Roger Warburton, Associate Professor in the Department of Administrative Sciences at Boston University’s Metropolitan College

1. Figuring Out:
Where Are You?
&
Does your Contractor Agree?
Roger D. H. Warburton, PhD, PMP
Associate Professor,
Metropolitan College, Boston University

2. The
“How ya doin?”
Problem
Contractor: We’re a little behind, but
it’s not a problem.
We’ll make it up.
What do you say?

3. Route 93 Re-Paving Problem

4. We Have a Plan
From 128/I93 to I90-I93 is 7.7 miles.
Plan: 0.77 miles each month
Schedule: 10 months.
Cost: $1,470,000.

5. What Actually Happened?
Month 1:
Contractor: We’re a little behind,
but it’s not a problem.
We’ll make it up.

6. What Actually Happened?
Month 2:
Contractor: We’re a little behind,
but it’s not a problem.
We’ll make it up.

7. What Actually Happened?
Month 3: We’re a little behind,
but it’s not a problem.
We’ll make it up.
Enough Already!

8. Here’s the bill!
Month 11
Budget Actual
$1,470,000 $1,869,000
There is a better way!

9. How Do We Measure
“Progress?”
Against the plan …..
Planned 0.77 miles
Actual 0.66 miles
You can always measure something!

10. What Was Accomplished?
 Miles of Roadway
 Lines of code
designed, written, tested
 Drawings completed WBS:
 Reports delivered Deliverable
 Units delivered Oriented
Square Meters of Paint
Hierarchy

 Feet of Steel Erected
 Cubic Yards of Tunnel Dug Out

11. You Already Have The Data
You are the PM.
The Mayor wants to know the
status of the project.
Monthly Reports:
What was planned?
What was accomplished?
What did it cost?

12. End of Month 2
1) Measure Progress:
Planned 1.54 miles
Actual 1.49 miles
2) Report Costs:
Planned $294,000
Actual $329,000

13. The “Value” of a Mile
Plan: 7.7 miles
Cost: $1,470,000
Planned Cost / Mile = $190,909
Complete ½ mile:
“Value” = $190,909 ÷ 2
= $95,455

14. The “Value” of a Mile
Plan: 7.7 miles
Cost: $1,470,000
Planned Cost / Mile = $190,909
Complete ½ mile:
“Value” = $190,909 / 2
Earned
= $95,455
Value

15. Glossary
 Planned Value, PV
 The sum of the value of the work planned
 Earned Value, EV
 The sum of the value of work performed
 Actual Cost, AC
 The sum of the costs incurred

16. Glossary
 Budget At Completion, BAC
 Estimated At Completion, EAC
 Estimate To Complete, ETC EAC
Time Now
Budget, BAC Estimate
To Complete
ETC
$
Actual Costs
To Date

17. Glossary
 Cost Performance Index, CPI
 Schedule Performance Index, SPI

18. CPI: Cost Efficiency

Planned 1.54 miles
Cost / Mile = $190,909 Actual 1.43 miles

19. SPI: Schedule Efficiency
 Schedule Performance Index, SPI
Planned 1.54 miles
Actual 1.43 miles
You are behind schedule

20. How Much Behind?
 Schedule Variance, SV
Planned 1.54 miles
Actual 1.43 miles
You are $21,000 behind schedule!

21. Route 93 Status: Month 4
You are the PM.
The Mayor wants to know the status of
the project.
(Miles Completed) Cost
Month Planned Completed Planned Actual
1 0.77 0.77 $147,000 $181,000
2 0.77 0.66 $147,000 $161,000
3 0.77 0.62 $147,000 $187,000
4 0.77 0.58 $147,000 $177,000
Plot Everything!

22. What actually happened?
Months

23. Add the Cost
Months

24. Cumulative Costs
Months

25. Efficiency
Months

26. Graphs vs. Tables
Month CPI
1 0.81
2 0.80
3 0.74
4 0.71
Months

27. Typical CPI & SPI
 CPI falls & Levels off
 SPI falls & rises → 1.0

28. How Much Will It Cost?
Estimate at
Completion
BAC = $1,470,000
CPI = 0.8 → EAC = $1,838,000

29. Estimate at Completion #2
#1: EAC = $1,838,000

30. Plot EAC (t)

31. Earned Value Management (EVM)
 Provides early warning of trouble
 EAC reliable ~ 20% into a project
 Christensen & Heise, 1992
 DOD experience >400 programs since 1977
 Without exception:
 The cumulative CPI does not
significantly improve during the
period of 15% through 85% of the
contract
 In fact it tends to decline!

32. “I did not use EVM because …”
 “Not needed on small projects”
 “Hard to apply” (Kim, 2000)
 “The implementation
requirements, terminology, and the countless
Contractor
rules and interpretations, are perceived as
Excuses
overly restrictive” (Fleming & Koppelman, 2005)
 It is difficult to find a balance between the utility
of the EV technique . . . versus the effort it takes
to implement (Quentin & Koppelman, 2005)

33. From Earned Value
to
TCPI

34. PMBOK 4th Edition
The to-complete performance index
(TCPI) is the calculated projection of
cost performance that must be
achieved on the remaining work to
meet a specified management goal,
such as the BAC or the EAC.

35. TCPI
A simple formula to change
the world!
“Once our customers start
calculating TCPI, we will no
longer be able to fudge project
cost!”

36. What is TCPI?

37. TCPI: Month 4
 Work Remaining:
 BAC – EV(t) = $1,470,000 – $546,000
 Funds Remaining:
 BAC – AC(t) = $1,470,000 – $681,000

38. You:
You need a 17% improvement.
Contractor:
No problem!
Trust me, we’ll make it up.
Everything will be OK.

39. Really?!
Your current efficiency is 80%
Your TCPI is 117%
You need a 37%
improvement!

40. It’s Getting Worse!
37%
You need a 37% improvement!

41. You Can’t Win!
You need
to be here!
TCPI → ∞!

42. Admit it,
You’re here

43. The “Modus” Project

44. Cumulative Doesn’t Help

45. Modus: CPI & SPI

46. We Know the Cost

47. Guidance


48. Conclusion
Earned Value is the
Public Sector Manager’s
Friend

49. Thank
You
rwarb@bu.edu

50. PMBOK to the Rescue!
If it becomes obvious that the BAC
is no longer viable, the EAC
supersedes the BAC

51. TCPI with EAC
Required efficiency is just the CPI!

52. Admit it,
You’re here

53. Schedule Prediction