Most project management people are familiar with the basics of earned value. But as I plan to blog about this topic in the next few weeks, I thought I’d introduce it with some fairly simple multiple choice questions for the weekend. (These are the sorts of questions my graduate students are asked on tests.)

You can see the answers by scrolling down beyond the test.

Have a great weekend!

Fraternally in project management,

Steve the Bajan

***

For Project Steel Donkey, the budget is $12 million and the expected monetary value (EMV) is $20 million if completed in 50 weeks, generating and expected project profit (EPP)of $8 million. Every week or part thereof later will reduce the EMV by $500,000 and every full week earlier will increase the EMV by $200,000.

At the end of Month 6, the planned value (PV or BCWS) is $5.0 million. The earned value (EV or BCWP) is $4.5 million. The actual cost (AC or ACWP) is $5.5 million.

*What is the schedule variance (SV)?*(a) – $1.0M (b) – $0.5M (c) $0.5M (d) $1.0M (e) None of the above*What is the simple schedule performance index (SPI)?*(a) .80 (b) .82 (c) .85 (d) .90 (e) None of the above*What is the cost variance (CV)?*(a) – $1.0M (b) – $0.5M (c) $0.5M (d) $1.0M (e) None of the above*What is the cost performance index (CPI)?*(a) .80 (b) .82 (c) .85 (d) .90 (e) None of the above*What is the critical ratio CPI (CRCPI)?*(a) .72 (b) .74 (c) .76 (d) .90 (e) .91*Assuming the SPI is accurate, what is our current estimated schedule overrun?*(a) 2.3 weeks (b) 3.4 weeks (c) 4.5 weeks (d) 5.6 weeks (e) 6.7 weeks*Assuming the SPI is accurate, what is our current estimated delay cost?*(a) $1.5M (b) $3.0M (c) $4.5M (d) $6M (e) None of the above*Assuming the simple CPI is accurate, what is our current cost estimate-at-completion (EAC)?*(a) $12.0M (b) $12.6M (c) $13.5M (d) $14.6M (e) None of the above*Assuming the simple CPI is accurate, what is our current cost estimate-to-complete (ETC)?*(a) $6.5M (b) $7.1M (c) $8.0M (d) $9.0M (e) None of the above*Assuming the critical ratio CPI is accurate, what is our current cost EAC?*(a) $15.2M (b) $16.2M (c) $17.2M (d) $18.2M (e) None of the above*Assuming the critical ratio CPI is accurate, what is our current cost ETC?*(a) $9.7M (b) $10.2M (c) $10.7M (d) $11.2M (e) None of the above*Assuming the simple CPI and SPI are accurate, what is our expected project profit (EPP) at completion?*(a) $2.4M (b) $2.6M (c) $2.8M (d) – $2.8M (e) None of the above*Assuming critical ratio CPI and SPI are accurate, what is our expected project profit (EPP) at completion?*(a) – $.08M (b) – $0.4M (c) $0.4M (d) $0.8M (e) None of the above*What is our planned DIPP (DIPP = [$EMV plus or minus $acceleration premium or delay cost] divided by $Cost ETC) at the end of Month 6?*(a) 1.80 (b) 2.0 (c) 2.40 (d) 2.80 (e) None of the above*What is our Actual DIPP at this point based on the CPI and SPI?*(a) 1.80 (b) 1.87 (c) 1.97 (d) 2.07 (e) None of the above*What is our DIPP Progress Index (DPI) at 6 months (DPI = Actual DIPP divided by Planned DIPP)?*(a) .65 (b) .75 (c) .85 (d) .95 (e) None of the above

*If we identify an activity in our project where spending an extra $1.0M would erase 4 weeks of critical path drag…*

*What would our expected project profit become using the simple CPI and SPI?*(a) $0.4M (b) $1.4M (c) $2.4M (d) $3.4M (e) None of the above*What would our expected project profit become using the critical ration CPI and SPI?*(a) $1.4M (b) $1.8M (c) $2.2M (d) $2.6M (e) None of the above*What would our current DIPP become using the simple CPI and SPI?*(a) 1.68 (b) 1.78 (c) 1.88 (d) 1.98 (e) None of the above*What would our DPI be using the simple CPI and SPI?*(a) 0.66 (b) 0.76 (c) 0.86 (d) 0.96 (e) None of the above

SCROLL DOWN FOR ANSWERS

**ANSWERS**

*What is the schedule variance (SV)?*(a) – $1.0M**(b) – $0.5M**(c) $0.5M (d) $1.0M (e) None of the above**($4.5 – $5.0M = – $0.5M)***What is the simple schedule performance index (SPI)?*(a) .80 (b) .82 (c) .85**(d)****.90**(e) None of the above**($4.5 divided by $5.0M = .90)***What is the cost variance (CV)?***(a) – $1.0M**(b) – $0.5M (c) $0.5M (d) $1.0M (e) None of the above**($4.5 – $5.5M = – $1.0M)***What is the cost performance index (CPI)?*(a) .80**(b) .82**(c) .85 (d) .90 (e) None of the above**($4.5 divided by $5.5M = .82)***What is the critical ratio CPI (CRCPI)?*(a) .72**(b) .74**(c) .76 (d) .90 (e) .91**(.90 * .82 = .74)***Assuming the SPI is accurate, what is our current estimated schedule overrun?*(a) 2.3 weeks (b) 3.4 weeks (c) 4.5 weeks**(d) 5.6 weeks**(e) 6.7 weeks**(50 weeks divided by .90 – 50 weeks = 5.6 weeks)***Assuming the SPI is accurate, what is our current estimated delay cost?*(a) $1.5M**(b) $3.0M**(c) $4.5M (d) $6M (e) None of the above**(6 * $500,000 = $3.0M)***Assuming the simple CPI is accurate, what is our current cost estimate-at-completion (EAC)?*(a) $12.0M (b) $12.6M (c) $13.5M**(d) $14.6M**(e) None of the above**($12M divided by .82 = $14.6M)***Assuming the simple CPI is accurate, what is our current cost estimate-to-complete (ETC)?*(a) $6.5M (b) $7.1M (c) $8.0M (d) $9.0M**(e) None of the above ($14.6M – $5.5M = $9.1M)***Assuming the critical ratio CPI is accurate, what is our current cost EAC?*(a) $15.2M**(b) $16.2M**(c) $17.2M (d) $18.2M (e) None of the above**($12.0M divided by 0.74 = $16.2M)***Assuming the critical ratio CPI is accurate, what is our current cost ETC?*(a) $9.7M (b) $10.2M**(c) $10.7M**(d) $11.2M (e) None of the above**($16.2M – $5.5M = $10.7M)**- A
*ssuming the simple CPI and SPI are accurate, what is our expected project profit (EPP) at completion?***(a) $2.4M**(b) $2.6M (c) $2.8M (d) – $2.8M (e) None of the above**($17.0M – $14.6M = $2.4M)** *Assuming critical ratio CPI and SPI are accurate, what is our expected project profit (EPP) at completion?*(a) – $.08M (b) – $0.4M (c) $0.4M**(d) $0.8M**(e) None of the above**($17.0M – $16.2M = $0.8M)***What is our planned DIPP (DIPP = [$EMV plus or minus $acceleration premium or delay cost] divided by $Cost ETC) at the end of Month 6?*(a) 1.80 (b) 2.0 (c) 2.40 (d) 2.80**(e) None of the above****($20M divided by $7M = 2.88)***What is our Actual DIPP at this point based on the simple CPI and SPI?*(a) 1.80**(b) 1.87**(c) 1.97 (d) 2.07 (e) None of the above**($17.0M divided by $9.1M = 1.87)***What is our DIPP Progress Index (DPI) at 6 months (DPI = Actual DIPP divided by Planned DIPP)?***(a) .65**(b) .75 (c) .85 (d) .95 (e) None of the above**(1.87 divided by 2.88 = .65)**

*If we identify an activity in our project where spending an extra $1.0M would erase 4 weeks of critical path drag…*

*What would our expected project profit become using the simple CPI and SPI? (a) $0.4M (b) $1.4M (c) $2.4M***(d) $3.4M**(e) None of the above**($19.0M – $15.6M = $3.4M)***What would our expected project profit become using the critical ration CPI and SPI?*(a) $1.4M (b)**$1.8M**(c) $2.2M (d) $2.6M (e) None of the above**($19.0M – $17.2M = $1.8M)**- W
*hat would our current DIPP become using the simple CPI and SPI?*(a) 1.68 (b) 1.78**(c) 1.88**(d) 1.98 (e) None of the above**($19.0M divided by $10.1M = 1.88)** *What would be our DPI using the simple CPI and SPI?***(a) 0.66**(b) 0.76 (c) 0.86 (d) 0.96 (e) None of the above**(1.88 divided by 2.88 = .66)**

thanks for the exercise but what can we do for medium size projects and business? probably such amount of indicators would overwhelm them

have a nice week

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“thanks for the exercise but what can we do for medium size projects and business? probably such amount of indicators would overwhelm them”

Hi, M.F.C. Your question is an interesting one. Certainly I believe that earned value’s value increases as the size of the project/program increases. However, cost (which is what earned value helps to manage) is really resource usage. A very good way of managing resource usage is simply to track labor hours. Planning and then daily reporting of labor hours allows for reliable trend analysis in terms of cost.

In terms of schedule, the most reliable tracking techniques and mechanisms are: (1) A large chart of the early dates of the network schedule, located in a “war room”, where teammembers are required, whenever they finish an activity, to “check it off” and inform the leaders of the immediate successors; (2) Tracking progress along the critical path; and (3)Tracking consumption of schedule reserve.

Medium sized projects (and medium sized organizations) do sometimes have separate issues. But a lot of what can be done for medium sized projects is the same as what can be done for all projects. In particular, M.F.C., check out the list of Ten Amendments I just posted in my new blog article (Amendment #10 was written with you in mind regarding use of earned value on medium sized projects).

Fraternally in project management,

Steve the Bajan

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