Lecture 14 Project Monitoring

1.040/1.401/ESD.018Project ManagementSpring 2007

Lecture 14Project Monitoring

Sam Labi and Fred MoavenzadehDepartment of Civil and Environmental EngineeringMassachusetts Institute of Technology

CLOSEOUTDEVELOPMENTOPERATIONS DESIGN,PLANNING FEASIBILITYFinally, the project begins!!!OrganizationEstimationPlanningFinanceEvaluationMonitoring & ControlChanges & ClaimsQuality & ReviewsCLOSEOUTRecall: The 5 Phases of Project Management

CLOSEOUTDEVELOPMENTOPERATIONS DESIGNPLANNING FEASIBILITYFinally, the project begins!!!OrganizationEstimationPlanningFinanceEvaluationMonitoring & ControlChanges & ClaimsQuality & ReviewsCLOSEOUTThis LectureRecall: The 5 Phases of Project Management

Project Monitoring -- Outline

Links to preceding and subsequent tasks

Key components of project monitoring

Measurement: basics of cost and schedule tracking

Performance MetricsEarned Value Analysis (EVA)Performance indicesHow is project monitoring linked to project evaluation and planning?What did we evaluate and plan that we also need to monitor?What have we achieved so far?How do we establish a track?Are we on the right track? How do we know?What is needed?

PART 1 Links between Project Monitoring and its Preceding or Succeeding Phases

1. Links to Preceding and Subsequent TasksCLOSEOUTDEVELOPMENTOPERATIONS DESIGNPLANNING FEASIBILITYOrganizationEstimationPlanningFinanceEvaluationMonitoring & ControlChanges & ClaimsQuality & ReviewsCLOSEOUTProducts:Cash flow diagram indicating Project cash inflows and outflows and when they are expected to occurNPV or B/C ratio each year of the analysis period1. ALink to Project Evaluation and FinanceProject Monitoring

1. Links to Preceding and Subsequent TasksCLOSEOUTDEVELOPMENTOPERATIONS DESIGNPLANNING FEASIBILITYOrganizationEstimationPlanningFinanceEvaluationMonitoring & ControlChanges & ClaimsQuality & ReviewsCLOSEOUTProducts:Cash flow diagram indicating Project cash inflows and outflows and when they are expected to occurNPV or B/C ratio each year of the analysis period1. ALink to Project Evaluation and FinanceProject MonitoringWhat is the actual cash flow for the project?

1. Links to Preceding and Subsequent TasksCLOSEOUTDEVELOPMENTOPERATIONS DESIGNPLANNING FEASIBILITYOrganizationEstimationPlanningFinanceEvaluationMonitoring & ControlChanges & ClaimsQuality & ReviewsCLOSEOUTProducts:Time-based or Work-based Schedules for Utilization of Funds, Labor, Equipment, Materials Time- Schedule for each Activity or TaskProject Costs for each ActivityExpected quality levels for each activity 1.BLink to Project Organization, Estimation, and PlanningProject MonitoringWhat amounts of man-power, machinery-hours, materials, is the project actually using?

1. Links to Preceding and Subsequent TasksCLOSEOUTDEVELOPMENTOPERATIONS DESIGNPLANNING FEASIBILITYOrganizationEstimationPlanningFinanceEvaluationMonitoring & ControlChanges & ClaimsQuality & ReviewsCLOSEOUTProducts:Time-based or Work-based Schedules for Utilization of Funds, Labor, Equipment, Materials Time- Schedule for each Activity or TaskProject Costs for each ActivityExpected quality levels for each activity 1.BLink to Project Organization, Estimation, and PlanningProject MonitoringWhat are the actual start-times, end times, durations of each activity?

1. Links to Preceding and Subsequent TasksCLOSEOUTDEVELOPMENTOPERATIONS DESIGNPLANNING FEASIBILITYOrganizationEstimationPlanningFinanceEvaluationMonitoring & ControlChanges & ClaimsQuality & ReviewsCLOSEOUTProducts:Time-based or Work-based Schedules for Utilization of Funds, Labor, Equipment, Materials Time- Schedule for each Activity or TaskProject Costs for each ActivityExpected quality levels for each activity 1.BLink to Project Organization, Estimation, and PlanningProject MonitoringHow much are we actually spending on each project activity or task?

1. Links to Preceding and Subsequent TasksCLOSEOUTDEVELOPMENTOPERATIONS DESIGNPLANNING FEASIBILITYOrganizationEstimationPlanningFinanceEvaluationMonitoring & ControlChanges & ClaimsQuality & ReviewsCLOSEOUTProducts:Time-based or Work-based Schedules for Utilization of Funds, Labor, Equipment, Materials Time- Schedule for each Activity or TaskProject Costs for each ActivityExpected quality levels for each activity 1.BLink to Project Organization, Estimation, and PlanningProject MonitoringWhat quality levels are we actually achieving?

1. Links to Preceding and Subsequent TasksCLOSEOUTDEVELOPMENTOPERATIONS DESIGNPLANNING FEASIBILITYOrganizationEstimationPlanningFinanceEvaluationMonitoring & ControlChanges & ClaimsQuality & ReviewsCLOSEOUTWhat do we learn from MonitoringHow can we use these lessons to improve the project ($, time, quality)1. CLink to Project ControlProject Monitoring

1. Links to Preceding and Subsequent TasksCLOSEOUTDEVELOPMENTOPERATIONS DESIGNPLANNING FEASIBILITYOrganizationEstimationPlanningFinanceEvaluationMonitoring ControlChanges & ClaimsQuality & ReviewsCLOSEOUTMONITORING AND CONTROL: A FEEDBACK PROCESS1. CLink to Project ControlProject Monitoring

Goal of Project Monitoring: To detect, at any time of the project, the following:Deviations from BudgetLagging SchedulePoor QualityKey questions in monitoring: What/How should we measure? Will we know it soon enough?

Goal of Project Control: To correct, at any time of the project, the deviations from budget, schedule, and quality.Bring project performance (budget, time, quality) back in line with plansSometimes, revise plans to bring them in line with performance!!!1. Links to Preceding and Subsequent Tasks1. CLink to Project Control

Correct Deviations 1. Links to Preceding and Subsequent TasksCLOSEOUTDEVELOPMENTOPERATIONS DESIGNPLANNING FEASIBILITYOrganizationEstimationPlanningFinanceEvaluationMonitoring ControlChanges & ClaimsQuality & ReviewsCLOSEOUT1. CLink to Project ControlProject MonitoringDetect deviations

Monitoring & Control The Feedback Process

Correct DeviationsMonitoring1. Measurement2. Performance Analysis)Detect deviationsControl1. Actions2. Revised Plans, Cash Flows, Schedules, etc.

Critical Role of a Feedback SystemIs the Feedback system necessary?Why not just carry out totally static planning or forward ever?

In real world, planning is never perfectly deterministicNothing always goes perfectly according to the original planWhy/How?Physical: Inclement weather, unforeseen geotechnical conditions, unforeseen utility location problems, etc.Early or late delivery of procured itemsChanges in Owner requirementsChanges in worker and equipment productivityCommunity opposition to project conditions (noise, dust, etc.Design and planning errors (inappropriate assumptions)

Definition of Project Monitoring Again, note that:

Performance could be in terms of time, money, or quality

Forecast performance = programAchieved performance = progress

3. Technology helps greatly in project monitoring (recall Lecture by Dr. Slaughter)Procedures for collecting data about project performance (achieved or forecasted)

Avoiding Deviations in Project Cost, Time, and Quality Common Challenges Faced by Project Managers Rank OrderChallenge Frequency 1Coping with end-date-driven schedules85% 2Coping with resource limitations83% 3Communicating effectively among task groups80% 4Gaining commitment from team members74% 5Establishing measurable milestones70% 6Coping with changes60% 7Working out project plan agreement with team57% 8Gaining commitment from management45% 9Dealing with conflict42%10Managing vendors and subcontractors38%11Other challenges35%

Reasons Often Cited for Cost and Schedule Deviations

PART 2

Key Components of Effective Monitoring

What do we need in order to monitor a project properly?A Mechanism for Progress MeasurementRepresentative Performance Metrics (established at planning phase)Cost & Schedule Milestones should be well-definedReporting Schedule (perhaps of variable t s) Financial importance of activity Activity criticality Rate of work Difficulty of workManagement Scheme organized for honestly and accurately identifying and reporting performanceInvolvement of responsible and knowledgeable people in the reporting schemeProject Reviews (walkthroughs & inspections)Project Audits

For effective monitoring, these should be the characteristics of your budget:

For effective monitoring, these should be the characteristics of your activities:

PART 3Measurement of Project Progress:The basics of cost and schedule tracking

Measurement of Project ProgressSome traditional measures of project progress are based on only the actual resources consumedTime spentMoney spent (Actual Cost)

What is the problem with this?Mr. X: This project is going well because it is in its 14th month and has spent $4.5 million.

Measurement of Project ProgressTime DelayCost Overrun Quality Shortfalls Progress can be measured at any time of the projectHere, Time Performance is for specific activities only, not for entire project, unless the entire project has been completed.Here Work Performance can be expressed in terms of input (man-hours, equipment-hours, material quantities used, etc.) or output (area or volume installed/constructed, etc.), or a combination of these. Quality Performance can be expressed in terms of the number or laboratory tests and site measurements that indicated project compliance to materials and workmanship specification, respectively.Accomplishment Shortfalls

Measurement of Project Progress Time DelayCost Overrun Quality Shortfalls Progress can be measured at any time of the projectAccomplishment Shortfalls

Scheduled(Plan)Monitored(Progress)TimedSdMCostscScMWork DonewSwMQualityqSqM

Measurement of Project Progress - Example Time DelayCost Overrun Quality Shortfalls

Scheduled(Plan)Monitored(Progress)Time18 months20 monthsCosts$1.1 million$1.24 millionQualityAll of the 1,345 testsOnly 1,329 of the tests

Some TerminologyDeviation in cost/expenditureCost overrun or excess expenditureCost underrun

Deviation in timeTime Delay or Schedule Slip

Deviation in quality Workmanship Quality LapsesWorkmanship/material/product Quality LapsesWorkmanship/material/product Quality Compliance

How do we measure aM? Method 1: Using inputsAmount of man-hours, equipment hours, raw materials used.What is the disadvantage of this method?

Method 2: Amount of work actually accomplished E.g., nr. of columns placed, panel mounted, etc.linear ft. of tracks laid, rebar or piping installed, etc.area of landscaping, drywall placed, etc.volume/weight of earth excavated, concrete cast, ashpalt laid, etc.

Scheduled(Plan)Monitored(Progress)TimedSdMCostscScMWork DoneaSaMQualityqSqM

How do we collect the data for measuring aM?Foremen/superintendents note work inputs and accomplishments on timesheets (or PDAs)Identify appropriate cost categories associated to each work activityEnter quantities in Quantities BookEnter worked hours in Timesheets- Hours worked can be obtained from projects payroll clerk

How frequently do we monitor?Monitoring Frequency Depends On

Size/Duration of the projectPracticalityWhat performance measure are we monitoring? Its importanceWhat detail of performance is needed? (Granularity)Financial cost of what is being monitoredCriticality of the activity to be monitoredFamiliarity of the monitoring procedureCost of monitoring and Resources available for monitoringHourly? Daily? Weekly? Bi-weekly? Monthly? Quarterly? Yearly? etc.

Advantages of high granularityPreserves option of finer investigationCan allow for quicker ... response to deviations assessment of the efficacy of project control strategies helping

Advantages of low granularityFewer staff needed for monitoringFaster recording (less time needed for monitoring)How detailed should we be?Very detailed Quite detailed Somewhat detailed Very coarse (Not detailed)Increasing GranularityDecreasing Granularity

Basis for cost monitoring: Cost Breakdown Structure (CBS)Canonical way of monitoring cash flows (costs) of the projectDifferent accounts used for different types of expendituresPermits monitoring of project expenditure for each activity (work item)Often consistent with work-based schedules.How do we measure cM?

Scheduled(Plan)Monitored(Progress)TimedSdMCostscScMWork DoneaSaMQualityqSqM

Simplified Examples of Project Progress Charts

Chart1

1.10.5

2.41.7

4.74.7

109.4

13.713.5

21.518.7

27.622

30.823.2

34.2September

36.9October

39.2November

40.1December

Cumulative (Program)

Cumulative (Progress or performed)

Month

Project Expenditure ($millions)

Cost Based

A. Cost-based Program (Schedule)B. Cost-based Progress (based on Work Performed)C. Cost-based Work Schedule and Work Performed

Project has 1-year duration. Amounts shown are project expenditures in millions of dollarsProject has 1-year duration. Amounts shown are project expenditures in millions of dollars

JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberJanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember

Activity 11.10.6Activity 10.50.50.7

Activity 20.72.33.1Activity 20.72.32.50.6

Activity 32.23.77.86.13.22.21.2Activity 32.23.55.23.31.2

Activity 41.21.51.2Activity 4

Activity 51.10.9Activity 5

Monthy Total Expenditure1.11.32.35.33.77.86.13.23.42.72.30.9Monthy Total Expenditure0.51.234.74.15.23.31.2

Cumulative Expenditure1.12.44.71013.721.527.630.834.236.939.240.1Cumulative Expenditure0.51.74.79.413.518.72223.2

MonthyCumulativeMonthyCumulativeCumulative (Program)Cumulative (Progress or performed)

January1.11.1January0.50.5January1.10.5

February1.32.4February1.21.7February2.41.7

March2.34.7March34.7March4.74.7

April5.310April4.79.4April109.4

May3.713.7May4.113.5May13.713.5

June7.821.5June5.218.7June21.518.7

July6.127.6July3.322July27.622

August3.230.8August1.223.2August30.823.2

September3.434.2SeptemberSeptember34.2

October2.736.9OctoberOctober36.9

November2.339.2NovemberNovember39.2

December0.940.1DecemberDecember40.1

Cost Based

Monthy

Cumulative

Month


Work Based

Monthy

Cumulative

Month


Sheet3



Month




Month


A. Work-based Program (Schedule)B. Work-based Progress (Work Performed)C. Work-based Work Schedule and Work Performed

Project has 1-year duration. Amounts shown are volume of concrete cast in 1000's of tonsProject has 1-year duration. Amounts shown are volume of concrete cast in 1000's of tonsProject has 1-year duration. Amounts shown are volume of concrete cast in 1000's of tons

JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberJanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember

Activity 13.852.1Activity 11.81.92.45

Activity 22.737.1311.16Activity 22.458.289.251.5

Activity 37.2613.7224.4819.5212.165.74.08Activity 37.9211.9517.6811.224.56

Activity 44.325.44.45Activity 4

Activity 54.073.14Activity 5

Monthy Total Work Done3.854.837.1318.4213.7224.4819.5212.1610.029.488.523.14Monthy Total Work Done1.84.3510.7317.1713.4517.6811.224.56

Cumulative Work Done3.858.6815.8134.2347.9572.4391.95104.11114.13123.61132.13135.27Cumulative Work Done1.86.1516.8834.0547.565.1876.480.96

MonthyCumulativeMonthyCumulativeCumulative (Program)Cumulative (Progress or performed)

January3.853.85January1.81.8January3.851.8

February4.838.68February4.356.15February8.686.15

March7.1315.81March10.7316.88March15.8116.88

April18.4234.23April17.1734.05April34.2334.05

May13.7247.95May13.4547.5May47.9547.5

June24.4872.43June17.6865.18June72.4365.18

July19.5291.95July11.2276.4July91.9576.4

August12.16104.11August4.5680.96August104.1180.96

September10.02114.13SeptemberSeptember114.13

October9.48123.61OctoberOctober123.61

November8.52132.13NovemberNovember132.13

December3.14135.27DecemberDecember135.27

00

00

00

00

00

00

00

00

00

00

00

00

Monthy

Cumulative

Month

Project Work Done (1000s of tons)

00

00

00

00

00

00

00

00

00

00

00

00

Monthy

Cumulative

Month

Project Work Done (1000's of tons)

00

00

00

00

00

00

00

00

00

00

00

00



Month


00

00

00

00

00

00

00

00

00

00

00

00



Month


Program (schedule)Program (schedule)Progress (actual)Progress (actual)Seems greatSeems poorBut:Seemingly good progress could be because lots of unscheduled work has been done because lots of low-weight work has been done thus misleading Consider a set of work-based program and progress charts(example, amount of concrete (m3) cast on site)Are simple program and progress charts enough to monitor performance?EVA helps address this issue!

Earned Value Analysis (EVA) - DefinitionsEVA integrates cost, schedule, and work performed by ascribing monetary values to each.

BCWSBudgeted Cost of Work Scheduled or programmed ($): the value of work scheduled to be accomplished in a given period of time

ACWPActual Cost of Work Performed ($): the costs actually incurred in accomplishing the work performed within the control time

BCWPBudgeted Cost of Work Performed ($): the monetary value of the work actually performed within the control time (= Earned Value).

A clearer pictureWork Schedule(WS)Work Performed(WP)

Budgeted Cost (BC)

Actual Cost (AC)

BCWS

BCWP

ACWS

ACWP

Used for plotting the Program S-curveUsed for plotting the Progress S-curveUsed for plotting the EVA S-curve

Therefore At any time of the project, we can determine the following:

Budgeted value of a scheduled work item, BV = BC * WS Actual value of a performed work item = AC * WP Budgeted value of a performed work item = BC * WP

ExampleAt any time of the project, we can determine the following:

Budgeted value of a scheduled work item, BV = BC * WS Actual value of a performed work item = AC * WP Budgeted value of a performed work item = BC * WP

PART 4

Performance Metrics

1.Performance metrics based on Earned Value Analysis (EVA)2. Other performance indices

Project Progress Performance on basis of EVA Some useful metricsResource Flow Variance (RV)Resource Flow Index (RI)Cost Variance (CV)Cost Index (CI)Schedule Variance (SV)Schedule Index (SI)Time Variance (TV)

Resource Flow Variance (RV)Definition: A progress performance metric that compares how much we expect to spend during a given time-frame with what we actually spent (regardless of how much work got done!)

Computation: RVt = BCWSt ACWPt

Interpretation: If RVt is +ve, we are experiencing underrun If RVt is ve, we are experiencing overrrun If RVt is 0 or close, we are on target

Resource Flow Index (RI)Definition: Same as that for RV. But is a ratio rather than a difference between the two values.

Computation: RIt = BCWSt/ACWPt

Interpretation: If RIt > 1, we are experiencing underrun If RIt < 1, we are experiencing overrrun If RIt = 1, we are on target

Cost Variance (CV)Definition: A progress performance metric that compares the budgeted value of work done vs. the actual value of work done.

Computation: CVt = BCWPt ACWPt = Earned Value (EVt) Actual Value (AVt)

Interpretation: If CVt is +ve, underrun or gain of value If CVt is ve, overrrun, or loss of value If CVt is 0 or close, we are on budget

Cost Index (CI)Definition: Same as that for Cost Variance, but involves a ratio instead of a difference.

Computation: CIt = BCWPt/ACWPt = Earned value (EVt)/Actual Value (AVt)

Interpretation: If CIt > 1, underrun or gain of value If CIt

Schedule Variance (SV)Definition: A progress performance metric that compares the budgeted value of work done vs. the earned value of work done.

Computation: SVt = BCWPt BCWSt = Earned Value (EVt) Budgeted Value (BVt)

Interpretation: If SVt is +ve, project is ahead or has gained time If SVt is ve, project is behind or has lost time If SVt is 0 or close, project is on schedule

Schedule Index (SI)Definition: Same as that for Schedule Variance, but involves a ratio instead of a difference.

Computation: SIt = BCWPt / BCWSt = Earned Value (EVt)/Budgeted Value (BVt)

Interpretation: If SIt > 1, project is ahead or has gained time If SIt < 1, project is behind or has lost time If SIt = 1, project is on schedule

Time Variance or Duration Variance (TV)Definition: A progress performance metric that assesses whether the project is spending more time (or less time) for an activity compares the scheduled duration (ST) of work performed vs. the actual duration (AT) of work performed.

Computation: TVt = STWPt ATWStInterpretation: If TVt is +ve, project is ahead or has gained time If TVt is ve, project is behind or has lost time If TVt is 0 or close, project is on schedule

Time Index (TI)Definition: Same as that for Time Variance but involves a ratio rather than a difference.

Computation: TIt = STWPt /ATWStInterpretation: If TIt is +ve, project is ahead or has gained time If TIt is ve, project is behind or has lost time If TIt is 0 or close, project is on schedule

Project Progress Performance on basis of EVA Useful metricsResource Flow Variance (RV)Resource Flow Index (RI)Cost Variance (CV)Cost Index (CI)Schedule Variance (SV)Schedule Index (SI)Time Variance (TV)Besides computational formula, is there another way to estimate the values of these performance metrics?

Yes, we can plot the following: ACWP, BCWP, BCWS, and then measure the performance metrics directly from the graph$maxtBCWSACWPBCWPTimeSCHEDULE VARIANCECOST VARIANCERESOURCE FLOW VARIANCETIME VARIANCEExample:tmaxACWPtBCWStBCWPtt-p

Example: Earned Value Analysis

Example: Schedule and Cost Index

Example: Integrating CI and SIBudget OKSchedule OK

Some Performance Metrics for Design and Procurement

Some Performance Indices for Engineering/DesignPunctuality in issuing drawings = 100 x # issued drawings at current date# drawings scheduled to be issued at TOwner approval process perf index = 100 x # approved drawings at current date# drawings scheduled to be approved at TManhours per progress point = Manhours spentActual progress points

Some Performance Indexes for Procurement Punctuality of placed orders = x 100 % # placed orders at T# orders to be placed at TPunctuality of materials on site = x 100 % Quantity of material on site at TQuantity of material to be on site at TQuantity on site per progress point = Quantity on site at TActual progress points

Have a good weekend!

as an effort to meet this challenge we adopt EVAwe use three different terms

Documents

Lecture 14 Project Monitoring