PM FPX 5334 Assessment 2 Bausch + Lomb Project

Student Name

Capella University

PM-FPX5334 Project Risk Assessment and Control

Prof. Name:

Date

Introduction

NearlyFree.com is currently managing a project that has exceeded its initial budget of $25,000. With the project at 43% completion, the company has recognized the issues and sought assistance for project management services. A thorough review of the financial statements reveals a discrepancy concerning the earned value, which has been under-budgeted. The objective of NearlyFree.com’s project is to develop and implement an automated web-based training system for new employees, aimed at reducing the workload and minimizing the resources required for the New Employee Orientation (NEO) process.

The project’s current scope outlines a 92-day timeline and an approved budget of $22,300. This report includes an evaluation of the earned value technique, an assessment of project success, and earned value calculations to support the project’s effective turnaround.

Earned Value Technique

The Earned Value technique is a project management approach that tracks the project plan, actual work performed, and the value of the work completed to determine if the project is progressing as planned. This technique provides insight into the time and budget expenditure that should have been incurred based on the work completed. Project control is conducted relative to the cost baseline using the Earned Value technique. It involves calculating key variables based on actual progress and further calculations to report project progress.

Inputs:

Earned Value (EV): Represents the actual progress of the task up to the analysis date. Planned Value (PV): Reflects the planned expenditure of funds up to the analysis date, as per the project schedule. Actual Cost (AC): Represents the actual expenditure of funds up to the analysis date.

Calculations:

Cost Variance: Indicates the project’s budget deviation at the analysis point.
[ Cost Variance = Earned Value (EV) – Actual Cost (AC) ]

Cost Performance Index: Reflects the project’s budget deviation relative to the total size.
[ Cost Performance Index = \frac{Earned Value (EV)}{Actual Cost (AC)} ]

Schedule Variance: Indicates the project’s schedule deviation at the analysis point.
[ Schedule Variance = Earned Value (EV) – Planned Value (PV) ]

Schedule Performance Index: Reflects the project’s schedule deviation relative to the total size.
[ Schedule Performance Index = \frac{Earned Value (EV)}{Planned Value (PV)} ]

Key Metrics:

Metric	Value
Budget Cost of Work Performed	$12,373.95
Budget Cost of Work Scheduled	$20,453.95
Actual Cost of Work Performed	$16,373.95

Schedule Variance (SV)

Schedule variance assesses whether the project is ahead or behind schedule at the analysis point. The formula is:
[ Schedule Variance = Earned Value (EV) – Planned Value (PV) ]
[ Schedule Variance = $12,373.95 – $20,453.95 ]
[ Schedule Variance = -$8,080.00 ]
A schedule variance of -$8,080 indicates that the project is behind schedule.

Cost Variance (CV)

Cost variance compares the budget set prior to the project’s start with actual spending. The formula is:
[ Cost Variance = Earned Value (EV) – Actual Cost (AC) ]
[ Cost Variance = $12,373.95 – $16,373.95 ]
[ Cost Variance = -$4,000.00 ]
A cost variance of -$4,000 shows that the project is currently under budget; ideally, this variance should be zero or greater.

Schedule Performance Index (SPI)

The Schedule Performance Index measures the project’s progress relative to the schedule. The formula is:
[ Schedule Performance Index = \frac{Earned Value (EV)}{Planned Value (PV)} ]
[ Schedule Performance Index = \frac{$12,373.95}{$20,453.95} ]
[ Schedule Performance Index = 0.60 ]
An SPI of 0.60 suggests that the project is behind schedule. If the SPI is less than 1, the project is delayed.

Cost Performance Index (CPI)

The Cost Performance Index evaluates the project’s financial efficiency, representing how much value is achieved for each dollar spent. The formula is:
[ Cost Performance Index = \frac{Earned Value (EV)}{Actual Cost (AC)} ]
[ Cost Performance Index = \frac{$12,373.95}{$16,373.95} ]
[ Cost Performance Index = 0.76 ]
With a CPI of 0.76, the project is over budget. A CPI lower than 1 indicates that the project may run out of funds before completion.

Budget at Completion (BAC)

The Budget at Completion (BAC) represents the total budgeted amount for the project. For NearlyFree.com, the initial project budget is $22,300.
[ Budget at Completion = $22,300 ]

Estimate at Completion (EAC)

The Estimate at Completion (EAC) predicts the total project cost based on past performance. The formula is:
[ Estimate at Completion = Actual Cost (AC) + \frac{(Budget at Completion (BAC) – Earned Value (EV))}{Cost Performance Index (CPI)} ]
[ Estimate at Completion = $16,373.95 + \frac{($22,300 – $12,373.95)}{0.76} ]
[ Estimate at Completion = $16,373.95 + $13,060.59 ]
[ Estimate at Completion = $29,434.54 ]

Budget Turnaround

Earned Value Analysis (EVA) is a standard technique used to monitor project progress, predict completion time and cost, and identify budget and schedule variances. NearlyFree.com’s original EVA for the NEO project indicates that the project is over 50% behind schedule, leading to a budget overrun. A more accurate EVA would have provided a realistic budget and schedule. The recommendation for NearlyFree.com’s NEO project is to extend the timeline, increasing earned value and reducing the proportion of work completed.

With the extended timeline, the project’s budget has increased from $22,300 to an Estimate at Completion of $29,434.54. This adjustment in both budget and timeline is essential for the project’s success, as exceeding the budget or timeline can affect stakeholder confidence, stock market value, and the company’s bottom line. A more detailed project schedule would have reduced the risk of budget overruns.

References

Cullen, S. (2016, August 2). Earned value analysis. WBDG. https://www.wbdg.org/resources/earned-value-analysis#:~:text=Earned%20Value%20Analysis%20(EVA)%20is,budget%20as%20the%20project%20proceeds.

Haughey, D. (2020, July 26). What is earned value? ProjectSmart. https://www.projectsmart.co.uk/what-is-earned-value.php

Peng, B. (2018, April 10). The earned value method. Project Engineer. https://www.projectengineer.net/the-earned-value-method/