Variance and Earned Value After a period of meticulous planning, project managers (PM) anticipate that their projects will be executed on schedule and within the proposed budget. According to Maheshwari and Credle (2010), there are internal and external factors that can impede a project’s progress. Therefore, once a project is in motion PMs often rely on tools to assist them with staying on course - and to mitigate project risk. One such tool is the Earned Value Measurement System (EVMS) that can be used to quantify a project 's progress and assist PMs with managing and controlling project costs, instead of merely monitoring costs during various stages of a project. The EVMS can also be used to forecast a project’s completion date and present an analysis of variances, which may occur due to additional or misinterpreted requirements, to determine a project’s earned value (Kerzner, 2013). According to Hayes (2002), earned value analysis is primarily performance focused; however, it is a methodology which accounts for a project’s scope, schedule, and overall budget. Furthermore, the scope is defined by separating a project into measurable tasks or deliverables such as labor and materials, which can help a PM to manage and track the status of each task more efficiently. This is essential because although a PM may carefully forecast requirements for a project’s labor and materials, a change in the market conditions could dictate the availability of resources; high demand could equate to a shortage of planned project materials, and labor resources (Mammarella, 2014). EVMS is a tool that detects project deviations and small variances, and allows a PM an opportunity to implement corrections early on (Kerzner, 2013). This paper will b... ... middle of paper ... ... the components of an EVMS and the importance of tracking and managing a project’s materials and labor costs effectively, and more importantly, separately. The EVMS can assist a PM to effectively track a project’s budget and provides essential information pertaining to BAC, EV, AC, PV, and CV. Projects are susceptible to being over budget and not on schedule due to various factors – internal and external (Maheshwari et al., 2010). Whether a project is deemed in jeopardy of going over budget due a PM misconstruing the project scope, or there is an unexpected occurrence such as a shortage of materials to successfully execute a project, implementing an EV analysis as a project management tool, “allows the project managers to refer to tangible numbers, not just a gut feeling, to determine whether the project is advancing on time and within budget” (Hayes, 2002, p. 80).
Decision tree approach: This approach is suitable for projects that do not have to be funded all at one time. The alternatives, probability of payoffs are identified using diagrams which are simple to understand and interpret with brief explanation giving important insights. It identifies managerial flexibility to reevaluate decisions using new information and then either invest additional funds or terminate the project.
Therefore, we will expound and clarify below. Management Analysis Capital Expenditure On the surface, making sure a project measures up to a range of consistent, prescribed criteria in order to be accepted would appear to be a sound business practice. But in our opinion, we think DC only focused on the financial management. We think they should utilize the strategy map strategy.
Kim, B. &. (2011). Combination of project cost forecasts in earned value management. Journal Of Construction Engineering & Management, 958-966.
Projects are widely used by many organizations and government institutions in the course of conducting their business. One of the reasons for this is because they have been proven to be effective in initiating change and translating strategic programs into daily activities. However, it has been established that most projects fail to deliver on time, budget, and customer specifications. In most cases, this failure is caused by over-optimism by the project management team. This over-optimism commonly referred to as optimism bias can simply be defined as overestimating the projects benefits and conversely underestimating its cost and duration time. Research have portrayed that this is often caused by failure to properly identify, understand, and manage effectively the risk associated with the project therefore putting its success at jeopardy(Mott McDonald, 2002). Fortunately, this biasness can be detected and minimized during the project gateway process.
Jugdev, K. (2012). Learning from Lessons Learned: Project Management Research Program. American Journal of Economics and Business Administration , 4(1), 13-22.
The following is not meant to be a complete procedural list, as it is meant to be indicative of the major parts of any EDMS project plan. This project plan can be considered a top level approach. A project manager following Project Management Institute (PMI) standards should be hired in order to establish a complete set of project management standards. This will most likely provide a better chance of success in the areas of time, costs, and desired results.
Project managers must possess the ability to use sound judgment based on the facts available to them, past experiences, and knowledge of current events to make effective decisions. Often, the success of project managers is based upon the outcomes of the decisions they did or did not make. As such, conducting performance assessments, during project implementation and after project completion, enables project managers and project stakeholders to accurately evaluate the success of the project. Projects are innately complex and multifaceted; therefore, project successes are difficult to measure and ascertain. “Based on an extensive review of the project success literature … a clear definition of project success does not exist and there is a need to develop meaningful and measurable constructs of project success” (Mir & Pinnington, 2014, p. 203).
Project managers must take cost estimates seriously if they want to complete software projects within budget constraints. After developing a good resource requirements list, project managers and their software development teams must develop several estimates of the costs for these resources. There are several different tools and techniques available for accomplishing good cost estimation.
Risk management is among the most important practices in the field of project management. A successful project completion and risk management often go side by side. An interesting aspect of project management is that a project can sti...
Project Management Institute (PMI) (2013). Project Management Professional (PMP) Handbook. [ONLINE] Available at: http://www.pmi.org/certification/~/media/pdf/certifications/pdc_pmphandbook.ashx. [Last Accessed 20 April 2014].
Analysis of variance (ANOVA) is a combination of statistical techniques in which a variance in a certain variable is divided into parts characteristic to various sources of variation. ANOVA provides a statistical evaluation of whether or not the ways of several congregates is equal and generalizes t-test of more than two groups. This technique is usually beneficial in comparing two, three, or more means of given tests, which can help businesses to identify trends. Moreover, the statistical technique is a practical tool that can be used to compare two groups either with a single independent variable or with two independent variables. It can also be used to assess differences in worker responses to employee engagement in a certain organization or to determine variations in employee productivity on specific work shifts depending on certain variables. As a result, analysis of variance is considered as a tool that can be used in manufacturing to improve or repair a process.
Project management is said to be completed within time when it completed within the “triple constraints”: cost, time and quality. And in a lot of causes, one them is sacrificed so as to meet the other two. Project managers prioritize which ones are the most important.
Per PMBOK (2008) the EVM is a performance measurement method used to “integrate project scope, cost, and schedule measures to help the project management team assess and measure project performance and progress” (p. 181). In the Gantt chart, we use that measurement to monitor the schedule and make adjustments as needed for to stay on time. In the EVM, it uses three key dimensions to calculate the projects standings. The planned value (PV) will establish a base line to compare the performance against. It establishes a baseline for the budget assigned to the phases or detailed activity throughout the full project. The earned value (EV) is a calculation to find the value of work performed in a specific phase or activity. This is done by multiplying the estimated percent of work completed for each task by the planned cost for that task. This will give you the amount of funds that should have been spent; you can compare that to the baseline created in the PV. The actual cost (AC) is the total cost that was spent on the activity being measured. This is the total cost of what the EV measured and it follows the baseline established in the PV. Schedule variance and cost variance will also be monitored against the
During the project initiation stage the business problem or opportunity is outlined whilst simultaneously various TM techniques and tools can be adopted to enhance productivity and overall project success. Value engineering is a technique which can be adopted to seize the opportunity to add value in the early stages of the project. The value of a system’s outputs is optimized by crafting a mix of performance (function) and costs. Allocating time for this technique is crucial during the initiation phase, as it deals with the value process solely during the inception and conception of a new product.
When planning a new project, how the project will be managed is one of the most important factors. The importance of a managers will determine the success of the project. The success of the project will be determined by how well it is managed. Project management is referred to as the discipline that entails the processes of carefully planning, organizing, controlling, and motivating the organization resources so as to foster and facilitate the achievement of specific established and desired goals and meet the specific criteria of success required in the organization (Larson, 2014). Over the course of this paper I will be discussing and analyzing the importance of project management.