Project Management: Variance Analysis and Earned Value Management
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This report discusses variance analysis and earned value management for a construction project. It includes recommendations for controlling project schedule and cost, and provides formulas for calculating earned value.
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Running head: PROJECT MANAGEMENT Project Management Name of the Student: Name of the University:
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1PROJECT MANAGEMENT Executive Summary The findings of this based is that from the variance analysis, it is found that the project cost is under the budget by calculating cost variance while the project is behind the schedule by calculating schedule variance. Earned Value Management (EVM) calculations is done to measure the future performance of the project by comparing its present situations. It helps the project manager to measure its performance used to find the variances on basis of comparison of the work performed and planned. EVM is utilized for cost as well as schedule control and useful for project forecasting. Cost variance is to be calculated by difference of completed workcostwithplannedcost.Similarly,theschedulevarianceisdifferencebetween completed work and planned schedule. The recommendations on the project are that in order to overcome with cost and schedule problems, it is suggested to control the project schedule, scope planning and risk management planning so that there are less possibilities of errors in the project.
2PROJECT MANAGEMENT Table of Contents Executive Summary...................................................................................................................1 Current status of the project.......................................................................................................3 Forecast future performance......................................................................................................8 Recommendations......................................................................................................................9 References................................................................................................................................10 Bibliography.............................................................................................................................11 Appendix..................................................................................................................................12 Supporting data....................................................................................................................12
3PROJECT MANAGEMENT Current status of the project The project is based on construction work. The current status of the project shows that the construction project is behind the schedule. Schedule variance (SV) is calculated by deducting the planned value subtracted from the earned value, and remaining value tells whether the plan is ahead or behind the schedule. In this project, the value of SV is (- $42,732.21), therefore it shows the construction project goes behind the schedule. The cost variance (CV) is calculated by showing difference between baseline cost as well as actual cost (Kerzner & Kerzner, 2017). In this project, the cost variance is also negative with value of (-$5,675.14), therefore the cost of project tasks are under the budget or baseline amount. Schedule and cost variances are existed to assess the financial presentation of the project work. The cost variances compare the budget set before starting of the project and what was actually spent in the project (Fleming & Koppelman, 2017). Cost variance is existed to determine difference between actual expenditure as well as expected expenditure. Schedule variance is existed to determine the performance of the project on basis of project schedule. From the Ms project schedule, it is found wrong is that the project schedule goes behind the schedule, therefore the project manager should manage the schedule by allocating more resources or increasing the working hours of the resources so that they can meet with the planned schedule of construction project. The project manager can plan proper steps to manage changers into the baseline schedule (Heagney, 2016). They can determine the project status, conduct review, determine that there is indeed any changes of the project schedule in addition to manage actual changes. It is right that the cost is under the budget and therefore there is no increasing in the budget.
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4PROJECT MANAGEMENT The Earned Value Management (EVM) data are as follows: Task NameSVCVSPICPI Construction Example-$42,732.21-$5,675.140.760.96 Permits & Site Prep$0.00-$1,125.0010.88 Construction Permits$0.00-$325.0010.86 Gather Required Documents$0.00-$175.0010.83 Complete Permit Applications$0.00-$75.0010.83 Submit Permit Applications$0.00$0.0011 Post Construction Permit$0.00-$75.0010.75 Site Preparation$0.00-$800.0010.88 Initial Site Survey$0.00-$250.0010.93 Develop Site Plan$0.00-$250.0010.9 Approve Site Plan$0.00-$300.0010.5 Construction-$42,732.21-$4,550.140.740.96 Foundation$0.00-$2,000.0010.9 Dig Foundation Footers$0.00-$1,800.0010.55 Pour Foundation Footers$0.00$0.0011 Inspect Foundation Footers$0.00-$100.0010.67 Build Foundation Wall$0.00$0.0011 Inspect Foundation Wall$0.00-$100.0010.75 Framing$0.00-$300.0010.99 Order Framing Materials$0.00$0.0011 Frame Floor & Walls & Roof$0.00$0.0011 Install Widows & Doors$0.00-$300.0010.91 Perform Framing Inspection$0.00$0.0011 Rough - Ins$0.00-$1,250.0010.95 Perform HVAC Rough In$0.00$0.0011 Perform Plumbing Rough In$0.00-$350.0010.94
6PROJECT MANAGEMENT Prep Walls & Trim$0.00$0.0000 Prime Walls & Trim$0.00$0.0000 Apply Finish Coat$0.00$0.0000 Clean-up Jobsite$0.00$0.0000 Rough In Finishes-$1,600.00$0.0000 Perform HVAC Finishes$0.00$0.0000 Perform Plumbing Finishes$0.00$0.0000 Perform Electrical Finishes$0.00$0.0000 Apply Roof Insulation-$1,600.00$0.0000 Exterior Finishes-$25,925.00$0.0000 Perform Final Grading-$3,600.00$0.0000 Driveways & Patios-$10,300.00$0.0000 Pour concrete driveway-$5,500.00$0.0000 Install concrete patio pavers-$4,800.00$0.0000 Exterior Decking-$7,025.00$0.0000 Build Exterior Deck-$6,400.00$0.0000 Stain Exterior Deck-$625.00$0.0000 Install Exterior Landscaping-$5,000.00$0.0000 Final Inspections$0.00$0.0000 Perform Building Code Inspections$0.00$0.0000 Perform Client Inspections$0.00$0.0000 Cost variance (CV):It is calculated by showing difference between baseline cost as well as actual cost (Chen, Chen, & Lin, 2016). Schedule variance (SV):It is designed by deducting the planned value deducted from the earned value. CPI (Cost performance index):It is a amount of financial competence of the project. It is represented by amount of finalized work for each unit per cost consumed (Willems &
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7PROJECT MANAGEMENT Vanhoucke, 2015). The ratio is calculated by dividing budgeted cost of completed work and earned value, by actual cost of work performed. Schedule performance index (SPI):It is degree of how the project is completed as compared to the schedule (Webb, 2017). The ratio is calculated by means of dividing budgeted cost of work performed and earned value by planned value. From the entire variance analysis, it is found that the project manager is required to determine if the project is on track or not by management the schedule besides cost. The total planned period of the project is 134.13 days and planned budget is $237,725. The project manager keeps in mind that the project cost is required to baselined to calculate if there are any variances between actual and planned cost and budget. ACWP is displayed the actual cost incurred for the construction work performed by the project resources on the project task, till the project status date. BCWS shows how the budget is spent in provided actual duration of the project task. In this project, the value is $174,782.14. At the initial stage, when a task is created, then value of BCWP is 0. As the project baseline is saved and the progress of task is reported, then it calculates BCWP. It is based on percentage completed of the each task as compared to the baseline duration. The construction project then calculates cumulative baseline cost as well as it provides what is the actual cost with the task progress in baseline duration. In this project, the BCWP is $132,049.93. There is total of 61% completion of entire project tasks. In this project, there is cost variance of (-$5,675.14), therefore the project is $5,675 cost under budget. Cost variance = Cost- Baseline cost. The schedule is negative shows that it is behind the schedule and it has time to complete the project work on schedule time if the project manager can control the project schedule based on project requirements. As SPI is
8PROJECT MANAGEMENT 0.76, it means that less than 100% of the schedule work is completed to date. CPI of 0.96 means that the project is currently under budget with some small amount. Following are the formulas used to calculate Earned value calculations and it is provided so that the reader can understand the entire variance exists in the project effectively. Planned value = Budgeted amount throughout current reporting period Actual cost = Actual cost of the project to date Earnedvalue=totalbudgetwhichismultipliedbypercentageofthework completion. SPI = EV/PV; it measures progress against the progress planned. When value of SPI<1.0 it states the less work is completed as per the planned. SPI>1.0 states that more work is completed as per planned. CPI = EV/AC; it measures work value against the actual cost. When value of CPI<1.0 it states the cost is higher as compared to budgeted. CPI>1.0 states that cost is less than budgeted. Forecast future performance Based on the analysis from Ms Project, the project plan heads that the project is behind the schedule and cost is under budget. EVM is measure of the presentation of project against the project baseline. It is the best practice to monitor project performance based on cost as well as schedule perspectives (Batselier & Vanhoucke, 2015). Both the project performance provides a direct impact on entire project cost. The project is behind the schedule but the cost is under budget than expected. Estimate at completion (EAC) is the forecasted cost of project as the project is progressed. It is intended by dividing budgeted at conclusion by cost performance index.
9PROJECT MANAGEMENT ETC is the expected cost required to complete the development. It permits the plan director to determine funding required to finish the work with availability of funding. It is calculated by dividing EAC by actual cost (Prayogi et al., 2019). There are various ways to determine the future performance of this project using EVM techniques such as: I.The future performance is based on budgeted cost. In this project calculated EAC is $242022.9, therefore it is the expected amount of money that the project is cost for completion of this construction plan. II.The future performance is based on expected cost. In this project calculated ETC is $104297.8, therefore it is the expected amount of money required to spend to complete remaining project work. III.The future performance is also based on variance at completion (VAC), and the value is -9972.87. It estimated that the project manager spends more than planned. Recommendations Based on the variance analysis, the possible areas of the concerns are schedule and cost variance. It is key important areas for winning present and future projects. Therefore, it is required to keep the project on schedule besides in budget. The variance shows the project manager what is the current position of the project plan. Following are the recommendations which are suggested to get a better project plan: Control the schedule:It should beneficial to keep the project on schedule from time standpoint while to avoid future cost overages. As this project is behind the schedule, therefore the project manager can take proper steps to correct scheduling problems and present schedule solutions with a status report to the project client.
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10PROJECT MANAGEMENT Scope planning:A scope baseline should require with approved version of the scope statement and work breakdown structure. The scope statement file helps the project manager to review prior information from previous project phases to make sure that the project plan is to be completed to meet with its objectives. Risk management planning:It should be used to identify the problems which could trouble the project and analyze how it is likely to occur and provide effect on the project plan. References Batselier, J., & Vanhoucke, M. (2015). Evaluation of deterministic state-of-the-art forecasting approaches for project duration based on earned value management.International Journal of Project Management,33(7), 1588-1596. Chen, H. L., Chen, W. T., & Lin, Y. L. (2016). Earned value project management: Improving thepredictivepowerofplannedvalue.InternationalJournalofProject Management,34(1), 22-29. Fleming, Q. W., & Koppelman, J. M. (2016, December). Earned value project management. Project Management Institute. Heagney, J. (2016).Fundamentals of project management. Amacom. Kerzner, H., & Kerzner, H. R. (2017).Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons. Lock, D. (2017).The essentials of project management. Routledge. Prayogi, R., Pratami, D., Puspita, I. A., & Bermano, A. R. (2019, March). Measuring SchedulePerformanceofFibertoTheHomeProjectUsingEarnedValue Management. In2018 International Conference on Industrial Enterprise and System Engineering (IcoIESE 2018). Atlantis Press.
11PROJECT MANAGEMENT Webb, A. (2017).Using earned value: a project manager's guide. Routledge. Willems, L. L., & Vanhoucke, M. (2015). Classification of articles and journals on project controlandearnedvaluemanagement.InternationalJournalofProject Management,33(7), 1610-1634.
12PROJECT MANAGEMENT Bibliography Binder,J.(2016).Globalprojectmanagement:communication,collaborationand management across borders. Routledge. Colin, J., & Vanhoucke, M. (2015). A comparison of the performance of various project controlmethodsusingearnedvaluemanagementsystems.ExpertSystemswith Applications,42(6), 3159-3175. Harrison, F., & Lock, D. (2017).Advanced project management: a structured approach. Routledge. Kerzner, H. (2018).Project management best practices: Achieving global excellence. John Wiley & Sons. Verzuh, E. (2015).The fast forward MBA in project management. John Wiley & Sons.
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