Project Performance
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Project Performance
Monitoring and controlling a project including preparing project performance reports, are some of the most important tasks a project manager will perform. The requirements for performance reporting will be determined by the stakeholders and should be documented in the project plan. Earned value analysis is one technique for determining how a project is performing. The results of earned value analysis are key inputs to stakeholder reporting which, in turn, are used to make decisions about the project.
Scenario for the Discussion
Refer to question #27 on page 266 of the Mantel text.
After considering the scenario, post by Day 3 your response to the following questions:
•What is your assessment of the performance of the project?
•What metrics did you use to come to your conclusion about the performance of the project?
•What do you think should be communicated to the stakeholders? Why?
SAMPLE ANSWER
- The following project is at the end of its sixth week. Find the cost and schedule variances. Also find the CPI and SPI. Then find the critical ratio of the project using earned value calculations. Finally, calculate the ETC and EAC for the project
Activity Predecessors Duration (wks) Budget ($) Actual Cost ($) %Complete
a — ———– 2 300 400 100
b — 3 200 180 100
c a 2 250 300 100
d a 5 600 400 20
e b, c 4 400 200 20
The Cost Variance (CV) is arrived at by finding the difference between the Earned Value (EV) and the Actual Cost (AC). The Earned Value (EV) is a sum of the Actual Completion (AC) (in percentage) and the Budget at Completion (BAC) (Bible, Bivins & Susan, 2011)
Activity‘d’ CV = EV – AC; Therefore EV = Actual Completion (%) X BAC
= 20% X 400
= 80
Activity‘d’ CV = 80 – 400
= -320
Activity‘e’ CV = EV – AC; Therefore EV = Actual Completion (%) X BAC
= 20% X 200
= 40
Activity‘e’ CV = 40 – 200
= -160
The Scheduled Variance (SV) is calculated by getting the difference between the Expected Value and the Planned Value (PV). On its part the PV is a sum of the Planned Completion (in percentage) and the BAC (Bible, Bivins & Susan, 2011)
Activity‘d’ SV = EV – PV; Therefore PV = Planned Completion (%) X BAC
= 20% X 600
= 120
Activity‘d’ SV = 120 – 600
= -480
Activity‘e’ SV = EV – PV; Therefore PV = Planned Completion (%) X BAC
= 20% X 400
= 80
Activity‘e’ SV = 80 – 400
= -320
Cost Performance Indicator (CPI) is an index that reveals the efficiency in resource utilization on the project (Bible, Bivins & Susan, 2011). The CPI is the value of dividing the Earned Value (EV) with the Actual Cost (AC)
CPI (Activity d) = EV / AC
= 80 / 400
= 0.2
CPI (Activity e) = EV / AC
= 40 / 200
= 0.2
The Scheduled Performance Indicator (SPI) is an index that is used to show the efficiency of the time utilized of the project (Sanchez, & Robert, 2010). It is a result of dividing Earned Value with the Planned Value
SPI (Activity d) = EV / PV
= 80 / 600
= 0.13
SPI (Activity e) = EV / PV
= 40 / 400
= 0.1
Estimate to Complete (ETC) refers to the estimated cost required to complete the remainder of the project (Sanchez, & Robert, 2010). ETC = Budget at Completion (BAC) – Actual costs to date (AC)
Activity d= 600 / 400 = 1.5
Activity e= 400 / 200 = 2.0
Estimate at Completion (EAC) refers to the present day estimate of the total cost of the project. It is arrived at by getting the difference between the approved budget for the whole task and the cost variance of the work done to date (Sanchez, & Robert, 2010)
Activity d = Budget at completion (BAC) + Actual Cost (AC) – Earned Value (EV)
= 600 + 400 – 80
= 920
Activity e = Budget at completion (BAC) + Actual Cost (AC) – Earned Value (EV)
= 400 + 200 – 40
= 560
The project is experiencing very poor performance. For starters, the projects is running over budget and behind schedule. This makes the project more expensive in the long run. In addition to having the project over budget and behind schedule, the project has not gained the expected value thus the value of project thus far is below the expectations.
The stakeholders need to know the current state of the project. They need to internalize their exposure to project risk. Additionally, the stakeholders need to know the value of their investment so that they can judge whether the management is generating the best value for their investment and if they are using the available scarce resources efficiently (Eden, Ackermann & Williams, 2005). To the stakeholders the information accessible to them assists them make informed decision about the organization.
References
Bible, Michael J., Bivins, Susan S. (2011). Mastering Project Portfolio Management: A Systems Approach to Achieving Strategic Objectives. Fort Lauderdale, Florida. J Ross Publishing, Inc.
Eden, C., Ackermann, F. and Williams, T. (2005) The amoebic growth of project costs. Project Management Journal, Vol. 36, No. 2, pp.15–27.
Sanchez, H., & Robert, B. (2010). Measuring portfolio strategic performance using key performance indicators. Project Management Journal, Vol. 41 No. 5, 64-73 https://doi.org/10.1002/pmj.20165
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