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l14costschdmtrs4 - Basics of Cost and Schedule Monitoring...

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Unformatted text preview: Basics of Cost and Schedule Monitoring Nathaniel Osgood 4/5/2004 Announcements Tuesday field trip Leave at 4pm At existing platform 4:15pm Problem set grading: ps1 ongoing, ps2 end of this week TP3 out today Questions on problem set? Topics Monitoring and Scheduling: The Big Picture Monitoring Links to previous topics Key components in realizing effective monitoring Measurement: Basics of cost and schedule tracking Components of Measurability Collecting information Performance Metrics Forecasting Quality monitoring Monitoring and Control: Two Parts of a Feedback System Goal is to detect and correct deviation from desired Budget Schedule Quality Detection: Monitoring Correction: Control Much harder than monitoring! Bring project performance back in line with plans Typical: Bring plans in line with performance Growing Expenditures, Declining Control Definitions Monitoring: Project Monitoring is the set of procedures and management practices used to collect information about the performance achieved or forecasted in a project and the developing organization, based on a set of performance metrics. Performance Analysis: The process of determining performance variances based on monitored or forecasted performance. Definitions Project Control: The purpose of project control is to adjust the project to meet its goals by assessing the performance of the project, analyzing the causes of performance problems, designing changes to address problems that are determined to need attentions, and implementing those changes through control actions. Project control is distinguished from project planning in two important ways: 1) project control yields a set of designs, decisions, and actions, whereas project planning yields a design, and 2) project control is a real time process during the implementation, not before the implementation begins. Critical Role of a Feedback System Totally static planning is a (useful!) fiction Many factors make deviations standard e.g. Physical: Weather, diff. geotechnical conditions,... Early or late delivery of procured items Changes in owner needs Differences in productivity Community opposition/Concerns abutting buildings Mistakes in planning Even within slack, have resource constraints Morale often dependent on good planning Perceived Challenges for Effective Monitoring & Control Rank Order 1 2 3 4 5 6 7 8 9 10 11 Challenge Coping with end-date-driven schedules Coping with resource limitations Communicating effectively among task groups Gaining commitment from team members Establishing measurable milestones Coping with changes Working out project plan agreement with team Gaining commitment from management Dealing with conflict Managing vendors and subcontractors Other challenges Frequency 85% 83% 80% 74% 70% 60% 57% 45% 42% 38% 35% Problems Ranked by General and Engineering Managers Topics Monitoring and Scheduling: The Big Picture Monitoring Links to previous topics Key components in realizing effective monitoring Measurement: Basics of cost and schedule tracking Components of Measurability Collecting information Performance Metrics Forecasting Quality monitoring Links to Earlier Topics: Scheduling Scheduling provides us with a yardstick to help us understand what to expect over time Work Progress Expenditures Without some scheduling, we would have nothing against which to compare progress! Monitoring Scheduling: Must reformulate schedule to reflect discrepancies! Schedule Updates from Monitoring New estimates for activity Costs Durations Resource availability Must compute new critical path May lead to changed monitoring priorities NB: A schedule that does not get updated to reflect in-field conditions is Unlikely to be used Dangerous if used Project Plan is the Foundation of Effective Monitoring Plan Ahead Involve Project Team Members during the Planning Define Specific Task Responsibility Obtain Commitment Assure Measurability Tie-Ins with Earlier Topics: Estimation Cost Estimation helps us understand cost implications of activities Often this is folded into the schedule Without estimation, we also would have nothing against which to compare progress! Often used to prepare initial budget Problems Different level of granularity Estimate oriented towards outside reporting Topics Monitoring and Scheduling: The Big Picture Monitoring Links to previous topics Key components in realizing effective monitoring Measurement: Basics of cost and schedule tracking Components of Measurability Collecting information Performance Metrics Forecasting Quality monitoring Components of Effective Monitoring Representative Performance Metrics (established at planning phase) Cost & Schedule Milestones should be well-defined and clearly approved/rejected. Reporting Schedule (perhaps of variable t 's) Financial importance of activity Activity criticality Rate of work Difficulty of work Management Scheme organized for honestly and accurately identifying and reporting performance Involvement of responsible and knowledgeable people in the reporting scheme Project Reviews (walkthrough's & inspections) Project Audits Characteristics of Effective Control System Topics Monitoring and Scheduling: The Big Picture Monitoring Links to previous topics Key components in realizing effective monitoring Measurement: Basics of cost and schedule tracking Components of Measurability Collecting information Performance Metrics Forecasting Quality monitoring Measurement of Project Progress Traditional measures of project "progress" are based on resources consumed Time spent Money spent What is the problem with this? Effective Measurement Most effective progress measurements are carried out not on project inputs ($, labor, time, etc.) but on project outputs Goal: Measure progress towards completion Inputs are easy to measure; how do we measure outputs? Where possible, divide activities into stages Define clear-cut milestones Keep track of costs, labor, time on per-activity basis Characteristics of Well Defined Milestone Clearly Defined Entity Verifiable Parameters for Each Delivery Item Clear Relationship to Program Management Plan Well Defined Responsible Organization or Individual Steps for Establishing Measurable Milestones Measuring Progress w/i Activity Units completed (units task specific) ft Rebar laid, # columns placed, yd3 earth moved, panels mounted, ft2 drywall placed, ft piping installed Incremental sub-task milestones Each associated with agreed-upon fraction of work May be weighted if going on simultaneously Supervisor subjective opinion Binary start-finish Input measure: $ incurred/estimated total $ Key Component: Linking Activities and Count Accounts Recording granularity critical limits what can be understood with the data Many-to-many mapping between Cost categories Activities Traditional operational accounting would just have cost code with type of item being charged Ways of addressing More detailed cost code (incorporating activity) Apportioning of ambiguous costs according to nonambiguous Tradeoffs in Cost Granularity More detailed advantages Preserves option of finer investigation Can allow for quicker Response to deviations Determination if control strategies helping Less detailed advantages Less work for staff Faster recording Lower likelihood of error/compliance failure Means of Collecting Data Foremen note progress on timesheets (Implicit): Team Cost category for item Square footage for progress estimate (if lucky...) Payroll clerk enters timesheets in office Additional managerial attention can be applied for important activities Review: Cost Breakdown Structure Canonical way of accounting for costs in the project Assigns accounts for different types of expenditures Should permits tracking expenditure by activity (work item) Often includes WBS-based characterization (e.g. CSI Masterformat) Managerial vs. Financial Accounting Managerial ("Cost") Accounting Reporting to managers for strategic planning Operational use Financial accounting Typically for outside parties (owners, taxes, regulators, ...) Trans. in general ledger (double-entry bookkeeping) Familiar income and balance-sheets Many "accounting fictions" to systematically account for flows Recall: Cost Code Mirrored by cost hierarchy Commonly include standardized and project components Project id (often has useful info to avoid lookup) Often omitted from internal project references Area-facility code (geographically distributed projects, or areas of a facility unique to project) Work-type code: WBS May be standard code (e.g. CSI Masterformat) if uniform across projects Distribution code: Cost type associated with work (e.g. Materials, Equipment, Labor, Subcontract, etc.) Illustrative Set of Project Cost Accounts 201 202 Clearing and preparing site Substructure 202.1 Excavation and shoring 202.2 Piling 202.3 Concrete masonary 202.31 Mixing and placing 202.32 Formwork 202.33 Reinforcing Outside utilities (water. gas, sewer, etc.) Superstructure 204.1 Masonary Construction 204.2 Structural steel 204.3 Wood framing, partitions, etc. 204.4 Exterior finishes (brickwork, terra cotta, cut stone, etc.) 204.5 Roofing, drains, gutters, flashing, etc. 204.6 Interior finish and trim 204.61 Finish flooring, stairs, doors, trim 204.62 Glass, windows, glazing 204.63 Marble, tile, terrazo 204.64 Lathing and plastering 204.65 Soundproofing and insulation 204.66 Finish hardware 204.67 Painting and decorating 204.68 Waterproofing 204.69 Sprinklers and fire protection 204.7 Service work 204.71 Electrical work 204.72 Heating and ventilating 204.73 Plumbing and sewage 204.74 Air conditioning 204.75 Fire alarm, telephone, security, miscellaneus Paving, curbs, walks Installed equipment (elevators, revolving doors, mail chutes, etc.) Fencing 203 204 205 206 207 Cost Code Illustration Example Project Code Reporting Often delayed (minimizing delay critical in effectiveness of feedback systems) Selective reporting widely used: Report only problematic items Frequent reporting for Important (e.g. high cost) Uncertainty (Unfamiliar procedure, ...) Critical Scope Reporting: Example 1 Reporting: Example 2 Integrated S-Curve Exploratory Breakdown Business intelligence software Dynamic breakdown by category Popular for high-level managers Common examples (EXCEL): PivotTable, PivotChart Schedule vs Cost Monitoring Schedule estimates: Aggregate measures suspect Remember that some activities much more important than others! May want to track particular activities Falling behind on non-critical activities may shift critical path Cost estimates: All sources of cost can lead to cost overruns In general, impact of absolute cost overrun from one activity similar to other activities Topics Monitoring and Scheduling: The Big Picture Monitoring Links to previous topics Key components in realizing effective monitoring Measurement: Basics of cost and schedule tracking Components of Measurability Collecting information Performance Metrics Forecasting Quality monitoring Performance Metrics Main categories of performance metrics: scope time money quality productivity safety Performance Metrics typically are defined in preparation for project monitoring before project control. Must facilitate the project control process as well as the reporting functions of project monitoring Main Performance Metrics Categories Performance measurements Amount of work accomplished Targets Units of measurement M, M2, M3, Tons, $ Scope Amount of work to be accomplished Milestones, Deadline Budget, Profit, Cash flow Time Money Completion dates Cost, Cash flow Day, Week, Month $, Net Present Value (NPV) Number of defects, Value of defects, Number of change orders Person, $, Day, Week, Month Quality Quality achieved (Appearance, Durability, Strength, Suitability) Target quality level (Appearance, Durability, Strength, Suitability) Safety Actual accidents and injuries, delays and economic damages occurred Actual productivity Goaled accidents and injuries level Productivity Planned productivity Work unit/worker/time Earned Value Approach - Definitions Integrating cost, schedule, and work performed by ascribing monetary values to each. Budgeted Cost of Work Scheduled (BCWS, $): the value of work scheduled to be accomplished in a given period of time. Actual Cost of Work Performed (ACWP, $): the costs actually incurred in accomplishing the work performed within the control time. Budgeted Cost of Work Performed (BCWP, $): the monetary value of the work actually performed within the control time (= Earned Value). Actual Time of Work Performed (ATWP, time) Schedule Time of Work Performed (STWP, time) Earned Value Chart Cost Variance Is project spending more or less money than anticipated for the work that I did? Cost Variance (CV = BCWP - ACWP) + (Underrun); - (Overrun); 0 (On Budget) Cost Index (CI = BCWP/ACWP) > 1 (Underrun); < 1 (Overrun); 1 (On Budget) Schedule Variance One metric for judging if project making is "progressing" faster or slower than expected More precisely: "How does the value of the work I have actually performed compare to the work I anticipated performing during this time?" "Progress" here is measured in value of the work ($) Calculated in $ -- but here this is a proxy for value Schedule Variance (SV = BCWP - BCWS) + (Ahead); - (Behind); 0 (On Schedule) Even if just slightly ahead/behind in time, may be large if working on very expensive component of project Schedule Index (SI = BCWP/BCWS) > 1 (Ahead); < 1 (Behind); 1 (On Schedule) Time Variance Is project spending more or less time than anticipated for the work that I did? Measured in units of time May be very close even if big difference in the resource spending Time Variance (TV = STWP - ATWP) + (Ahead); - (Delay); 0 (On Schedule) Time Index (TI = STWP / ATWP) i > 1 (Ahead); < 1 (Delay); 1 (On Schedule) Resource Flow Variance Compares how much expecting to spend during this timeframe with what actually spent regardless of how much work got done. Warning: Doesn't indicate bad or good. e.g. = if Going faster but more cheaply than expected Going slower but more expensively than expected Resource Flow Variance (RV = BCWS - ACWP) + (Underrun); - (Overrun); 0 (On Target) Resource Flow Index ACWP) (RI = BCWS / > 1 (Underrun); < 1 (Overrun); 1 (On Target) Control Limits Example: Gantt Chart Schedule Example: Traditional Reporting Example: Earned Value Reporting Example: Activity Analysis Example: Variances ACTIVITY BCWP - ACWP = CV A B E $ 1,500 - $ 1,500 = $ 0 $ 3,000 - $ 3,000 = $ 0 $ 1,628 - $ 2,900 = -$ 1,272 CUMULATIVE VARIANCE = -$ 1,272 ACTIVITY BCWP - BCWS = SV A B E $ 1,500 - $ 1,200 = $ 300 $ 3,000 - $ 3,000 = $ 0 $ 1,628 - $ 3,256 = -$ 1,628 CUMULATIVE VARIANCE = -$ 1,328 Example: Activity Indexes Activity A B E BCWP = SI BCWS 1,500 1,200 3,000 3,000 1,628 3,256 = 1.25 =1 = 0.5 BCWP = CI ACWP 1,500 1,500 3,000 3,000 1,628 2,900 =1 =1 = 0.56 Example: Project Indexes The Aggregate Cost Index is: SI = 1,500 + 3,000 + 1,628 1,200 + 3,000 + 3,256 = 0.82 CI = 1,500 + 3,000 + 1,628 1,500 + 3,000 + 2,900 = 0.83 Example: Earned Value Reporting Values (in Dollars) of BCWS, BCWP, and ACWP for Weeks 1-4 Week 1 Week 2 Activity BCWS BCWP ACWP BCWS BCWP ACWP BCWS A 300 500 500 300 500 500 300 B 1,000 1,000 1,000 1,000 1,000 1,000 1,000 E 814 300 814 814 400 686 814 2,114 1,800 2,314 2,114 1,900 2,186 2,114 Week 3 BCWP ACWP 300 300 500 500 500 1,000 1,300 1,800 BCWS 300 0 814 1,114 Week 4 BCWP ACWP 200 200 500 500 428 400 1,128 1,100 Example: Earned Value Analysis Example: Schedule and Cost Index Example: Integrating CI and SI ...
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This note was uploaded on 10/29/2008 for the course PM 1040 taught by Professor Dr.nathanielosgood during the Spring '04 term at MIT.

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