CHAPTER THIRTEEN

Project Evaluation and Control

PROJECT PROFILE
U.S. Army Can’t Track Spending on its Spending Tracker Project
Introduction
13.1 CONTROL CYCLES—A GENERAL MODEL
13.2 MONITORING PROJECT PERFORMANCE
The Project S-Curve: A Basic Tool
S-Curve Drawbacks
Milestone Analysis
Problems with Milestones
The Tracking Gantt Chart
Benefits and Drawbacks of Tracking Gantt Charts
13.3 EARNED VALUE MANAGEMENT
Terminology for Earned Value
Creating Project Baselines
Why Use Earned Value?
Steps in Earned Value Management
Assessing a Project’s Earned Value
13.4 USING EARNED VALUE TO MANAGE A PORTFOLIO OF PROJECTS
PROJECT PROFILE
Earned Value Management at Northrop Grumman
13.5 ISSUES IN THE EFFECTIVE USE OF EARNED VALUE ANALYSIS
13.6 HUMAN FACTORS IN PROJECT EVALUATION AND CONTROL
Critical Success Factor Definitions
Conclusions
Summary
Key Terms
Solved Problems
Discussion Questions
Problems
Case 13.1 The IT Department at Kimble College
Case 13.2 The Superconducting Supercollider
Case 13.3 “Dear Mr. President—Please Cancel our Project!”: The Honolulu Elevated
Rail Project
Internet Exercises
MS Project Exercises
PMP Certification Sample Questions
Answers
Appendix 13.1 Earned Schedule
Notes

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TRANSPARENCIES
Note for Instructors: To present transparencies in class, please download the PowerPoint
Presentations (available on [Link]) that accompanies this product.
The PPT ISBN is 9780134730479.

13.1 A GENERAL MODEL OF THE PROJECT CONTROL CYCLE

The Project Control Cycle

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13.2 BUDGETED COSTS FOR SAMPLE PROJECT

Duration (in weeks)

5 10 15 20 25 30 35 40 45 Total

Design 6 2

Engineer 4 8 8 8

Install 4 20 6

Test 2 6 4 2

Total 6 6 8 12 28 8 6 4 2

Cumul. 6 12 20 32 60 68 74 78 80 80

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13.3 PROJECT S-CURVE

Cumulative Cost
($ in thousands)

80

60

40

20

5 10 15 20 25 30 35 40 45
Elapsed Time (in weeks)

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 13.4 PROJECT S-CURVE SHOWING NEGATIVE VARIANCE

Cumulative Cost
($ in thousands)

80

60

$10,000 Negative Var.

40

20

5 10 15 20 25 30 35 40 45
Elapsed Time (in weeks)

Cumulative Budgeted Cost

Cumulative Actual Cost

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 13.5 GANTT CHART WITH MILESTONES

Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.

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 13.6 TRACKING GANTT WITH PROJECT ACTIVITY DEVIATION

Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.

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13.7 EARNED VALUE TABLE WITH PERCENTAGE OF TASKS COMPLETE

Duration (in weeks)

5 10 15 20 25 30 35 40 45 % Comp.

Design 6 2 100

Engineer 4 8 8 8 100

Install 4 20 6 50

Test 2 6 4 2 0

Total 6 6 8 12 28 8 6 4 2

Cumul. 6 12 20 32 60 68 74 78 80

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 13.8 CALCULATING EARNED VALUE

(All numbers are in thousands $)

Planned % Comp. Earned Value

Design 8 100 8

Engineer 28 100 28

Install 30 50 15

Test 14 0 0

Cumul.
Earned 51
Value

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13.9 PROJECT BASELINE, USING EARNED VALUE

Cumulative Cost
($ in thousands)

80

Project Baseline
60

Earned Value

40

20

5 10 15 20 25 30 35 40 45
Elapsed Time (in weeks)

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13.10 EARNED VALUE METRICS

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13.11 EARNED VALUE TABLE

Activity Jan Feb Mar Apr May Jun Jul Plan %C

Value

Staffing 8 7 15 100
15

Blueprinting 4 6 10 80 8

Prototype
Devel 2 8 10 60
6

Full Design 3 8 10 21 33 7

Construction 2 30 32 25 8

Transfer 10 10 0
0

Punch List 15 5 20 0 0

Σ= 118 44

Monthly Plan 8 7 6 17 10 55 15

Cumulative 8 15 21 38 48 103 118

Monthly Actual 8 11 8 11 10 30 0

Cumulative
Actual 8 19 27 38 48 78

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13.12 SCHEDULE VARIANCES FOR EVM

Schedule Variances

Planned Value (PV) 103

Earned Value (EV) 44

Schedule Performance Index EV/PV = 44/103 = .43

Estimated Time to Completion (1/.43 × 7) = 16.3 months

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13.13 COST VARIANCES FOR EVM

Cost Variances

Actual Cost of Work (AC) 78

Earned Value (EV) 44

Cost Performance Index EV/AC = 44/78 = .56

Estimated Cost to Completion (1/.56 × $118,000) = $210,714

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13.14 CRITICAL SUCCESS FACTORS IN PROJECT IMPLEMENTATION

1. Project Mission

2. Top Management Support

3. Plans and Schedules

4. Client Consultation

5. Personnel

6. Technical Tasks

7. Client Acceptance

8. Monitoring and Feedback

9. Communication

10. Troubleshooting

DISCUSSION QUESTIONS

13.1 Why is the generic four-stage control cycle useful for understanding how to
monitor and control projects?

One of the more difficult challenges of project control is finding a way to accurately
measure progress. The four-stage cycle breaks project down into specific goals that can
be measured against the project baseline. Deviations from the planned budget or time
line can be identified and corrected swiftly. The fact that it is a cycle, implying repetition
of the process, demonstrates the constant need for project monitoring and control
measures. The final step in the cycle is to recycle the process resulting in continuous
project control.

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13.2 Why was one of the earliest project tracking devices referred to as an S-curve?
Do you see value in the desire to link budget and schedule to view project
performance?

This early device compared project time and cost graphically. The nature of project time
and costs creates an S when the points are plotted on a graph, hence the term “S-curve.”
There is value in linking the budget and schedule as an indicator of project performance.
Following the S-curve, managers can get a rough depiction of expected progress. They
can also see deviations of their own project from the typically expected progression.

13.3 What are some of the key drawbacks with S-curve analysis?

The cause of S-curve drawbacks lies mainly in its lack of tying the schedule and budget
to actual project progress. S-curves give little indication as to the cause of variations
from projections. The S-curve simply points out deviation of cost in relation to time. It
does not relate task completion to time or cost. Therefore, when a deviation is
discovered, it is unknown whether the project is on target so far as physical progress
(whether work is being completed on, ahead, or behind the anticipated time and budget).
Without knowing the cause of the variance, managers may make incorrect assumptions
about the status of the project.

13.4 What are the benefits and drawbacks with the use of milestone analysis as a
monitoring device?

Milestone analysis is beneficial in signaling the completion of important project stages

and in creating distinctions between work packages. This increases the team’s ability to
respond to change and create logical review points. Milestones also provide periodic
goals that keep team members motivated. They represent significant accomplishments
within the larger picture of the project. It also draws the team’s attention to the project’s
status. Overall, the analysis provides a clear picture of project development. However,
this form of analysis only allows for reaction to problems, not foresight or prevention.
Problems are then able to compound and grow to the point of unmanageable resulting in
a significant over-budget/schedule project.

13.5 It has been said that Earned Value Management (EVM) came about because the
Federal Government often used “Cost-plus” contractors with project organizations. Cost-
plus contracting allows the contractor to recover full project development costs plus
accumulate profit from these contracts. Why would requiring contractor firms to employ
earned value management help the government hold the line against project cost
overruns?

Earned Value Management goes beyond reporting costs and progress. It links costs
incurred to the time and budget baseline as well as to measurable performance

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milestones. By using EVM, the government is requiring that costs incurred during the
project be directly tied to performance or progress of the project. The cost of the project
is based on the budgeted cost of work performed. Therefore, negative or positive
variances in performance are measured by the value of the work performed, not by the
costs spent to complete the work. This allows companies to have a better understanding
of what variances mean and their impact on the overall project. By understanding why
the meaning of variances, managers are in a better position to take corrective action and
to keep the project on schedule.

13.6 What are the major advantages of using EVM as a project control mechanism?
What do you perceive are its disadvantages?

The major advantages of EVM are that it is a comprehensive approach to measuring

progress (links cost, time, and completion), its use of objective criteria, and it enables
more accurate information for decision making. Disadvantages may include the time
consuming nature of analysis in large-scale projects, mathematical formulas used for
efficiency do not take into account unique problems that stall the project or spike costs in
one area (which may not lead to overall poor efficiency), and a lack of information
regarding what type of corrective action may need to be taken.

13.7 Consider the major findings of the research on human factors in project
implementation. What common themes seem to emerge from the research on
behavioral issues as a critical element in determining project status?

The overarching theme is that in order to understand why a project is progressing the way
it is the project must be evaluated on human performance criteria. There are several
human factors proven to be influential in project success. Some of the main areas that
need to be measured are motivation, leadership, expertise and top management support.
The problem with this area of assessment is that it lacks a straightforward, objective
system for measurement.

13.8 The 10 critical success factors have been applied in a variety of settings and
project types. Consider a project with which you have been involved. Did any of
these factors emerge clearly as being the most important for the project’s success?
Why??

This question requires students to give a specific answer based on their own experience
with projects. Responses will vary depending upon the project they select to respond to
with the critical success factor model.

13.9 Identify the following terms: PV, EV, and AC. Why are these terms important?
How do they relate to one another?

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PV refers to Planned Value. This is the expected (planned) budget for all project
activities that are planned to occur within a specific time period. Planned Value is
compared with Earned Value to determine the “real” progress that has been made on a
project.

EV refers to Earned Value. Earned value is the budgeted cost of the work performed.
This is important in establishing the true progress of the project and in understanding the
meaning of variances from the project baseline.

AC stands for Actual Cost. These are the total costs incurred to complete project work.

13.10 What do the Schedule Performance Index and the Cost Performance Index
demonstrate? How can a project manager use this information to estimate future
project performance??

The indexes compare the planned value and actual cost of the project with the earned
value (EV) measure to assess “true” project performance. The goal for an organization is
to maintain SPI and BPI of 1.0 or higher, indicating that the project’s progress is ahead of
schedule. The lower the project’s SPI and CPI are from 1.0, the less progress is being
made on the project and the higher the likely overruns on schedule and budget we can
anticipate.

13.11 Suppose the SPI is calculated as less than 1.0. Is this good news for the project or
bad news? Why?

This would probably be viewed as bad news. A performance index of less than 1.0
indicates that the project, based on current EV and PV information, is not progressing at
the planned rate. Depending upon how much less than 1.0 the SPI is, the project’s
schedule could either be marginally or significantly delayed.

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CASE STUDIES

Case Study 13.1 The IT Department at Kimble College

This case identifies some of the serious problems and challenges involved in accurately
tracking and determining the status of ongoing projects. In this case, there is no clear
method for tracking and identifying project performance midstream. Either it succeeds,
or (more often) it comes in very late and over budget. Dan Gray, the new head of the IT
department, is not helping the process because he himself has a tendency to paint a rosy
picture of his projects.

Questions

1. As a consultant monitoring this problem, what solutions will you propose? To

what degree has Dan’s management style contributed to the problems?

This department needs to develop a monitoring and control system that allows project
managers and administrators the ability to get real-time information on project
development so there are no end-game surprises, when a project is “suddenly” late
and over budget. The use of earned value, milestones, or some other tracking
mechanism is critical.

2. What are some types of project status information you could suggest the project
team leaders begin to collect in order to assess the status of their projects?

Use of standard monitoring and control metrics such as milestones would begin to
give some interim updates on project status. The problem with milestones is that they
are a reactive measure (you know you missed one only when you miss one). On the
other hand, earned value, combined with frequent updates regarding project activity
development, can provide real-time information and well as the ability to make
reasonable projections into the future to avoid any surprises regarding how projects
are performing.

3. How would you blend “hard data” and “managerial or behavioral” information to
create a comprehensive view of the status of ongoing projects in the IT
department at Kimble College??

Using concepts such as earned value, coupled with “softer” information provided by tools
such as critical success factor analysis, will give project managers and top management a
more comprehensive assessment or how projects are performing, how effectively project
teams are functioning, and early-warning signs in cases where behavioral issues may be
poised to negatively affect the project’s performance. “Hard data” and “soft data” each
serve a purpose in detailing a clear view of the project’s current status as well as the
status of project team performance, which is critical to the ability to successfully
complete the project.

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Case Study 13.2 The Superconducting Supercollider
A famous example of a project that started with great fanfare and was quietly shut down
was the Superconducting Supercollider. A particle physics structure as it was conceived,
the project received funding after an intense (and some would argue, divisive)
competition among various communities seeking to house the complex. A combination
of incremental funding coupled with very poor project oversight led to allegations of
slipshod work, inflated costs, and unnecessary expenses. All these problems contributed
to a rapid decline in the attitude of the Federal Government toward keeping the project
alive and it was finally killed through withdrawal of funding. This case also makes an
excellent discussion point for that argument that good project management also requires
good stakeholder management; that is, keeping all the powerful project stakeholders
happy and supportive of the project.

Questions
1. Suppose you were a consultant called into the project by the federal government
in 1990, when it still seemed viable. Given the start to the project, what steps
would you have taken to reintroduce some positive “spin” on the Superconducting
Supercollider?

This question asks students to think about developing stakeholder management strategies
for the project to enhance its reputation. Early warning signs were already emerging
about poor cost control and slow, expensive development. However, there was still a
window of time in which a canny project manager could have worked to reestablish
support for the project from the key funding agencies and powerful congressional
members. Students should consider steps to re-engage these crucial supporters.

2. What were the warning signs of impending failure as the project progressed?
Could these signs have been recognized so that problems could have been
foreseen and addressed or, in your opinion, was the project simply impossible to
achieve? Take a position and argue its merits.

There are several points of departure that students can adopt in answering this question.
First, the divisive nature of the competition for the location of the Superconducting
Supercollider was guaranteed to ensure that losing communities, and their federal
representatives, would be upset and unlikely to give the project the benefit of the doubt
downstream. Second, the way that project funding was initially doled out at a slow pace
(due to Federal budget deficit concerns) made it difficult for the project to kick off
strongly; in fact, they had to begin slowly and never were able to gain much momentum.
Third, the project also was sold on the basis of European financial support, which never
materialized. When this lack of funding became evident, it gave the project’s enemies
powerful ammunition to move to kill the program.

The larger question regarding how much of these problems were foreseeable is a
debatable issue and one that can generate a lot of in-class discussion as students take one
position or the other. The ultimate goal of this component of the case is for them to
develop some guidelines for their own careers in projects, in terms of how to uncover

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warning signs of project difficulties and what positive steps can be taken to address them
before they become debilitating to the project.

3. Search for “Superconducting supercollider” on the Internet. How do the majority

of stories about the project present it? Given the negative perspective, what are
the top three lessons to be learned from this project?

This is a summary question that asks students to consider the lessons to be learned from
this disaster. Most Internet sites that address just the science underlying the
Superconducting Supercollider offer a mixed view of it and are supportive of the particle
physics science that drove its development. Federal watchdog groups, on the other hand,
view the project as a classic case of governmental waste with nothing to show for it.

Case 13.3 “Dear Mr. President—Please Cancel our Project!”: The Honolulu
Elevated Rail Project
This case is a great current example of a very expensive project that was kicked off
because of an assumed need—to relieve congestion in downtown Honolulu through an
elevated urban rail system. Critics argue that in addition to having a ballooning cost, the
actual planning was poorly conceived, leaving Honolulu with an intrusive and ugly rail
system through the downtown area, ruining panoramic views, and impeding traffic.
Additionally, advocates underestimated the power needs for the rail system, requiring the
transport authority to renegotiate electricity fees for the system. Finally, the original
costs that were assumed for the project were calculated during an economic downturn
and with the economy booming again, the costs of the project have gone up dramatically.
All of these elements points to a state Governor who is anxious to be rid of the project
and hoping that President Trump will deny additional federal funding, in which case the
project will likely be cancelled.

Questions

1. Why are public works projects like the Honolulu Rail project nearly impossible to
stop once they have been approved, even if later cost estimates skyrocket?

Public works projects often have the backing of powerful politicians who love the idea of
having their name attached to a major project and loath the thought of having it cancelled.
Based on the ideas of “escalation of commitment,” it is common for these projects to
continue, in the thought that stopping it once it has started would be worse than “cutting
the cord” and ending the financial drain. There are many examples of projects that, even
in the face of obvious failure, will be continued to the finish in hopes that the final result
“won’t be too bad.”

2. Project Management researchers have charged that many large infrastructure projects,
like this one, suffer from “delusion” and “deception” on the parts of their advocates.
Explain how “delusion” might be a cause of ballooning budgets in this project. How
does “deception” affect the final project budget overruns?

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Faculty are encouraged to draw on the work of Dr. Bent Flyvbjerg here in formulating
and discussing this issue, as he made the “delusion” and “deception” observations. His
argument is the that delusional optimism, first observed through the Prospect Theory
work of Daniel Kahneman, is common with project planning, as planners and politicians
always assume the most optimistic times when estimating project durations. They also
assume the most favorable conditions and research (and common sense) suggests that this
is never the case in real life. As a result, decision-makers enter into project planning with
a delusional optimism that inevitably leads to downstream problems. Deception is the
deliberate masking of issues of problems for the project and as noted above, it is common
for key decision-makers and politicians to downplay problems or potential roadblocks,
often knowing in advance that these problems will occur.

PROBLEMS

13.12 Using the following information, develop a simple S-curve representation of the
expected cumulative budget expenditures for this project (figures are in thousands).

Duration (in days)

10 20 30 40 50 60 70 80

Activities 4 8 12 20 10 8 6 2

Cumulative 4 12 24 44 54 62 68 70

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Solution:

13.13 Suppose the expenditure figures in Problem 1 were modified as follows (figures
are in thousands).:

Duration (in days)

10 20 30 40 50 60 70 80

Activities 4 8 10 14 20 24 28 8

Cumulative 4 12 22 36 56 80 108 116

Draw this S-curve. What does the new S-curve diagram represent? How would you
explain the reason for the different, non-S-shape of the curve?
Solution:

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The “non-S” shape of the curve reflects the fact that project expenditures occurred later in
the project, suggesting that the project’s activities may not have followed the traditional
life cycle model for resource usage.

13.14 Assume the following information (figures are in thousands):

Budgeted Costs for Sample Project
Duration (in weeks)
5 10 15 20 25 30 35 40 45 Total
Design 4 4 2
Engineer 3 6 12 8
Install 4 12 24 6
Test 2 6 6 4 2
Total Monthly Cumul.
a. Calculate the monthly budget and the monthly cumulative budgets for the
project.
b. Draw a project S-curve identifying the relationship between the project’s
budget baseline and its schedule.

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Solution:
a.
Budgeted Costs for Sample Project
Duration (in weeks)
5 10 15 20 25 30 35 40 45 Total
Design 4 4 2
Engineer 3 6 12 8
Install 4 12 24 6
Test 2 6 6 4 2
Monthly 4 7 12 24 34 12 6 4 2
Total Monthly Cumul. 4 11 23 47 81 93 99 103 105

b. S-Curve rendering—Using Excel spreadsheet option

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13.15 Use the following information to construct a tracking Gantt chart using MS
Project.

Activities Duration Preceding Activities

A 5 days none
B 4 days A
C 3 days A
D 6 days B, C
E 4 days B
F 2 days D, E

Highlight project status on day 14 using the tracking option and assuming that all tasks to
date have been completed on time. Print the output file.

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Solution:

Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.

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13.16 Using the information in Problem 13.15, highlight the project’s status on day 14 but assume that activity D has not yet begun.
What would the new tracking Gantt chart show? Print the output file.

Solution:

Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.

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13.17 Use the following table to calculate project schedule variance based on the units
listed (figures are in thousands).

Schedule Variance Work Units

A B C D E F Total
Planned 20 15 10 25 20 20 110
Value
Earned 10 10 10 20 25 25
Value
Schedule
variance

Solution:

Schedule Variance Work Units

A B C D E F Total
Planned 20 15 10 25 20 20 110
Value
Earned 10 10 10 20 25 25 100
Value
Schedule -10 -5 0 -5 5 5 -10
variance

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13.18 Using the data in the table below, complete the table by calculating the
cumulative planned and cumulative actual monthly budgets through the end of June.
Complete the earned value column on the right. Assume the project is planned for a
12-month duration and a $250,000 budget.

Activity Jan Feb Mar Apr May Jun Plan %C Value

Staffing 8 7 15 100

Blueprinting 4 6 10 100

Prototype
Development 2 8 10 70

Full Design 3 8 10 21 67

Construction 2 30 32 25

Transfer 10 10 0

Monthly Plan
Cumulative
Monthly Actual 10 15 6 14 9 40
Cumul. Actual

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Solution:

Activity Jan Feb Mar Apr May Jun Plan %C Value

Staffing 8 7 15 100 15

Blueprinting 4 6 10 100 10

Prototype
Development 2 8 10 70 7

Full Design 3 8 10 21 67 14

Construction 2 30 32 25 8

Transfer 10 10 0 0

Σ= 54

Monthly Plan 8 11 8 11 10 50
Cumulative 8 19 27 38 48 98
Monthly Actual 10 15 6 14 9 40
Cumul. Actual 10 25 31 45 54 94

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13.19 Using the data from Problem 13.18, calculate the following values:

Schedule Variances
Planned Value (PV)
Earned Value (EV)
Schedule Performance Index (SPI)
Estimated Time to Completion

Cost Variances
Actual Cost of Work Performed (AC)
Earned Value (EV)
Cost Performance Index (CPI)
Estimated Cost to Completion

Solution:

Schedule Variances
Planned Value (PV) 98
Earned Value (EV) 54
Schedule Performance Index (SPI) EV/PV = 54/98 = .55
Estimated Time to Completion (1/.55) × 12 mos. = 21.75 mos.

Cost Variances
Actual Cost of Work Performed (AC) 94
Earned Value (EV) 54
Cost Performance Index (CPI) EV/AC = 54/94 = .58
Estimated Cost to Completion (1/.58) × $250,000 = $434,622

13.20 You are calculating the estimated time to completion for a project of 12 months’
duration and a budgeted cost of $500,000. Assuming the following information,
calculate the Schedule Performance Index and the estimated time to completion
(figures are in thousands).

Schedule Variances

Planned Value of Work Scheduled (PV) 65

Earned Value (EV) 58

Schedule Performance Index

Estimated Time to Completion

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Solution:

Schedule Performance Index (SPI) = 58/65 = .89

Estimated Time to Completion = (1/.89) × 12 months = 13.48 months, or almost 1.5

months behind schedule.

13.21 Suppose, for the Problem 13.20, that your PV was 70 and your EV was 95.
Recalculate the SPI and estimated time to completion for the project with this new
data..

Solution:

Schedule Performance Index (SPI) = 95/70 = 1.36

Estimated Time to Completion = (1/1.36) × 12 months = 8.84 months, or

approximately 3 months ahead of schedule.

13.22 You have collected the following data based on three months of your project’s
performance. Complete the table. Calculate cumulative CPI (CPIC). How is the
project performing after these three months? Is the trend positive or negative?

EV EVC AC ACC CPI CPIC

January $30,000 $35,000
February $95,000 $100,000
March $125,500 $138,000

Solution:

EV EVC AC ACC CPI CPIC

January $30,000 $30,000 $35,000 $35,000 0.86 0.86
February $95,000 $125,000 $100,000 $135,000 0.95 0.93
March $125,500 $250,500 $138,000 $273,000 0.91 0.92

Overall, the project is performing below required levels (assuming CPI should equal 1.0
or higher). However, the original poor value is trending moderately better (moving
from 0.86 to 0.92 over three months). Trend is positive but the CPI is still under-
performing.

13.23 You have collected EV, AC, and PV data from your project for a five-month
period. Complete the table. Calculate SPIC and CPIC. Compare the cost and
schedule performance for the project on a month-by-month basis and cumulatively.
How would you assess the performance of the project? (All values are in thousands

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 $)

EV EVC AC ACC PV PVC SPI SPIC CPI CPIC

April 8 10 7
May 17 18 16
June 25 27 23
July 15 18 15
August 7 9 8

Solution:

EV EVC AC ACC PV PVC SPI SPIC CPI CPIC

April 8 8 10 10 7 7 1.14 1.14 0.80 0.80
May 17 25 18 28 16 23 1.06 1.09 0.94 0.89
June 25 50 27 55 23 46 1.09 1.09 0.93 0.91
July 15 65 18 73 15 61 1.00 1.07 0.83 0.89
August 7 72 9 82 8 69 0.88 1.04 0.78 0.88

In analyzing trends for this project, we see from the cumulative columns that the project’s
SPI started very strong and has been gradually slipping over the course of the five months
recorded, going from 1.14 to 1.04. On the other hand, cumulative CPI has actually been
trending more positively in recent months, moving from the original 0.80 to 0.88.
Although it is still below our threshold level of 1.0, CPI has shown marginal
improvement.

13.24 Assume you have collected the following data for your project. Its budget is
$75,000 and it is expected to last four months. After two months, you have calculated
the following information about the project:

PV = $45,000
EV = $38,500
AC = $37,000

Calculate the SPI and CPI. Based on these values, estimate the time and budget necessary
to complete the project. How would you evaluate these findings? Are they good news or
bad news?

Solution:

SPI = EV/PV = $38,500/45,000 = .86

CPI = EV/AC = $38,500/37,000 = 1.04

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Estimated Time to Completion = (1/.86) × 4 months = 4.68 months

Estimated Cost to Completion = (1/1.04) × $75,000 = $72,078

The findings are a bit of good news and a bit of bad. The good news is that your
estimated cost to completion is lower than the original budget; however, the bad news is
that the project is behind schedule and is likely to take 4.65 months to complete, rather
than the originally planned 4 months.

13.25 You had planned to construct a series of eight traffic roundabouts in your town,
with each roundabout costing $150,000. Your goal was to complete the project
during the four (4) months of good weather in the summer but due to unexpected
delays, the project has not gone according to plan. After two months, earned value
(EV) is calculated at $400,000. What is your budgeted cost at completion (BAC)?

Solution:
This is a bit of a trick question. If we know, in advance, that we are planning eight
traffic roundabouts and they cost $150,000 each, the budgeted cost at completion is
simply 8 × $150,000 = $1.2 million.

13.26 (Optional—Based on Earned Schedule discussion in Appendix 13.1) Suppose you

have a project with a Budget at Completion (BAC) of $250,000 and a projected
length of 10 months. After tracking the project for six months, you have collected the
information in the table below.
a. Complete the table. How do Earned Value SPI (based on $) and Earned Schedule
SPI differ?
b. Calculate the schedule variances for the project for both Earned Value and Earned
Schedule. How do the values differ?
Jan Feb Mar Apr May Jun
PV ($) 25,000 40,000 70,000 110,000 150,000 180,000
EV ($) 20,000 32,000 60,000 95,000 123,000 151,000
SV ($) -5,000 -8,000 -10,000 -15,000 -27,000 -29,000
SPI ($) 0.80 0.80 0.86 0.86 0.82 0.84
ES (mo.) 0.80 1.47 2.67 3.63 4.33 5.03
SV (t) -0.20 -0.53 -0.33 -0.37 -0.67 -0.97
SPI (t) 0.80 0.74 0.89 0.91 0.87 0.84

Solution:
a. The SPI values are relatively similar, the ES SPI figures are initially more positive
than earned value figures.

b. IEAC for Earned Value is (1/.0.84) x 10 mos. = 11.90 months.

IEAC (t) for Earned Schedule is (10/0.84) = 11.90 months.

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 The results are the same in this case; Earned Value Schedule variance is $-29,000 and
Earned Schedule variance is −0.97.

MS Project EXERCISES

Exercise 13.32

Using the following data, enter the various tasks and create a Gantt chart using MS
Project. Assign the individuals responsible for each activity and once you have
completed the network, update it with the percentage complete tool. What does the MS
Project output file look like?

Activity Duration Predecessors Resource % Complete

A. Research product 6 - Tom Allen 100
B. Interview customers 4 A Liz Watts 75
C. Design Survey 5 A Rich Watkins 50
D. Collect Data 4 B, C Gary Sims 0

Solution:

Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.

Exercise 13.33

Now, suppose we assign costs to each of the resources in the following amounts:

Resource Cost
Tom Allen $50/hour
Liz Watts $55/hour
Rich Watkins $18/hour
Gary Sims $12.50/hour

Create the resource usage statement for the project as of the most recent update. What are
project expenses per task to date?

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Solution:

Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.

Exercise 13.34

Use MS Project to create a Project Summary Report of the most recent project status.

Solution:

Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.

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Exercise 13.35

Using the data shown in the network precedence table below, enter the various tasks in
MS Project. Then select a date approximately halfway through the overall project
duration, and update all tasks in the network to show current status. You may assume that
Activities A through I are now 100% completed. What does the tracking Gantt look like?
Project—Remodeling an Appliance

Activity Duration Predecessors

A. Conduct competitive analysis 3 -
B. Review field sales reports 2 -
C. Conduct tech capabilities assessment 5 -
D. Develop focus group data 2 A, B, C
E. Conduct telephone surveys 3 D
F. Identify relevant specification improvements 3 E
G. Interface with Marketing staff 1 F
H. Develop engineering specifications 5 G
I. Check and debug designs 4 H
J. Develop testing protocol 3 G
K. Identify critical performance levels 2 J
L. Assess and modify product components 6 I, K
M. Conduct capabilities assessment 12 L
N. Identify selection criteria 3 M
O. Develop RFQ 4 M
P. Develop production master schedule 5 N, O
Q. Liaison with Sales staff 1 P
R. Prepare product launch 3 Q

Solution:

Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.

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Exercise 13.36
Use the following information to construct a Gantt chart in MS Project. What is the
expected duration of the project (critical path)? Assume the project is halfway finished in
terms of the schedule (day 16 completed) but activity completion percentages are as
shown. Construct a tracking Gantt chart for the project (be sure to show the percentage
complete for each activity). What would it look like?

Activity Duration (in Days) Predecessors % Completed

(Day 16)
A 6 None 100%
B 2 A 100%
C 4 A 100%
D 7 C 14%
E 10 D 0%
F 6 B, C 33%
G 5 E, F 0%

Solution:
The project’s duration is 32 days and the critical path is: A-C-D-E-G. The tracking Gantt
view of the project, based on the 16th day in development and the % completed values,
would be:

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Exercise 13.37
Using the data for Problem 13.36, add the resource assignments to each of the activities
and input their hourly rates as shown. Construct an earned value chart for the project.
Which activities have negative variances? What is the estimate at completion (EAC)
for the project? (Hint: Remember to click “Set baseline” prior to creating the EVM
table. This table is found by clicking on the “View” tab, then “Tables,” then “Other
Tables.”)

Resource Name Hourly Rate ($)

Josh (Activity A) 12.00
Mary (Activity B) 13.50
Evan (Activity C) 10.00
Adrian (Activity D) 22.00
Susan (Activity E) 18.50
Aaron (Activity F) 17.00
Katie (Activity G) 32.00

Solution:

Partial table showing cost and schedule variances for activities D and F.

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