Unformatted text preview: ate forecasts as treating the forecast as a budget and managing it accordingly. When using Modern Project on a government project, if you want to get a more accurate estimate of the EAC, you can do so as follows. First, use the Forecast to get the managed forecast of laborhours. Then apply the appropriate labor-hour rates to get the "EAC labor costs." Finally, add in the planned nonlabor-hour expenditures. Of course, this is considerably more time-consuming than using the EAC computation, and, no doubt, this is one of its attractions on large projects. The author has found, however, that it is often worth the extra effort to get an accurate estimate at completion by computing it from the Forecast as outlined earlier. The computed estimate at complete can often be fairly inaccurate, especially during the early phases of a project. Page 227 The reason for this is twofold. First, modifying the materials and equipment expenditure budgets by the productivity ratio is not an accurate way to get an estimate at complete for the materials and equipment cost. Often, the materials and equipment are purchased by a purchasing department over which the project manager has little control, and the deviations from the original estimates of these costs tend to be related to market conditions, and not to productivity on the project. Second, cumulative productivity rates tend to change a lot during the life of the project. All forecasting methods tend to get better as you get closer to the end of the project, but the calculated ones are often unreliable until fairly late in the project lifetime. The baseline curve in Figure 8-4 is labeled ''BCWS," which stands for "Budgeted Cost of Work Scheduled." It is essentially the time-phased PMB. Like the ACWP curve, the BCWS curve is a time-phased cost budget, as opposed to a time-phased labor-hour budget. When using Modern Project on a government project, the labor-hour component of the PMB corresponds to the Control labor-hour budget. But on most government projects it is very difficult to tell what the PMB corresponds to theoretically. The reason for this difficulty is the TAB theory of accounting for change orders and variances, as explained earlier in the chapter. At any point in time, it depends on how many of these deviations from the plan have been incorporated into the OTB and how much of the Management Reserve has been allocated into the PMB to cover these deviations. If all of the deviations to date have been incorporated into the OTB and the necessary budget to cover them has been allocated from the Management Reserve into the PMB, then the labor-hour component of the PMB corresponds to the Forecast in Modern Project. When using Modern Project on a government project, you get the baseline cost budget (BCWS) from the Cost Comparison Report for any level of the WBS (or any alternate) hierarchy. The earned value curve in Figure 8-4 is labeled "BCWP," which stands for "Budgeted Cost of Work Performed." Again...
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This note was uploaded on 01/11/2011 for the course ACC 9 taught by Professor Yeetan during the Spring '10 term at Sunway University College.
- Spring '10