Module-4

Performing Projects and Project supply chain management:

 Plan purchasing and acquisitions, plan contracting, contact types,

.IN
project partnering and collaborations, project supply chain

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management.

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Project Progress and Results:

SY
 Project Balanced Scorecard Approach, Internal project, customer,
financial issues,

U
Finishing the project: VT
 Terminate project early, finish projects on time, secure customer
feedback and approval
 Knowledge management, perform administrative and contract
closure.
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Performing Projects and Project supply chain
management
Plan purchasing and acquisitions:
Introduction to Project Supply Chain Management

.IN
 A supply chain consists of all parties involved, directly or indirectly, in
fulfilling a customer

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

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request. In project management, this request can be made by the project team
in order to acquire some specific product or service required for completing

SY
various stages of the project. The request also can be made by the customer
whom the project team serves

U
 As a result, supply chain operations require managerial processes that span
VT
functional areas within individual organizations and link trading partners and
customers across organizational boundaries.
 In recent years, the topic of supply chain management has evolved into a
systematic approach for managing all material and information flows across
supply chain partners.
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 With its broader coverage and profound impact, project supply chain
management has become a challenge to many firms. Because the ultimate
goal of serving project customers hinges on the systematic performance of
partners (including suppliers, transporters, etc.), supply chain management
becomes a critical project management activity.

.IN
 However, many companies normally have been concerned with purchasing

C
and procurement, where the goal was to obtain necessary goods and
services at the lowest possible price.

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SY
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VT

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 The traditional purchasing perspective is only concerned with the
relationship between the project team and its supplier(s)—those who
supply the project organization directly.
 At its most extensive, supply chain management involves strategic and

.IN
operational issues concerned with all organizational partners involved in
projects.

C
 Doubtless, all supply chain parties need to work together to complete the

N
project faster, better, and/or cheaper. They all need to remember the

SY
tradeoffs determined by the key project stakeholders for better achieving
project outcomes.

U
 In traditional project procurement management literature, purchasing,
VT
supply management, and procurement are usually used interchangeably to
refer to the integration of related functions to purchase or acquire the
needed materials and services for the project team.
 supply chain management (SCM) and project management (PM) are
traditionally separate business areas, we find that integrating SCM into PM
can significantly enhance the effectiveness of project management.
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 Contract Types:
1. Fixed-Price Contracts:
 A fixed-price contract is “an agreement that sets the fee that will be paid
for a defined scope of work regardless of the cost or effort to deliver it.”

.IN
 The most common variations of fixed-price contracts are firm-fixed-price
(FFP), fixed-price-incentive-fee (FPIFD), and fixed-price-economic-price-

C
adjustment (FP-EPA).

N
 FIRM-FIXED-PRICE (FFP) CONTRACTS:

SY
 are “a type of fixed-price contract where the buyer pays the seller a set amount
as defined in the contract, regardless of the seller’s cost.”

U
 Any cost increase due to adverse performance is the responsibility of the seller,
who is obligated to complete the effort.
VT
 A simple form of a firm-fixed-price contract is a procurement order for a
specified item to be delivered by a certain date for a specified price such as a
truckload of mulch delivered on the job site of 3110 Elm Street o May 15 for
$300.

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 FIXED-PRICE-INCENTIVE-FEE (FPIF) CONTRACTS:
 are “a type of contract where the buyer pays the seller a set amount as
defined by the contract, and the seller can earn an additional amount if the
seller meets defined performance criteria.”

.IN
 An example is a contract for rebuilding a bridge for a fixed price of
$1,250,000 with an incentive of an extra $3,000 for every day it is

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complete before the scheduled date of September 15.

N
 The buyer would like to have use of the bridge sooner, and the seller would

SY
like to earn a higher fee, so both have an incentive to finish the project
early.

U
VT

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 FIXED-PRICE-ECONOMIC-PRICE-ADJUSTMENT (FP-EPA)
CONTRACTS
 are “fixed price contracts, but with a special provision allowing for final
adjustments to the contract price due to changed conditions such as inflation

.IN
changes, or cost increases (or decreases) for specific commodities.”
 An example is a contract that states the contractor will receive $400,000 to

C
supply all of the gravel for a project, but the price may be adjusted based upon

N
market price for gravel at the dates when it is delivered.

SY
 Fixed-price contracts provide low risk for the buyer, since the buyer does
not pay more than the fixed price regardless of how much the project
actually costs the seller.

U
VT

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 2. Cost-Reimbursable Contracts:
Cost-reimbursable contracts are “a type of contract involving payment to the
seller for the seller’s actual costs, plus a free typically representing the seller’s
profit.
 COST-PLUS-FIXED-FEE (CPFF) CONTRACTS are “a type of cost-

.IN
reimbursable contract where the buyer reimburses the seller for the seller’s
allowable costs (allowable costs are defined by the contract) plus a fixed

C
amount of profit (fee).”

N
 An example is a research project where all scientist hours spent on the project
are paid along with a fee of $5,000 regardless of how many hours the scientist

SY
spent.
 COST-PLUS-AWARD-FEE (CPFF) CONTRACTS are “a category of

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contract that involves payments to the seller for all legitimate costs incurred for
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completed work, plus an award fee representing seller profit.”
 An example is a development contract that pays the contractor $3,000,000
plus puts in escrow an award fee pool of $210,000 and an executive in the
customer’s organization has sole discretion of how much of the award fee pool
is given based upon customer satisfaction criteria.

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 COST-PLUS-INCENTIVE-FEE (CPIF) CONTRACTS are “a
cost- type of
reimbursable contract where the buyer reimburses the seller for the seller’s
allowable costs (allowable costs are defined by the contract) and the seller earns a
profit if it meets defined performance criteria.”

.IN
 These criteria can be for schedule, cost, and/or performance.
 An example of a schedule criterion is a contract for constructing a college

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dormitory that calls for completion by August 15 so it is ready for the fall semester.

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3. Time and Material (T&M) Contracts

SY
 Time and material contracts are “a type of contract that is a hybrid contractual
arrangement containing aspects of both cost-reimbursement and fixed-price

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contracts.”

VT
In this type of contract, the unit rate for each hour of labor or pound of material is
set in the contract as in a fixed-price contract. However, the amount of work is not
set, so the value of the contract can grow like a cost-reimbursement contract.
 The seller simply charges for what is done to produce the product or service in the
contract. This can be problematic if the time scheduled for production is greatly
underestimated.
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 The following items are frequently considered when selecting the right
type of contract:
 • Overall degree of cost and schedule risk
 • Type and complexity of requirements

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 • Extent of price competition

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 • Cost and price analysis

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 • Urgency of the requirements

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 • Performance period
 • Contractor’s responsibility

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• Contractor’s accounting system

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 • Extent of subcontracting

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 One of the important factors to know is the degree of risk for the seller and
the buyer that each type of contract contains. Each of the contract types has
risk attached to it.
 When considering different contracts, it must be clear who assumes the

.IN
most risk—the buyer or the seller.
 Under normal conditions, the greatest risk to the buyer is the costplus-

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fixed-fee contract.

N
 The contract with the greatest risk to the seller is the firmfixed- price

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contract.
 Generally, the buyer and seller negotiate details of the contract that offer

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risks and benefits that both parties can accept.
VT

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Project Partnering and Collaboration:
 Companies are constantly in need of outsourcing or contracting significant
segments of project work to other companies.

.IN
 The trend for the future suggests that more and more projects will involve
working with people from different organizations.

C
 Research also finds that through strategic partnering, companies are more

N
likely to access advanced technology, share risks, and improve project-

SY
based performance and relative competitiveness.
 This section extends the previous discussion of project procurement and

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contracting by focusing specifically on issues surrounding working with
different suppliers to complete a project.
VT
 The term partnering is used to describe this process. Partnering is a method
for transforming contractual arrangements into a cohesive, collaborative
project team with a single set of goals and established procedures for
resolving disputes in a timely and cost-efficient manner.
 The single set of goals takes care of the customer requirements and the
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entire project instead of each individual organization.
 SOURCES OF CONFLICT DURING PROJECT PURCHASING In
the procurement and purchasing environment, conflicts are inevitable.
 For example, many people envision the purchasing process as a type of
zero-sum game, meaning what one party loses is what the other party

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gains. (The most common type of conflict is this: Lower price means cost
reduction for the buyer, but it also means revenue loss to the seller.)

C
 In fact, many types of interest conflicts arise among different companies.

N
For example, delays in construction are common and expensive, and

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litigation related to design and construction is rising.
 Obvious conflicts of interest predispose owners and contractors to be

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suspicious of one another’s motives and actions. Suspicion and mistrust
VT
prevent effective problem solving throughout the process.
 In taking care of each party’s own interests, mistakes and problems are
often hidden. When conflicts emerge, they often create costly delays as
well as questionable responses simply because the information transferred
may be distorted many times before it reaches the decision maker.
 The consequences, however, are avoidable
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 RESOLVING PROJECT PURCHASING CONFLICTS One approach
to resolving conflict is to use project partnering as an effective way to
engage both the project owner and contractors.
 Project partnering naturally developed as people began to realize that the

.IN
traditional win/lose adversarial relationship between owner and contractor
degenerates into a costly lose/lose situation for all the parties involved.

C
 The systematic project supply chain management view goes beyond this

N
traditional view to increase the baseline of trust and collaboration.

SY
U
VT

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 MUTUAL GOALS IN PROJECT PARTNERSHIPS Some common goals warrant a
more supportive relationship.
 For example, both the buyer and seller would like to complete the project on time and
safely. Both parties would prefer to avoid costly and time-consuming litigation. On the
other hand, once the specified project can be finished on a faster and cheaper basis,

.IN
either party is in a better position of getting better operational rewards.
 Some of the many advantages for establishing a project partnership.

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 For example, Procter & Gamble (P&G) started using the Web to share information and

N
streamline purchasing a few years ago. Ford used 900 virtual work spaces to design cars
and hold meetings.

SY
 In one project, Ford used digital conference rooms from eRoom to manage the
formation of the auto industry e-marketplace Covisint.

U
 Lawyers from law firms and three automakers shared virtual rooms to haggle over
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contracts.

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 EFFECTIVE PROJECT PARTNERING APPROACHES Many
differences exist between the way traditional project procurement unfolds and
the way contemporary project procurement takes place in a partnering mode.
 Many large Japanese manufacturers have found a middle ground between

.IN
purchasing from a few suppliers and vertical integration. These manufacturers
are often financial supporters of suppliers through ownership or loans.

C
 The supplier then becomes part of a company coalition known as a keiretsu.

N
Members of the keiretsu are assured long-term relationships and are therefore

SY
expected to function as partners, providing technical expertise and stable
quality production to the manufacturer.

U
 Companies can use different purchasing modes for specific purchasing items
when dealing with large projects. For example, one major Chinese petroleum
VT
company used five purchasing models for multiple projects, which include
purchasing mechanisms for strategic materials, full competitive products,
limited resource products, nonstandard products, and existing long-term
collaboration suppliers.
 Third-party inspection companies were hired to conduct onsite assessment and
quality approval for the incoming materials of multiple projects at the same
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time
 SECURING COMMITMENT TO PARTNERING When developing a
project supply chain partnership, a project manager may want to consider
contractors with a mutual interest and expertise in partnership.
 At the beginning, the owner needs to get the commitment of the top
management of all firms involved. All the benefits of the partnership and

.IN
how the partnership would work need to be described in detail.

C
 Team building is an effective approach for involving all the key players
from different firms. Separate training sessions and workshops are offered

N
to promote a collaborative spirit.

SY
 One of the major goals of the team-building sessions is to establish a “we”
as opposed to an “us and them” attitude among the different participants.

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VT

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 A second objective of the sessions is to establish a mechanism in advance
designed to ensure that this collaborative spirit is able to withstand the
problems and setbacks that will invariably occur on the project. Some of
the most significant mechanisms are as follows:

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 • Problem resolution—Solving problems at the lowest level of
organizations and having an agreed-upon escalation procedure

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 • Continuous improvement—Endless waste elimination and cost reduction

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 • Joint assessment—Reviewing the partnering process jointly

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 • Persistent leadership—Displaying a collaborative response consistently

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 More project organizations are pursuing partnering relationships with each
other.
VT
 Project partnering represents a proactive way for handling many of the
challenges associated with working with different organizations. The
process usually starts with some agreed-upon procedures and provisions
for dealing with problems and issues before they happen. One way is to
design a contract with specific incentives and penalties.
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 Partnering fosters a strong desire to contain costs when changes are
necessary and leads to a team approach in resolving any financial and time
consequences.
 In the next section, we discuss the integrated project supply chain

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management approach.
 Partnering seeks to recast relations between actors in projects by

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promoting the use of collaborative, more open relationships.

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 The integrated supply chain perspective further shifts traditional channel

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arrangements from loosely linked groups of independent businesses that
buy and sell products or services to each other toward a managerially

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coordinated initiative to increase customer satisfaction, overall efficiency,
VT
continuous improvement, and competitiveness.

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Project Progress and Results:
 Project Balanced Scorecard Approach

.IN
 To successfully accomplish all five aspects of project determination, a
project manager can think in terms of a balanced scorecard approach to her
project.

C
 The concept behind a balanced scorecard is that an organization needs to

N
be evaluated along customer, internal business, financial, and growth and

SY
innovation perspectives.
 If one considers a project as a temporary organization, the same aspects
make sense to monitor and control a project.

U
 When a project manager seeks to monitor and control a project, the
VT
different aspects are often interrelated, and their impacts on each other
need to be considered.
 For example, a proposed change may impact the scope, quality, schedule,
and/or cost. However, to understand project control, each aspect must first
be considered individually.

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 Below fig. shows a project balanced scorecard approach to project
determination.

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C
N
SY
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VT

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Internal Project Issues:
 While all aspects of a project are important and interrelated when
determining progress and results, a logical starting place is the project
work that needs to be accomplished.

.IN
 Closely related are the risks that may impede the work and adequate
communication. Collectively, these form the project’s internal issues.

C
N
 These issues can be envisioned as the project’s nerve center. Problems in

SY
any of them travel to all other project areas just as nerves in a body carry
information throughout

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VT

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 Direct and Manage Project Work:
 Directing and managing project work is “the process of leading and
performing the work defined in the project management plan and
implementing approved changes to achieve the project’s objectives.”

.IN
 When project managers authorize project work, they should empower

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others to the extent possible, yet control them to the extent necessary.

N
 It should be clear who is allowed to authorize each portion of work to

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commence.
 The project management plan identifies work to be accomplished, but

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the project manager or his or her appointee must tell someone when it is
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time to perform the work.
 Often, spending limits are intertwined with work authorization (e.g.,
“Please perform this activity and do not spend more than $X on it.
Report back to me for approval if you need to spend more.”).

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 The work to be performed can come from one of several sources. The
primary source is the work package level of the work breakdown structure.
However, approved corrective actions, preventive actions, and defect
repairs may also trigger work to be authorized.

.IN
 When directing project work, tradeoffs are often present both between the
project and other work and within the project itself. Organizations often
have many projects and a variety of other work that must all be

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accomplished.

N
 Some work is of higher priority than other work. A project manager needs

SY
to understand where her work fits in the priority.

U
 If her project is relatively low in priority, she may have trouble getting
people to perform their activities very quickly.
VT
 In a case like that, the project manager and sponsor should have open
communications so the sponsor can either help the project manager secure
the resources needed and/or understand that the project could be late
through no fault of the project manager.

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 Monitor and Control Project Work:
 “the processes of tracking, reviewing, and reporting the progress to meet
the performance objectives defined in the project plan.”
 To monitor means to “collect project performance data with respect to a

.IN
plan, produce performance measures, and report and disseminate
performance information.”

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control means “comparing actual performance with planned performance,

N

analyzing variances, assessing trends to effect process improvements,

SY
evaluating possible alternatives, and recommending appropriate corrective
action when needed.”

U
 A variance is “a quantifiable deviation, departure, or divergence away from
VT
a known baseline or expected value.” What all of this means is that a smart
project manager keeps an eye on many things that can indicate how well
the project is doing and is prepared to act if necessary to get the project
back on track.
 The most difficult part of monitoring and controlling is figuring out what
metrics to keep, what to measure,Studied
andsmart,
how to report the results to various
not hard — thanks to [Link]
decision makers as necessary.
 TYPES OF PROJECT CONTROL:
 Two types of control are used extensively on projects. Both compare actual
performance against the project plan.
 One type is steering control, in which the work is compared to the plan on

.IN
a continual basis to see if progress is equal to, better than, or worse than
the project plan. Adjustments can be made as often as necessary.

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 The second type of control is go/no-go control. Go/no-go control requires a

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project manager to receive approval to continue. This can be conducted at

SY
milestones or when someone needs to determine if a key deliverable is
acceptable or not.

U
 For both types of control, resulting change requests can include corrective
VT
actions, preventive actions, or defect repair.
 The results of monitoring and controlling project work, schedule, budget,
risks, or anything else can range from minor to major depending on how
close the actual progress is to the plan.

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 Depending on the extent to which actual progress performance varies from
planned performance, the results of monitoring and controlling activities
can suggest anything from modifying the charter to transferring project
deliverables as planned.

.IN
 • If the actual progress is very different from the original intent, perhaps
the project

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

N
charter needs to be revisited to ensure that the project still makes sense.

SY
 • If progress is somewhat different from planned but the charter is still a
good guide, perhaps the project plan needs to be adjusted.

U
 • If the project plan is still a useful guide, perhaps minor adjustments need
VT
to be made in day-to-day instructions within the project executing stage.
 • Finally, if the results indicate the customer is ready to accept the project
deliverables, perhaps it is time to proceed into the project closing stage.

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 PERFORM INTEGRATED CHANGE CONTROL George and John are
new project managers fresh out of college.
 Both are approached by internal customers of their projects (managers of
departments where the project deliverables will be used).

.IN
 Their customers tell them what a fantastic job each is doing. The customers
then say, “This is great! Could you add these couple of little improvements to

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it? Then it would be even more valuable to me.”

N
 George, wanting to please his customer, says, “Yes, we can add that little bit.”

SY
John’s immediate answer is “Let’s see what impact that might have on the
schedule, budget, quality, and project team.

U
 I will be happy to consider it, but want to be sure to deliver the project results
VT
we promised on time and on budget.” George, in his eagerness to please, made
a classic mistake.
 Many great projects have been derailed because someone stroked the ego of a
project manager who then agreed to changes without understanding their
impact.

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 Perform integrated change control is “the process of reviewing all change
requests, approving changes, and managing changes to deliverables,
organizational process assets, project documents, and project management
plan; and communicating their disposition.

.IN
 Change control is “a process whereby modifications to documents,
deliverables, or baselines associated with the project are identified,

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documented, approved, or rejected.”

N
 Change control includes considering the impact of any change, deciding

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whether to agree to the change, and then documenting and managing that
change.

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VT

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 Monitoring and Controlling Project Risk
 During project planning, the project team normally develops a risk
management plan that is used to guide risk monitoring and controlling
activities.

.IN
 They also normally create a risk register to record each identified risk, its
priority, potential causes, and potential responses.

C
 The risk management plan and risk register are used to monitor and control

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project risks, and to resolve them when they occur.

SY
 Control risks is “the process of implementing risk response plans, tracking
identified risks, monitoring residual risks, identifying new risks, and

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evaluating risk process effectiveness throughout the project.
VT
 On some projects, the majority of risk events that materialize are ones that
the project team has previously identified.
 Efforts needed on these risks largely include tracking the identified risks,
executing the response plans, and evaluating their effectiveness.

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 Manage Communications
 Manage communications is “the process of creating, distributing, storing,
retrieving, and the ultimate disposition of project information in accordance
with the communications management plan.

.IN
 DETERMINE PROJECT INFORMATION NEEDS Some stakeholder
information needs were identified during communications planning such as

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authorization to proceed, direction setting, status reporting, and approval of

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outputs.

SY
 Other information needs arise during project execution.
 All need to be handled accurately, promptly, and in a manner that balances

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effectiveness with cost and effort.

VT
• Communicate accurately—Accurate communications means not only being
factually honest, but also presenting information in a manner that people are
likely to interpret correctly.
 • Communicate promptly— “Promptly” means providing the information soon
enough so that it is useful to the recipient
 • Communicate effectively—Effectiveness is the extent to which the receive
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opens, understands, and acts appropriately upon the communication.
 ESTABLISH INFORMATION RETRIEVAL AND DISTRIBUTION
SYSTEM
 Project information can be retrieved from many different sources. It can
also be distributed via many systems.

.IN
 Project management software such as MS Project is frequently used for
schedule information and sometimes for cost and human resource

C
information.

N
 Many methods of communicating are used by project managers. In this

SY
information age, project managers need to keep three things in mind with
communications.

U
 1. Target the communications. More is not better when people are already
overloaded. VT
 2. Many methods are available, and the choices change rapidly. Use new
methods as they help, but do not discard proven methods just for the sake
of change.
 3. Projects often have many stakeholders who need specific information.
Use your communications plan and always keep asking if there is any other
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stakeholder in need of upward, downward, or sideways communications.
 COLLECT INFORMATION ON EXECUTED WORK AND WORK
IN PROGRESS
 Project managers gather data on the work they have authorized so they can
understand the progress they are making.
 This information is necessary for scheduling additional work, for

.IN
understanding how they are doing with respect to the schedule, and for
quality purposes.

C
 A project manager may try to gather data to answer the following typical

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questions:

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 • How well is this particular activity proceeding in terms of time and
budget?

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 • How well is the entire project proceeding in terms of time and budget?
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 • How much more money will need to be spent to finish?
 • To what extent does the quality of this work meet requirements?
 • How many hours of human resource time have we used to complete this
activity, compared to how much we estimated?
 • What methods that we have used are worth
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 REPORT PERFORMANCE
 Performance reporting includes gathering work performance data, and
using it to create work performance information and reports.
 Work performance data are “the raw observations and measurements

.IN
identified during activities being performed to carry out the project work.”
 Work performance information is “the performance data collected from

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various controlling processes, analyzed in context and integrated based on

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relationships across areas.

SY
 Work performance reports are “the physical or electronic representation of
work performance information compiled in project documents, intended to

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generate discussions, actions, or awareness.

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Performance can be reported either at fixed time intervals or at key project
milestones. Detailed progress can be reported frequently within the project
team and to functional managers who control resources—perhaps weekly
or even daily on a project with critical time pressure.

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 Control Communications
 Control communications is “the process of monitoring and controlling
communications throughout the entire project life cycle to ensure the
information needs of the project stakeholders are met.”

.IN
 The project manager and core team often discuss whether the
communications are following the plan, how effective they are, and how to

C
improve their effectiveness.

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SY
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VT

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 Customer Issues
 The second major perspective included in a balanced scorecard
approach to project control is the customer. Customers want the
deliverables of the project. They want the results to be useful (quality)

.IN
 Perform Quality Assurance

C
 performing quality assurance is “the process of auditing the quality

N
requirements and the results of quality control measurements to ensure

SY
appropriate quality standards and operational definitions are used.
 This implies that a project manager both ensures that work is performed

U
correctly and that key stakeholders are convinced that the work is
performed correctly.
VT
 Project stakeholders form their opinions regarding quality of a project
both by how the work is performed and by how the deliverables meet
standards.

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 AUDITS:
 A quality audit is “a structured, independent process to determine if
project activities comply with organizational and project policies,
processes and procedures.”

.IN
 For an audit to be successful, the intent must be to improve the manner in
which work is accomplished and not to punish people. With this in mind,

C
an audit can begin with a review of the official documentation of how a

N
process should be performed.

SY
 The auditors then often interview the workers and have them explain (or
better yet, demonstrate) how they perform the work. Records are

U
investigated to see if the documentation is complete and current. At this
point, the auditors have the following three sets of data:
VT
 1. Documentation of how the work is supposed to be done (the standards
either developed or adopted in quality planning)
 2. Descriptions of how the work is actually done
 3. Documentation to verify how the work was completed
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 Control Quality
 Quality assurance deals with using correct policies and convincing
stakeholders that the project team is capable of producing good output.
 Quality control (the current subject), on the other hand, deals with
comparing specific project measurements with stakeholders’ standards.

.IN
 The purposes of quality control on projects are to reduce the number of
defects and inefficiencies, as well as to improve the project process and

C
outputs.

N
 Quality control consists of:

SY
 • Monitoring the project to ensure that everything is proceeding according
to plan

U
 • Identifying when things are different enough from the plan to warrant
VT
preventive or corrective actions
 • Repairing defects
 • Determining and eliminating root causes of problems
 • Providing specific measurements for quality assurance
 • Providing recommendations for Studied
corrective and preventive actions
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 Financial Issues:
 Cost control is obviously a financial issue. Cost, schedule, and scope are
often so closely intertwined that they are monitored and controlled at the
same time, and change in one impact the others. Because of the close

.IN
interrelationships between them, cost, schedule, and scope are envisioned
here as financial issues.

C
Control Scope

N
 Control scope is “the process of monitoring the status of the project and

SY
product scope and managing changes to the scope baseline.”
 Ideally, project managers and teams practice scope control in a proactive

U
manner. They attempt to understand what might cause changes to either the
VT
product scope (the features of the project deliverables) or the project scope
(the work that must be done to create the deliverables).
 Once a project team discovers something that may cause a need to change
the scope, their first effort is typically to head it off. It is easiest if the
stakeholders can still be satisfied and project objectives can be met by not
changing the scope. However, many times it is necessary to make a scope
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change.
 Control Schedule and Costs
 Schedule and cost control are very similar in concept to control in other
knowledge areas.

.IN
 The project manager should start with the approved cost and schedule
baseline. Next, the current status of the schedule and cost should be

C
determined.

N
 If the schedule or budget has changed by at least a pre-agreed amount,

SY
changes should be formally recommended and managed through the
integrated change control

U
 system to ensure that any impacts on other areas are taken into account.
VT
Cost control often has one additional consideration—that is, ensuring that
no more money is spent than the amount authorized.
 This may force other changes on the project, such as delaying the schedule
or reducing part of the project scope.

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 Earned Value Management for Controlling Schedule and Costs:
 Earned value management is “a methodology that combines scope, schedule,
and resource measurements to assess project performance and progress.”
 Earned value allows a project team to understand their project’s progress in

.IN
terms of cost and schedule as well as to make predictions concerning the
project’s schedule and cost control until the project’s conclusion.

C
 Earned value is used as a decision-making tool. The project manager can
quickly assess how the project is doing according to the baseline plan and

N
whether the project will end without major cost and/or schedule impacts.

SY
 The earned value data allow a project manager to decide on the status of his or
her project at a given point in time.

U
 When interpreting earned value management, cost and schedule must be
VT
considered independently.
 A project can be either ahead or behind the planned schedule and either over or
under the planned budget. Secondly, all earned value terms deal with one of
two time frames.
 Each represents either current status as of the last date that project data were
gathered or a prediction for the end Studied
of the project.
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 CURRENTLY KNOWN VALUES
 Planned value (PV) is “the authorized budget assigned to scheduled
work.”23 In our example, we expected to spend $250,000 for the work we
planned to have , the work that has been completed is worth $200,000.

.IN
 Actual cost (AC) is the “the realized cost incurred for the work performed
on an activity during a specific time period.”

C
 In our example, we actually owe $400,000 for the work that has been

N
completed.

SY
 Budget at completion (BAC) is “the sum of all budgets established for the
work to be performed.

U
VT
 VARIANCES Schedule variance (SV) is “a measure of schedule
performance expressed as the difference between the earned value (EV)
and the planned value (PV)

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 INDEXES Schedule performance index (SPI) is “a measure of schedule
efficiency expressed as the ratio of earned value (EV) to planned value
(PV)
 Cost performance index (CPI) is “a measure of cost efficiency of

.IN
budgeted resources expressed as the ratio of earned value (EV) to actual
cost (AC).”

C
 ESTIMATES Estimate to complete (ETC) is “the expected cost needed

N
to finish all the remaining project work.”

SY
U
VT

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