NEW HORIZONS ONLINE LIVE Project Management Professional (PMP ) PMBOK Guide 6th Edition DAY 4
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Other PMP Topics Cost Ranges Rough Order of Magnitude (ROM) (often done in the initiating process group): -25% to +75% Definitive (also called Control, often done late in the planning process group): -5% to +10%
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Budget components 12
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Earned Value Key Measures Planned Value (PV): the monetary (e.g. dollar) value of the work that should have been accomplished as of the status date Earned Value (EV): the monetary value of the work that was accomplished as of the status date Actual Cost (AC): the amount of money actually spent to accomplish the work as of the status date
Earned Value Key Measures Planned Value (PV): the monetary (e.g. dollar) value of the work that should have been accomplished as of the status date BAC
Earned Value Key Measures Actual Cost (AC): the amount of money actually spent to accomplish the work as of the status date BAC
Earned Value Key Measures Earned Value (EV): the monetary value of the work that was accomplished as of the status date BAC
Earned Value Key Measures Earned Value (EV): the monetary value of the work that was accomplished as of the status date % complete x PV
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 = /
25 CAPS
Lab Exercise - EVM A project manager performs Earned Value Analysis and finds the following results: AC: 220,000, PV: 250,000, EV: 220,000. A. CV = 0 B. CV = 30,000 C. CV = -30,000 CV = 1 26
Lab Exercise - EVM A project manager performs Earned Value Analysis and finds the following results: AC: 220,000, PV: 250,000, EV: 220,000. A. CV = 0 B. CV = 30,000 C. CV = -30,00 D. CV = 1 27
28 Lab Exercise - EVM
Lab Exercise - EVM EV = AC CV EV = 4M 500K 29 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)
36 EVM Formulas
37 EVM Formulas
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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 39
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 40
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 41
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 42
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? 43 A. Enterprise Environmental Factor B. Organizational Process Assets C. Scope Baseline D. Project Management Plan
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 Cost Estimation 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 44
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Quality
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50 Precision
Precision 1/16 51
52 Precision vs. Accuracy
Example Size to be produced: 2 + or -.004 53
Example Size to be produced: 2 + or -.004 54
55 Size to be produced: 2 + or -.004
Example Size to be produced: 2 + or -.004 Results of first process run 40% above range, 20% within range 40% below range 56
57 Plan Quality Management
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Fishbone (Ishikawa) diagram
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66 Histogram
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68 Scatter diagrams
69 The 6-Sigma Limit
The 3-Sigma Rule The 3-sigma rule, an empirical rule, states that for normal distribution, almost all values lie within 3 standard deviations of the mean. The values in the normal distribution will exhibit deviation as follows: 70 About 68.27% of the values lie within 1 standard deviation of the mean. About 95.45% of the values lie within 2 standard deviations of the mean. About 99.73% of the values lie within 3 standard deviations of the mean. About 99.98% of the values lie within 6 standard deviations of the mean.
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75 Project Resource Management
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Org Chart Project Sponsor Project Expeditor Project Manager Project Coordinator Project Team Project Team Project Team 78
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Organizational Theory McGregor s Theory X and Theory Y Ouchi s Theory, Theory Z Herzburg s Motivation-Hygiene Theory Maslow s Hierarchy of Needs ERG Theory McClelland s Theory of Needs Vroom s Expectancy Theory 80
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85 Acquire Project Team
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