The “inverse” of the planning process

Chapter Overview
1) Overview – This chapter describes the “inverse” of the planning process, namely monitoring. For projects, monitoring involves collecting, recording, and reporting information about the project for the benefit of the PM, teams, organization, and clients. The chapter emphasizes the idea that for the information being monitored to be useful, it must be timely.
2) The Planning-Monitoring-Controlling Cycle – The key elements to be monitored in projects are time (schedule), cost (budget), and scope (performance). This process will fail, however, if the upfront planning process is inadequate. Also, the monitoring and control process should be an integral part of the project’s and the organization’s normal activities, not something imposed (and perceived) as an artificial add-on.
a) Designing the Monitoring System – For the monitoring system to be successful, the PM must define exactly which characteristics of time, cost, and scope he/she believes are worth watching. In addition the range or boundaries, the data should fall in for the project to be considered “in-control,” must be defined. The project action plan should provide the basis for the majority of the key items to be measured. However, the PM needs to guard against collecting massive amounts of data that do not contribute to the goal of keeping the project on track. It is crucial to remember that effective PMs are not primarily interested in how hard their project teams work. They are interested in achieving results.
b) How to Collect Data – For the monitoring process to be successful, the frequency, type, and amount of data to be collected must be precisely defined. Data collected typically takes one of the following forms:
i) Frequency counts – How often an event occurs.
ii) Raw numbers – Amount of something, like hours spent on a task.
iii) Subjective numeric ratings – Subjective estimates often applied to quality measures.
iv) Indicators – Indirect measures, such as transaction processing speed, being used to suggest customer satisfaction.
v) Verbal measures – Descriptions of characteristics like the morale of the team.
Once the data has been collected, it may be beneficial to subject it to some statistical analysis. This will help determine the size of data variance significant for the project. When the level of significant variation is determined, then the PM can apply “management by exception.” In this technique, the PM only acts on a variance when it exceeds the pre-determined significant variance level. Statistical analysis may reveal data trends that allow the PM to act before the significant variance level has been reached. The issue of creating an atmosphere that fosters honesty on a project is widely ignored, but it is of major importance.
3) Information Needs and Reporting – The monitoring system will collect a lot of data, but the reporting system it is tied to should tailor the reports to the level of management. Senior managers will not need as much detail as the team members, but all must be working off the same base data. Today many electronic tools are available to aid in the analysis and dissemination of project data.
a) The Reporting Process – Reports are a common way of disseminating data. Reports should also express relevant information to the manager viewing it and should be tailored according to the needs of the manager. Reports, when timely and well constructed have a number of benefits to the project team and other interested parties, primarily through the consistent communication of data important to managing the project.
b) Report Types – Reports can be divided into three types: routine, exception, and special analysis. Routine reports are those that come out periodically or to some other predetermined schedule. Exception reports support instances of decision-making and are distributed to the participants in that decision. Exception reports may be issued when a decision is made on an exception basis and it is desirable to inform other managers as well as to document the decision. Special analysis reports are used to disseminate the results of special studies or problem reports.
c) Meetings – Meetings are an important tool for disseminating information and making decisions. The PM will be responsible for many meetings and can take several steps towards improving their quality:
i) Have a clear purpose for each meeting and make sure the participants understand the purpose.
ii) Have an agenda and start and stop the meeting on time.
iii) Ideally, both the PM and the meeting participants should be prepared for the meeting. Publishing the agenda in advance helps.
iv) Have a designated person take minutes for the meeting. The author’s advice on who should take minutes is contrary to many other works on the subject of good meetings. Most PMs find it very difficult to take minutes, facilitate the meeting, and be a participant. These are in fact three distinct roles, and should be divided up if possible. If no one else is available, then the PM must take minutes to esure that there is some record about the meeting.
v) Minutes should be an honest and professional record of the reasoning and decisions, but not necessarily of the discussion that took place at the meeting.
vi) Avoid overly formal procedures. People need to feel that they can freely participate in the meeting without having to be experts in parliamentary procedures.
vii) Special and open-ended meetings may be necessary to solve serious problems.
d) Common Reporting Problems – There are three common problems in the design of the project reporting system:
i) The reports are too detailed for their intended purpose.
ii) Poor interface between the project’s and the parent organization’s information systems. The project collects and reports data that the parent organization can’t use and vice versa.
iii) Poor correspondence between the planning and the monitoring systems.
4) Earned Value Analysis – A valuable technique for monitoring overall project performance is earned value.
a) The Earned Value Chart and Calculations – The key element of the earned value technique is the measurement of progress in addition to cost and schedule. If progress is not measured, then data about cost and schedule is meaningless because the PM does not know what resulted from the expenditures. A team member may have spent considerable time on a task and achieved nothing. On the other hand the team member may have spent very little time on the task, but completes it. By combining the results of these analyses at the task level, a reasonably accurate estimate can be made of the overall project’s progress against cost and schedule. There are several conventions for estimating progress at the task level:
i) Taking credit for progress based on the quantity complete versus the total quantity required.
ii) Taking credit for 50% complete when the task begins and the other 50% when the task ends (50-50 estimate).
iii) Taking no credit for progress until the task completes (0-100 rule).
iv) Taking credit for progress based on the use of a critical input. This works only if the process consuming the input is reliable and well defined.
v) Taking credit for progress based on either the percent of the budget that has been expended or the percent of the elapsed time that has gone by (proportionality rule).
All of these methods have some error, but when applied to a large project, the errors become insignificant. There are a number of acronyms associated with the earned value process, the most commonly used are:
• AC – Actual cost incurred in working on the task. Also known as ACWP, the actual cost of work performed.
• PV – Planned value. This is the budgeted cost for the work scheduled on a task up to a given point in time. Also known as BCWS, the budgeted cost of work scheduled.
• EV – Earned value. This is the amount of money budgeted for the work that has been performed to date. Also known as BCWP, the budgeted cost of work performed.
• CV – Cost variance. The difference between the earned value and the actual cost. Calculated as CV = EV – AC.
SV – Schedule variance. The difference between the earned value and the planned value. Calculated as SV = EV – PV.
• CPI – Cost performance index. The ratio of the earned value to the actual cost. Calculated as CPI = EV/AC.
• SPI – Schedule Performance index. The ratio of the earned value to the planned value. Calculated as SPI = EV/PV.
• BAC – Budget at completion. This is the total planned budget for the project.
• ETC – Estimate to complete. This is the current estimate of the cost to complete the project from a given point in time. The ETC changes based on the project performance to date. There are several ways to calculate it, but the most common is ETC = (BAC + EV)/CPI.
• EAC – Estimate at completion. This is the current estimate of what the total cost of the project will be. Calculated as EAC = AC + ETC.
b) Example: Updating a Project’s Earned Value – The text works through an example of the earned value calculation.
c) MSP Variance and Earned Value Reports – Microsoft® Project can be used to perform the earned value calculations. The user should be cautioned, however, that the use of earned value in MSP is not straightforward. Further, depending on the version used, MSP does not follow the standard conventions for some of its earned value calculations.
d) Milestone Reporting – The text gives an example of project reporting based on milestones.
5) Computerized PMIS (Project Management Information Systems) – Real projects with large volumes of data require computers to manage the monitoring process. The decreasing cost and increasing power of computers has lead to the widespread availability of reliable and inexpensive project management software.
The availability of project management software has led to some problems:
i) Computer paralysis – Spending more time on the computer than managing the project.
ii) PMIS verification – The data from the PMIS may not report real or significant problems occurring in the project.
iii) Information overload – The PMIS makes it easy to overwhelm the participants with data.
iv) Project isolation – The PMIS is used in lieu of face-to-face communication.
v) Computer dependence – The PM and other managers wait for the computer to tell them that there is a problem.
vi) PMIS misdirection – Different areas of the project get different levels of scrutiny because of the nature of the PMIS.
a) Choosing Software – When choosing project management software, the potential user should read several software surveys conducted with project managers. There are a number of surveys and reviews available on the current crop of project management software. There are a number of characteristics to evaluate, including the ability of the software to support the development of schedules, budgets, resource plans, and monitoring reports. The following steps are usually followed for selecting software.
i) Establish a comprehensive set of selection criteria.
ii) Set priorities for the criteria.
iii) Conduct a preliminary evaluation of the software packages relative to the criteria.
iv) Limit the candidate packages to three and obtain demos of each.
v) Evaluate each package with a standard project typical of the current and projected future needs.
vi) Negotiate on price.
Teaching Tips
As discussed in previous chapters, the author’s integration of MSP into the subject matter is a valuable feature of the text. The instructor must be prepared to support the student’s questions, however, when they confront the details of using MSP. This is particularly true for the earned value calculations. The basic sequence for using MSP’s earned value calculations in a classroom context is as follows:
1) Setup the network with predecessor/successor relationships and durations in the conventional manner.
2) Enter the budget from the problem statement as a Fixed Cost in the Task Sheet, Cost Table View. Note that the Baseline costs should be zero.
3) Save a Baseline by using the Save Baseline function in the Tools, Tracking menu.
a) If this has been performed correctly, the Baseline Cost in the Cost Table View should now be equal to the budgets.
4) In the Task Information View, adjust the Percent Complete for each task using the data from the problem statement.
5) In the Task Sheet, Cost Table View enter the actual costs for each task from the problem statement.
6) Earned value calculations are always based on a snapshot in time. MSP will not make these calculations unless its “Status Date” is set to the point where the snapshot is desired. In a real project, the Status Date advances with the real date, and MSP automatically maintains the earned value analysis. In a classroom setting, the earned value snap shot will be set by the problem statement for some point between the beginning and ending dates of the given sample project. Since MSP, by default, sets the beginning date of the project to the actual date data was first entered into MSP, the earned value snap shot will typically be in the future relative to the date the student is analyzing the problem. In other words, MSP will not populate the earned value analysis because it “thinks” that no time has elapsed. To force MSP to perform the calculations, the Status Date must be advanced to an appropriate date in the future, based on the problem statement.
7) In the Project, Project Information window adjust the Status Date to an appropriate date matching the desired snapshot date of the problem status.
8) By adjusting the status date, MSP will automatically calculate the standard earned value information. The data can be displayed using the Task Sheet, Earned Value Table View. Depending on the MSP version used, the earned value titles may not be the current ones (e.g. MSP displays BCWS instead of PV). The titles can be changed by double clicking on the column and editing the Title field.
A hands-on example of earned value analysis can be found here: http://epmcentral.com/articles/evexample.php
PMs will conduct a lot of meetings. The discipline necessary to conduct good meetings on a consistent basis is hard to come by. The mechanics of running a good meeting can never be repeated too many times, so the instructor may wish to add to the text’s discussion on the subject. There are many excellent references that emphasize, among other things, the different roles that exist for attendees of a meeting.
Material Review Questions
Question 1:
Refer to the introduction of chapter 10.
Monitoring is collecting, recording, and reporting information concerning all aspects of project performance that the project manager or others in the organization wish to know.
Monitoring, as an activity, should be kept distinct from controlling (which uses the data supplied by monitoring to bring actual performance into approximate congruence with planned performance), as well as from evaluation (through which judgments are made about the quality and effectiveness of project performance).
Question 2:
Refer to the text subheading titled Designing the Monitoring System. The factors to consider include:
1) The characteristics of scope, cost, and time that should be controlled by the project team.
2) The need to focus on output rather than activity when creating measures for the dimensions of project success. A project should seek to get the job done; it should not seek to sustain project-related activity.
3) The need to minimize the use of resource consumption as a measure of outputs.
4) The appropriate level of precision required of monitoring measures.
5) The stakeholders who require monitoring data and the formats needed to deliver timely, relevant, and consistent information that can be accurately used to support project objectives.
Question 3:
In general, performance associated with tangible outputs can be relatively easy to monitor. The major difficulties in monitoring projects are associated with intangible aspects of performance such as team morale, customer satisfaction, and the quality of interpersonal relationships with key project stakeholders. Other factors that are difficult to measure are those that take place long after a project is complete, such as measuring the impact of new primary school teaching techniques on students’ performance in secondary school.
Question 4:
A routine report is issued in a predetermined format on a regular basis.
Problems with routine reports include:
• Routine reports can generate apathy among the recipients, particularly if they are voluminous and there is no mechanism to help readers spot exceptions.
• Many busy people will simply fan the pages and put it into the recycle bin, without realizing that this is the week when something of significance has actually shown up in the report.
• Routine reports continue to be created, printed, and distributed even after they become obsolete or no longer used.
Question 5:
Some of the difficulties experienced in designing reports include:
• Including the right data needed to make decisions
• Determining the proper timing of reports
• Including the right amount of detail for the level of decision
• Reporting the data in a format where the necessary data isn’t overlooked
• Not including data that is outside the scope of the decision
Question 6:
1) Cost Variance (CV): The CV = EV – AC. CV is the difference between the amount earned and the amount spent. It is a measure of the efficiency at which the work is performed. CV is independent of whether the project is ahead or behind schedule.
2) Schedule Variance (SV): The SV = EV – PV. SV is the difference between the amount earned and the amount that should have been spent based on the plan. It is a measure of whether the project is ahead or behind schedule.
3) Time Variance (TV): TV = ST – AT. TV is the difference between the intended schedule for the work performed and the actual time taken to perform it.
Question 7:
I would add a few based on my experience in watching people struggle to use Microsoft® Project, but they are applicable to any computer based project management tool:
• A person who develops some skill at operating the software assumes to be equivalent to a project manager, even if they have little or no knowledge of the field.
• Users go to great lengths to create networks for schedules, often creating far more predecessor/successor relationships than needed to define the network. Then the schedule doesn’t come out the way they want to and because the network is so complex they don’t know if the schedule is correct or don’t understand the by-product of network errors. They go into a lengthy process of network tweaking trying to get the schedule they wanted to in the first place. Of course, it’s possible that the initial analysis was correct and the schedule is not achievable, but this is lost in the flurry of network modifications.
• Computer users tend to see the world one screen at a time, so it is difficult to step back and see the big picture of the network and schedule.
• When the schedule development and analysis is dependent on a PMIS guru, it takes a long time and is not very collaborative. The team gets together and tells the guru what they want. He or she goes off and prepares a schedule and then they get back together. If the team criticizes the schedule, the guru has to go off to perform another round of updates and so on.
• Similar to the previous point, the PMIS guru has to take the team’s data and translate it based on the limitations of the computer system. The guru’s translation may be functional and meet the software’s requirements, but the team doesn’t understand or trust the results.
Question 8
Refer to the text section titled How To Collect Data. The types of measures include:
1) Frequency Counts
2) Raw Numbers
3) Subjective Numeric Ratings
4) Indicators
5) Verbal Measures
Question 9:
Earned value is a project monitoring technique used to compare cost, time, and scope. The basic idea is to get cost, time, and scope into the same unit of measure at the same point in time, so that they can be readily compared. Progress is put into the common unit of measure by taking some estimate of the percent complete of a task and multiplying it times the total budget for that task, and summing over all the tasks that comprise the project. Then it can be said that the task has “earned” that many dollars. The idea is comparable to the concept of standard hours on a machine. The industrial engineers determine that it takes 2 minutes apiece to produce a part. Then if the machine produces 100, it is said to have earned 200 standard minutes. This is then compared to the actual time to develop variances just like those in earned value.
Question 10:
The earned part in earned value can be determined in a number of different ways:
• Subjective progressing – The person responsible for the task simply reports of what percent of the task is done. If there is no independent monitoring, the numbers are often inflated to keep management at bay.
• Milestone progressing – The percent complete is based on some predetermined milestones within the task. For example, writing 10 chapters of an instructors’ manual can earn 10% progress each time a draft chapter is turned in.
• 50-50 progressing – 50 percent progress is earned when a task starts, and the other 50% is earned when it completes.
• 0-100 progressing – No progress is earned till the task is completed. Then all of it is earned at once.
• Critical input use – Progress is earned based on the consumption of a critical input. Any progressing scheme that is based on inputs is dangerous because it contradicts the fundamental premise of earned value, that progress and cost are two separate things.
• Proportionality rule – Progress is earned by dividing actual task time or actual task cost to date by total scheduled task time or total budgeted task cost. As with critical input, this method risks giving credit solely for the consumption of resources with no assurance of actual progress.

Class Discussion Questions
Question 11:
Perhaps the best way to highlight the benefits of timely, app ropriate information is to contrast having it with not having it. The PM is expected to deliver products within cost and schedule constraints. If the PM has no information, he or she has no way of knowing whether the project is heading in the right direction. Without information, the PM would have to wait, with fingers crossed, until the end hoping for a positive outcome. Then he/she will no doubt be surprised and disappointed with the result. Senior management would not be impressed with the excuse that the PM had no information and so took no action to guide the project. Looking at the question this way suggests that timely and appropriate information is priceless to the successful management of projects.
Question 12:
Using a manual system for a large project is virtually impossible. My yardstick for “large projects” is shipbuilding, where design and construction projects for a lead ship could be anywhere from 1-5 million man hours for a surface ship and upwards of 30-40 million man hours for a nuclear submarine. In general, computerized systems have the advantage of being able to easily process large amounts of data. With the database tools available today, it is relatively easy for trained users to extract and perform custom analysis on selected sets of data. A disadvantage of a computerized system is that data handling is so easy that people often don’t spend time thinking through what information is truly useful to the project; they just dump everything out without discrimination. The text describes some other common problems associated with computerized systems. The advantage of a manual system is that it is typically simpler and easier for all concerned to understand.
Question 13:
The reporting needs of a project are different than the reporting needs of a functional organization. If the project is sufficiently complex, the volume of data requires the use of mechanized systems to plan, monitor, and control execution to achieve the project’s objectives. In many cases, the PMIS is simply a cost of doing business for a modern organization. In other words, the benefits produced by the PMIS will justify the costs incurred to set it up and run it during the project’s execution.
Question 14:
Functional organizations tend to rely upon processes to perform most of their repetitive work. As the processes become stable and predictable, simple measures of output are often sufficient for control. Projects on the other hand are typically neither stable nor predictable. Therefore, they need much more intensive control systems to ensure that they remain on track. In addition, because projects span multiple functions, the monitoring systems must me more extensive as well.
Question 15:
The earned value chart does an excellent job of measuring cost and time. It does only a passable job of measuring the third dimension, scope, since it relies on an indirect assessment, namely task percent complete. Unless a very disciplined process is enforced for assessing percent complete, the relationship between the percentage and the intended performance may be tenuous at best.
Question 16:
Earned value data for a project is based on the sum of the values for the individual tasks in a given snapshot of time. Generally, earned value data is first viewed at the project level to get an overall feel for performance. Then, if variances are discovered, they can be traced to the individual tasks or groups of tasks that contributed to the problem. If the project plan is well thought out, then the tasks with variances will be a true representation of where problems are actually occurring in the project.
Question 17:
A PMIS would usually be oriented toward documenting plans, tracking progress against plans, and controlling execution against plans by reporting progress, status, and forecasted results. As previously discussed, the PMIS is oriented toward the management needs of an unique project. The MIS, on the other hand, would be more oriented toward routine activities within the company. They might include activities such as production scheduling, financial accounting, managerial accounting, quality assurance, quality control, and product design.
Question 18:
Any type of software that contributes to analysis or communication would be of use to the PM. This could include spreadsheets, word processors, database programs, graphics and presentation software, scheduling software (personal, not project) and, everyone’s favorite, e-mail.
Question 19:
The PMIS should be selected because it helps the PM to get the job done in a cost-effective manner, consistent with the organization’s policies and procedures. The text describes the elements of the selection process:
1) Establish a comprehensive set of selection criteria.
2) Set priorities for the criteria.
3) Conduct a preliminary evaluation of the software packages relative to the criteria.
4) Limit the candidate packages to three and obtain demos of each.
5) Evaluate each package with a standard project typical of the current and projected future needs.
6) Negotiate on price.
Question 20:
1) Start-up: The PMIS will be used to plan the project and to identify the most favorable approaches for realizing business objectives.
2) Implementation: Progress will be captured, analyzed, and reported to monitor and control performance against plans.
3) Termination: A project archive will be created and an analysis of the results should identify lessons that can be applied to other projects.
Question 21:
Is it unethical to withhold bad news? Yes.
Is it unethical to manage the way that bad news is conveyed? No.
Bear in mind that “manage” includes timing, format, content, and audience for the delivery. Remember the adage, “Never surprise the PM.”
Question 22:
I have operated in and managed many projects, large and small, in the earned value environment for the last twenty years. Based on my experience, I believe either of the following two works well:
1) 0-5-100 provided the packages are relatively for short duration. Five percent progress is earned to show that the package is underway, then the balance when it completes. This is in the spirit of the JIT manufacturing process, making the packages so short that intermediate progress is irrelevant. By short enough I mean 1-2 weeks maximum.
2) Milestone progressing for longer packages. In this scheme, predetermined milestones within the package are associated with predetermined levels of progress. When the person performing the task can demonstrate that they have hit a milestone, preferably with physical evidence (like a draft report or preliminary data), then so much progress is earned.
Both of these methods have a couple of key elements in common. They depend on objective evidence to earn progress, while neither considers the amount of resources consumed.

Project Management in Practice Questions
Using Project Management Software to Schedule the Olympic Games
Question 23:
Each event had different setup requirements. The drawings provided part of the information needed to configure the event area in a manner capable of meeting the requirements of each event. These requirements included factors such as number of people, materials, equipment, and facilities.
Question 24:
They probably did two things. The first was placing bad weather allowances in the schedule as buffers. The second was having contingencies to move some events to alternate sites as a last resort.
Question 25:
The logistical problems were more complex (many requirements that must be met within existing constraints) than the scheduling problems.
Success through Earned Value at Texas Instruments
Question 26:
Under-budgeting a project is risky, but certainly not unheard of for the reason cited in the article; a desire to win the contract. If the management team at ViewStar was knowingly working the project at a loss, then they could have left the internal budget at the higher value and simply billed TI for less than the actual costs. Then, internally, they would have had a budget with high integrity, and externally would have met their business goals. In some circumstances this can’t be done. For example, when contracting with the U.S Government, the contractor must bid the “real” price with auditable backup data to demonstrate how the price was set. It appears that ViewStar, however, set aggressive goals in the hopes that their project team would pull off the increased scope at the reduced cost. They may have also wanted to motivate the team right from the start, or were willing to take a loss on the project in order to win the bid.
Question 27:
The motivation of a project team would depend on their perception of the importance of the project. If they were committed to a project because it was, for example, a search and rescue operation after a hurricane, they would probably redouble their efforts to get back on schedule. If, on the other hand, this was the latest in a series of projects that management had deliberately underbid with the expectation that the team would once again put in 80 hr weeks to catch up, their motivation would be quite poor.
Question 28:
TI must have been impressed with the technology they were getting from ViewStar and viewed them as a partner. Adversaries, particularly ones trapped in a project that both sides perceive has gone bad, don’t make congenial negotiators. There must have been positive aspects of the project that helped both parties make a mutually agreeable deal. ViewStar had the technology. TI had production capacity. Both parties received value from the trade.
Drug Counseling Program
Question 29:
The first measure takes the form: “Frequency Counts”. The second also comes in the same category.
Question 30:
The first measure would be the most accurate as well as reliable, since it would be determined scientifically. It is not based on interviews, which sometimes may mislead the PM.

Problem 1:
($000)
Month AC PV EV
22 $540 $523 $535
CV $(5) Unfavorable
SV $12 Favorable
CV = EV – AC
SV = EV – PV
Negative variances are unfavorable.

Problem 2:
($000)
Month AC PV EV
5 $34 $42 $39
CV $5 Favorable
CPI 1.15
SV $(3) Unfavorable
SPI 0.93
CV = EV – AC
CPI = EV/AC
SV = EV – PV
SPI = EV/PV

Negative variances are unfavorable.
If an index is less than one, the variance is unfavorable.
Problem 3:
($000)
Day AC PV EV
70 $78 $84 $81
CV $3 Favorable
CPI 1.04
SV $(3) Unfavorable
SPI 0.96
CSI 1.00 On target
TV (2.50) Days delayed
CSI = (CPI)(SPI)
TV = SV / slope
Slope = PV / Days
CSI is on target because the unfavorable SV is offset by the favorable CV.
TV predicts that the project is 2.5 days behind schedule given the estimated EV.

Problem 4:
($000)
Month AC PV EV
17 $350 $475 $300
CV $(50) Unfavorable
CPI 0.86
SV $(175) Unfavorable
SPI 0.63
CSI 0.54 Unfavorable
This project is seriously delayed and also over budget.

Problem 5:
($000)
Month AC PV EV
10 $23 $17 $20
CV $(3) Unfavorable
CPI 0.87
SV $3 Favorable
SPI 1.18
CSI 1.03 Favorable
This project is ahead of schedule, but has an unfavorable CV.

Problem 6:
($000)
AC = $550 AC = $750
Day AC PV EV Day AC PV EV
65 $550 $735 $678 65 $750 $735 $678
CV $128 Favorable CV $(72) Unfavorable
CPI 1.23 CPI 0.90
SV $(57) Unfavorable SV $(57) Unfavorable
SPI 0.92 SPI 0.92
CSI 1.13 Favorable CSI 0.83 Unfavorable
TV (5.00) Days behind TV (5.00) Days behind
The first step is to estimate EV. Starting with TV, we solve to determine SV. Once SV is known, EV can be determined because the PV was given.
In problem 6, changing the AC value only affects cost-related measures and indices. The SV and SPI are unaffected by a change in AC.
Problem 7:
($000)
AC PV EV
$10.0 $12.0 $8.4
CV $(1.6) Unfavorable
CPI 0.84
SV $(3.6) Unfavorable
SPI 0.70
CSI 0.59 Unfavorable
In this problem, EV = 70%  PV.
This client is probably upset because the CSI suggests that this project is likely to be delayed and to cost more than originally planned.

Problem 8:

Figure 10.8a shows the solution table for problem 8.

ETC = (BAC – EV) / CPI. EAC = ETC + AC. TV = SV / (PV / Wks).
The weekly values for AC, EV, and PV are evenly prorated over the scheduled interval for each activity.
Figure 10.8b shows the network for problem 8.

PV = 300 + 200 + 250 + .5(600) + .5(400) = 1250
EV = 300 + 200 + 250 + .5(600) + .5(400) = 1250
AC = 400 + 180 + 300 + 400 + 200 = 1480
BAC = 300 + 200 + 250 + 600 + 400 = 1750

Cost variance = EV-AC = -230
Schedule variance = EV – PV = 0
Time variance = (EV-PV)/(PV/day) = 0/(1250/6) = 0

CPI = EV/AC = 1250/1480 = 0.845
SPI = EV/PV = 1250/1250 = 1.0
CSI = CPI (SPI) = .845 (1.0) = .845

ETC = (BAC – EV)/CPI = (1750-1250)/0.845 = 592
EAC = AC + ETC = 1480 + 592 = 2072

P8b.

PV = 300 + 200 + 250 + .8(600) + .5(400) = 1430
EV = 300 + 200 + 250 + .2(600) + .2(400) = 950
AC = 400 + 180 + 300 + 400 + 200 = 1480
BAC = 300 + 200 + 250 + 600 + 400 = 1750

Cost variance = EV-AC = -530
Schedule variance = EV – PV = -480
Time variance = (EV-PV)/(PV/week) = -480/(1430/6) = -6.7 weeks (late)

CPI = EV/AC = 950/1480 = 0.642
SPI = EV/PV = 950/1430 = 0.664
CSI = CPI (SPI) = 0.642 (0.664) = 0.426

ETC = (BAC – EV)/CPI = (1750-950)/0.642 = 1246
EAC = AC + ETC = 1480 + 1246 = 2726
Problem 9:

Figure 10.9a shows the network for problem 9.

Figure 10.9b shows the solution table for problem 9.

Problem 10:

The solution to problem 10.8 as it might appear in MS-Project.
The table shows the results; however, there are several steps needed to create this data in Microsoft® Project that are not obvious to the casual observer.
1) Setup the network with predecessor/successor relationships and durations in the conventional manner.
2) Enter the budget from the problem statement as a Fixed Cost in the Task Sheet, Cost Table View. Note that the Baseline costs should be zero.
3) Save a Baseline by using the Save Baseline function in the Tools, Tracking menu.
a) If this has been performed correctly, the Baseline Cost in the Cost Table View should now be equal to the budgets.
4) In the Task Information View, adjust the Percent Complete for each task using the data from the problem statement.
5) In the Task Sheet, Cost Table View enter the actual costs for each task from the problem statement.
6) Based on the starting date of the network, determine the date for the Friday at the end of the sixth week.
7) In the Project, Project Information window adjust the Status Date to the Friday of the sixth week of the project.
8) By adjusting the status date, MSP will automatically calculate the standard earned value information. The data can be displayed using the Task Sheet, Earned Value Table View. The table in this manual was prepared with MSP 2000, which still used the traditional names for the earned value data (i.e. BCWS, BCWP etc.). The titles were changed by double clicking on the column and editing the Title field.

Problem 11:

This table shows the result of the 0-100 rule. Note that the actuals accrue in the same manner as the previous problem. Here, the difference is that the EV accrues all at once when the task ends. The graph below shows the sudden increases in EV that results.

With this method, EV lags behind. For a large project well underway, the effect is small, but for this tiny sample, the EV “picture” is not very useful.

Problem 12:
The table shows the accumulation of the values. Note that using the proportionality rule, progress is accrued for activities “D”, “E” and “F” based on the elapsed time. This, of course, assumes that “D”, “E” and “F” all started on time. The graph shows the relatively smooth accrual of progress, which may not be warranted without knowing more about the status of the in-progress activities.

Problem 13:

Problem 14:
This is just a briefer version of Problem 8b in his chapter, so refer back to the solution above please.

Incidents for Discussion
Jackson Insurance and Title Company
This incident is a good opportunity for the class to discuss the meaning of control versus other aspects of the project management process.
Mark seems to have done a good job recognizing some of the problems that DP is having with their projects. His recommendations do not, however, constitute a good control system. He has concentrated on requirements development and software quality. While these are important, they, by themselves, do not constitute a control system since his recommendations do not address how the project will be measured against the requirements. Further, Mark has created a situation where scope creep could become quite serious. Involving the customer in requirements definition is admirable, but with no checks and balances, the customer requirements could exceed the project’s cost and schedule goals. Mark could control this aspect by instituting a go/no-go control point, when the team feels the customer requirements are fully defined. Once that gate is crossed, no further change would be accepted without it going through a formal change management system.
The U.S. Army Corp of Engineers
Bryan needs to work with the two supervisors to accomplish two things:
• Ensure that the project plans and schedules for dams #1 & #2 are integrated.
• Develop a control system that reports both individual and joint progress on the dams.
CASE: The Project Manager/Customer Interface
Question 1:
Reggie Brown did some things well to anticipate and then attempt to salvage a difficult situation:
• Anticipated problems (e.g. badging) before the outage.
• Obtained written authorization from Goodsen to proceed on a time and materials basis.
• Stuck to a long term, “maintain the customer relationship” view in spite of some very trying circumstances.
• Gave a revised estimate to the customer, specifying the areas of concern and their impact on the project.
• Followed up with the customer when the payments weren’t coming.
• Kept excellent records of what happened.
• Persevered and got most of the money owed.
Brown and BWNS could have done some things better:
• Negotiated a contract that was much more specific on areas of potential dispute like
o Customer created delays
o Increase in customer scope
o Who on both sides is empowered to authorize changes in scope
• Recognized that the previous informal working relationship was no longer adequate
• Paid more attention to the commercial side of the project, including getting the right people involved from day one.
Question 2:
A number of factors were outside of Brown’s control:
• New purchasing procedures imposed by NLP without notification
• NLP’s inability to transfer the generators on-time
• NLP’s repeated oral assurances that everything was okay, in spite of evidence to the contrary
• NLP’s refusal to include technical personnel in key meetings
Question 3:
Some of the key skills required for an effective customer interface include:
• The ability to identify problems early on and take action.
• The recognition of who is authorized contractually to make changes and sticking to the process.
• The ability to recognize scope creep and control it.
• The ability to speak with commercial personnel including purchasing agents, lawyers, contract’s managers, financial, and accounting staff.
• The ability to be a good communicator.
• The ability to develop and nurture informal communication channels to supplement the formal ones.
• The ability to be a tough bargainer and recognize when that kind of behavior is appropriate.
• The ability to recognize and pursue a long term view.

Student responses to the second question may vary. Students could argue that the project was successful because it was completed. Other students may argue that it wasn’t because of the delays, cost overruns, and the problems with the relationship souring.
Question 4:
The project has several incidents of scope creep including:
• NLP did not accept BWNS’s badging procedure
• The generators were not turned over on time
• U-bend stress relief
• Added plug inspections
I would consider this scope creep, although a little different than what is typically thought of. Generally, we think of scope creep as adding more “bells and whistles.”
Question 5:
Unfortunately, the new PM will soon discover that the customer is not always right. This is a tough lesson because most people want to please the customer in any way that seems reasonable. The problem for the novice PM is that most scope creep wolves come disguised in sheep’s clothing of small, seemingly reasonable requests. The problem is fourfold. First, by entertaining the request informally, the PM often has no clue what the real cost, schedule, and performance impact is when he/she accepts the change. Second, the PM establishes a precedent for how future requests are made. Third, even though any individual request by itself may not have much impact, there is never only one, and the cumulative impact will eventually sink the project. Fourth, informal requests often are poorly documented and so it’s difficult to prove what happened after the fact in the event of a dispute. The hard lesson is that no matter how reasonable the request seems it must be handled through a formal change management process.
The problems described in this case cannot be attributed to the common reporting problems described in the chapter. It is clear that no matter what reports were prepared, NLP had decided not to pay the amount owed.
Question 6:
A rational person may question why BWNS would want to win the business back under these circumstances. Assuming that they are taking a long-term view, however, they could do the following:
• Let Westinghouse challenge the new purchasing terms and conditions until NLP changes
• SPIS should keep submitting high quality bids, but stick to their guns on the issue of terms and conditions
• SPIS should continue its informal contacts with the technical experts at NLP
• SPIS should structure their bids with incentives that better distribute risks and rewards between the parties
• SPIS should be clear that they want NLP’s business and solicit responses to all their bids

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