Project Management in Practice

Beyond the alphabet soup of PRINCE2, MSP, MoP, PMBOK, ITIL, Agile

Tag Archives: scope

How do I know if my project is going well?


Cost Variance

What is the main job as a project manager? If you go by the PRINCE2 manual, it will tell you my job is to control the 6 parameters in a project – time, cost, quality, scope, risk and benefit. Let’s look a bit deeper.

Schedule Variance

In most cases, unless you are part of a portfolio of projects, most likely you as a project manager won’t be responsible for the benefits realisation. This is there to ensure the project is always concerned with delivering to the business case as closely as possible. With risks you can plan and have management strategies and specific budgets. If it is outside your tolerance levels, you have the project board to get direction from. You can tightly control scope through the mechanism set out for your project – either the project board itself or a designated change authority. Quality management is one area where PRINCE2 is quite prescriptive and actually provides a mechanism.

When you think about it closely, the two things that will set you apart as a project manager is on time, on budget delivery. Usually most project boards are willing to consider some amount of off-specification or compromise on quality. When time is impacted, you cannot bring the project back to equilibrium without compromising one of cost, quality, scope or quality.

Cost Performance Indicator (CPI)

Schedule Performance Indicator (SPI)

Where you or the project board may need to compromise may depend on how far the project is likely to be delayed and what the projected cost will be under the current scope and quality. It is very easy to know that the project is 2 weeks behind. Does that mean that the project will be delivered only 2 weeks later than scheduled? If you delve down into the reasons for the delay, the most likely causes are underestimating efforts or risks. It is more likely rest of the project will follow the delay pattern you’re seeing than what you had originally planned. So how do you measure the most likely completion date and cost?

Project Health

This is where Earned Value Analysis (EVA) plays a huge role. In your role in monitoring project progress, reviewing this pattern is critical. Say you are part of the way through a project. So far you have completed work that you had planned 758.55 hours to complete. In fact it has taken you an additional 34.70 hours to achieve this. This is your schedule variance. It is obvious that you’re spending more than what you planned. This on its own does not necessarily indicate the project is in trouble. In fact, the reason you may be producing the additional output may be because you are significantly ahead of schedule. Using less hours is also not necessarily an indication of being on track. You may be burning less hours than planned and as a result falling further behind in your project.

Project Health Over Time

To get a better sense of this, compare how much of the schedule you expected to be through at the current date. In the project I am using to illustrate, I had expected to complete about 786 hours of earned value (completed tasks). This tells me I am also behind on schedule. How far ahead or behind schedule and cost I am can easily be calculated by calculating the SPI and CPI indicators. If you multiply the two, you get an accurate reflection of where your project is. In my case here, I’m slightly behind on both cost and schedule.

CPI is critical to forecast what your likely final cost would be, based on current status of the projects. The fact that the estimates in the project so far has been slightly less than what it has taken to implement them, means the other estimates are also out. Plot the project health indicators each time you monitor progress. It will very quickly give you a feel for the status. Any single week’s assessment may not give you an accurate reflection of where you are.

Estimated Final Cost

Project estimates, especially in software development, is an art rather than science. If you get within 5% of time and cost, I think you have been successful. Therefore, I consider anything around 0.95 x 0.95 = 0.9 to be around the low side of acceptable result. Ideally you are not out by 5% on both counts. A project health score of 0.95 would be an outstanding achievement. How do I calculate what the likely final cost is? Divide the original planned cost by the current CPI. Based on current rate, this is what the final cost will be. Estimating final scheduled delivery is slightly more complex, as you have to consider the critical path. If the progress is ahead of schedule in tasks outside the critical path, in reality you won’t gain any schedule reduction.

The most crucial part of a project manager’s job is to ensure professional management of the project itself. The key to achieving this is ensuring anyone responsible for making decisions about the project is fully aware of how the project is progressing. Something running behind schedule and cost should not come as a surprise near the end of the project.

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