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Answer: $_____

Answers
1. Project™s cost variance = BCMP “ ACMP. $3,750 “ $3,000 = $750 (compares what was planned to
be spent against what was actually spent).
If the answer is a positive figure, less money is being spent than was planned; the project is under
budget.
2. Schedule variance in cost terms = BCMP “ BCMS. $3,750 “ $4,500 = “ $750 (compares what was
spent in terms of accomplishment as compared to what was planned to be spent).
If the answer is a negative figure, less work is being accomplished than planned, and the project is
behind schedule.
3. Cost performance index (CPI) = BCMP/ACMP. $3,750/$3,000 = 125 percent (compares the ratio of
what was accomplished in dollar terms to that which was actually spent).
If the answer is more than 100 percent, the project performance relative to cost performance is good.
4. Schedule performance index (SPI) = BCMP/BCMS. $3,750/ $4,500 = 83.3 percent (compares the
ratio of what was accomplished in dollar terms to what was planned to be accomplished).
If the answer is less than 100 percent the project relative to schedule performance is poor.
There is good news and bad news so far. This activity is behind schedule, but the project™s money is being
spent effectively. In other words, the cost performance is good; more units of work are being accomplished
for fewer dollars than planned. The schedule performance is not measuring up to plan, however.
5. Budgeted cost for the remaining milestones (BCRM) = BAC “ BCMP. $7,500 “ $3,750 = $3,750
(subtracts the accomplishment in dollar terms from the original planned budget at completion).
This answer indicates how much money is left in the budget.
6. Estimate to complete the project (ETC) = (BAC “ BCMP)/CPI. ($7,500 “ $3,750)/1.25 = $3,000
(uses the BCRM calculated in Step 5 and takes into account the cost performance index).
This answer shows the additional money needed to complete the job.
7. Total estimate at completion (EAC) = ACMP + ETC. $3,000 + $3,000 = $6,000 (adds what has
already been spent to what yet needs to be spent in order to finish the job).
This answer anticipates the total budget at the end of the project.
This is only the beginning of the calculations that can be used in accomplishment analysis. The example
assumes that Task ABC is accomplished in a linear fashion and that each of the deliverables will be produced
at equal intervals and for equal dollars. This may not be true. In fact, much work is accomplished in a
nonlinear way.
Often progress is measured over time on the basis of an assumed linear relationship, perhaps because linear
extrapolations are easier to calculate than nonlinear ones. But we think that the problem is more complex. In
essence, there seems to be a natural tendency to think in terms of linear relationships. When this is coupled
with the fact that we live in a nonlinear world, it leads to false assessments of progress and, in turn, diversion
of management attention from real problems to apparent problems. This result can be a disaster, even
crippling an organization.
As an example, assume that a technician faced with the task of upgrading sixty personal computers can
complete the job in sixty hours (this is the technician™s estimate). Furthermore, assume that four machines can
be completed at the end of the first day. When we examine the first day™s progress, we are distressed to
discover that only two machines have been completed. Should we panic? Probably not.


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The technician might have started the task by inspecting all sixty upgrade kits to ensure that each contained
Title
all of the correct supplies. In this case, the effort required on the remaining fifty-eight machines may be less
than two hours per machine. In addition, it is possible that the machines are of different ages and
configurations, and the technician may have decided to take the most difficult machines first, knowing that
they would take more time per machine. There may be other machines in the queue that will take substantially
----------- less than two hours per machine. And it is possible that the technician spent seven hours on the first machine,
figuring how to install and test the upgrade most efficiently. Having done so, the second machine may have
only taken one hour, and the other fifty-eight machines may take less than one hour each because of the
learning curve. There are a number of circumstances in which our linear extrapolation is misleading and
distressful.
It is not a linear world, and therefore linear plans fail the project manager. More often than not, there is a
nonlinear plan in the minds of those performing the work. If this is the case, you cannot afford to accept a
linear plan from the members of the project team. In developing the project plan, communicate the desire for a
nonlinear plan and facilitate the gathering of nonlinear plan data. The software used must be capable of
accepting nonlinear data and using them as the basis for comparisons with actual performance.
The example we worked through for Activity ABC had an inherent assumption in it: the schedule called for
the production of twenty units per week. It is often the case that there is a nonlinear baseline for the
production of deliverables within a project or an activity. Let™s make a different assumption and work through
the activity again. There should be some dramatically different results.

Example 2
Assume that the 100 units mentioned, at a cost of $75 each, are going to be produced according to the
following schedule:
Week Units
1 10
2 15
3 20
4 25
5 30
This activity is scheduled to take 5 weeks, during which time 100 units are to be produced, each unit costing
the firm $75. The status of this activity at the end of the third week is the same as in Example 1: 50 units have
been produced earning the value (BCMP) of $3,750 (50 units — $75 per unit = $3,750) and $5,000 has been
spent (ACMP).

Questions
Answer the questions that follow concerning the status of this project and its forecast of projections.
1. What should have been accomplished at the end of the third week: in other words, what is the plan?
_____ units should have been produced.
$_____ should have been spent (BCMS).
2. The project™s cost variance = BCMP “ ACMP = _____
Are we over or under budget? _____
3. Schedule variance in cost terms = BCMP “ BCMS = _____
Are we ahead of or behind schedule? _____
4. Cost performance index (CPI) = BCMP/ACMP = _____
Are we performing better or worse than planned? _____
5. Schedule performance index (SPI) (in $) = BCMP/BCMS = _____
Are we performing better or worse than planned? _____
6. Budgeted cost for remaining work = BAC “ BCMP (where BAC = budget at completion) = _____
7. Estimate to complete the project (ETC) = (BAC “ BCMP)/CPI = _____
8. Total estimate at completion (forecasted cost) (EAC) = ACMP + ETC = _____

Answers
1. The plan is to produce 45 units and to spend $3,375 (BCMS).
2. The project™s cost variance = BCMP “ ACMP (determines whether the completed work has cost
more or less than was budgeted for that work) = $3,750 “ $5,000 “ $1,250.
We are over budget.
3. Schedule variance in dollars = BCMP “ BCMS (compares work completed to work scheduled) =
$3,750 “ $3,375 = $375, or 5 units at $75 per unit.
We are ahead of schedule.
4. Cost performance index (CPI) BCMP/ACMP = $3,750/$5,000 = 75 percent.
Less than 100.0 indicates poor performance. We are performing worse than planned.
5. Schedule performance index (SPI) = BCMP/BCMS = $3,750/ $3,375 = 111 percent.
Less than 100.0 indicates poor performance. We are performing better than planned.
6. Budgeted cost for remaining work = BAC “ BCMP (where BAC = budget at completion) = $7,500 “
$3,750 = $3,750.
7. Estimate to complete the project (ETC) in dollars = (BAC “ BCMP)/CPI = ($7,500 “ $3,750)/.75 =
$5,000.
8. Total estimate at completion of project or the forecasted final cost (EAC) = ACMP + ETC = $5,000
+ $5,000 = $10,000.


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Project Management
by Joan Knudson and Ira Bitz
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ISBN: 0814450431 Pub Date: 01/01/91

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Let™s compare the answers we obtained from assuming the linear and nonlinear plans for the units to be
Title
produced.
Item Linear Plan Nonlinear Plan
Planned output 60 45
Actual output 50 50
-----------
Cost variance +$750 “$1,250
Cost status under over
Schedule variance “$750 +$375
Schedule status behind ahead
CPI 125 percent 75 percent
Cost performance good poor
SPI 83.3 percent 111 percent
Schedule performance poor good
Budget for remaining work $3,750 $3,750
Estimate to complete $3,000 $5,000
Estimate at completion $6,000 $10,000

Earned value is often analyzed graphically. Figure 9-3 shows the earned value plan using the nonlinear data
from Example 2. The y-axis coordinates are the number of units (left side) and percentage complete (right
side). Dollars could also be used as a y-axis. You might be concerned at the increasing pace of unit production
which has been planned by the project team. Figure 9-4 is an example of the earned value plan (BCMS) and
earned value actual (BCMP) for this activity at the end of the third week using the nonlinear data. It is quite
clear that the effort is ahead of schedule. Figure 9-5 shows the earned value plan and earned value actual with
actual cost data for the activity using the nonlinear data from Figures 9-3 and 9-4. The earned value actual
(BCMP) is over the earned value plan (BCMS); therefore, the effort is ahead of schedule. However, the actual
cost (ACMP) is well over the earned value plan (BCMS); therefore, the effort is substantially over budget.
Having these types of data makes it easier for you to check the information given to you by project team
members or by their functional bosses. Measurements for earned value or work accomplishment have more
substance and integrity than just schedule and cost variances and are a better base from which to extrapolate
future costs and schedules. Incidentally, it is also true that the nonlinear relationships tend to prevail when
looking at person-hours versus time, and therefore the nonlinear planning requirements apply to the
measurement of actuals as well.




Figure 9-3 Earned value plan using nonlinear data.




Figure 9-4 Earned value plan (BCMS) and earned value actual (BCMP) at end of third week.




Figure 9-5 Earned value plan and earned value actual, with actual cost data.


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Title
Chapter 10
Supporting Project Management: Software, Training,
and Administration
-----------

In this chapter, we explore three of the many support issues relative to project management:
• Software support: Employing automated tools to manipulate project management data in order to
plan, control, and investigate what-if simulations, and to generate meaningful reports.
• Training support: Teaching interested parties about the organization™s project management
methodology, their project management process and associated tool kit, and the chosen software tool (if
one exists).
• Administrative support: Providing qualified help to the project manager and functional managers of
the project team with the purpose of collecting, processing, and disseminating project management
information.
Many companies appear to believe that once they purchase a piece of project management software, all of
their project managers will become competent overnight. Buying a project management scheduling package
does not ensure success, however. First, one must understand the basics of project management in order to
prepare the data for system entry, comprehend the logic the software uses to calculate the output, and be able
to interpret the data and request meaningful reports.
Training is required to provide a grounding in the fundamental tools and techniques of project management.
In addition, the project manager and team members must be given the time to plan, monitor, and track the
project”an effort that cannot be accomplished in one™s spare time. If the project manager is not given the
time to do the project management job correctly, administrative support must be found to take away some of
the burden.

Software Support
Choosing the right project management software package used to be as easy as going to a local computer store
and seeing what was available, but accelerating changes in project management software have mandated a
different approach. More emphasis on sophisticated features and ease of use require an in-depth evaluation of
the major alternatives. The payoff is a more effective implementation of project management.
In 1955, the project management software count was zero. By 1981, it had increased to approximately 220.
The number of products introduced to perform project management functions on the computer, mainframe or
mini, was impressive. In the early 1980s project management software packages were introduced for the
microcomputer. The functionality was very limited, yet this was the most significant step in the evolution of
project management software in at least a decade.
Today over 1,300 new products are available to perform project management functions. Four hundred of these
are microcomputer-based, MS-DOS machine-based products. How many will there be tomorrow? Clearly the
answer is fewer. Certainly project management is an expanding market, and more and more organizations are
realizing that a portion of their workload lends itself to being managed with project management, but the
market is not broad enough to support that many products. There has to be a shakeout in the project
management software business. Some companies and some products”including good ones”will not survive.
This represents a risk to the organization acquiring a project management software product. Will the company
be there to provide technical support? Will there be new releases, fixing bugs and/or offering new features
desired by the customer base? If new, incompatible hardware product lines are introduced, will there be new
releases of the software that will run on the hardware? All of these questions can be a major concern to the
potential buyer. None of the answers is easy. The companies offering the products range in size from
one-person operations to giants of industry. Neither may survive in the face of intense competition. Financial
resources do not, in and of themselves, guarantee survival. The risk may not be capable of being managed, but
certainly it must be recognized when the software decision is presented to management for approval.
Before you begin your search for the perfect package, do your homework. Conduct a thorough analysis of
your current project management methodology to determine your specific requirements for a software
package. Devise a comprehensive checklist of all the requirements necessary for you to manage your projects
using a software tool. Describe the way you utilize resources, handle job costs and budgets, handle task
assignments and task relationships, want to see reports, and so forth. On your checklist, note which items are
mandatory, which are highly desirable, and which are window dressing. Once you have your checklist you™re
ready to evaluate products. But first, let™s take a look at what project management software can and cannot do:
What Project Management Software Can Do
• Perform calculations such as early start, early finish, late start, late finish, float, critical path,
resource loading, and labor budget extrapolations, to name but a few.
• Allow you to try various scenarios to determine the impact of changes.
• Sort and extract data to produce a variety of reports.
• Perform some of the calculations to level your overloaded resources or to meet a mandated target
date.
• Portray the actuals compared to the plan from data you have entered.

What Project Management Software Cannot Do
• Define the project objectives.
• Develop the work breakdown structure.
• Determine the logical dependencies of tasks one to another.
• Choose who should be working on which tasks.
• Estimate the duration of tasks.
• Fix all the problems of resource overloading or attempt to meet a mandated target date by
compressing the critical path.
• Design the correct reports for different people on your distribution list.

The bottom line is that project management software cannot do your thinking. What it can do is take the
laborious work out of calculating and recalculating the data and out of preparing handwritten reports.

Defining Key Software Features
The following features are of significance in evaluating the suitability of individual project management
programs to your specific application.
Pricing
There is only a slight correlation between price and performance. Some $500 products outperform products
costing six to ten times as much. The fullest-featured products are not on the shelves of your local software
store. With but a few exceptions, the products that have more functionality are marketed directly by the
source to the end user. These products tend to be somewhat less well known and are more difficult to locate to
include in a comparative evaluation. The products in the store may be sufficient to meet your needs, but if
they are not, look further. Sales volume is not an indicator of quality or functionality. Many products have
sold on the basis of their name or reputation, without having any significant feature advantage over less
well-known products sitting unused on bookshelves. Features are being added at a frantic pace. Most vendors
are working feverishly to add capabilities to their products, and the rate at which updates are being released is
increasing.


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Number of Activities
Title
What is the total number of activities (tasks) that may be assigned to any project”to both the main project
and each subproject? We are witnessing a gradual evolution away from a strict numerical restriction toward
the terms limited by the system or unlimited. You will need to investigate whether the number of activities is
limited by the amount of available main memory in your computer or by disk capacity. Check the limiting
-----------
factors and whether the capacities meet your minimum functional requirements.
Total Resources
What are the total numbers of resources”individuals, skill categories, equipment categories, materials, and
others”available for assignment at any given time? Some packages limit the number of resources per task;
others limit the number per project. Determine what software factors limit resources and what your minimum
constraints are before you purchase.
Direct Costs
How does the software package handle direct costs (material, equipment, supplies) that may be assigned to
each activity? If you want a detailed accounting, confirm that the categories may be both listed and
accumulated by specific item rather than by a generic title such as “Fixed Costs” or “Other Costs.” Consider
how the costs are allocated: up front, amortized across the duration, in fixed payments, at specific
performance milestones, or at the end of an activity”or whether you have a choice. The program™s capability
for allocating and reporting the respective direct costs by time periods is a significant feature.
Resource Availability and Allocation
It is not realistic to expect that any one resource will be made available 100 percent of its time to a specific
project. Resource availability and allocation features allow the planner to designate the number of hours a
resource is available to the project and/or the percentage of the resource™s time that is committed to the
project. In more sophisticated packages, the resource allocation feature can provide overtime costing, lag
starts of individual resources, multiple shift allocation, and individual resource calendars for scheduling
vacations, holidays, and conferences.
Resource-Constrained Scheduling
Where resources are overscheduled, resource leveling is employed. Tasks on noncritical paths are moved
within their float and/or elongated into their float. This reduces the amount of resources required during any
one unit of time. If the movement of tasks does not resolve the problem”in other words, some resources are
still overscheduled”the critical path activities are delayed until no resource is scheduled more than the
number of hours that it has available to the project. When the effect on the completion date is recalculated, the
project may take longer than originally scheduled. Selective changes may then be made to task priorities,
dependencies, resource assignments, and other alternatives to reach a balance between the original and
extended completion dates. These changes may be repeated in an iterative fashion until a compromise
acceptable to the project team and management is achieved. It is particularly important to allocate resources
intelligently during the planning stages. Although the same results could be obtained by manually adjusting
assignments and durations, it is more efficient and effective to have a computer system perform the
calculations.
On-Screen Network Diagram
An on-screen network representation of the activities and milestones in a project is an integral tool for
successful project management. Systems that provide on-screen networks may permit activities to be moved
on the screen to achieve an optimum presentation for report purposes. Other programs, in comparison, provide
a fixed network diagram, which generally is the result of entries made in the task and/or Gantt screens.
On-Screen Schedule/Gantt Chart
Planners require graphic schedule information, and most packages use the Gantt or bar chart format, which

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