Professional Development Seminar Series Feb, 2019 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Agenda Introduction to Definition Context Project Cost Management EVM Metrics Cost Control Formula 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 1
Introduction Approved by PMI, AACEI, ASQ, IMA and CQI IRCA. We are also approved by KHDA. Trained more than 19000 students. Branches in Dubai, Abu Dhabi, Chennai and Mumbai. Our flagship preparation courses are PMP and CCP. Contact us: online@3foldtraining.com 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Definition Introduction to Earned Value Management 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 2
Definition Earned Value Management. A methodology that combines scope, schedule, and resource measurements to assess project performance and progress. Earned Value (EV). The measure of work performed expressed in terms of the budget authorized for that work. Earned Value is also known as Budgeted Cost of Work Performed (BCWP). * These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth PMI, PMP, PMBOK and the PMI Registered Edition, Education Project Provider Management logo are Institute, registered Inc., marks 2013. of the Project Management Institute, Inc. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Context Earned Value Management in Project Management 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 3
Project Cost Management As per the PMBOK Guide 5 th Edition, Project Cost Management includes the processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget. Plan Cost Management Estimate Costs Determine Budget Control Cost Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Page 193. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review What is a Process? A systematic series of activities directed towards causing an end result such that one or more inputs will be acted upon to create one or more outputs. Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 7-10, Page 215. * These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth PMI, PMP, PMBOK and the PMI Registered Edition, Education Project Provider Management logo are Institute, registered Inc., marks 2013. of the Project Management Institute, Inc. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 4
Process Interaction Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 7-11, Page 217. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Project Cost Management Processes Plan Cost Management The process that establishes the policies, procedures, and documentation for planning, managing, expending, and controlling project costs. Estimate Costs The process of developing an approximation of the monetary resources needed to complete project activities. Determine Budget The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline. Control Costs The process of monitoring the status of the project to update the project costs and managing changes to the cost baseline. * These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth PMI, PMP, PMBOK and the PMI Registered Edition, Education Project Provider Management logo are Institute, registered Inc., marks 2013. of the Project Management Institute, Inc. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 5
1. Plan Cost Management The process that establishes the policies, procedures, and documentation for planning, managing, expending, and controlling project costs. Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 7-2, Page 195. * These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth PMI, PMP, PMBOK and the PMI Registered Edition, Education Project Provider Management logo are Institute, registered Inc., marks 2013. of the Project Management Institute, Inc. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Cost Management Plan - Content Units of measure Level of precision Level of accuracy Organizational procedures link Control thresholds Reporting formats Rules of progress measurement this is where Earned value management (EVM) rules of performance measurement are set. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 6
2. Estimate Costs Estimate Costs is the process of developing an approximation of the monetary resources needed to complete project activities. Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 7-4, Page 200. * These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth PMI, PMP, PMBOK and the PMI Registered Edition, Education Project Provider Management logo are Institute, registered Inc., marks 2013. of the Project Management Institute, Inc. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Contingency Reserve Cost estimates may include contingency reserves (sometimes called contingency allowances) to account for cost uncertainty. Contingency reserves are the budget within the cost baseline that is allocated for identified risks, which are accepted and for which contingent or mitigating responses are developed. Contingency reserves are often viewed as the part of the budget intended to address the known-unknowns that can affect a project. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 7
Management Reserve Estimates may also be produced for the amount of management reserve to be funded for the project. Management reserves are an amount of the project budget withheld for management control purposes and are reserved for unforeseen work that is within scope of the project. Management reserves are intended to address the unknown unknowns that can affect a project. The management reserve is not included in the cost baseline but is part of the overall project budget and funding requirements. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 3. Determine Budget Determine Budget is the process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline. Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 7-6, Page 208. * These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth PMI, PMP, PMBOK and the PMI Registered Edition, Education Project Provider Management logo are Institute, registered Inc., marks 2013. of the Project Management Institute, Inc. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 8
Cost Baseline The cost baseline is the approved version of the time-phased project budget, excluding any management reserves, which can only be changed through formal change control procedures and is used as a basis for comparison to actual results. It is developed as a summation of the approved budgets for the different schedule activities. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Project Budget Components Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 7-8, Page 213. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 9
S-curve Since the cost estimates that make up the cost baseline are directly tied to the schedule activities, this enables a time-phased view of the cost baseline, which is typically displayed in the form of an S-curve Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 7-9, Page 214. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 4. Cost Control Earned Value Management 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 10
4. Control Costs Control Costs is the process of monitoring the status of the project to update the project costs and managing changes to the cost baseline. Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 7-10, Page 215. * These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth PMI, PMP, PMBOK and the PMI Registered Edition, Education Project Provider Management logo are Institute, registered Inc., marks 2013. of the Project Management Institute, Inc. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Cost Control Tools and Techniques on focus 1. Earned Value Metrics 2. Progress Measurement 3. Performance Measurement 4. Forecasting 5. To-complete performance index (TCPI) 6. Variance At Completion 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 11
1. EVM Metrics Planned Value, Actual Cost, Earned Value 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review EVM Metrics EVM develops and monitors three key dimensions for each work package and control account: Planned value Actual cost Earned Value 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 12
Planned Value Planned value (PV) is the authorized budget assigned to scheduled work. It is the authorized budget planned for the work to be accomplished for an activity or work breakdown structure component, not including management reserve. This budget is allocated by phase over the life of the project, but at a given moment, planned value defines the physical work that should have been accomplished. The total of the PV is sometimes referred to as the performance measurement baseline (PMB). The total planned value for the project is also known as budget at completion (BAC). * These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth PMI, PMP, PMBOK and the PMI Registered Edition, Education Project Provider Management logo are Institute, registered Inc., marks 2013. of the Project Management Institute, Inc. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Actual Cost Actual cost (AC) is the realized cost incurred for the work performed on an activity during a specific time period. It is the total cost incurred in accomplishing the work that the EV measured. The AC needs to correspond in definition to what was budgeted in the PV and measured in the EV (e.g., direct hours only, direct costs only, or all costs including indirect costs). The AC will have no upper limit; whatever is spent to achieve the EV will be measured. * These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth PMI, PMP, PMBOK and the PMI Registered Edition, Education Project Provider Management logo are Institute, registered Inc., marks 2013. of the Project Management Institute, Inc. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 13
Earned Value Earned value (EV) is a measure of work performed expressed in terms of the budget authorized for that work. It is the budget associated with the authorized work that has been completed. The EV being measured needs to be related to the PMB, and the EV measured cannot be greater than the authorized PV budget for a component. The EV is often used to calculate the percent complete of a project. Progress measurement criteria should be established for each WBS component to measure work in progress. Project managers monitor EV, both incrementally to determine current status and cumulatively to determine the long-term performance trends. * These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth PMI, PMP, PMBOK and the PMI Registered Edition, Education Project Provider Management logo are Institute, registered Inc., marks 2013. of the Project Management Institute, Inc. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Earned Value Earned Value = % completed x Budget Progress measurement technique measures the percent complete which will assist in calculating the earned value. The budget is the budgeted cost of the measured component which could be a work package, control account, or the project. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 14
2. Progress Measurement Units completion, Start/Finish, Incremental Milestone, Supervisor Opinion, Cost Ratio and Equivalent Units/Weighted Average 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Units Completion Formula Installed Quantity Total Quantity x 100 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 15
Start/Finish (Fixed Formula) 30% 100% Start Finish This method is applicable to tasks that lack readily definable intermediate milestones or those for which the effort/time required is very difficult to estimate. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Incremental Milestone 30% 60% 80% 100% Start Finish This method is applicable to any control account that includes subtasks that must be handled in sequence. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 16
Supervisor Opinion In this method, the supervisor simply makes a judgment of percent complete. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Cost Ratio This method is applicable to tasks that involve a long period of time or that are continuous during the life of a project, and which are estimated and budgeted on bulk allocations of dollars and work hours rather than on the basis of production. Actual cost or Workhours to date Forecast atcompletion x 100 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 17
Weighted or Equivalent Units This method is applicable when the task being controlled involves a long period of time and is composed of two or more overlapping subtasks, each with a different unit of work measurement. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Allowed Credit Subtask Total U/M Total Qty To-Date Qty Earned Tons 0.02run foundation bolts each 120 120 12.00 0.03shim % 100 100 18.00 0.06shakeout % 100 100 36.00 0.04columns each 80 70 21.00 0.12beams each 987 230 16.78 0.12cross braces each 780 0 0.00 0.17girts and sag roads bay 40 0 0.00 0.08plumb and align % 100 0 0.00 0.31connection each 3000 90 5.58 0.05punch list % 100 0 0.00 1Steel Totals Ton 600 109.36 quantity to date Earned Quantity = (allowed credit)*(summary quantity)* total quantity Earned Tons Columns =.04 x 600 x 70 80 21 Tons Percent Complete = 109.36 600 18.23% Equivalent Units 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 18
Wall 4 Wall 2 Earned Value Calculation Schedule Plan Schedule: To complete the work in 4 weeks work is equally distributed Wall 1 Budgeted Cost USD 10,000 per side Status at the end of week 3 Wall 1 100% - $ 12000 Wall 2 100% - $ 13000 Wall 3 50% - $ 7000 Wall 4 0% - $ 0 Wall 3 Calculate BAC, PV, AC and EV 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Solution Work Package Planned Value Actual Cost Progress Earned Value Wall 1 10000 12000 100 % 10000 Wall 2 10000 13000 100 % 10000 Wall 3 10000 7000 50 % 5000 Wall 4 10000 0 0 % 0 Total 40000 32000 25000 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 19
3. Performance Measurement Cost Variance, Cost Performance Index, Schedule Variance, Schedule Performance Index 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Performance Measurement Cost Variance Earned Value Actual Cost Positive = Under planned cost Neutral = On planned cost Negative = Over planned cost Schedule Variance Earned Value Planned Value Positive = Ahead of Schedule Neutral = On schedule Negative = Behind Schedule Cost Performance Schedule Performance Cost Performance Index Earned Value Actual Cost Greater than 1.0 = Under planned cost Exactly 1.0 = On planned cost Less than 1.0 = Over planned cost Schedule Performance Index Earned Value Planned Value Greater than 1.0 = Ahead of schedule Exactly 1.0 = On schedule Less than 1.0 = Behind schedule 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 20
Cost Performance Cost Variance Cost Performance Index 25000 32000 = (7000) 25000 / 32000 = 0.781 Schedule Performance Schedule Variance Schedule Performance Index 25000 30000 = (5000) 25000 / 30000 = 0.833 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 4. Forecasting Estimate At Completion & Estimate To Complete 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 21
BAC = $ 40,000 PV = $ 30,000 AC = $32,000 EV = $ 25,000 CPI = 0.781 SPI = 0.833 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Estimate At Completion EAC BAC CPI CPI is expected to be the same for the remainder of the project EAC (BAC EV) AC + (CPI x SPI) CPI and SPI influence the remaining work Estimate At Completion EAC AC + (BAC EV) Future work will be accomplished at the planned rate EAC AC + Bottom up ETC Initial plan is no longer valid 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 22
Estimate At Completion EAC EAC 40000 0.781 = 51216 32000 + (40000 25000) = 47000 CPI is expected to be the same for the remainder of the project EAC Future work will be accomplished at the planned rate EAC (40000 25000) 32000 + = (0.781 x 0.833) 55055 32000 + Bottom up ETC CPI and SPI influence the remaining work Initial plan is no longer valid 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Estimate To Complete Estimate To Complete ETC EAC AC ETC Re-Estimate Assumes work is proceeding on plan. Re-estimate the remaining work from the bottom up. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 23
Estimate To Complete ETC ETC 51216 32000 = 19216 CPI is expected to be the same for the remainder of the project. Re-Estimate Assumes work is proceeding on plan. Re-estimate the remaining work from the bottom up. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 5. TCPI To Complete Performance Index 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 24
To Complete Performance Index TCPI (BAC EV)/(BAC AC) The efficiency that must be maintained in order to complete on plan. To Complete Performance Index TCPI (BAC EV)/(EAC AC) The efficiency that must be maintained in order to complete the current EAC. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review TCPI To Complete Performance Index TCPI (BAC EV)/(BAC AC) (BAC EV)/(EAC AC) (40000-25000) / (40000-32000) 1.875 (40000-25000) / (51216-32000) 0.781 The efficiency that must be maintained in order to complete on plan. The efficiency that must be maintained in order to complete the current EAC. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 25
6. Variance At Completion VAC 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review Variance At Completion VAC Variance At Completion BAC EAC The estimated difference in cost at the completion of the project. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 26
BAC = $ 40,000 BCWS = $ 30,000 ACWP = $32,000 BCWP = $ 25,000 CPI = 0.781 SPI = 0.833 EAC = $ 51216 ETC = $ 19216 VAC Variance At Completion BAC EAC 40000 51216 = (11216) The estimated difference in cost at the completion of the project. 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review End of the Seminar Thank you 2019. All rights reserved. online@3foldtraining.com. www.pmexamstudy.com. www.3foldtraining.com. PMP Exam Review 27