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Cost Management Chapter 4

Chapter Four of the document discusses Project Cost Control, emphasizing the importance of monitoring project costs and managing changes to the cost baseline. It introduces Earned Value Management (EVM) as a methodology for assessing project performance through planned value, earned value, and actual cost, along with relevant calculations for schedule and cost variances. The chapter also includes examples and questions to apply the concepts of cost prediction and performance indices.

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Mohamed Abouelmagd
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5 views15 pages

Cost Management Chapter 4

Chapter Four of the document discusses Project Cost Control, emphasizing the importance of monitoring project costs and managing changes to the cost baseline. It introduces Earned Value Management (EVM) as a methodology for assessing project performance through planned value, earned value, and actual cost, along with relevant calculations for schedule and cost variances. The chapter also includes examples and questions to apply the concepts of cost prediction and performance indices.

Uploaded by

Mohamed Abouelmagd
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Arab Academy for Science and Technology

College of Engineering and


Technology
Industrial and Management
Department

IM 763E : Cost Management for Engineering


Projects

CHAPTER FOUR
Project Cost Control

Dr. Raymond Fraig


Assistant Professor, PMP,PMI-RMP,CCC

All rights reserved – Raymond Fraig -01003989333 – [email protected] 1


Cost Control
• The process of monitoring the status of the
project to update the project costs and
managing changes to the cost baseline.

• The key benefit of this process is that it


provides the means to recognize variance
from the plan in order to take corrective
action and minimize risk.
Cost Control Procedure
1. Estimate costs
2. Measure and report actual field cost and
quantity
3. Compare between actual versus estimated
cost
4. Perform variance analysis
5. Plan and implement corrective and
preventive actions
Earned Value
Management
 EVM is a methodology that combines scope,
schedule, and cost measurements to assess
project performance and progress.
 EVM develops 3 dimensions for each work
package :
Planned Value The budgeted cost for the work scheduled WBS
PV component, total PV for the project known as
Budget At Completion (BAC).
Earned Value The budgeted amount for the work actually
EV completed on WBS component in a time period,
.describe the percentage completion of a project
Actual Cost The total cost incurred in accomplishing work on
AC the WBS component during a given time period, AC
.have no upper limit
EVM Rules
 Schedule variance (SV) is a measure of schedule performance
on a project.
SV = EV – PV

 Cost variance (CV) is a measure of cost performance on a


project.

CV = EV – AC

 Schedule performance index (SPI) is a measure of progress


achieved compared to progress planned.

SPI = EV/PV

 Cost performance index (CPI) is a measure of the value of


work completed to the actual cost.

CPI = EV/AC
EVM Rules
Example (1)
The cost data for a small construction project are
given in the following table; the schedule
duration is 20 months the project has been
worked on for 15 months. PERFORM EVM
ANALYSIS for the mentioned data date.
Solution
Cost Prediction

 Estimate at Completion (EAC)


• EAC forecast for ETC work performed at the budgeted rate.
EAC = AC + (BAC – EV)

• EAC forecast for ETC work performed at the present CPI.


EAC = BAC / CPI
Where EAC: estimate at completion - BAC: budget at completion

 To Complete Performance Index (TCPI)

TCPI = Work Remaining (BAC‐EV)

Funds Remaining (EAC‐AC)

9
Q&A
BAC = 200 PV= 100 AC= 120 EV= 80

Assuming that all future work will be performed at the


budgeted rate, the estimate at completion (EAC) is:

A. 200.

B. 220.

C. 240.

D. 260.

Answer: C
10
Q&A
BAC = 200 PV= 100 AC= 120 EV= 80

Assuming that what the project has experienced to date can


be expected to continue in the future, the estimate at
completion (EAC) is:

A. 300.

B. 325.

C. 350.

D. 375.

Answer: A
11
Q&A
BAC = 200 PV= 100 AC= 120 EV= 80

Assuming that what the project has experienced to date can


be expected to continue in the future, the variance at
completion (VAC) is:

A. - 80.

B. - 100.

C. + 100.

D. + 200.

Answer: B
12
Q&A
BAC = 200 PV= 100 AC= 120 EV= 80

Assuming that ALL future work will be performed at the


budgeted rate, the estimate to complete (ETC) is:

A. 120.

B. 140.

C. 180.

D. 200.

Answer: A
13
Q&A
BAC = 200 PV= 100 AC= 120 EV= 80

To achieve that goal, you and your team must complete


the remaining work at the to-complete performance
index (TCPI) of:

A. 0.67.

B. 1.00.

C. 1.50.

D. 2.00.

Answer: C
14

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