1. Module 9 Session 9.1 Visual 1 Module 9 Designing Control and Reporting Systems (Time, Cost, Resources and Scope (Performance and Quality)) Session 9.1: Designing Control Systems

2. Module 9 Session 9.1 Visual 2 Instructional Objectives (Module 9) At the end of the module, learners as members of a project team will be able to: 1. Design a management control and reporting system to: (a)manage the project’s progress and adherence to plan in terms of time, cost, resources and scope (performance and quality) (given an approved implementation plan); and (b)control the project’s scope & design. 2.Make appropriate changes in the current operational plan and in the baseline plan.

3. Module 9 Session 9.1 Visual 3 On-the-job Tasks On-the-job tasks that learners should be able to perform as a result of the module are listed on the module outline and include:  Using standard tools for managing time, cost, resources, and scope (performance and quality) in relation to plan and for controlling scope and design.  Working with the information systems and accounting departments as required to establish data collection, processing, and reporting systems.  Matching the appropriate report style and content to the audience and purpose.  Changing the current operational plan and the baseline plan as required.

4. Module 9 Session 9.1 Visual 4 Sessions 1.Designing Control Systems 2.Managing Changes in Scope and Design 3.Designing Reporting Systems 4. Case Study

5. Module 9 Session 9.1 Visual 5 Instructional Objectives (Session 9.1) At the end of the session, learners will be able to:  Describe the meaning of project control and why it is important.  Identify the key elements of a project that must be controlled.  Interpret information that results from a variance analysis, trend analysis, and earned value analysis.  Describe why it is important to implement a change-in-scope and a configuration management system for a project.  Additional instructional objectives for the session are listed on the session outline.

6. Module 9 Session 9.1 Visual 6 Principles of Project Control Cargo Ship Analogy External influence Reset course Actual travel Position surveyed Start of journey Destination Course set initially (Plan)

7. Module 9 Session 9.1 Visual 7 Captain’s questions 1.What is the plan? (What is our planned course?) 2.What are the actuals? (What is our present position?) 3.What are the variances? Why? (Are we on course or off course?) 4.What are the trends and how do they extrapolate to the future? 5.What actions are required?

8. Module 9 Session 9.1 Visual 8 Project Control (CPM Picture) Baseline plan = Schedule + Budget + Resources + Scope Approved at start of implementation – Used to set “course” and to assess progress Current operation plan = result of day-to-day changes and decisions Task NameW1W2W3W4W5W6W7 ABCD Project Task A Task B Task D Task C Slightly ahead of schedule Today line

9. Module 9 Session 9.1 Visual 9 Project Control (CPM Picture) (continued) Planned Budget to Week 4$110 Actual Cost to Week 4 $150 Difference ($ 40) Task NameW1W2W3W4W5W6W7 ABCD Project Task A Task B Task D Task C Slightly ahead of schedule Today line

10. Module 9 Session 9.1 Visual 10 Project Control (CPM Picture) (continued) Earned Value = Budgeted Value of Work Complete Planned Budget to Week 4$110Earned Value $120 Actual Cost to Week 4 $150Actual Cost$150 Difference ($ 40)Over Budget($ 30 ) Task NameW1W2W3W4W5W6W7 ABCD Project Task A Task B Task D Task C Slightly ahead of schedule Today line

11. Module 9 Session 9.1 Visual 11 Project Rectangle Time (Schedule) Scope (Performance and Quality ) = Work done that meets specifications Cost (Budget) Resources

12. Module 9 Session 9.1 Visual 12 Project Control Process  Set the control period for the frequency of updating  Determine the level of detail at which control will be exercised  Control 4 key variables  time (schedule)  cost (budget)  resources (people, materials, equipment)  scope (performance & quality)  Adjust the current operational plan and revise the baseline plan if necessary

13. Module 9 Session 9.1 Visual 13 Controlling Schedule (Time) Control of schedule is based on the activity plan. How much work is completed relative to plan?  Measure progress at end of each control period.  Count as complete only work that meets specifications!  Work directly on network diagram or bar chart.  Pay special attention to activities on critical path.

14. Module 9 Session 9.1 Visual 14 Schedule: Key Questions 1 & 2 1)What are the actuals? a) start dates? b)finish dates of completed activities? c) progress of incomplete activities? d) anticipated completion of incomplete activities? 2)What was the plan? a) start dates? b) finish dates? c) duration?

15. Module 9 Session 9.1 Visual 15 Schedule: Key Questions 3 & 4 3)What are the variances (ahead or behind)? Why was there a variance? a) planned start vs. actual start dates b) planned finish vs. actual finish dates or anticipated completion c) planned duration vs. actual or anticipated duration 4)What are the trends and how do they extrapolate to the future? a)at the project level? b)at the subproject (component) level? c)Are variances staying the same?

16. Module 9 Session 9.1 Visual 16 Controlling Schedule: Trend Graph Actual Weeks into Project Expected Total Duration Planned Project Duration in Weeks

17. Module 9 Session 9.1 Visual 17 Schedule: Key Question 4 (continued) 4)What are the trends and how do they extrapolate to the future? d)Check the critical path e)Predict the future 1.Anticipate likely start/finish dates 2.Estimate time to completion

18. Module 9 Session 9.1 Visual 18 Schedule: Key Question 5 5)What actions are required? a) Act on information (Analyze the WHY!) b) Make decisions 1. Modify current operational plan as needed 2. Modify baseline plan if necessary

19. Module 9 Session 9.1 Visual 19 Schedule: Summary of the Process 1)Review the actual performance (work complete) 2)Compare to the planned schedule 3)Determine the schedule variance (gap) 4)Analyze trends and extrapolate to the future a) Check the expected project completion date b) Predict the future — Analyze why? 5)Take action a) Modify the current operational plan as required b) Modify the baseline plan if necessary

20. Module 9 Session 9.1 Visual 20 Controlling Scope (Performance and Quality)  Performance = work completed that meets or exceeds specifications. (Quality)  Performance is measured by determining if a scheduled activity is complete.  Activities that do not meet specs are not complete.  It’s harder to assess performance for project with less tangible deliverables.  Control process is similar to that for schedule.

21. Module 9 Session 9.1 Visual 21 Measuring Performance: Percent Complete Percent complete is:  A Summary Ratio  Built up from completed work of all components  Difficult to use (especially for less tangible deliverables) and  Do not base percent complete on time and budget  (50% of time and 50% of budget is often not equal to 50% complete!)  Must actually measure progress (work accomplished)  Use Earned Value as a better measure of performance

22. Module 9 Session 9.1 Visual 22 Controlling Resources  Resources are:  People  Equipment  Materials  Facilities  The project manager must:  Strive to hold functional managers to their commitments to provide required resources  Track the actual resources assigned to their project  Compare the actual resources with the resource plan

23. Module 9 Session 9.1 Visual 23 Controlling Cost (Budget) Sound cost control begins with a realistic budget.  Plan what needs to be done and then budget.  Then develop a budget based on that plan.  It is a mistake to budget first and then try to make the project fit the budget without reducing scope.

24. Module 9 Session 9.1 Visual 24 Analyzing Cost (Budget): 5 Key Questions At the end of each control period ask: 1)What are the actuals? What did we actually spend? (commitments treated as expended) 2)What is the plan (budget)? What did we plan to spend? 3)What are the variances? Why? How does planned cost compare with actual cost? 4)What are the trends and how do they extrapolate into the future? 5)What actions are required?

25. Module 9 Session 9.1 Visual 25 Analyzing Cost (Budget) Three ways to analyze expenditures:  Type of expenditure (labor, capital, materials)  Organization (engineering, operations)  Project component (activity, work package, subproject) Computers can generate a variety of reports and combinations.

26. Module 9 Session 9.1 Visual 26 Cost Analysis Graph: The S-Curve Time Cumulative $ Plan and Budget 1 2 3 4 5 6 7 8 9 10 11 12 13 14 110 100 90 80 70 60 50 40 30 20 10

27. Module 9 Session 9.1 Visual 27 Money/Time: Earned Value { Time Cumulative $ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 110 100 90 80 70 60 50 40 30 20 10 Plan and Budget Actual Cost of Work Performed Over Budget Variance $30 Today Line Behind Schedule Variance, 2 weeks Earned Value (Budgeted Cost of Work Complete) { Estimated Total Cost to Complete ?

28. Module 9 Session 9.1 Visual 28 Definitions of Earned Value Earned value integrates time, performance, and actual cost information into one metric.  Definition 1: the budgeted value of work complete at a point in time.  Definition 2: the value of the actual work completed expressed in terms of current budgeted dollars. Overcomes problems with percent complete.

29. Module 9 Session 9.1 Visual 29 Task NameW1W2W3W4W5W6W7 ABCD Project Task A Task B Task D Task C Total Budget Task A Task B Task C Task D TOTAL 50 10 0 110 60 80 10 0 150 50 70 10 5 135 Budget to Week 4 Actual Cost Schedule Cost Status: End of Week 4 Cross Hatch shows completion Today line

30. Module 9 Session 9.1 Visual 30 Planned Budget, Actual Cost, and Earned Value by Week Note: Earned value for task B for Week 4 is 25 plus 10 from Week 5 for a Total of 35. And actual cost is 35 plus 10 from Week 5 for a Total of 45. Task NameW1W2W3W4W5W6W7 ABCD Project Task A Task B Task D Task C Today line Planned Budget W1W2W3W4W5W6W7 Task A 25 Task B 25 20 Task C 10 Total Actual Cost 30 45 150 Earned Value 25 35 120 = 30 overrun

31. Module 9 Session 9.1 Visual 31 Task A, Weeks 1 + 2$50$60$10 Task B, Weeks 3 + 4$50$80$30 =$40 less Task B, $10 of Week 5 completed ahead of schedule in Week 4 - $10 = $30 Where does overrun of $30 come from? BudgetActual Overrun

32. Module 9 Session 9.1 Visual 32 Total Budget Task A Task B Task C Task D TOTAL 50 10 0 110 60 80 10 0 150 50 70 10 5 135 Cumulative Budget W4 Actual Cost Earned Value 50 60 10 0 120 Variance=40 Variance=30 Earned Value Calculation Note: Actual Cost is 150 whereas Earned Value is 120. Task NameW1W2W3W4W5W6W7 ABCD Project Task A Task B Task D Task C Today line

33. Module 9 Session 9.1 Visual 33 Actual expenditure (Cost of work performed to date) = $150 Cash flow: Actual expenditure$150 Planned expenditure$110 Variance (cash flow overrun)+$40 Budget: Cost of work performed to date:$150 Earned value (budgeted value of work performed to date):$120 Variance (budget overrun)+$30 $30 $120 = 25% Over

34. Module 9 Session 9.1 Visual 34 Example: Estimated Cost to Completion Cost of remaining work exceeds plan: Variance as percent of earned value:30/120= 25% Actual= $150 Earned value to date:= $120 Variance, 25% = +$30 Original total budget is $135 minus earned value of $120 equals $15 to complete Adjusted cost to complete: $15 plus 25% = ($15 + $3.75 ) = $18.75 + $150 = $168.75 Note: The project will end over budget Final cost = Original Budget + Variance to date + Cost to complete

35. Module 9 Session 9.1 Visual 35 Project A-I: Original Planned Schedule Budgeted Cost Task NameDurationCostCost per WkW1W3W5W7W9W11W13W15W17W19W21 Project21 wks$116.305.5 Task A2 wks$3.801.9 Task B9 wks$39.604.4 Task C4 wks$8.802.2 Task D3 wks$5.101.7 Task E4 wks$12.403.1 Task F6 wks$31.805.3 Task G2 wks$6.003.0 Task H3 wks$5.401.8 Task I 1 wk$3.403.4 TaskProgress Critical TaskProject Summary

36. Module 9 Session 9.1 Visual 36 Planned Budget by Week PLANNED BUDGETW1W2W3W4W5W6W7W8W9W10W11 Task A3.81.90 Task B39.6 4.40 Task C8.8 2.20 Task D5.1 1.70 Task E12.4 3.10 Task F31.8 Task G6 Task H5.4 Task I3.4 TOTAL by Week1.90 6.60 9.20 7.50 4.40 Cumulative1.903.8010.4017.0023.6030.2039.4048.6057.8065.3069.70 PLANNED BUDGET W12W13W14W15W16W17W18W19W20W21 Task A Task B Task C Task D Task E Task F 5.30 Task G 3.00 Task H1.80 Task I3.40 TOTAL by Week 8.30 5.30 1.80 3.40 Cumulative78.0086.3091.6096.90102.20107.50109.30111.10112.90116.30

37. Module 9 Session 9.1 Visual 37 S-Curve of Plan and Budget 20.00 40.00 60.00 80.00 100.00 120.00 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Weeks Cumulative Plan and Budget

38. Module 9 Session 9.1 Visual 38 Comparisons  Actual $ vs. Budget $ (rate of spending)  Actual work in place vs. Planned work in place (performance and schedule progress)  Actual $ vs. Earned Value (cost/schedule/performance)  Estimated cost to complete vs. Original budget (forecasted total budget)  Estimated time to complete vs. Original schedule (forecasted schedule)

39. Module 9 Session 9.1 Visual 39 Project A-I: End of Week 13 with Task E moved to Late Start and Task G delayed Tasks A, B, C, D completed as planned; Task F progressed on schedule. Task G, original duration 2 weeks; to date, only two-thirds completed, work will continue for another week beyond the today line. Task NameDuration Project21 wks Task A2 wks Task B9 wks Task C4 wks Task D3 wks Task E4 wks Task F6 wks Task G3 wks Task H3 wks Task I 1 wk TaskProgress Critical TaskProject Summary W1 W2 W3 W4 W5 W6 W7 W8 W9 W10 W11 W12 W13 W14 W15 W16 W17 W18 W19 W20 W21 W22 Today Line Task E delayed; not yet started; shifted to late start, and therefore becomes a critical task.

40. Module 9 Session 9.1 Visual 40 W 12W 13W 11 Task A Task B Task C Task D Task E Task F Task G Task H Task I Total by Week Cumulative Planned Budget 4.40 5.30 3.00 5.30 3.00 4.408.30 57.3065.6073.9052.9 W 12W 13W 11 Task A Task B Task C Task D Task E Task F Task G Task H Task I Total by Week Cumulative Actual Cost 6.90 5.30 3.90 5.30 4.10 6.909.209.40 59.8069.0078.4052.9 ? Planned Budget and Actual Cost: End of Week 13 (Revised, with Activity E shifted to Late Start)

41. Module 9 Session 9.1 Visual 41 Planned Budget, Actual Cost, and Earned Value: End of Week 13 ? W 12W 13W 11 Task A Task B Task C Task D Task E Task F Task G Task H Task I Total by Week Cumulative Actual Cost 6.90 5.30 3.90 5.30 4.10 6.909.209.40 59.8069.00 78.4052.9 W 12W 13W 11 Earned Value 4.40 5.30 2.00 5.30 2.00 4.407.30 57.3064.60 71.90 52.9 Task A Task B Task C Task D Task E Task F Task G Task H Task I Total by Week Cumulative W 12 W 13 W 11 Planned Budget 4.40 5.30 3.00 5.30 3.00 4.408.30 57.3065.60 73.9052.9 Task A Task B Task C Task D Task E Task F Task G Task H Task I Total by Week Cumulative

42. Module 9 Session 9.1 Visual 42 Planned Budget73.90 Earned Value71.90 Actual Cost78.40 W 13 S-Curve of Planned Budget, Actual Cost and Earned Value Variance 6.5 4.5 0 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 W 11 W 12 W 13 Actual Cost Earned Value Planned Budget

43. Module 9 Session 9.1 Visual 43 Project A-I: End of Week 13 with Task E moved to Late Start and Task G delayed Tasks A, B, C, D completed as planned; Task F progressed on schedule. Task G, original duration 2 weeks; to date, only two-thirds completed, work will continue for another week beyond the today line. Task NameDuration Project21 wks Task A2 wks Task B9 wks Task C4 wks Task D3 wks Task E4 wks Task F6 wks Task G3 wks Task H3 wks Task I 1 wk TaskProgress Critical TaskProject Summary W1 W2 W3 W4 W5 W6 W7 W8 W9 W10 W11 W12 W13 W14 W15 W16 W17 W18 W19 W20 W21 W22 Today Line Task E delayed; not yet started; shifted to late start, and therefore becomes a critical task.

44. Module 9 Session 9.1 Visual 44 Estimating Cost to Completion What is the cost to complete Task G? 1.Planned budgeted cost Original budgeted cost: 1 unit of cost / unit of work Estimated cost to complete: 2 units of work x 1 unit of cost = 2 cost units 2.Most recent cost Last cost for 2 units: 4.1 Estimated cost to complete next two units at same rate: 4.1 cost units 3.Average cost First 2 weeks: 3.9 + 4.1 = 8 Average = 8/2 weeks = 4.0/week (4 units) Next week: 4.0 (2 units needed)

45. Module 9 Session 9.1 Visual 45 Estimating Cost to Completion (continued) 4.Trend analysis Week 1 Cost for G:3.9 units Week 2 Cost for G:4.1 units Increase Week 1 to 2:0.2 units (5% increase Week 1 to 2 in cost per 2 units of G) Week 3 Cost for G:Week 2 cost plus 5% = 4.1 units + 0.2 = 4.3 units

46. Module 9 Session 9.1 Visual 46 Estimating the Total Cost for Task G  Estimated Cost to Completion + Actual to Date = Estimated Total Cost at Completion  Our assumptions about cost to completion affect our estimate of total cost at completion Most Recent Cost Average Cost Trend Cost Original Estimate 8.0 4.14.34.02.0 12.112.012.3 10.0 Actual to Date 3.9 + 4.1 = 8 Actual Est. Com.

47. Module 9 Session 9.1 Visual 47 Anticipating Control Challenges Control problems (challenges) result from:  Budgeting first and planning second  Poor initial planning  Everyday challenges of project management in a changing environment  Predictable types of control problems (challenges):  Cost  Progress  Plan  Administration

48. Module 9 Session 9.1 Visual 48 Cost-Related Control Challenges 1.Accounting systems not project-oriented 2.Delays in getting information 3.Commitments not tracked 4.Down payments not accounted for

49. Module 9 Session 9.1 Visual 49 Progress-Related Control Challenges  Assessing progress is easier for some projects than others:  How tangible are the activities?  How easy is it to determine if quality standards are met?  How can incomplete work be measured?  50/50 rule  Percent complete  Rework can be an issue

50. Module 9 Session 9.1 Visual 50 Progress-Related Control Challenges (continued)  Changes in scope (creep)  Baseline plan (definition)  Three views of the baseline plan  Concrete plan  Rubber plan  Rational plan  Reasons for changing the baseline plan  a change in scope of project  a change in the environment

51. Module 9 Session 9.1 Visual 51 Administrative Issues  Avoid too much detail  Focus on the future, not the past  Manage, don’t monitor  Pay attention to early warnings  Track changes in the economy: Monitor inflation rates and price escalation

52. Module 9 Session 9.1 Visual 52 Causes of Cost Overruns and Schedule Slips  Bad estimates  Inflation  Delayed management decisions  Poor management control  Changes in design (scope)  Shortage of planned resources  Force Majeure (war, riot, revolution, disaster)  Problems with suppliers  Changes in environment  Underestimate of risks

53. Module 9 Session 9.1 Visual 53 Summary: Principles  The Project Manager is like the captain of a ship.  PM must manage (not only monitor) the project rectangle:  time (schedule)  cost (budget)  resources  scope (performance and quality)  The control period determines how often the project’s status is assessed.  Earned value integrates time, cost, and performance.

54. Module 9 Session 9.1 Visual 54 Summary: 5 Key Questions Key questions concerning time, cost, resources, and quality of performance (scope): 1.What are the actuals? 2.What is the plan? 3.What are the variances? Why? 4. What are the trends and how do they extrapolate into the future? 5.What actions are required?

55. Module 9 Session 9.1 Visual 55 Summary: Types of Plans  Current operational plan  Day-to-day plan  Adjusted regularly  Goal is to match baseline plan  Baseline plan  Approved project plan  Approaches to revision concrete rubber rational

56. Module 9 Session 9.1 Visual 56 Summary: Think Ahead!  The project manager must constantly be thinking ahead and actively managing:  Time to completion  Cost to completion  Cost at completion  Quality of performance to specifications (scope)