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Saturday, December 17, 2011

Chapter 28: Cost Management during Monitoring & Controlling the Project


Aim: To understand the Control Costs process

The control costs process helps the project manager ensure that the work is occurring within the project budget and identifies any variances early in the process.

The table below shows the inputs, tools and techniques, and outputs for the control costs process.

Control Costs
Inputs Tools & Techniques Outputs

Project management plan
Project funding requirements
Work performance information
Organizational process assets

Earned value management
Forecasting
To-complete performance index
Performance reviews
Variance analysis
Project management software

Work performance measurements
Budget forecasts
Organizational process assets updates
Change requests
Project management plan updates
Project document updates
The control costs process identifies any areas that are costing more than planned. As a project moves toward completion the value of the project’s deliverables changes. The “value” of a project at any point in time is known as its earned value. One method of comparing the earned value of a project to the budget is earned value analysis.

Exam Alert:
Do you remember Earned Value Analysis? The calculations where we calculate SPI & CPI using the EV, PV and AC. Remember??

The whole idea behind a corrective or preventive action is to help preserve the healthy execution of your project and maximize its resource utilizations.

Let us Recap the Terms & Formulae used during Earned Value Analysis:
Terms:
• BAC – Budget At Completion – This is the amount that you planned that your project will use at completion
• EV – Earned Value – The value (in monetary terms) your project has earned so far
• PV – Planned Value – The value that your project is supposed to have earned so far
• AC – Actual Cost – The Actual cost that you have spent so far
• ETC = Estimate To Complete – The amount of money you will need to complete the project
• EAC = Estimate At completion – The Amount of money you would have spent when the project completes
• TCPI – To Complete Performance Index – The Cost Performance Index that you must attain in order to finish the project as per the planned amounts
Formulae:
• SPI – Schedule Performance Index = EV / PV
• CPI – Cost Performance Index = EV / AC
• SV – Schedule Variance = EV – PV
• CV – Cost Variance = EV – AC
• ETC = EAC – AC
• EAC = BAC / CPI
• TCPI = BAC – EV / BAC – AC or
• TCPI = BAC – EV / EAC – AC

To know more about the Control Costs process Click Here

To know more about the Earned Value Measurements with examples Click Here

Preb: Chapter 27

Next: Chapter 29

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