Are your project consultants creatingless value than what you're paying them?

By James Hallstrom, PMP on October 22nd, 2009

Common Sponsor questions

● Are we on budget?

● Are we on schedule?

● Why do we need to spend X dollars every month on the project consultants? What are they doing?

Are we on budget?

● Cost Performance Index (CPI)● CPI = Budget cost of work performed / Actual

cost work performed or CPI = BCWP / ACWP

Jan Feb Mar Apr May Jun0

0.25

0.5

0.75

1

1.25

1.5

1.75

2

CPI versus Time

Time

CP

I

Under Budget

Over Budget

Fig. 1: CPI

Are we on Schedule?

● Schedule Performance Index (SPI)● SPI = Budget cost of work performed / Budget

cost of work scheduled or SPI = BCWP / BCWS

Jan Feb Mar Apr May Jun0

0.25

0.5

0.75

1

1.25

1.5

1.75

2

SPI versus Time

Time

SP

I

Ahead of Schedule

Behind Schedule

Fig. 2: SPI

Why do we need to spend X dollars every month on the project

consultants? What are they doing?

● Earned Value Management can answer this along with the first two questions.

Why do we need to spend X dollars every month on the project

consultants? What are they doing?

● Find the consultants' PV, EV and AC● PV = Planned Value. It's the value of work

planned (BCWS)● EV = Earned Value. It's the value of work

performed to date (BCWP)● AC = Actual Cost of the work performed (ACWP)

Break down consultants' tasks

● View project work for consultants only.

Jan Feb Mar Apr May Jun Jul0

1000

2000

3000

4000

5000

6000

7000

8000

Project Work versus Time

Time

Wor

k C

ompl

eted

in h

rs Ahead of Schedule

Fig. 4: Project Work

Behind Schedule

Break down project

● Change this to BCWS by multiplying the hours by the consultants' rate. Use blended rate if you have manager consultants that are not included in the WBS. This is the consultants' PV.

Jan Feb Mar Apr May Jun Jul0

50100150200250300350400450500550600650700

PV versus Time

Time

Dol

lars

spe

nt in

thou

sand

s

Fig. 5: Planned Value or BCWS(Budgeted Cost of Work Scheduled)

Under Budget

Over Budget

Calculate consultants' EV and AC

● Every reporting period calculate your consultants' EV and AC and plot on their PV chart.

Jan Feb Mar Apr May Jun Jul0

50100150200250300350400450500550600650700

Std EVM chart

PVEVAC

Time

Dol

lars

in th

ousa

nds

Fig. 6: PV, EV and AC

Jan Feb Mar Apr May Jun Jul0

50100150200250300350400450500550600650700

Std EVM chart

PVEVAC

Time

Dol

lars

in th

ousa

nds

Fig. 6: PV, EV and AC

$50k

$60K

1 wk

Schedule variance is 1 week behind or $50k below plan

Cost variance is $60k below work performed

How do you create/capture this data?

● Many software programs can calculate PV, EV and AC values for the project plan

OR ● Use a spreadsheet, as I used in my last project

Cut task details out of the Project Plan

Paste into spreadsheet

Spreadsheet is located at: http://tinyurl.com/yj52qw3

Spreadsheet calculates PV and EV

Plots PV and EV data

Cut and Paste into weekly presentation

Issues and Concerns1. Overhead costs (PM and leadership) need to be included. Normally

these aren't tasks on the project plan.

2. Task estimates need to be as accurate as possible. Under-estimating will cause resources to appear over-paid.

3. Scope changes will change the PV curve and descoping completed work will cause EV to decrease. The spreadsheet will recreate the PV curve but not the EV curve. Any descoping of completed or partially completed work will make resources appear to be over-paid.

4. Calculating work accomplished based on percent complete or using start/finish/current date both work but accuracy is the key.