You are managing a project with a budget of 500 to be completed in 6 months.
Due to various causes there have been substantial delays and cost overruns on the project and at the end of 3 months you find that you have already spent 400 and only 200 – worth of deliverables have been completed.
After discussions with your team you find that based on the past experiences and lessons learnt you can now commit to a CPI of 1.5 for the remaining duration of the project.
What should be the budgetary enhancement that you would ask for based on this data?
Answer (Author Analysis)
Figure 1- Month 3rd Preliminary Analysis
Educated Guess for BCWS record ( 1/6, 2/6, 3/6, 4/6, 5/6, 6/6 from 500)
Educated Guess for BCWP & ACWP Record in Month 1 until Month 2
Preliminary Analysis Month 3rd
ACWP = 400; BCWP = 200; BCWS = 500*(3month/6month) = 250;
BAC = 500; BAC is scope of the project value. BAC = BCWS at month 6th = final value of BCWP.
CPI = BCWP/ACWP = 0.5; SPI = BCWP / BCWS = 0.8
SV = BCWP – BCWS = 200 – 250 = -50 ;Behind schedule by 50 worth value
CV = BCWP – ACWP = 200 – 400 = -200 Cost Overrun by 200 worth value
Note for commit to a CPI of 1.5 for the remaining duration of the project
Current CPI is abnormal ==>Recalculating EAC
EAC is ACWP at the end of project, ACWP in month 6th is = EAC
ETC = BAC – BCWP = 500 – 200 = 300
EAC = ACWP + ETC
EAC = ACWP + (BAC – BCWP)
EAC = 400 + (500 – 200) = 700
Creating new Baseline (Re-Baseline)
Figure 2 – New Baseline (Re-Baseline month 3rd)
New Baseline (Re-Baseline) in Month 3rd
– Adjusting BAC, old BAC = 500, new BAC = EAC = 700, Because BAC changing which means scope is changing BCWS affected to change. Remember that if scope remain still, BAC not change then BCWS and BCWP will be remain as it is. See Humprey references1
– ACWP remain same = 400
– BCWS = ACWP = 400 ; Because cost overrun worth value 200 distributed to remaining month 4th until month 6th
– BCWP = ACWP = 400; Because cost overrun worth value 200 distributed to remaining month 4th until month 6th
– In other word New Baseline is old project scope worth value 500 added by cost overrun worth value 200 become Project with worth value 700
Disputation for Note “for commit to a CPI of 1.5 for the remaining duration of the project”
When we commit to get CPI 1.5 at the end of project month 6th the analysis is (Consider only New Baseline month 4th until month 6th)
CPI= ETC /ACWP cumulative month4 to month 6
1.5 = ETC / ACWP cumulative month4 to month 6
3/2 = 300/ ACWP cumulative month4 to month 6
ACWP cumulative month4 to month 6 = 200 or ETC for CPI 1.5 = 200 to complete work deliverable worth of 300 values
From Old BAC = 500, already expense ACWP = 400,
Remaining Budget = Old BAC – ACWP = 500 – 400 = 100
To commit CP 1.5 at we need to ask budgetary enhancement for = ACWP cumulative month4 to month 6 – Remaining Budget = 300 – 200 = 100
Usually in normal practices CPI is calculated on all the lifetime period of project. So for this study case CPI should be normally counted from month 1st until month 6th. Calculation CPI from month 4 to month 6 is not normal practice.
Eventhough there are dissention in this study case about how CPI calculated but this study case is a good practice how to create new baseline (re-baseline) concept when BAC or scope changes
This study case was taken from PMBOK 5th edition. In I want to be a PMP® linkedin group discussion 17 September 2013 Questions from PMBok Fifth edition – Cost Alakananda Rao, PMP
- Humphreys, Gary C. (2011). What is Scheduling? Schedule Types. Project Management Using Earned Value 2nd Edition,(pp. 137-146). Orange, United States Of America : Humphreys & Associates Inc
- TestEagle. (2013). how-to-calculate-estimate-at-completion-eac-for-the-pmp-exam. Retrieved September 17, 2013 from http://testeagle.com/blog/2012/03/how-to-calculate-estimate-at-completion-eac-for-the-pmp-exam/
- Rao, Alakananda (2013). I want to be a PMP® linkedin group . Questions from PMBok Fifth edition – Cost. Retrieved September 17, 2013 from http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&discussionID=274036493&gid=2356441&commentID=164825079&goback=%2Enpv_94027909_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_nav*4responsive*4tab*4profile_*1&trk=NUS_DISC_Q-subject#commentID_164825079