‫Let's move on now to the next process we can control and process a group which is control costs.
‫And this is the process of monitoring the status of the project to update the project budget and managing
‫the changes to the cost base line as we have indicated earlier.
‫We have created a cost base line and now after we have started executing our project we want to compare
‫the actuals the actual expenditures with the cost baseline that we have created in order to do so.
‫We'll take the following into consideration.
‫The project management plan and the cost base like that we have created the project funding requirements
‫included in the project management plan the work performance data indicating the activities that have
‫been accomplished.
‫The cost the actual cost and so on the organizational process assets and the enterprise environmental
‫factors.
‫As usual the tools and techniques that will be used to measure the performance of the coast along with
‫other performance indicators are as following.
‫Let's start by the even value management in order to clearly understand the real value management and
‫its formulas.
‫Let's start by explaining the following acronym PV stands for the plant value.
‫And this is the estimated value of the war plan to be done until today.
‫So if we have this original plan and we have reached here today and pare the original baseline we should
‫have accomplished the amount of work indicated in the baseline.
‫And by accomplishing this amount of work we should have paid a sum that is called the plant value now
‫in value is the estimated value of the work actually accomplished.
‫So.
‫So the cost for the actually accomplished work is the real value the value is the the estimated cost
‫of the work that we have actually accomplished.
‫But in order to accomplish this amount of work we have paid something which is called The actual cost.
‫So the actual cost is the actual cost incurred to accomplish this amount of water.
‫These are the pillars of the value management and by comparing plan value to in value and the actual
‫cost to the value we will get.
‫Our schedule indicators and of course indicators as following for instance the coast variance the cost
‫variance is the difference between the cost of the war that has been accomplished and the actual costs
‫that have been made.
‫So if we have accomplished more than what we have spent then the coast variance is positive and we are
‫doing well but if negative we are over budget this gradual variance is the difference between the cost
‫of the work that has been accomplished and the cost of the work that should have been done.
‫So if we have accomplished more than the work that we have planned then we are doing well and we are
‫ahead of schedule.
‫But if negative then that means that we are behind schedule another way of completing those is by dividing
‫the value on the actual cost.
‫So if the cost of the work that having been accomplished divided on the cost that we have actually paid
‫if this issue is over one that means that we are doing well and that means that we are getting more
‫than one dollar for each dollar spent on the project and we call this the cost performance index.
‫The same goes for the Schedule Performance Index which is the cost of the actually accomplished work
‫on the cost that has been set in the schedule baseline.
‫So if we have accomplished more than we have planned this ratio will be over 1.
‫And that means that we are progressing at for instance 1.2 percent of the original schedule rate again
‫that means that we are ahead of schedule.
‫So these are the basics of the even value management we have here to note that the interpretation of
‫the work that has been actually accomplished can differ from one company to another.
‫If you think that by starting an activity you have accomplished a part of this activity.
‫Other organizations might believe that you dont actually accomplish any activity until its 100 percent
‫completed.
‫So there are actually different rules to interpret the meaning of accomplishing some more.
‫The second tool to control costs is forecasting and it is required from the project manager to report
‫the forecast of his project.
‫Meaning how much time is left until the completion of the project and how much cost do we anticipate
‫that we will pay until the project is finished in order to calculate the forecast.
‫Let's have a look again at the definition of the forecasting acronyms.
‫The budget at completion is the original budget period the cost baseline the estimate at completion
‫is the current estimate that we expect the project to cost the current estimate of how much more we
‫will still need to complete the project and the variance of completion is how much over or under budget
‫do we expect to be at the end of the project.
‫So if we are here today and we have accomplished some amount of work and were accomplishing this amount
‫of all we have paid the actual cost.
‫Now how can we predict the amount that we will need to pay until we can finish the project which is
‫the key to completion.
‫And if we finish our project then what would be the estimate at completion in order to do this calculation.
‫We will depend on the cost performance index that has indicated to us that for each dollar that we spend
‫in the project how much dollars do we really accomplish.
‫So if for instance $1 accomplishes one point two dollars and your original budget is one million dollar.
‫And that means that you will not need the whole budget to complete your project.
‫Instead what's really needed to complete your project is calculated by the original budget or the budget
‫at completion divided by the cost performance index.
‫Or you can calculate it by the actual cost that we have already paid plus the estimated to complete
‫the project and the estimated to complete the project is calculated by the original budget minus the
‫cost of the work that has been really accomplished.
‫Divided by the cost performance index since it can make more than $1 or less according to the value.
‫Or if you want to be more precise you should divide by the cost performance index multiplied by the
‫Schedule Performance Index the estimate to complete is calculated by the stalemate at completion which
‫is one of the following formulas minus the cost that we have actually paid and the various completion
‫will be the budget that completion minus the estimated completion and this is how we calculate our projects
‫forecast.
‫Another tool that we might need to perform is to complete performance index TZP on the calculation of
‫the CPI is necessary especially when you have a cost performance index that is less than 1 meaning that
‫you are going over budget.
‫Since you are getting less than a dollar for each dollar that you pay in the project.
‫So the question would be what is the CPI for the coming period in the project.
‫In order for me to finish my project the budget at completion defined in the original plan.
‫So I dont have to ask for increase in the original budget.
‫This can be calculated by the following formula.
‫That is CPI it was the work remaining to be done which is the budget at completion minus the end value.
‫The whole walk minus the work that has been accomplished divided by the funds remaining which is the
‫budget completion minus the actual cost or the estimate at completion minus the actual cost which is
‫better and more accurate.
‫So in this way we calculate the CPI for the coming period.
‫That is called the two complete performance.
‫And of course those are all calculations and formulas that we use in our project to measure project
‫performance.
‫Other tools that you might want to do are performance reviews.
‫You can use also project management software such as Microsoft Project in order to do these calculations
‫automatically and you will also do some research analysis in order to make sure that there is an allocated
‫for the budget is still valid and you will not need to ask for an increase in budget for instance the
‫output of this process all is following work performance information is the project ahead of schedule
‫or behind schedule.
‫Are we incurring any cost overrun or do we make some savings in the project cost forecasts change requests
‫if needed.
‫For instance if we are behind schedule then we might issue a change the cost to other sources so we
‫can catch up with the schedule baseline change requests monthly to project management plan updates and
‫project documents updates and organizational processes assets updates including any lessons learned
‫from the performance measurements that we have calculated.