Stage 3: Execution and Control

1. Stage 3: Execution and Control Earned Value Analysis MS Project and EVA More on Goldratt

2. This is the third stage • Of the…. • What were the first two stages?

3. What were the deliverables of the first stage? • Project manager selected • Requirements document • Project charter • Project team selected • Signature signoffs by the stakeholders

4. What were the deliverables of the second stage? • Project plan • Project budget • The whole point of the plan and budget is to GUIDE EXECUTION • Signature signoffs by the stakeholders attached to the project plan and budget

5. Now what happens? THIRD STAGE BEGINS!! • Project ramps up (begins) • Project executes in conformance to plan and budget • Execution is tracked relative to plan

6. Goldratt’s rules regarding execution • The project manager must stay focused • On what? • What about safety? • How does Goldratt maintain a static critical path? • Communicate and Inform

7. Freeze Requirements??? • What are the PROS? • What are the CONS?

8. Freeze those requirements!! • Late-project creeping requirements are the most common source of cost and schedule overruns • Late-project creeping requirements are a major factor in project cancellations

9. Rather than freezing, use some kind of change control system • Allows for some changes to happen, depending upon contractual considerations • Allows for the system to reject some proposed changes • Use of a CCB is considered a modern BEST PRACTICE

10. Forces pushing for late-project requirements change • Competition intros new version of competitive product with unanticipated KILLER features • New work is undiscovered late in the project • A “Wouldn’t It be Great if…” scenario happens • End-users want changes because they now know more about their requirements than they did 18 months ago • Developers want changes because they have a great emotional and intellectual investment in all of the system’s details

11. Knowledge Areas and Processes used in Stage III • Integration management: • Project plan execution; integrated change control • Scope management: • Scope change control • Time management: • Schedule control • Cost management: • Cost control • Quality management: • Quality control

12. Processes utilized in Stage III, Continued • Communication management: • Information distribution, Performance reporting • Risk management: • Risk monitoring and control • Procurement management: • Contract administration

13. Controlling Changes to the Project Schedule • Perform reality checks on schedules • Allow for contingencies • Don’t plan for everyone to work at 100% capacity all the time • Hold progress meetings with stakeholders and be clear and honest in communicating schedule issues

14. Cost Control • Project cost control includes • monitoring cost performance • ensuring that only appropriate project changes are included in a revised cost baseline • informing project stakeholders of authorized changes to the project that will affect costs • Earned value analysis is an important tool for cost control

15. Earned Value analysis--EV • = Budgeted Cost of Work Performed (BCWP) • Also uses Budgeted Cost of Work Scheduled (BCWS), and • Actual Cost of Work Performed (ACWP) • When you complete an activity, you earn the budgeted value of that activity

16. Why Earned Value Analysis?? • You can’t tell what your true cost variance is because you don’t know where you are relative to schedule • Suppose you are behind schedule but also you have spent less than what the schedule has called for. Are you really under budget?

17. An Example Budget Overrun??? Actual Budget TIME

18. Budgeted Cost of Work Performed (BCWP) = Earned Value • Defined as the monetary value of the work actually accomplished within the control period. ACTIVITY BCWP 1 $12,000 2 $30,000 3 $16,000 $58,.000 CUMULATIVE

19. BCWP • Suppose $100,000 has been budgeted for a task and the task is 50% complete • Then its earned value is $50,000

20. Budgeted Cost of Work Scheduled (BCWS) = Planned Value • Defined as the value of the work scheduled to be accomplished in a given period of time ACTIVITY BCWS 1 $12,000 2 $30,000 3 $33,000 CUMULATIVE $75,000

21. BCWS • What is the BCWS of a $10,000 task whose start date is still in the future? • What is the BCWS of a $10,000 task whose stop date is in the past? • What is the BCWS of a $10,000 task whose duration is 10 days and five days have already passed?

22. BCWS, Cont’d • The BCWS of a $10,000 task whose start date is in the future is 0 (goose egg)

23. BCWS, Cont’d • The BCWS of a $10,000 task whose stop date is in the past is $10,000

24. BCWS, Cont’d • The BCWS of a $10,000 task whose duration is 10 days and five days have already passed is $5,000.

25. Actual Cost of Work Performed (ACWP) • Defined as the cost actually incurred and recorded in accomplishing the work performed within the control period ACTIVITY ACWP 1 $15,000 2 $30,000 3 $29,000 CUMULATIVE $74,000

26. Schedule Variance (SV) • Defined as the difference between the budgeted cost of work performed and the budgeted cost of work scheduled • = BCWP - BCWS • Indicates the deviation between the work content performed and the work content scheduled for the control period

27. Cost Variance (CV) • Defined as the difference between the budgeted cost of work performed and the actual cost of work performed • = BCWP - ACWP • A positive CV indicates a lower actual cost than budgeted for the control period, while a negative CV indicates a cost overrun

28. It’s your turn • For each of the activities in the examples above, calculate • SCHEDULE VARIANCE • COST VARIANCE • Calculate cumulative schedule and cost variance

29. Schedule Index (SI) • Defined as the ratio BCWP/BCWS • A value close to 1 indicates an activity that is on schedule • Values greater than 1 suggest the activity is ahead of schedule • Values less than 1 indicate a schedule overrun

30. Cost Index (CI) • Defined as the ratio BCWP/ACWP • A value close to 1 indicates an activity that is on budget • Values greater than 1 suggest the activity is below budget • Values less than 1 indicate a budget overrun

31. Answers to Schedule and Cost Variance • Cumulative schedule variance = -17,000 • Cumulative cost variance = -16,000

32. Answers to Schedule and Cost Index • Cumulative schedule index = .77 • Cumulative cost index = .78

33. Updating cost and schedule estimates • BAC = Budget at completion = total budget of the project activities based on the original project plan

34. Updating, Cont’d • WR = Work Remaining = budgeted cost of the work not yet accomplished by the end of the reporting period • WR = BAC - BCWP • ETC = updated estimate of the cost of work remaining = COST(WR) • EAC = updated estimate of the total project cost = ACWP + ETC

35. Using MS Project for Earned Value Analysis • Before entering any actual cost or schedule information • YOU MUST FIRST SAVE YOUR PROJECT PLAN AS A BASELINE • Then you enter your actual costs • Then you enter your percentages complete • Now MS Project will do earned value analysis

36. To Enter Your Actual Costs into MS Project • 1.On the Tools menu, click Options, and then click the Calculation tab.2.Clear the Actual costs are always calculated by Microsoft Project check box.3.Click OK.4.On the View Bar, click Task Usage.5.On the View menu, point to Table, and then click tracking.

37. More on Entering Your Actual Costs into MS Project 6.Drag the divider bar to the right to view the Act. Cost field 7.In the Act. Cost field, type the actual cost for the assignment for which you want to update costs.

38. Goldratt’s rules regarding execution • The project manager must stay focused • On what? • What about safety? • How does Goldratt maintain a static critical path? • Communicate and Inform

39. Safety • The extra time a project professional puts into his or her time estimate to do a particular task • {It is customary to assign tasks to project personnel and then to ask them how long it will take them to do the task, knowing full well that they will then be required to finish their task within their estimated time}

40. Solutions • Take the safety out of the individual tasks and put it at the end of the critical path in the time buffer, called a project buffer • This means making the tasks roughly 50-60% as long as they would otherwise be.

41. More solutions • At the point where each feeding path intersects with the critical path, place another time buffer, called a feeding buffer. The feeding buffer protects the critical path from delays occurring in the corresponding non-critical paths. • When resources are needed on the critical path, these resources are advised ahead of time exactly when they must make themselves available. When that time comes, they must drop everything else and do the required critical tasks.

42. Measurement solutions • Measure progress only on the critical path; what percent of the critical path we have already completed, taken in relation to where we should be according to the plan. This is all we care about!! • Have project leader measure progress on non critical paths in terms of unused buffer days

43. Shrinking the task time: Effects • There is less procrastination • There is much more focus • There is less multitasking

44. What are the ramifications of a delayed software product, intended for commercial sale? • Less market share • Less profit; maybe no profit • Lower analyst profit expectations • Declining share price • Out of business? • How many firms has Microsoft driven out of business? • Ask Mitch Kapor (founder of Borland) what the implications of getting a product late to the marketplace are