Lecture Week 11

Tutorial Week 12

Prof. M. Lu copyright 2024 179

Cost Budgeting and Earned
Value Management

180
Project management: from project
planning to project control

Plan
Project
Time Plan
Scheduling
Budget Control
Project
Cost Plan
Estimating

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The S Curve

• Project cost estimate + Project Schedule =

Control Budget
• Control budget is represented as S curve,
providing baseline for cost control, time,
cost performance tracking, earned value
management

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Prof. M. Lu copyright 2024 183
Budget in EVM

In EVM, the budget is essentially represented as

(1)Planned Value (PV) S curve over project time

(2)Budget At Completion (BAC).

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PV ( BVWS)
• Activity: “Trench excavation for utilities “ . (Critical)

0 7 10
Time
t

ES EF
• Activity duration 10 days; cost estimate $10K.
• Data date is 7, ( 7 days passing, by end of D7)

1: Report : 2: Plot PV vs. Time on This Activity:

PV
PV =?
EV =?
AC =? Time
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0 10
PV ( BVWS)
• Activity: “Trench excavation for utilities “ . (Critical)

0 7 10
Time
t 10 d duration

$ 10 k cost

ES EF

= = $ 10k × 70% = $ 7 k

• Data date is 7, ( 7 days passing, by end of D7)

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 PV ($) PV For One Activity

10k Vs.

Time
7d 10d

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Plot PV vs. Time for the whole project

PV

Time

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Project Cost Budget S-curve

PV For the Whole Project

PV ($)

Budget at Completion
(BAC)

Time
(Project Duration)

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PV ( BVWS)
• Activity: “Trench excavation for utilities “ . (Critical)
0 7 10
Time
t

ES EF
• Activity duration 10 days; cost estimate $10K.
• Data date is 7, ( 7 days passing, by end of D7)

1: Report : 2: Plot PV vs. Time on This Activity:

PV
PV =?
EV =?
AC =? Time
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0 10
Credit Rules vs. Percentage complete ?

(BVWC )

(c) Dr. Ming Lu U of A 191

Important
• PV only depends on progress on scheduled bar chart;
• AC only depends on project actuals account;
• EV depends on credit rules (e.g. 50:50).
Complete percentage as given indicates "having started" or
"completed" on activities, which may not be relevant for EV
calculation.

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 1.0 threshold: Above/Equal/Below threshold implications

CPI = ( )

SPI = ( )

TCPI = ( )

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Forecast End-Project Performance

a) Budget at Completion (BAC): How much did we budget for the
total project effort?
b) Estimate at Completion (EAC): What do we currently expect
the total project cost?
c) Estimate to Complete (ETC): From this point on, how much
more do we expect it to cost to finish the project?
d) Variance at Completion (VAC): As of today, how much over or
under budget do we expect to be at the end of the project?

At Data Date, which one do you need to forecast? Which ones are
given or derived.
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Assumptions underlying determination of ETC

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EVM Basics Review

Accumulative
Cost

Data Date
EAC

ETC
VAC

CV BAC

AC

SV

PV

EV

Time Line
TCPI vs. CPI

• TCPI differs from CPI

TCPI depends on how to estimate EAC at
completion
CPI depends on EV and AC at data date;

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Tutorial
Week 12

Prof. M. Lu copyright 2024 198

• You have a project to build a new fence. The fence is four sided. Each side is
to take one day to build and is budgeted for $1,000 per side. The side are
planned to be completed one after the other. Today is the end of day three
• Using the following project status chart, calculate PV, EV etc. Interpretation
is also important

Activity Day 1 Day 2 Day 3 Day 4 Status End of Day 3

Complete,
Side 1 S-F
Spent $1,000
Complete,
Side 2 S-PF -F
Spent $1,200
50% done,
Side 3 PS-S-PF
Spent $600
Not yet
Side 4 PS-PF
started
S=Actual Start, F=Actual Finish, PS=Planned Start, PF=Planned Finish

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• At End of Day 3

Name Formula Answer Interpretation

PV
EV
AC
BAC
CV
CPI
SV
SPI
EAC
ETC
VAC

TCPI

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Dr. M. LU © 2015
1. Similar to variances, indexes help to compare planned progress with actual progress in project
control by applying EVM.
a) True
b) False
2. You have a project to be completed in 12 months. The budget for the project is $100,000. Six
months have passed, and $60,000 has been spent. On closer review, you find that only 40% of the
work has been completed to date. 50:50 credit rule applies as per the contract. What is the
project’s Earned Value (EV)?
a) EV = $30,000
b) EV = $50,000
c) EV = $40,000
d) None of the above
3. The amount of work that should have been done by a particular date is the --------------------.
a) PV
b) EV
c) ACWP
d) VAC
Prof. M. Lu copyright 2024 201
4. The ---------------------- specifies how much you are earning for each dollar spent on the
project.
a) SPI
b) CPI
c) TCPI
d) CV
5. Budgeted Cost of Work Performed (BCWP) and Earned Value are different.
a) True
b) False
6. What is the formula to calculate Earned Value?
a) EV = SV - PV
b) EV = AC + PV
c) EV = CPI*ACWP
d) EV = CV – AC

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7. CPI is the past cost performance of the project, and ----------- is the future cost performance of the
project.
a) SPI
b) CPI
c) TCPI
d) SV
8. ------------ is also known as the Actual Cost of Work Performed (ACWP).
a) PV
b) EV
c) AC
d) VAC
9. It is not necessary to consider all tasks while calculating the Schedule Performance Index.
a) True
b) False
10. Given CPI is less than 1.0 for an ongoing project, the TCPI is less than 1.0.
a) True
b) False
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11. Suppose the SPI of a project is calculated 0.85. Is it good news or bad news for the project manager?
a) Good
b) Bad
c) Neutral
d) Cannot be defined with the given information
12. To arrive at a budget, it is necessary to know the predicted duration of the project and to account for the
labor, equipment and materials to be consumed by the project.
a) True
b) False
13. In EVM, the budget is essentially represented in -------------------
a) S curve for PV
b) BAC
c) TCPI
d) Both a and b
14. In EVM analysis, an analogous actual cost of work scheduled (ACWS) exists.
a) True
b) False
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15 What does it mean when a project has a Schedule Performance Index (SPI) of %85 :
a) 85% of the whole project work has been completed.
b) 85% of the project budget has been spent.
c) 85% of the project budget planned to date has been spent.
d) 85% of the work planned to date has been completed.

16 Which term represent the outstanding money required to finish the project?
a) EV
b) EAC
c) ETC
d) BAC

17 A project has EV = $500, AC = $550 and PV = $600. The overall project budget is $1,100.
Assume the project will continue to spend at the current CPI rate, what is the VAC?
a) -$160
b) $115
c) -$110
d) $110

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