COST AND SCHEDULE PERFORMANCE BY WBS & OBS
- Art of determining and Presenting
- Technical Performance
- Make trade offs
- Technical performance
- Many Management Systems
- Were developed independently of each other
- Not well integrated
- Serve specific needs
- Project schedule
- Requirements Documents
- So Need to pull together data it so can be used in project management, be accurate, not mislead/misrepresent, and not be fragmented
Comparison actual performance against a baseline plan
Budget versus Actual cost
When budget is only considered it is difficult to judge status of project. May appear as cost underrun but cannot infer anything related to schedule.
Earned Value (EV) Calculated using
ACWP –Actual Cost of Work Performed
BCWS – Budgeted Cost of Work Scheduled
BCWP – Budgeted Cost of Work Performed
EV is the amount of work performed and remaining work
Method of providing indicators of project status
Can show status of tasks and Milestones
Useful in determining if completed ahead, behind, or on schedule, float available, etc…
But cannot give a value of x number of days ahead or behind
Work Breakdown Structure (WBS)
Break down of products and services that make up the project
Level 1: Includes work required to complete the project
Level 2: Depicts Project Products, software, etc.. To be developed, produced…
Level 3: divides level2 into component parts and services
Level #: Further defines project components and parts to a manageable degree suitable for assigning responsibility for accomplishment
A logically Developed WBS facilitates schedule development at certain levels that will accommodate System, subsystem, or component development, production, or construction
Operational Breakdown Structure (OBS)
Identifies the people that will do the work
Should account for factors such as work scope, complexity, volume, cost, time, duration, span of organizational control
Used to assign work to individuals responsible for accomplishment
Must be integrated to WBS to identify control accounts
WBS vs. OBS
Used to form control accounts
An organizational effort for a WBS element
Should represent a manageable unit of work and provide visibility but not be so many as to be cumbersome and costly to maintain
Work complexity, Funding, Time, and duration of work for replanning must be considered
Should provide sufficient detail so that adequate resources are available to complete the work
Should include all work to properly establish a realistic baseline for the entire project
Use formally structured project
Use WBS to recognize and define all effort involved in project and work that must be accomplished
Depending on type of project activities milestone, networks, Gantt chart, Manufacturing Resource planning can be used for scheduling Techniques
Networking: Used for Large One –of-a Kind projects. Document the workflow sequence and interdependencies between tasks. Used to measure the progress and analyze the critical path
There should be a master schedule that lays out the total scope of the project from beginning to end
Once established A Schedule Risk Assessment (SRA) can be performed to identify Technical, Programmatic, and schedule risks in a program and quantify the impact of risks on programs schedule
Integrated master plan (IMP) and Schedule (IMS)
Helps give visibility of an event based plan consisting of a hierarchy of program events
Used to identify events at the beginning of the program and developed prior to contract award
Includes discrete tasks, work packages, and planning packages from the the Performance Measurement Baseline (PMB)
Physical Products, Milestones, Technical Performance Goals, and other indicators that are used in Performance Measurement
Schedule will outline the time needed to accomplish the technical Scope, evaluate progress, and forecast completion dates for work
Should not change unless contractual modifications or deliberate management decisions require updating
Chages due to inability to complete work should be allowed and work arounds for problems should be displayed
Detail level schedules used to manage work and must be connected to the master schedule, and if included intermediate level schedules
Must be vertically traceable from master to detail level
The Detail Level Schedule takes the form of a control account planning sheet with work packages and tasks supporting control account work requirements
After Schedules for Control Accounts is established schedule data for higher level WBS or organizational elements can be derived by simply summarizing data
CONTROL ACCOUNT MANAGEMENT
Control Account is key management control Point
Responsibility for work accomplishment is established
Defined element of work to be performed by a specific organizational entity
Defined scope of work, Schedule, and Budget
Control account Manger (CAM) plans the detailed work tasks, manages accomplishment and reports regularly to the project manager
A Performance Measurement System (Earned Value Management Syatem EVMS) is dependant on good budgeting Practices.Provides a realistic baseline against which performance can be compared to Internal budgets must add up to the Contract Budget Base (CBB)
Total Budgets are set by management as cost goal for the project activities
Based on allocations from estimates of managerially significant elements of work (Control Accounts) each with a budgeted value in terms of overall project budget
As work is performed actual cost can be compared to the budgeted value to reflect cost performance. The contract negotiated cost provides the departure for the budget baseline
The distribution of budget to scheduled increments of work can be used to produce a time-phased budget baseline for the project.
The Spread of resources on a resource loaded schedule can be analyzed to find over and under allocating resources in order to maximize the efficient use of people, materials, facilities, etc…
Adjusting Schedule may involve contracted dates and target set by management which must be accommodated and may not result in the earliest possible completion date
Identifying cost elements
Cost Elements: Labor, Material, Subcontracts, and other direct cost should be identified so that reporting and analysis can be performed for the program manager and customer.
Budgets should be identified by cost elements (Labor, Material, Subcontracts, and other direct costs)
Cost element segregation is necessary to accommodate the differences of management and control of the elements so Cost variances can be analyzed.
Separates how much is related to labor performance and material cost
Helps determine estimated cost of work remaining
Undistributed Budget (UB)
Remainder of a project’s budget
Authorized for the internal organizations assigned to perform the work
Internal budgets must address the indirect and indirect activities, Direct costs are managed at the control account level while indirect costs usually managed at a more summary level in a pool arrangement
Planning must consider what parts of the project cannot be identified in the WBS or the OBS at a detail level so budget can be set aside for work and does not get distributed to other control accounts
MANAGEMENT RESERVE (MR)
Budget Set aside for Known Unknowns, or unforeseen work within the project’s scope of work
Used to reduce the risk due to complexity and uncertainty and management judgement
Used to provide budget and resource load the schedule for newly identified work at the control account level
Project Funding vs Performance budgeting
Funding = Real Money
Funding must be made available as required by management for internal projects, or by customers on contract. Allocation of the projects Total Budget or Contract Budget Base for the work to be performed. Each segment of work will be given a value that relates it to the project’s Total Budget. When the work is done it becomes the earned value regardless of actual cost. At the end of the project the earned value =
32 Guidelines for EVMS
Guideline 1 – Define Work Scope (WBS)
Guideline 2 – Define Project Organization (OBS)
Guideline 3 – Integrate Processes
Guideline 4 – Identify Overhead Management
Guideline 5 – Integrate WBS/OBS to Create Control Accounts
II. Planning, Scheduling, and Budgeting
Guideline 6 – Schedule with Network Logic
Guideline 7 – Set Measurement Indicators
Guideline 8 – Establish Budgets for Authorized Work
Guideline 9 – Budget by Cost Elements
Guideline 10 – Create Work Packages, Planning Packages
Guideline 11 – Sum Detail Budgets to Control Account
Guideline 12 – Level of Effort (LOE) Planning and Control
Guideline 13 – Establish Overhead Budgets
Guideline 14 – Identify Management Reserve and Undistributed Budget
Guideline 15 – Reconcile to Target Cost Goal
III. Accounting Considerations
Guideline 16 – Record Direct Costs
Guideline 17 – Summarize Direct Costs by WBS Elements
Guideline 18 – Summarize Direct Costs by OBS Elements
Guideline 19 – Record/Allocate Indirect Costs
Guideline 20 – Identify Unit and Lot Costs
Guideline 21 – Track and Report Material Costs and Quantities
IV. Analysis and Management Reports
Guideline 22 – Calculate Schedule Variance and Cost Variance
Guideline 23 – Identify Significant Variances for Analysis
Guideline 24 – Analyze Indirect Cost Variances
Guideline 25 – Summarize Information for Management
Guideline 26 – Implement Corrective Actions
Guideline 27 – Revise Estimate at Completion (EAC)
V. Revisions and Data Maintenance
Guideline 28 – Incorporate Changes in a Timely Manner
Guideline 29 – Reconcile Current to Prior Budgets
Guideline 30 – Control Retroactive Changes
Guideline 31 – Prevent Unauthorized Revisions
Guideline 32 – Document Performance Measurement Baseline (PMB) Changes
The 16 foundational guidelines are
Guideline 1: Define the authorized work elements for the program.
Guideline 3: Provide for the integration of the company’s planning, scheduling, budgeting, work authorization and cost accumulation processes with each other, and as appropriate, the program Work Breakdown Structure (WBS) and the program organizational.
PLANNING AND BUDGETING
Guideline 6: Schedule the authorized work in a manner, which describes the sequence of work and identifies significant task interdependencies required to meet the requirements of the program.
Guideline 7: Identify physical products, milestones, technical performance goals, or other indicators that will be used to measure progress.
Guideline 8: Establish and maintain a time-phased budget baseline, at the Control Account level, against which program performance can be measured.
Guideline 9: Establish budgets for authorized work with identification of significant cost elements (labor, material, etc.) as needed for internal management and for control of subcontractors.
Guideline 10: To the extent it is practical to identify the authorized work in discrete work packages, establish budgets for this work in terms of dollars, hours, or other measurable units.
Guideline 12: Identify and control level of effort activity by time-phased budgets established for this purpose. Only that effort which is immeasurable or for which measurement is impractical may be classified as level of effort.
Guideline 16: Record direct costs in a manner consistent with the budgets in a formal system controlled by the general books of account.
Guideline 21: For EVMS, the material accounting system will provide for:
Accurate cost accumulation and assignment of costs to Control Accounts in a manner consistent with the budgets using recognized, acceptable, costing techniques.
Cost performance measurement at the point in time most suitable for the category of material involved, but no earlier than the time of progress payments or actual receipt of material.
Full accountability of all material purchased for the program including the residual inventory.
ANALYSIS AND MANAGEMENT REPORTS
Guideline 23: Identify, at least monthly, the significant differences between both planned and actual schedule performance and planned and actual cost performance, and provide the reasons for the variances in detail needed by program management.
Guideline 26: Implement managerial actions taken as a result of earned value information.
Guideline 27: Develop revised estimates of cost at completion based on performance to date, commitment values for material, and estimate of future conditions. Compare this information with the performance measurement baseline to identify variances at completion important to company management and any applicable customer reporting requirements including statements of funding requirements.
REVISIONS AND DATA MAINTENANCE
Guideline 28: Incorporate authorized changes in a timely manner, recording the effects of such changes in budgets and schedules. In the directed effort prior to negotiation of a change, base such revisions on the amount estimated and budgeted to the program organizations.
Guideline 30: Control retroactive changes to records pertaining to work performed that would change previously report amounts for actual costs, earned value, or budgets.
Guideline 32: Document changes to the performance measurement baseline.
Questions For Stakeholders
- What Specific Business Needs Does The Project Meet Satisfy?
- What Measurable Goals Does The Project Define?(Requirements)
- What Operations and Processes Will be Included in the Project?
- How Are The Projects Scope, Time Constraints, and Cost Interrelated?
- Who Are The Stakeholders and Key Stakeholders of the Project?
- What Are The Stakeholder’s Requirements? What do They Need From the Project, What do They Expect, What Information do They Have
- What Will Determine if the Project is Successful?
- Who is Requesting the Project? Internal or External Customer/Business Analyst
- What are the Outputs of the Project… Up to the Final Product?