Important Terms and Definitions - Monitoring & Controlling the Golden Triangle

Let us wrap up this section by covering the important terms we learnt as part of this section on managing and controlling the golden triangle.

• Actual cost (AC) - The total cost actually incurred until a specific point on the timescale in performing the work for a project or a project activity.
• Budget at completion (BAC) - The total budget authorized for performing the project work. This is the planned budget for the project, the cost that you originally estimated for the project.
• Change control system - A collection of formal documented procedures that specifies how the project deliverables and documents will be changed, controlled, and approved.
• Cost baseline - The planned budget for the project over a time period, used as a basis against which to monitor, control, and measure the cost performance of the project. The cost performance is measured by comparing the actual cost to the planned cost over a time period.
• Cost performance index (CPI) - A measure of the cost efficiency of a project calculated by dividing earned value (EV) by actual cost (AC).
• Cost variance (CV) - A measure of cost performance obtained by subtracting actual value (AC) from earned value (EV). A positive result indicates good performance, whereas a negative result indicates bad performance.
• Earned value (EV) or budgeted cost of work performed (BCWP) - The value of the actually performed work expressed in terms of the approved budget for a project or a project activity for a given time period.
• Earned value management (EVM) or earned value technique (EVT) - A management methodology and a technique to measure project progress by comparing integrated measures of scope, schedule, and cost with the planned performance baseline.
• Estimate at completion (EAC) at budgeted rate - The estimate from the current point in time of how much it will cost to complete the entire project or an entire project activity for which the BAC is given. The value of EAC is obtained by adding the value of ETC at the budgeted rate to AC.
• Estimate at completion (EAC) at current CPI - The estimate from the current point in time of how much it will cost to complete the entire project or an entire project activity for which the BAC is given. The value of EAC is obtained by adding the value of ETC at the current CPI to AC.
• Estimate to complete (ETC) at budgeted rate - The expected cost, estimated by assuming the future performance will be at the budgeted rate, to complete the remaining work for the project or for a project activity.
• Estimate to complete (ETC) at present CPI - The expected cost, estimated by assuming the future performance will be at the current CPI, to complete the remaining work for the project or for a project activity.
• Performance measurement baseline - An approved integrated plan for scope, schedule, and cost for the project, against which the project execution is compared to measure the project performance.
• Project scope creep - Changes applied to the project scope without going through the approval process, such as the integrated change control process.
• Schedule baseline - A specific version of the project schedule developed from the schedule network analysis and the schedule model data. This is the approved version of the schedule with a start date and an end date, and it is used as a basis against which the project schedule performance is measured.
• Schedule performance index (SPI) - A measure of the schedule efficiency of a project calculated by dividing earned value (EV) by planned value (PV).
• Schedule revision - An update to the project schedule that includes changing the project start date, end date, or both.
• Scope baseline - The approved project scope, which includes the approved project scope statement, the WBS based on the approved project scope statement, and the corresponding WBS dictionary.
• Variance - A measurable deviation in the value of a project variable, such as cost from a known baseline or expected value.
• Variance analysis - A technique used to assess the magnitude of variation in the value of a variable (such as cost from the baseline or expected value), determine the cause of the variance, and decide whether a corrective action is required.

Prev: Section Summary

Next: Introduction to Closing a Project

Summary - Monitoring & Controlling the Golden Triangle

We have reached the end of the discussion on Monitoring and Controlling the Golden Triangle. Let us summarize what we have learned so far.

• You need to monitor and control your project throughout its lifecycle, which includes monitoring and controlling performance.
• In an ideal world, there should be no changes to or variations from the planned baselines, such as cost, schedule, and scope baselines.
• A good-quality project is completed within the planned cost, schedule, and scope.
• However, in the real world, there are changes and variations, and therefore quality needs to be monitored and controlled, which involves monitoring certain project results by making measurements and taking actions based on those measurements.
• The three project parameters: cost, scope, and schedule are collectively known as a triple constraint because if one of them changes, at least one of the other two parameters must change.
• Therefore, project monitoring and controlling includes monitoring and controlling these three parameters, which involves measuring cost, schedule, and scope performance and taking actions based on performance.
• The most commonly used technique to measure cost and schedule performance is known as the earned value technique (EVT), also called earned value management (EVM), and it measures performance by comparing the earned value of the actual work performed to the actual cost and to the planned value that was supposed to be earned according to the plan.
• You incur cost in executing the scheduled work.
• So performance is also measured in terms of performed work or schedule performance.

Prev: Measuring Performance

Next: Important Terms & Definitions

Chapter 82: Introduction to Monitoring & Controlling the Golden Triangle

High-quality projects deliver the promised product, service, or result within the planned budget, schedule, and scope. This is also a very important and basic criterion of success: Complete the project with complete scope, on schedule, and within budget.
So, it is not surprising to see that the project performance is largely measured by making integrated measures of scope, schedule, and cost and comparing them to the scope, schedule, and cost baselines. Cost and time are the underlying fundamental parameters that determine budget and schedule, respectively. So, the three fundamental parameters that we are talking about here are scope, time, and cost.

Why are these 3 factors so important?

You can understand the answer by trying to answer the below questions based on the scenario:
Scenario: You are the CEO of a Bank and as a strategic business plan, you want an online banking website for all your customers which you intend to roll-out by Jan 2012. Your Board of Directors has allocated a 10 million USD budget for the same and you identified some XYZ Software company and given them this project. Now…

1. XYZ Company has not finished the website and it is December 2011 already and based on the state of things, it looks like you are not going to meet the Jan 2012 cut that your Board of Directors wanted. Will you be happy? (SCHEDULE)
2. XYZ Company has finished the website but, your UAT team is unable to use the website properly. Funds transfer doesn't happen at times, certain type of account information isn’t visible, bill payments feature has totally been forgotten. Though the website can go live in Jan 2012, many of the features are not fully ready. Will you be happy? (SCOPE)
3. XYZ Company is making good progress on your website. It is September and they have already utilized 8 million dollars and it looks like they might need 2 million more in order to meet the go-live in Jan 2012. Will you be happy? (COST/BUDGET)

I am sure that, if you were the CEO, you will be grossly unhappy in any of the 3 situations.

This is how important these 3 factors Schedule, Scope & Budget are and that is why they are called the Golden Triangle.

Since the success of the project is tightly coupled with these 3 factors, it is extremely important that you monitor them efficiently. This is what we are going to learn in the next few chapters.

Prev: Important Terms & Definitions - Monitoring & Controlling Quality and Risk

Next: Big Picture of Controlling Schedule, Cost and Scope