Chapter 10 Monitoring and Information Systems

Dr. Chen, Special Topic: Project Management 1

Chapter 10Monitoring and Information

Systems

Jason C. H. Chen, Ph.D.Professor of MIS

School of Business AdministrationGonzaga UniversitySpokane, WA 99258

[email protected]

Dr. Chen, Special Topic: Project Management

Project Management


Figure Project Triangle (Project Management Trade-offs)

Time Cost

Scope

The objective of the PM is to define project’s scope realistically and ultimately deliver quality of product/service on time, on budget and within scope.

The center of project triangle

isQUALITY

[schedule] [budget]

[performance]


Project Management versus Process Management

“Ultimately, the parallels between process and project management give way to a fundamental difference: process management seeks to eliminate variability whereas project management must accept variability because each project is unique.”

Elton, J. & J. Roe. “Bringing Discipline to Project Management” Harvard Business Review


Terms

• Monitoring - Collecting, recording, and reporting information concerning any and all aspects of project performance

• Controlling - Uses the data supplied by monitoring to bring actual performance into compliance with the plan

• Evaluation - Judgments regarding the quality and effectiveness of project performance


The Planning–Monitoring–Controlling Cycle

• We mainly want to monitor:– Time (schedule)– Cost (budget)– Scope (project performance)

• Closed-loop system– Revised plans and schedules following

corrective actions


Project Authorization and Expenditure Control System Information Flow

Figure 10-1


Designing the Monitoring System

• Identify key factors to be controlled:– Scope– Cost– Time

• Information to be collected must be identified.


Designing the Monitoring System Continued

• Do not want to avoid collecting necessary data because it is hard to get.

• Do not want to collect too much data.• The next step is to design a reporting

system that gets the data to the proper people in a timely and understandable manner.


Data Collection

• Once we know the data we want, we need to decide how to collect it.

• Should the data be collected after some event?– Order and/or precedence

• Should it be collected on a regular basis?• Are there any special forms needed for data

collection?


Data/Information …

BAD information is WORSE than ...________information.NO


Attributes of Data/Information Quality

We realize that a firm needs better information to survive and prosper. Therefore, high quality information

products have to be provided to management.


ContentDimension

Form

Dimension

Time

Dimension

Attributes of Data/Information Quality

TimelinessCurrencyFrequencyTime Period

ClarityDetailOrderPresentationMedia

AccuracyRelevanceCompletenessConcisenessScopeperformance


Much Data Involves

• Frequency counts• Raw numbers• Subjective numeric ratings• Indicators• Verbal measures


Information Needs and Reporting• Everyone should be tied into the reporting

system – see order management slide

• Reports should address each level• Not at same depth and frequency for every

level– Lower-level needs detailed information– Senior management levels need overview (i.e.,

summarized) reports• Report frequency is typically high at low

levels and less frequent at higher levels


The Reporting Process

• Reports must contain relevant data.• Must be issued frequently.• Should be available in time for control.• Distribution of project reports depends on

interest– For senior management, may be few milestones

(what is it?)– For project manager, there may be many

critical points


Gantt Chart Milestone(for “Design” phase)

critical vs. non-critical Shows time estimates of tasks

A milestone represents an event or condition that marks the completion of a group of related tasks or the completion of a phase of the project.

If any activity on critical path delayed, the overall project time will be increased


Benefits of Detailed and Timely Reports

• Mutual understanding of the goals• Awareness of the progress of parallel

activities• Understanding the relationship of tasks• Early warning signals of problems• Minimizing the confusion• Higher visibility to top management• Keeping client up to date


Report Types

• Routine - Reports that are issued on a regular basis or each time the project reaches a milestone

• Exception - Reports that are generated when an usual condition occurs or as an informational vehicle when an unusual decision is made

• Special Analysis - Reports that result from studies commissioned to look into unexpected problems

• All are linked to data (database, knowledge base etc.)


Meetings

• Reports do not have to be written• They can be delivered verbally in meetings• Projects have too many meetings• The trick is to keep them to as few as

possible


Meeting Rules

• Use meetings to make group decisions• Start and end on time and have an agenda• Do your homework before the meeting• Take minutes (what is minutes?)• Avoid attributing remarks to individuals in

minutes• Avoid overly formal rules of procedure• Call meeting for serious problems


Common Reporting Problems

• Too much detail• Poor interface between the data/procedures

of the project and the information system of the parent company

• Poor correspondence between the planning process and the monitoring process


Earned Value Analysis• A valuable technique for monitoring overall

project performance is earned value.• One way is by using an aggregate performance

measure called earned value.• Have covered monitoring parts

– Timing and coordination between individual tasks is important

• Must also monitor performance of entire project – Crux of matter should not be overlooked


The Earned Value Chart and Calculations

• The Earned Value Chart and Calculations– The key element of the earned value technique

is the measurement of progress in addition to cost and schedule.

– If progress is not measured, then data about cost and schedule is meaningless because the PM does not know what resulted from the expenditures.


The Earned Value Chart and Calculations (cont.)

• Actual against baseline ignores the amount of work accomplished

• Earned value incorporates work accomplished

• Multiply the “estimated percent work complete” for each task by the “planned cost”

• Only need percent complete estimate for tasks currently in progress.


Rules to Aid in Estimating Percent Completion

• 50-50 rule– Taking credit for 50% complete when the task

begins and the other 50% when the task ends (50-50 estimate).

• 0-100 percent rule– Taking no credit for progress until the task

completes (0-100 rule).


Rules to Aid in Estimating Percent Completion

• Critical input use rule– Taking credit for progress based on the use of a

critical input. This works only if the process consuming the input is reliable and well defined.

• Proportionality rule– Taking credit for progress based on either the

percent of the budget that has been expended or the percent of the elapsed time that has gone by (proportionality rule).


The Earned Value Chart

Figure 10-6EAC = ETC + AC


Variances

• Variances can help analyze a project1. A negative variance is bad2. Cost and schedule variances are calculated as

the earned value minus some other measure• Will look at some of the more common

ones

CV = EV – AC


Cost Variance (CV)

• CV = EV – AC• EV: earned value• AC: actual cost of the work

• Negative variance indicates a cost overrun• Magnitude depends on the costs


Schedule Variance (SV)

• SV = EV – PV• PV: planned value (the cost of the work we

scheduled to be performed to date)

• Negative variance indicates you are behind schedule

• Measured using costs


Time Variance (TV)• TV = ST – AT• ST: time scheduled for the work that has been

performed• AT: actual time used to perform

• Negative variance indicates you are behind schedule

TV = SV / slopeSlope = PV / Days


Indices

• Cost Performance Index CPI = EV/AC

• Schedule Performance Index SPI = EV/PV

• Time Performance Index TPI = ST/AT

• Cost Schedule Index CSI = EV2/(AC)(PV)


Summary on Variances and Indices

• Cost Performance Index CPI = EV/AC

• Schedule Performance Index SPI = EV/PV

• Time Performance Index TPI = ST/AT

• Cost Schedule Index CSI = EV2/(AC)(PV)

CV = EV – ACCV: cost varianceEV: earned valueAC: actual cost of the workSV = EV – PVSV: schedule variancePV: planned value (the cost of the work we scheduled to be performed to date)TV = ST – ATTV: time varianceST: time scheduled for the work that has been performedAT: actual time used to perform

TV = SV / slopeSlope = PV / Days


“To complete” and “At Completion”

• Project manager reviewing what is complete and what remains

• Final cost and final completion date are moving targets

• The project manager compiles these into a to complete forecast

• Actual + forecast = final date and cost at completion


ETC and EAC

ETC = (BAC + EV)/CPIEAC = ETC + ACwhere,

ETC = Estimated cost to completeBAC = Budget at completionEV = Earned valueCPI = Cost performance indexEAC = Estimated cost at completionAC = Amount expended to date (actual cost)


Milestone Reporting

• Reports that are created when a project reaches a major milestone

• They are designed to keep everyone up-to-date on project status

• For executives and clients, these may be the only reports they receive


Computerized PMIS (Project Management Information Systems)

• Real projects are often large– Hundreds of tasks– Thousands of work units

• Reporting is clearly a job for the computer• Project management information systems

were one of the earlier applications• Initially focus was on scheduling• Now it includes, earned values, variances,

and more


PMIS Errors

• Computer paralysis• Information overload• Project isolation• Computer dependence• PMIS misdirection


Creating a Project Budget

• Top-down• Bottom-up

Project Plan

WBS

Scheduling Budgeting

The budget is a plan that identifies the resources, goals and schedule that allows a firm to achieve those goals


VIDEO

• VIDEO: • 7.

An_Introduction_to_the_Earned_Value_Measurement_System(15m)

• 8. Value_Driven_Project_Mgt(9m28s)


Problem 1:($000)

Month AC PV EV22 $540 $523 $535CV $(5) UnfavorableSV $12 Favorable

CV = EV – ACSV = EV – PVNegative variances are unfavorable.

EV: earned valueAC: actual cost of the work


Problem 2:($000)

Month AC PV EV5 $34 $42 $39

CV $5 FavorableCPI 1.15SV $(3) UnfavorableSPI 0.93

CV = EV – ACCPI = EV/ACSV = EV – PVSPI = EV/PV

Negative variances are unfavorable.If an index is less than one, the variance is unfavorable.

PV: planned value (the cost of the work we scheduled to be performed to date)


Problem 3:($000)

Day AC PV EV70 $78 $84 $81CV $3 FavorableCPI 1.04SV $(3) UnfavorableSPI 0.96CSI 1.00 On targetTV (2.50) Days delayed

CSI = (CPI)(SPI)TV = SV / slopeSlope = PV / DaysCSI is on target because the unfavorable SV is offset by the favorable CV.TV predicts that the project is 2.5 days behind schedule given the estimated EV.


Problem 4:($000)

Month AC PV EV17 $350 $475 $300CV $(50) UnfavorableCPI 0.86SV $(175) UnfavorableSPI 0.63CSI 0.54 Unfavorable

This project is seriously delayed (SPI) and also over budget (CV).

Cost Performance Index CPI = EV/AC

Schedule Performance Index SPI = EV/PV

Time Performance Index TPI = ST/AT

Cost Schedule Index CSI = EV2/(AC)(PV)


Problem 5:($000)Month AC PV EV

10 $23 $17 $20CV $(3) UnfavorableCPI 0.87SV $3 FavorableSPI 1.18CSI 1.03 Favorable

This project is ahead of schedule, but has an unfavorable CV.


Problem 6:($000)

AC = $550 AC = $750Day AC PV EV Day AC PV EV65 $550 $735 $678 65 $750 $735 $678CV $128 Favorable CV $(72) UnfavorableCPI 1.23 CPI 0.90SV $(57) Unfavorable SV $(57) UnfavorableSPI 0.92 SPI 0.92CSI 1.13 Favorable CSI 0.83 UnfavorableTV (5.00) Days behind TV (5.00) Days behind

The first step is to estimate EV. Starting with TV, we solve to determine SV. Once SV is known, EV can be determined because the PV was given.In problem 6, changing the AC value only affects cost-related measures and indices. The SV and SPI are unaffected by a change in AC.


Problem 7:($000)

AC PV EV $10.0 $12.0 $8.4

CV $(1.6) UnfavorableCPI 0.84SV $(3.6) UnfavorableSPI 0.70CSI 0.59 Unfavorable

In this problem, EV = 70% PV.This client is probably upset because the CSI suggests that this project is likely to be delayed and to cost more than originally planned.

Documents

Chapter 10 Monitoring and Information Systems