Parametric Models And Project Cost Management Accounting Essay

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A parametric model lets you estimate effort from an explicit set of variables: Program size, function points, program capability, facilities, modularity, and so on. The parametric model is based on a set of statistical assumptions and mathematical equations that express how the effort estimate depends on the parameters. It is calibrated by fitting the model to the measured productivity of a set of real projects.

Applying the parametric model takes the package-level analogy to another level of detail. The technical expert, rather than relying on gut feeling and experience to estimate the effort, uses his or her insight to assign values to the parameters. All parametric models consist of numerous variables each of which must involve some subjective judgments. Each of the parameter values is tantamount to an informed guess. A parametric model essentially replaces several informed guesses with one informed guess. There are several parametric estimation tools available.

Some of the commercially available tools use proprietary algorithms, while others require an element of faith. Certain of this claim to be tailored to object-oriented

Projects. But the ones I have seen do not consider use cases as a measure of Requirements, but rather seem mainly concerned with measures of object complexity (such as depth of inheritance). Certainly, it is true you can add effort by making your designs unnecessarily complex, but that insight does not help in planning. The literature on sizing object-oriented projects is remarkably sparse.

Therefore, we review Barry Boehm's Constructive Cost Model (COCOMO) family of models.

COCOMO

************

FOR FURTHER READING

article "Cost Models for Future Software Lifecycle Processes: COCOMO 2.0, by Barry Boehm,

Bradford Clark, Ellis Horowitz, and Chris Westland in Annals of Software Engineering (v. 1, pp. 57-94,1995).

Also check out NASA's ParametricCost-Estimating Handbook, available online at www.jsc.nasa.gov

/bu2/pcehg.html.

PMBOK

Project Cost Management

Project Cost Management includes the processes involved in planning, estimating, budgeting, and controlling costs so that the project can be completed within the approved budget. There are three major part in this management area:

1-Cost Estimating - developing an approximation of the costs of the resources needed to complete project activities.

2 Cost Budgeting - aggregating the estimated costs of individual activities or work packages to establish a cost baseline.

3 -Cost Control - influencing the factors that create cost variances and controlling changes to the project budget.

These processes interact with each other and with processes in the other Project management Knowledge Areas as well. Each process can involve effort from one or more persons or groups of persons based upon the needs of the project. Each process occurs at least once in every project and occurs in one or more project phases, if the project is divided into phases. Although the processes are presented here as discrete elements with well-defined interfaces, in practice they may overlap and interact in ways not detailed here.

Project Cost Management is primarily concerned with the cost of the resources needed to complete schedule activities. However, Project Cost Management should also consider the effect of project decisions on the cost of using, maintaining, and supporting the product, service, or result of the project. For example, limiting the number of design reviews can reduce the cost of the project at the expense of an increase in the customer's operating costs. This broader view of

Project Cost Management is often called life-cycle costing. Life-cycle costing, together with value engineering techniques, can improve decision-making and is used to reduce cost and execution time and to improve the quality and performance of the project deliverable.

Project Cost Management considers the information requirements of the project stakeholders. Different stakeholders will measure project costs in different ways and at different times. For example, the cost of an acquired item can be measured when the acquisition decision is made or committed, the order is placed, the item is delivered, and the actual cost is incurred or recorded for project accounting purposes.

Project manager should form and establishes the criteria for planning, structuring, estimating, budgeting, and controlling project costs. The cost management processes and their associated tools and techniques vary by application area, are usually selected during the project life cycle

definition, and are documented in the cost management plan.

the cost management plan can establish:

• Units of measure. Each unit used in measurements is defined, such as staff

hours, staff days, week, lump sum, etc., for each of the resources.

• Organizational procedures links. The WBS component used for the project cost accounting is called a control account (CA). Each control account is assigned a code or account number that is linked directly to the performing organization's accounting system. If cost estimates for planning packages are included in the control account, then the method for budgeting planning packages is included.

• Control thresholds. Variance thresholds for costs or other indicators (e.g., person-days, volume of product) at designated time points over the duration of the project can be defined to indicate the

1. Project Cost Management Overview

Project Cost Management Process Flow Diagram

Cost Estimating

Estimating schedule activity costs involves developing an approximation of the costs of the resources needed to complete each schedule activity. In approximating costs, the estimator considers the possible causes of variation of the cost estimates, including risks.

The cost estimating process considers whether the expected savings can offset the cost of the additional design work. Cost estimates are generally expressed in units of currency (dollars, euro, yen,etc.) to facilitate comparisons both within and across projects. In some cases, the estimator can use units of measure to estimate cost, such as staff hours or staff days, along with their cost estimates, to facilitate appropriate management control.

The accuracy of a project estimate will increase as the project progresses through the project life cycle. The costs for schedule activities are estimated for all resources that will be charged to the project. This includes, but is not limited to, labor, materials, equipment, services, and facilities, as well as special categories such as an inflation allowance or a contingency cost. A schedule activity cost estimate is a quantitative assessment of the likely costs of the resources required to complete the schedule activity.

A

Cost Estimating:

Inputs

1 Enterprise Environmental Factors

Like: Marketplace conditions • Commercial databases.

2 Organizational Process Assets • Cost estimating policies. • Cost estimating templates.

Historical information• Project files. • Project team knowledge. • Lessons learned.

3 Project Scope Statement

4 Work Breakdown Structure

The project's work breakdown structure (WBS) provides the relationship among all the components of the project and the project deliverables

5 WBS Dictionary

The WBS dictionary and related detailed statements of work provide an identification of the deliverables and a description of the work in each WBS component required to produce each deliverable.

6 Project Management Plan

The project management plan provides the overall plan for executing, monitoring, and controlling the project, and includes subsidiary plans that provide guidance and direction for cost anagement planning and control. To the extent that other planning outputs are available, they are considered during cost estimating.

Schedule management plan. The type and quantity of resources and the amount of time those resources are applied to complete the work of the project is a major part of determining the project cost. Schedule activity resources and their respective durations are used as key inputs to this process.

Staffing management plan.

Risk register.

Cost Estimating: Tools and Techniques

1 Analogous Estimating

Analogous cost estimating means using the actual cost of previous, similar projects as the basis for estimating the cost of the current project.

2 Determine Resource Cost Rates

The person determining the rates or the group preparing the estimates must know the unit cost rates, such as staff cost per hour and bulk material cost per cubic yard, for each resource to estimate schedule activity costs.

3 Bottom-up Estimating

This technique involves estimating the cost of individual work packages or individual schedule activities with the lowest level of detail. This detailed cost is then summarized or "rolled up" to higher levels for reporting and tracking purposes. The cost and accuracy of bottom-up cost estimating is typically motivated by the size and complexity of the individual schedule activity or work package. Generally, activities with smaller associated effort increase the accuracy of the schedule activity cost estimates.

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4 Parametric Estimating

Parametric estimating is a technique that uses a statistical relationship between historical data and other variables (e.g., square footage in construction, lines of code in software development, required labor hours) to calculate a cost estimate for a schedule activity resource. This technique can produce higher levels of accuracy depending upon the sophistication, as well as the underlying resource quantity and cost data built into the model. A cost-related example involves multiplying the planned quantity of work to be performed by the historical cost per unit to obtain

the estimated cost.

5- Project Management Software

Project management software, such as cost estimating software applications, computerized spreadsheets, and simulation and statistical tools, are widely used to assist with cost estimating. Such tools can simplify the use of some cost estimating techniques and thereby facilitate rapid consideration of various cost estimate alternatives.

6 Vendor Bid Analysis

Other cost estimating methods include vendor bid analysis and an analysis of what the project should cost. In cases where projects are won under competitive processes, additional cost estimating work can be required of the project team to examine the price of individual deliverables, and derive a cost that supports the final total project cost.

7 Reserve Analysis

Many cost estimators include reserves, also called contingency allowances, as costs in many schedule activity cost estimates. This has the inherent problem of potentially overstating the cost estimate for the schedule activity. Contingency reserves are estimated costs to be used at the discretion of the project manager to deal with anticipated, but not certain, events. These events are "known unknowns" and are part of the project scope and cost baselines.

One option to manage cost contingency reserves is to aggregate each schedule activity's cost contingency reserve for a group of related activities into a single contingency reserve that is assigned to a schedule activity. This schedule activity may be a zero duration activity that is placed across the network path for that group of schedule activities, and is used to hold the cost contingency reserve.

Alternatively, the schedule activity may be a buffer activity in the critical chain method, and is intentionally placed directly at the end of the network path for that group of schedule activities. As the schedule activities progress, the contingency reserve, as measured by resource onsumption of the non-buffer schedule activities, can be adjusted. As a result, the activity cost variances for the related group of schedule activities are more accurate because they are based on cost stimates that are not pessimistic.

8 Cost of Quality

Cost of quality can also be used to prepare the schedule activity cost estimate.

Cost Estimating: Outputs

.1 Activity Cost Estimates

An activity cost estimate is a quantitative assessment of the likely costs of the resources required to complete schedule activities. This type of estimate can be presented in summary form or in detail. Costs are estimated for all resources that are applied to the activity cost estimate. This includes, but is not limited to, labor, materials, equipment, services, facilities, information technology, and special categories such as an inflation allowance or cost contingency reserve.

.2 Activity Cost Estimate Supporting Detail

The amount and type of additional details supporting the schedule activity cost estimate vary by application area. Regardless of the level of detail, the supporting documentation should provide a clear, professional, and complete picture by which the cost estimate was derived.

Supporting detail for the activity cost estimates should include:

• Description of the schedule activity's project scope of work

• Documentation of the basis for the estimate (i.e., how it was developed)

• Documentation of any assumptions made

• Documentation of any constraints

.3 Requested Changes 7

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2 Cost Budgeting

Cost budgeting involves aggregating the estimated costs of individual schedule activities or work packages to establish a total cost baseline for measuring project performance. The project scope statement provides the summary budget. However, schedule activity or work package cost estimates are prepared prior to the detailed budget requests and work authorization [1].

Time-Phased Budget

Once you have a WBS and a schedule, you can go to the next step and develop a time-phased budget which details when you plan to spend the project's budget and what you expect to have accomplished at each level of expenditure. A time-phased budget is sometimes called an earned value plan.

At this juncture, you have all the data you need to create your initial budget. You set a project budget by assigning cost to each WBS item. Using your staffing plan and schedule, assign the human resources to each of the tasks. Using a spreadsheet or, better yet, a project management tool, you can calculate the labor expense. Given the labor rates for each job category, multiply the number of hours assigned to each of the resources by the rate. Add your estimates for the other costs-travel, software licenses, hardware, and whatever else you need.

By comparing the planned and actual money spent against the planned and actual completion of the WBS items, you have a measure of how well you are tracking the budget. If the entire budget for a set of WBS items has been spent and the items are not complete, clearly you have a problem staying on budget. A variety of differences and ratios are available for determining budget health of a project once you have a time-phased budget. These ratios can and should be tracked on a monthly basis [2].

Cost Budgeting: Inputs, Tools & Techniques, and Outputs

Cost Budgeting: Inputs

1 Project Scope Statement

2 Work Breakdown Structure

The project work breakdown structure (WBS) provides the relationship among all the components of the project and the project deliverables

3 WBS Dictionary

The WBS dictionary and related detailed statements of work provide an identification of the deliverables and a description of the work in each WBS component required to produce each deliverable.

4 Activity Cost Estimates

The cost estimates for each schedule activity within a work package are aggregated to obtain a cost estimate for each work package.

6 Project Schedule

The project schedule includes planned start and finish dates for the project's schedule activities, schedule milestones, work packages, planning packages, and control accounts. This information is used to aggregate costs to the calendar periods when the costs are planned to be incurred.

7 Resource Calendars

8- Contract

Contract information related to what products, services, or results have been purchased - and their costs - are used in developing the budget.

.9 Cost Management Plan

The cost management plan component of the project management plan and other subsidiary plans are considered during cost budgeting.

Cost Budgeting: Tools and Techniques

1 Cost Aggregation

Schedule activity cost estimates are aggregated by work packages in accordance with the WBS. The work package cost estimates are then aggregated for the higher component levels of the WBS, such as control accounts, and ultimately for the entire project.

2 Reserve Analysis

3 Parametric Estimating

4 Funding Limit Reconciliation

Large variations in the periodic expenditure of funds are usually undesirable for organizational operations. Therefore, the expenditure of funds is reconciled with the funding limits set by the customer or performing organization on the disbursement of funds for the project. Reconciliation will necessitate the scheduling of work to be adjusted to smooth or regulate those expenditures, which is accomplished by placing imposed date constraints for some work packages, schedule milestones, or WBS components into the project schedule. Rescheduling can impact the allocation of resources. If funds were used as a limiting resource in the Schedule Development process, then the process is repeated using the new imposed date constraints. The final product of these planning iterations is a cost baseline.

Cost Budgeting: Outputs

1 Cost Baseline

The cost baseline is a time -phased budget that is used as a basis against which to measure, monitor, and control overall cost performance on the project. It is developed by summing estimated costs by period and is usually displayed in the form of an S-curve, as illustrated in Figure **. The cost baseline is a component of the project management plan.

Many projects, especially large ones, have multiple cost or resource baselines, and consumables production baselines (e.g., cubic yards of concrete per day) to measure different aspects of project performance.

2 Project Funding Requirements

3 Cost Management Plan (Updates)

If approved change requests result from the Cost Budgeting process, then the cost management plan component of the project management plan is updated if those approved changes impact the management of costs.

4 Requested Changes

7.3 Cost Control

Project cost control includes:

• Influencing the factors that create changes to the cost baseline • Ensuring requested changes are agreed upon • Managing the actual changes when and as they occur • Assuring that potential cost overruns do not exceed the authorized funding periodically and in total for the project • Monitoring cost performance to detect and understand variances from the cost baseline • Recording all appropriate changes accurately against the cost baseline • Preventing incorrect, inappropriate, or unapproved changes from being included in the reported cost or resource usage

• Informing appropriate stakeholders of approved changes • Acting to bring expected cost overruns within acceptable limits. Project cost control searches out the causes of positive and negative variances and is part of Integrated Change Control [1]

Budget Tracking

Budget tracking is a way to assess whether the amount you have spent at any point in

the project is in line with your plan. The tracking techniques in this section provide two views on the financial status:

Variances. The difference between actual and planned spending.

Projected costs. Estimates of the actual cost of the project based on the current rate of spending.

Become familiar with the following terms in order to understand and communicate budget tracking:

• Budgeted cost of work scheduled (BCWS)

• Budget cost of work performed (BCWP)

• Earned value (EV)

• Actual cost of work performed (ACWP)

• Percent complete (PC)

• Cost variance (CV)

• Cost variance index (CVI)

• Schedule variance (SV)

• Schedule variance index (SVI)

• Cost performance index (CPI)

• Estimate at complete (EAC)

• Variance at complete (VAC)

Tracking these measures also gives you the view of the program you need to

control your spending. The variances tell you whether you are spending money

faster than you should for the amount of work accomplished. The completion

estimates, EAC and VAC, can help you determine whether your budget is

adequate or adjustments are needed.

I described how to create a time-phase budget-a plan of how you expect to spend money during the phases of each of the builds. This is the budgeted cost of work scheduled (BCWS), sometimes called planned cost. To determine the BCWS at a given date, go to your Gantt chart to see how much of the project you planned to have completed and add up the cost of the planned budget items done to that point. These costs generally include the labor, the staff assigned to the effort, hardware and software, and others, such as planned travel and meeting costs.

The BCWS does not measure value of the actual work performed. The accepted way to measure the planned and accomplished work is to assign a dollar value, called the earned value, to the scheduled work. Conceptually, if at any point in the program you can determine how much of the budget should have been spent to accomplish the amount of completed work, you have a basis of comparison for deciding if you are ahead or behind in your budget. If you have spent more than you expected to reach this point, you are behind budget; if you have spent less, you are ahead of budget. The earned value of the work is measured by the budgeted cost of work performed (BCWP). Compute the BCWP by assessing how far along you are in the development-the amount of work complete-and by computing the budget for that amount of work. [2]

Figure Cost Control: Inputs, Tools & Techniques, and Outputs

Cost Control: Inputs

1 Cost Baseline

2 Project Funding Requirements

3 Performance Reports

4 Work Performance Information

Work performance information pertaining to the status and cost of project activities being performed is collected. This information includes, but is not limited to: • Deliverables that have been completed and those not yet completed • Costs authorized and incurred • Estimates to complete the schedule activities • Percent physically complete of the schedule activities.

.5 Approved Change Requests

.6 Project Management Plan

Cost Control: Tools and Techniques

1 Cost Change Control System

2 Performance Measurement Analysis

Performance measurement techniques help to assess the magnitude of any variances that will invariably occur. The earned value technique (EVT) compares the cumulative value of the budgeted cost of work performed (earned) at the original allocated budget amount to both the budgeted cost of work scheduled (planned) and to the actual cost of work performed (actual). This technique is especially useful for cost control, resource management, and production.

An important part of cost control is to determine the cause of a variance, the magnitude of the variance, and to decide if the variance requires corrective action.

The earned value technique uses the cost baseline contained in the project management plan to assess project progress and the magnitude of any variations that occur. The earned value technique involves developing these key values for each schedule activity, work package, or control account:

• Planned value (PV). PV is the budgeted cost for the work scheduled to be completed on an activity or WBS component up to a given point in time.

• Earned value (EV). EV is the budgeted amount for the work actually completed on the schedule activity or WBS component during a given time period.

This technique is of particular interest to software project managers. No longer must software projects use up all their resources before there is a harsh realization that much of the work has not been completed, forcing features to be dropped to stay within the added budget authorized by management. Earned-value project management can be most helpful to any software project manager who has made a firm ommitment to complete all the features within a definitive schedule and for a finite amount of funds[3].

The formulas provide a means to understand the financial health of a project without having to reassess the cost value for each of the unfinished tasks[4].

• Actual cost (AC). AC is the total cost incurred in accomplishing work on the schedule activity or WBS component during a given time period. This AC must correspond in definition and coverage to whatever was budgeted for the PV and the EV (e.g., direct hours only, direct costs only, or all costs including indirect costs).

7

• Estimate to complete (ETC) and estimate at completion (EAC). See ETC and EAC development, described in the following technique on forecasting. The PV, EV, and AC values are used in combination to provide performance measures of whether or not work is being accomplished as planned at any given point in time. The most commonly used measures are cost variance (CV) and schedule variance (SV). The amount of variance of the CV and SV values tend to decrease as the project reaches completion due to the compensating effect of more work being accomplished. Predetermined acceptable variance values that will decrease over time as the project progresses towards completion can be established in the cost management plan.

• Cost variance (CV). CV equals earned value (EV) minus actual cost (AC). The cost variance at the end of the project will be the difference between the budget at completion (BAC) and the actual amount spent. Formula: CV= EV - AC

• Schedule variance (SV). SV equals earned value (EV) minus planned value (PV). Schedule variance will ultimately equal zero when the project is completed because all of the planned values will have been earned. Formula: SV = EV - PV

These two values, the CV and SV, can be converted to efficiency indicators to reflect the cost and schedule performance of any project.

• Cost performance index (CPI). A CPI value less than 1.0 indicates a cost overrun of the estimates. A CPI value greater than 1.0 indicates a cost under run of the estimates. CPI equals the ratio of the EV to the AC. The CPI is the most commonly used cost-efficiency indicator.

Formula: CPI = EV/AC

• Cumulative CPI (CPIC). The cumulative CPI is widely used to forecast project costs at completion. CPIC equals the sum of the periodic earned values (EVC) divided by the sum of the individual actual costs (ACC).

Formula: CPIC = EVC/ACC

• Schedule performance index (SPI). The SPI is used, in addition to the schedule status (Section 6.6.2.1), to predict the completion date and is sometimes used in conjunction with the CPI to forecast the project completion estimates. SPI equals the ratio of the EV to the PV.

Formula: SPI = EV/PV

Figure ** uses S-curves to display cumulative EV data for a project that is

over budget and behind the work plan.

[1]

For object-oriented programs, we suggest you adopt the following methodsto compute the BCWS and BCWP values when you are between phases:

BCWS(Budgeted cost of work scheduled).

*******

BCWP(Budget cost of work performed)

****

For example, if during the inception phase, you plan to develop 350 use cases and have completed 175, claim the BCWP for that phase is 50 percent of the BCWS of the phase.

BCWS and BCWP are views of your budget, not your spending. With BCWS and BCWP, you have a view of how much money you expected have spent at a given point in time (BCWS) and how much you expected to spend for the amount of work actually accomplished (BCWP).

To complete the picture, you need to track how much money you actually spent. You might be right on schedule-in which case, BCWS and BCWP are equal-but still have spent more or less than planned.

The actual cost of work performed (ACWP)

is the amount of money spent to date. It is computed by adding up the project's expenditures. Your accounting department usually provides the information. The other financial measures are computed from the BCWS, BCWP, and the ACWP. Each of the calculations provides a useful measure for assessing how well you are tracking the budget. The next two measures are variances. Variances are differences between actual and planned values.

The cost variance (CV) is the difference between planned and actual cost for the accomplished effort.

CV = BCWP - ACWP

It measures the difference between what you planned to spend and what you actually spent to do the amount of work done to date. If the CV is negative, you have a cost overrun; if it is positive, you have spent less then you expected to get the work done you are ahead of budget.

CV = BCWP - ACWP

The schedule variance (SV) is the difference between the cost of the work accomplished to date and the cost of the work scheduled to date.

SV = BCWP - BCWS

It measures the difference in the value of the work done and the work you expected to be done. If the value of the work actually done is less than you planned at a given point in time, the SV is negative and you are behind schedule. On the other hand, a positive SV means your team has done more work that you expected for this point in time, and so you are ahead ofschedule.

The percent complete (PC) is the percentage of the scheduled work to date that is actually completed.

PC = 100 Ã- BCWP / BCWS

The PC provides a view of the same information as the SV, normalized by the size of budget. It illustrates the importance of the SV.

In addition to the PC, two other normalized values are of interest: CV and SV,

normalized by the appropriate view of the budget.

The cost variance index(CVI)

is the cost variance normalized by the budgeted cost of work performed.

CVI = CV/BCWP = (BCWP - ACWP)/BCWP

The schedule variance index (SVI)

is the schedule variance normalized by the budgeted cost of work scheduled.

SVI = SV/BCWS = (BCWP - BCWS)/BCW

The CVI and SVI are used in the same way as the CV and SV, respectively.They measure whether the work done and money spent is on budget. By normalizing the variances with respect to the budgets, the CVI and SVI provide a comparison of the size of the variance and the budget. The quotients put the size of the variances in perspective.

Understanding the Variances

SV and CV are independent quantities. Knowing one will not enable you to compute the other. For example, it is possible to be ahead of schedule but over budget. Table 9.1 covers all the possibilities.

SV < 0

On or under budget and on or ahead of schedule: At this point in time, the amount of work performed is greater than or equal to the amount planned. In addition, you have not spent more than planned for work performed. This situation occurs when the planned resource gets the work done early or exactly on time.

SV < 0

On or under budget and behind schedule: At this point in time, the amount of work accomplished is less than planned. However, you have not spent more than planned for the work. This situation may arise if not all of your planned staff has been available. The smaller staff has performed well, but they cannot keep up with the schedule.

CV < 0

Over budget and on or ahead of schedule: At this point in time, you have spent more than planned for the work accomplished. However, that work was done before the planned date. This situation may arise if you have more staff than planned working the problem; however, that staff brought in the work ahead of schedule.

CV < 0

Over budget and behind schedule: At this point in time, you have spent more than

planned for the work accomplished and that work is behind schedule. This situation

may arise if your planned staff does not get the work done as rapidly as planned. They have charged the project at the planned rate, but the amount of work accomplished is less than expected. In this situation, the cost of the work accomplished is greater than planned.

Tracking the values over time on a graph helps to determine budget trends-whether the variances are growing over time. This lets you see whether your variances are getting better or worse. See Figure ** where the ACWP, BCWS, and BCWP are graphed.

The difference between the lines is variance. If the project were going exactly according the plan, the graphs would line up. The vertical line shows the completion. The horizontal line at the top is the final budget. If the project goes exactly as planned, the graphs will cross where the completion date and the BAC line intersect. The graph

gives you a visual representation of the budget trends. If the gaps between the lines is growing, then so are your variances. If it appears the graphs will cross the vertical line above the BAC line, then you are over budget.[2]

Figure 7-7. Illustrative Graphic Performance Report

The earned value technique in its various forms is a commonly used method of performance measurement. It integrates project scope, cost (or resource) and schedule measures to help the project management team assess project performance.

.4 Project Performance Reviews

Performance reviews compare cost performance over time, schedule activities or work packages overrunning and underrunning budget (planned value), milestones due, and milestones met.

Performance reviews are meetings held to assess schedule activity, work package, or cost account status and progress, and are typically used in conjunction with one or more of the following performance-reporting techniques:

• Variance analysis. Variance analysis involves comparing actual project performance to planned or expected performance. Cost and schedule variances are the most frequently analyzed, but variances from plan in the areas of project scope, resource, quality, and risk are often of equal or greater importance.

• Trend analysis. Trend analysis involves examining project performance over time to determine if performance is improving or deteriorating.

• Earned value technique. The earned value technique compares planned performance to actual performance.

6 Variance Management

The cost management plan describes how cost variances will be managed, for example, having different responses to major or minor problems. The amount of variance tends to decrease as more work is accomplished. The larger variances allowed at the start of the project can be decreased as the project nears completion.

Cost Control: Outputs

Considering with time

Earned value management was originally developed for cost management and has not widely been used for forecasting project duration. However, recent research trends show an increase of interest to use performance indicators for predicting total project duration.

[A comparison of different project duration forecasting methods using earned value metrics

Stephan Vandevoordea, 1, E-mail The Corresponding Authorand Mario Vanhoucke]

S Vandevoorde, M Vanhoucke - International Journal of Project …, 2006 - Elsevier

Refrences:

1- PMBOK

2- Object-Oriented Project Management with UML,(Publisher: John Wiley & Sons, nc.)

Author(s): Murray Cantor ISBN: 0471253030 Publication Date: 08/01/98

3- Earned Value Project Management A Powerful Tool for Software Projects Quentin W. Fleming and Joel M. Koppelman Primavera Systems, Inc.

4- Connecting Earned Value to the Schedule

Walt Lipke Software Division Tinker AFB, Oklahoma

W Lipke - The Measurable News, 2004 - earnedschedule.com

FOR FURTHER READING

See Harold Kerzner's textbook, Project Management, published by Van Nostrand Reinhold for more detail on budget tracking and cost control.

less detailed discussion is found in James Lewis', Fundamentals of Project Management, published by the American Management Association in 1997.

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