Project Cost Management Exercise

1. Match the definitions in column 2, with the EVM term named in column 1, inserting your answer in the space provided in column 3.

EVM Term	Definition	Answer (number)
1. SV (Schedule Variance)	A. How efficiently are the resources, both physical and human, being used in the performance of the work activities
2. CV (Cost Variance)	B. How far the project will be over, on, or under budget, when the project completes, and by how much.
3. SPI (Schedule Performance Index)	C. An estimate of how much the project will cost at completion, given the current circumstances which may have caused the original forecast to be modified. Based on project performance to date, this provides a projection for the cost of the remaining work.
4. CPI (Cost Performance Index)	D. How far the team is ahead or behind the schedule of work activities
5. ETC (Estimate to Complete)	E. A forecast of the cost of the work activities and the resources required for it, at the project end.
6. EAC (Estimate at Completion)	F. How far the team is over or under budget, or indeed on budget.
7. VAC (Variance at Completion)	G. How much more budget is required to complete the remaining work required.
8. Earned Value	H. The efficiency with which the PM must use remaining project resources to achieve the project goal(s).
9. BAC (Budget at Completion)	I. A picture in time of the value of the work progress; an understanding of the work actually completed at the time of measurement, expressed in terms of approved budget assigned to the tasks or activities.
10. TCPI (To Complete Performance Index)	J. How efficiently the team is performing relative to the planned work at that time

2. Match the defined meanings in column 2, with the EVM formula named in column 1, inserting your answer in the space provided in column 3.

EVM Formula	Defined Meaning	Answer (number)
1. SV = EV – PV	A. Negative means over budget; zero means on budget; positive means under budget
2. CV = EV – AC	B. >1 is good (project is under budget); 1 is also good (on budget); <1 is bad (over budget)
3. SPI = EV / PV	C. Negative means behind schedule; zero means on schedule; positive means ahead of schedule
4. CPI = EV / AC	D. >1 is good (project is ahead of schedule and you are progressing at more than planned (greater than 100%)); 1 is also good (on schedule); <1 is bad (behind schedule – progressing at less than planned (less than 100%))

Questions:

1. You have been selected to project manage the construction of a sports centre and the project is 3 months into phase 2, which is to complete the final fit (all the interiors) of the ground floor, fit out all the electrics, plumbing and gasworks for the first and second floors and finalise the installation of the roof and air conditioning system.

When going through all the progress reports previously given to the Project Sponsor and stakeholders, and those sent to the previous PM, you realise that this project phase had:

a planned value of £280,000
an earned value of £250,000 and
actual costs amounting to £295,000

What are the implications for your project?

a) This project is on track to deliver and is within its budget
b) This project is behind schedule but is within its budget
c) This project is on schedule but over budget
d) This project is behind schedule and over budget

2. You have been selected to project manage the construction of a sports centre and the project is 3 months into phase 2, which is to complete the final fit (all the interiors) of the ground floor, fit out all the electrics, plumbing and gasworks for the first and second floors and finalise the installation of the roof and air conditioning system.

When going through all the progress reports previously given to the Project Sponsor and stakeholders, and those sent to the previous PM, you realise that this project phase had:

a planned value of £280,000
an earned value of £250,000 and
actual costs amounting to £295,000

And what should you do about this situation?

a) Do nothing as you know the teams can easily catch up in the time left during this phase
b) Have an urgent meeting with the Project Sponsor to share this information and lay the blame on your predecessor
c) Examine the PM Plan to find out where the variances happened and why and to see what can be done to pull things back
d) Resign now because there are no contingencies left and the project cannot recover from this mess

Okay, now some calculations (so you don’t go away disappointed!!)

3. PV = $190,000 EV = $150,000 AC = $170,000

What does this mean? What are the SV and CV?SV =

CV =

4. PV = $190,000 EV = $150,000 AC = $170,000What is the SPI?

What is the CPI?

5. PV = $140,000 EV = $160,000 AC = $145,000
What does this mean? What are the SV and CV?SV =

CV =

6. PV = $140,000 EV = $160,000 AC = $145,000What is the SPI?

What is the CPI?

7. PV = $240,000 EV = $250,000 AC = $270,000

SV =