI) • A ratio showing how cost efficient the project needs to

be to complete the remaining work with the funds originally established for the project (BAC)

• TCPI = Remaining Work/Remaining Money.

• Thus: TCPI = (BAC-EV)/(BAC-AC)

• Greater than 1 indicates the project is currently overbudget.

• Less than 1 indicates the project is currently underbudget

• E.g. A TCPI of 2.0 means the project team needs to get $2 of value for every $1 of money left. For some projects, this would be unachievable, prompting a significant change request to address this shortcoming.

To-Complete Performance Index

(TCPI)

• Alternatively, TCPI can use a revised estimate at completion (EAC) instead of the original BAC.

• Indicates the necessary efficiency to complete the current EAC

• TCPI = (BAC-EV)/(EAC-AC)

– Note: BAC-EV in this formula calculates the remaining work, whereas EAC-AC reflects the remaining money based on an updated cost estimate to complete (EAC)

EVM Formulas, Pg. 267

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EVM Formulas, Pg. 267

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Question

• One common way to compute

estimate at completion (EAC)

is to take the budget at completion

(BAC) and:

A. Divide by SPI

B. Multiply by SPI

C. Multiply by CPI

D. Divide by CPI

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Answer

• One common way to compute

estimate at completion (EAC)

is to take the budget at completion

(BAC) and:

A. Divide by SPI

B. Multiply by SPI

C. Multiply by CPI

D. Divide by CPI

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Question

• Estimate at completion (EAC) is a

periodic evaluation of:

A. The cost of work completed

B. The value of work performed

C. The anticipated total cost at project

completion

D. What it will cost to finish the job

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Answer

• Estimate at completion (EAC) is a

periodic evaluation of:

A. The cost of work completed

B. The value of work performed

C. The anticipated total cost at project

completion

D. What it will cost to finish the job

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Question

A particular project in the domain of civil

construction requires that every on-site worker be

insured. Which of the following inputs best

conveys this requirement to the Estimate Cost

process so that the insurance cost is estimated

and subsequently budgeted?

A. Enterprise Environmental Factor

B. Organizational Process Assets

C. Scope Baseline

D. Project Management Plan 24

Answer

A particular project in the domain of civil construction

requires that every on-site worker be insured. Which of

the following inputs best conveys this requirement to

the Estimated Cost process so that the insurance cost

is estimated and subsequently budgeted?

A. Enterprise Environmental Factor

B. Organizational Process Assets

C. Scope Baseline

D. Project Management Plan

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Quality

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Plan Quality Management

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Fishbone (Ishikawa) diagram

Flowcharts

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Histogram

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Scatter diagrams

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