A Guide to Project Management

To facilitate appropriate management control cost

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Unformatted text preview: plish the Earned Value. The relationship of 2) Earned Value less 1) Planned Value constitutes the Schedule Variance (SV). The relationship of 2) Earned Value less 3) Actual Costs constitutes the Cost Variance (CV) for the project. See also Section .4 Additional planning. Few projects run exactly according to plan. Prospective changes may require new or revised cost estimates or analysis of alternative approaches. .5 Computerized tools. Computerized tools, such as project management software and spreadsheets, are often used to track planned costs versus actual costs, and to forecast the effects of cost changes. ment ment geE L geE PL P 7.4.3 Outputs from Cost Control .1 Revised cost estimates. Revised cost estimates are modifications to the cost information used to manage the project. Appropriate stakeholders must be notified as needed. Revised cost estimates may or may not require adjustments to other aspects of the project plan. .2 Budget updates. Budget updates are a special category of revised cost estimates. Budget updates are changes to an approved cost baseline. These numbers are generally revised only in response to scope changes. In some cases, cost variances may be so severe that rebaselining is needed to provide a realistic measure of performance. .3 Corrective action. Corrective action is anything done to bring expected future project performance in line with the project plan. .4 Estimate at completion. An Estimate at Completion (EAC) is a forecast of most likely total project costs based on project performance and risk quantification, described in Section 11.4.3. The most common forecasting techniques are some variation of: EAC = Actuals to date plus a new estimate for all remaining work. This approach is most often used when past performance shows that the original estimating assumptions were fundamentally flawed, or that they are no longer relevant to a change in conditions. Formula: EAC = AC + ETC. EAC = Actuals to date plus remaining budget (BAC EV). This approach is most often used when current variances are seen as atypical and the project management team expectations are that similar variances will not occur in the future. Formula: EAC = AC + BAC EV. EAC = Actuals to date plus the remaining project budget (BAC EV) modified by a performance factor, often the cumulative cost performance index (CPI). This approach is most often used when current variances are seen as typical of future variances. Formula: EAC = AC + ((BAC EV)/CPI)--this CPI is the cumulative CPI. 92 NAVIGATION LINKS ACROYMNS LIST ACRONYMS LIST ACROYMNS LIST A Guide to the Project Management Body of Knowledge (PMBOK Guide) 2000 Edition 2000 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA Chapter 7--Project Cost Management Each of these approaches may be the correct approach for any given project and will provide the project management team with a signal if the EAC forecasts go beyond acceptable tolerances. .5 Project c...
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