Performance Reporting

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Project reporting involves all the activities aimed to monitor the progress of a project. The state of each activity is defined by the evaluation of data representing the metrics chosen for the report. The actual data observed in the advancement of the project are compared with the estimated data set as target before the beginning of the project.
+
Performance reporting is the process of tracking, reviewing, and reporting the progress to meet the performance objectives defined in the project management plan.
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The main outcome of a functional reporting system is to provide information about the state of a project. These information should be available in a time range that allows the project manager to eventually take effective corrective actions. <ref>Project Management: Planning and Control Techniques, Third Edition, Wiley, Chichester, 1999, p. 191</ref>
+
When a project exceed a certain scale is necessary to establish some form of formal control. By controlling the status of a project, a manager can keep people accountable for process execution and prevent minor problems to scale up. The main outcome of a performance reporting system is providing information about the progression of a project. These information should be available in a time range that allows the project manager to eventually take effective corrective actions <ref>Project Management: Planning and Control Techniques, Third Edition, Wiley, Chichester, 1999, p. 191</ref>.
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In a longer time prospective, the purpose of reporting is to register how different decision making process and practices led to failure or success. This insight should then be used as guideline for improvement by replicating good practices and avoiding mistakes<ref>https://www.nap.edu/read/11344/chapter/4, 22/09/2017</ref>.
+
Performance reporting needs to provide information at an appropriate level for each audience as it is delivered the project manager and to stakeholders involved in the project. Consequently, the report metrics has to represent and estimate accurately the intended performance. Typically, key measures in progress reporting assume time or financial value.
−
== Scope of Control==
+
Managers has to identify in the organization different professional in charge of the report maintenance. These are appointed of gathering data, implementing the report and of distribute it to all the involved stakeholders.
−
Different knowledge areas are involved as in planning, also in the control activities, these are<ref>Project Management: Planning and Control Techniques, Third Edition, Wiley, Chichester, 1999, p. 193</ref>:
+
While the project is in execution, the actual data are compared with the estimated data, defined by the baseline. This pages focus on different quantitative tools and indexes to perform this comparison. Occurrence of variances can be considered as signal of ineffective process execution.
 +
In a longer time prospective, the purpose of performance reporting is to prove how different decision making process and practices led to failure or success. This insight should then be used as guideline for improvement by replicating good practices and avoiding mistakes<ref>https://www.nap.edu/read/11344/chapter/4, 22/09/2017</ref>.
 +
== Scope of Performance reporting==
 +
The main input for Performance reporting is the project management plan. Many different knowledge areas contribute in writing the plane. These areas also play a role in monitoring the project work. Many documents they issue help to asses the status of the project<ref>Project Management: Planning and Control Techniques, Third Edition, Wiley, Chichester, 1999, p. 193</ref>. The following table illustrates the knowledge areas or function that usually contribute in generating the reports, their role in the reporting process and the document they use to generate the reports:
  
 
{| class="wikitable"
 
{| class="wikitable"
Line 37: Line 40:
 
* Progress report (actual vs planned)
 
* Progress report (actual vs planned)
 
* [[Gantt Chart in Project Management|Gantt chart]]
 
* [[Gantt Chart in Project Management|Gantt chart]]
−
* Revised barchart
+
* Revised bar chart
 
* [[Earned Value Analysis|Earned value]]
 
* [[Earned Value Analysis|Earned value]]
 
* Trend documents
 
* Trend documents
Line 118: Line 121:
 
|}
 
|}
  
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== Data acquisition==
+
==Set Up==
−
Data capture is the activity of collecting and reporting information to the project manager on periodical basis. This allows the project management to be aware of the project's progress and status. The purpose of the metrics is to provide the management with the current situation overview and possible future scenarios. Before starting other reporting activities is necessary to understand who is the owner of the report and which kind of performance he/she intend to monitor. Once the metrics are defined is necessary to ensure a good quality of the measured data, as the reporting system will results accurate as the data captured are.
+
===Maintenance===
 +
Before implementing a monitoring system is important to establish:
 +
*Who should be responsible to gather and elaborate the data. It could be a project team, contractors, cost engineers or data could come from the company's ERP<ref>https://www.defactosoftware.com/erp-software/data-analysis-and-reporting</ref>
 +
*When the data will be assembled and communicated and which is going to be the reporting period (day, week, months, quarter...)
 +
 
 +
===Setting a Baseline Plan===
 +
[[File:WBS Packages.jpg|thumb|400px|WBS packages time-phased costs are used to set a baseline for the report]]
 +
The first action to implement progress and performance reporting is setting a baseline. The development of a project baseline is properly a part of planning process. However, since it constitutes the main input for the comparison with actual data, it constitutes the foundation for any reporting activity.
 +
The baseline is an written document that represents commitment to the achievement of some cost, schedule or other performance. The reference value are acquired from the [[Work Breakdown Structure (WBS)|work breakdown structure]]. The [[Work Breakdown Structure (WBS)|WBS]] provides discrete work packages tied to deliverables and organization unit.
 +
Furthermore, each work package defines the work, duration and budget. The [[Project Network Diagram|project network schedule]] time-phase all work, resources and budget into a baseline plan. The costs included in the baseline are usually labor, equipment and materials. Also direct overhead costs are associated to different work packages.
 +
One of the most common methods to assign costs to the baseline is to divide in percentage the completion of the project. This is possible by identify a relevant measure unit that properly express the progression of the project. Units could be workdays, drawing completed, line or code or others.
 +
 
 +
 
 +
==Measuring Progress and Performance==
 +
Data acquisition (or capture) is the activity of selecting and collecting data that builds up the information in a report. This activity is performed adopting a time frequency that allows to appreciate the variations of the process .For instance sales number could be reported daily while financing cost could be displayed in a monthly report. At the same time the data contained in the report as to be enough recent to allow the project management to take corrective actions on the reported activities. The purpose of the metrics is to provide the management with the current situation overview and estimated future scenarios.
  
−
===Metrics===
+
===Time and cost Performance===
−
The data are collected on the base of the performance the manager wants to measure. Usually it is not possible to make measurement on the intended mertics as they do not manifest in quantitative values. For this reason proxy metrics are introduced for measurement purpose.
+
The measured indicators can be qualitative or quantitative. Qualitative indicators can be performed by on-site-inspection or other kind of personal assetment. Quantitative measures regards mainly time and budget performance. Relevant measurement are made on the early or late actualization of the [[The Critical Path Method (CPM)|critical path]]. The slack of of near-critical path can be measured in relation with the arise of new critical activities.
 +
Economical measurement keeps track on the expenditure performance to compare it with the budget values. However, in order to realistically estimate the performance agains time phased budget, we have to consider [[Earned Value Analysis|earned value]] (budgeted cost of the work performed.) as well.
 +
The data are collected based on the performance that the manager or interested stakeholder want to keep track of.
 
Typically the information that are expressed by the data are related to<ref>Project Management: The Managerial Process, Third Edition, Clifford Gray and Eric Larson, Mc Graw Hill, 2006, p. 193</ref>:
 
Typically the information that are expressed by the data are related to<ref>Project Management: The Managerial Process, Third Edition, Clifford Gray and Eric Larson, Mc Graw Hill, 2006, p. 193</ref>:
 
* Activity duration and completion status
 
* Activity duration and completion status
Line 128: Line 147:
 
* Actual cost of resources and activities
 
* Actual cost of resources and activities
 
Those measures are then compared with the expected duration, usage and costs defined before the activity execution. When projected and actual data are available is then possible to make a comparison and identify possible deviations.
 
Those measures are then compared with the expected duration, usage and costs defined before the activity execution. When projected and actual data are available is then possible to make a comparison and identify possible deviations.
−
However the control process should not just take in account time and cost variable, but also the inconsistent issues and behaviors that can be identified during the execution of project activities in different knowledge areas, such as Project Value, Quality, or Reputation<ref>Definition of a Project Performance Indicators Model: Contribution of Collaborative Engineering Practices, Marcelo Silva Pereira and Rui M. Lima
 
−
, 2017</ref>.
 
−
If some deviation manifests in the schedule, resource or expenditure metric it should be possible to locate the problem in the organization. The report should be capable to explicate causes and responsibilities for overrun. Additionally the report should indicate the forecast for cost overrun in case of midway overrun.
 
  
−
===Maintenance===
+
===Other Project Performance===
−
Once the metrics are defined is necessary to define:
+
However, the performance control process should not just take in account quantitative values. Also inconsistent issues and behaviors can be identified during the execution of project activities in different knowledge areas, such as Project Value, Quality, or Reputation<ref>Definition of a Project Performance Indicators Model: Contribution of Collaborative Engineering Practices, Marcelo Silva Pereira and Rui M. Lima, 2017</ref>.
−
*Who should be responsible to gather and elaborate the data. It could be a project team, contractors, cost engineers or data could come from the company's ERP<ref>https://www.defactosoftware.com/erp-software/data-analysis-and-reporting</ref>
+
Sometimes it is not possible to measure the intended metrics as they do not manifest in quantitative values. For this reason are introduced other metrics, used as proxy for measurement purpose.
−
*When the data will be assembled and communicated and which is going to be the reporting period (day, week, months, quarter...
+
If some deviation manifests (in the ''schedule, resource, expenditure'' or ''other metrics'') it should be possible to locate the problem in the organization. The report should be capable to explicate causes and responsibilities for overrun. Additionally the report should indicate the forecast for cost overrun in case of midway overrun.
  
−
==Application==
+
===Technical Performance===
−
===Setting a Baseline Plan===
+
In many case technical performance are taken as granted. However, poor performance can have serious consequences on the execution of the project. The scope statement can contain technical specification about the necessary equipment, with indication of criteria and tolerance limits.
−
As first action to implement progress and performance reporting is to set a baseline. The development of a project baseline is properly a part of planning process. However since it constitutes the main input for the comparison toward measured data it constitute the foundation for any reporting activity. The baseline is an written document that represent commitment to the achievement of some cost and schedule performance. The reference value are acquired from the [[Work Breakdown Structure (WBS)|work breakdown structure]]. The [[Work Breakdown Structure (WBS)|WBS]] provides discrete work packages tied to deliverables and organization unit.
+
In any case is usually good practice to monitor performance metrics. This measures may include weight, transaction times, number of delivered defects, storage capacity and other physically measurable indexes. Deviation demonstrate more or less functionality than planned at a milestone and can be used to forecast the degree of success in achieving the project's scope.
−
Furthermore, each work package defines the work, duration and budget. The [[Project Network Diagram|project network schedule]] time-phase all work, resources and budget into a baseline plan. The costs included in the baseline are usually labor, equipment and materials. Also direct overhead costs are associated to different work packages.
+
 
−
One of the most common methods to assign costs to the baseline is to divide in percentage the completion of the project. This is possible by identify a relevant measure unit that properly express the progression of the project. Units could be workdays, drawing completed, line or code or others.
+
===Human Performance===
 +
At operational level, managers has to create ad-hoc KPIs an monitor the specific working performance through project management information system. The purpose of these KPI is to measure the performance in the execution of specific activities, closely linked to the achievement of organizational goals. In this case, the are defined by the management and their achievement is usually linked with different kind of rewards. The desired target value for KPI has to be set high enough to challenge the employees to fulfill it. At the same time the targets have to be considered achievable by the personnel to be considered meaningful<ref>Jones, G. R., & George, J. M. (2011). Essentials of contemporary management. Boston: McGraw-Hill/Irwin. </ref>.
 +
 
 +
==Comparing Plan against Actual==
 +
As the plans rarely manifest exactly as estimated, it is a priority to detect deviations in useful time. The management must be able take corrective actions as soon the deviation manifests. For this reason is imperative to measure periodically the status of the project to compare the actual toward the expected plans. Consequently, the timing of the status must have a frequency that allows early detection and correction of deviations. A good indication is to generate a status report every one to four weeks to be useful and allow to take proactive actions.
 +
===Time performance===
 
[[File:Tracking Gantt.png|thumb|300px|Baseline and tracking Gantt Charts]]
 
[[File:Tracking Gantt.png|thumb|300px|Baseline and tracking Gantt Charts]]
−
===Measuring Progress and Performance===
+
The project network schedule derived from the WBS/OBS is used as baseline to monitor the current project status. The two graphical tools used for communicating the project schedule status are ''tracking Gantt chart'' and ''control charts''. Tracking Gantt chart associates the baseline duration of each past activity to its actual completion. At the same time it displays the remaining duration for ongoing and future activities.
−
The measured performance can be qualitative or quantitative. Qualitative measures can be performed by on-site-inspection. Quantitative measures regards mainly time and budget performance. Relevant measurement are made on the early or late actualization of the [[The Critical Path Method (CPM)|critical path]]. The slack of of near-critical path can be measured in relation with the arise of new critical activities.
+
Control chart is beneficial when is necessary to underline current and past schedule performance. This graph plots the reporting period on the x-axis and the positive or negative deviation respect the schedule on the y-axis. The result is an outline over time of the difference of the scheduled date in the critical path in the report date with the actual point on the critical path.
−
Economical measurement keeps track on the expenditure performance to compare it with the budget values. However, in order to realistically estimate the performance agains time phased budget we have to consider [[Earned Value Analysis|earned value]] as well. [[Earned Value Analysis|Earned value]] is defined as budgeted cost of the work performed.
+
===Cost Analysis===
−
====Time performance====
+
The traditional cost analysis measurement usually focus on the comparison of [[Earned Value Analysis|earned value]] ('''EV''') with:
−
The project network schedule is used as baseline to monitor the current project status. The two tools used for communicate the project schedule status are Gantt chart and control charts. Tracking Gantt chart associate to the baseline duration of each activity to the actual completion until the report date, and the remaining duration of the remaining activities.
+
*'''PV''': ''Expected schedule value'', cumulative value of the resource cost estimation in a time phased baseline.
 +
*'''AC''': ''Actual costs'', (of the work completed), the sum of the the cost incurred in accomplishing work.
 +
In the analysis based on ''earned value'' and ''expected schedule'' value we need to assess '''planned cost of work scheduled''', '''budgeted cost of work completed''' and '''actual cost of work completed'''. These values are used on periodical basis to calculate '''schedule variance''' and '''cost variance'''.  
 +
''Cost variance'' indicates if the work performed costed more or less than expected at any point in the project lifetime. This value can be calculated as difference between actual cost and earned value.
 +
''Schedule Variance'' quantifies the progress of work packages in monetary terms. Schedule Variance is calculated by subtracting planned value from earned value<ref>https://pmstudycircle.com/2012/05/schedule-variance-sv-cost-variance-cv-in-project-cost-management/</ref>.
  
−
===Comparing Plan against Actual===
+
===Status Report===
−
As the plans rarely manifest exactly as estimated, it is a priority to detect deviation in useful time. The management must be able take corrective actions as soon the deviation manifests. For this reason is imperative to measure periodically the status of the project to compare the actual toward the expected plans. Consequently, the timing of the status must have a frequency that allows early detection and correction of deviations. A good indication is to generate a status report every one to four weeks to be useful and allow to take proactive actions.
+
A status report is an overview of the process progression for the period in which it has been issued. In each time period are gathered information about each work package completion:
 +
*If the activity has not been performed yet will earn 0% of its PV (time phased value of the work scheduled).
 +
*If the activity has been completed it will earn 100% of its PV.
 +
*If the activity is in execution it will earn the corresponding completion percentage of PV.
 +
Subsequently we can apply the same completion percentage to calculate the Earned Value. Once again it will be finally possible to compute the schedule variance.
 +
The data acquired in this way can be used to plot PV,EV and SV (together with actual cost) up to the current period.
 +
===Performance Indexes===
 +
Many indexes derived from the values mentioned in the previous section can give further insight on efficiency performance and completion in project execution.
 +
{| class="wikitable"
 +
! Type
 +
! Name
 +
! Formula
 +
! Meaning
 +
|-
 +
| rowspan="2" style="text-align: center;" | Performance Index
 +
| Cost Performance Index
 +
| <math>(CPI)=\dfrac{EV}{AC}</math>
 +
| Cost Efficiency of the work accomplished to date. This value represent the efficiency of each monetary unit spent in the project. For example if CPI=0.8,it means that for every 8 DKK of value,it was actually spent 10 DKK. The CPI is the most used and accepted index.
 +
|-
 +
| Scheduling Performance Index
 +
| <math>(SPI)=\dfrac{EV}{PV}</math>
 +
| Scheduling efficiency to date. This measurement express the percentage of value earned compared to the baseline. Value bigger than one will indicate projects ahead of schedule while value lower than 1 will point at project behind schedule.
 +
|-
 +
| rowspan="2" style="text-align: center;" | Completion Index
 +
| Percent complete index (Budget)
 +
| <math>PCIB=\dfrac{EV}{BAC}</math>
 +
| Completion percentage in terms of ''budget amounts''. Where ''BAC'' is budgeted cost at completion.
 +
|-
 +
| Percent complete index (Actual)
 +
| <math>PCIB=\dfrac{AC}{EAC}</math>
 +
| Completion percentage in terms of ''actual costs''. Where ''EAC'' is estimated cost at completion.
 +
|}
 +
===Final cost forecast===
 +
It is quite likely that a project incur in cost overrun. When this happen, is necessary to revise the final cost estimate and setting a new baseline. In some case examination from expert is sufficient to generate this valuation. This is usually the case for small projects.
 +
In larger project it can be applied a method based on the scaling up the remaing work cost by the ''cost performance index (CPI)''. The estimated cost to complete the remaining work is calculated as:<br>
 +
<math>ECT=\dfrac{Work Remaining}{CPI}=\dfrac{BAC-EV}{EV/AC}</math> <br>
 +
This value, summed with the cumulative cost of the work completed in the assessment date (AC), gives the estimation of total cost at completion.
 +
This method can be combined with the '''To complete performance index''' (TCPI):
 +
<math>TCPI=\dfrac{BAC-EV}{BAC-AC}</math> <br>
 +
This measure indicates which value should have each monetary unit to remain into the budget. This means that if TCPI is equal to 2, any DDK spent should worth the double to remain in the budget.
  
−
The project manager should train and communicate the importance of maintaining reporting system to the project members.
+
=Risk limitation=
 +
The measurement of performances can both generate and identify criticality within a project. It is important to be aware which is the best measurement setup and how to use the indicators to spot and act on time on variations.
 +
==Data acquisition==
 +
Sometimes exists a trade-off between data detail and acquisition cost. Supervising the monitoring points used for percentage completion of the project can raise the costs when more personnel is required for the task. Smaller project can reduce this risk by adopting other earned value rules:
 +
*'''0/100% rule''', short duration work packages switch from 0 to 100 of earned value when the work is completed
 +
*'''50/50% rule''', half of the value of the work package budget is earned when the work starts, the other half is earned at completion of the work.
 +
Nevertheless, in large process is necessary to use the percent rule to allocate earned value.
 +
==Scope variation==
 +
Variation of scope are vary common and sometimes unavoidable in the lifetime of a project. These changes can have both internal (e.g. Project Managers decide to change the scope) or external (e.g. due to regulatory change ) causes. Voluntary changes in the scope should occur just when they are necessary for the survival of the project or when they bring significant improvements. From the accounting point of view, past expenditures should not be edited as transfer from different costs account should not be allowed.
 +
Changes are often seen with suspicion as when they manifest the organization's cash flow requirement can increase, as effect of more resource needed. However, is not excluded that scope variation can be rewarding, having positive effect on cost and schedule performance.   
 +
===Baseline variation===
 +
When significant variances occurs, managers has to take action to bring back the project in line with the original or revised plan. When the scope changes throughout the project, a new baseline must be set, so to include the new information.
 +
===Scope Creep===
 +
In some case the scope can undergo significant modification following minor refinements. This phenomenon is called ''Scope Creep'' and it is common in early project. Some factors that demands for scope modification can be:
 +
*Customer requirements for additional features
 +
*Embedding a new technology
 +
*Poor design assumption
 +
The baseline is usually unchanged as this modification are not noticed until delay and cost overrun are observed.
 +
==Contingency reserve==
 +
Before the beginning of every project can be necessary to define a contingency reserve. This found has the purpose of covering unexpected expenses. Its size mirror the risk of the project and it should be directly proportional with the the novelty of the project for the firm.
  
−
== Notes ==
+
= Notes =
 
<references/>
 
<references/>

Latest revision as of 10:23, 30 September 2017

Performance reporting is the process of tracking, reviewing, and reporting the progress to meet the performance objectives defined in the project management plan. When a project exceed a certain scale is necessary to establish some form of formal control. By controlling the status of a project, a manager can keep people accountable for process execution and prevent minor problems to scale up. The main outcome of a performance reporting system is providing information about the progression of a project. These information should be available in a time range that allows the project manager to eventually take effective corrective actions [1]. Performance reporting needs to provide information at an appropriate level for each audience as it is delivered the project manager and to stakeholders involved in the project. Consequently, the report metrics has to represent and estimate accurately the intended performance. Typically, key measures in progress reporting assume time or financial value. Managers has to identify in the organization different professional in charge of the report maintenance. These are appointed of gathering data, implementing the report and of distribute it to all the involved stakeholders. While the project is in execution, the actual data are compared with the estimated data, defined by the baseline. This pages focus on different quantitative tools and indexes to perform this comparison. Occurrence of variances can be considered as signal of ineffective process execution. In a longer time prospective, the purpose of performance reporting is to prove how different decision making process and practices led to failure or success. This insight should then be used as guideline for improvement by replicating good practices and avoiding mistakes[2].

Contents

[edit] Scope of Performance reporting

The main input for Performance reporting is the project management plan. Many different knowledge areas contribute in writing the plane. These areas also play a role in monitoring the project work. Many documents they issue help to asses the status of the project[3]. The following table illustrates the knowledge areas or function that usually contribute in generating the reports, their role in the reporting process and the document they use to generate the reports:

Area Role Reporting documents
Scope (or Configuration) Management The scope of work defines what the project is producing or delivering. Reports will take track of scope variation during the implementation.
  • Project Communication
  • Impact statements
  • Variations and Modifications
  • Change requests
  • Concessions
  • Closeout report
Technical Support Technical experts keeps track of their results to interpret clients need and addressing it respecting regulation and adopting good practices.
  • Configuration control
  • Impact statements
  • Commissioning
  • As build drawings
Time Management Outlines the sequence and timing of the scope of work through control documents as Progress report
Procurement Management The procurement function classifies all the purchased items. These are procured to specification, time schedule and budget
  • Purchase Order
  • Gantt chart
  • Expediting status report
  • Revised procurement schedule and budget
Resource Management Resource management is in charge to integrate the resource estimate with time management to produce resource forecast. Used resourced are closely linked to manpower requirements.
  • Time sheets
  • Revised manpower histogram
Cost Management Cost Management allocates budgets and cash-flows to the work packages
  • Expenditures report (actual vs planned)
  • Committed cost and cost-to-compete
  • Revised budgets
  • Earned value
Change Control Set of documents that tracks and revise the progress of the scope of work.
  • Project Communication
  • Impact statements
  • Non Conformance Reports (NCR)
  • Change request and Concessions
  • Drawing revisions
  • Modification and Variation Orders (VO)
  • Extras to contract
  • Specification and Configuration revisions
Quality Management State how the company plans to meet the requirements
  • Inspection reports
  • Non conformance Reports (NCR)
  • Concessions
  • As-built drawings
  • Data books and operation manuals
  • Commissioning
Communication Management The communication functions share information and instruction to the responsible parties.
  • Transmittals
  • Minutes of meeting
Human Resource Management The HR function sets frameworks for the persons employed in the project.
  • Time sheets
  • Performance evaluations
Environmental Management Takes in account all the external issues that may effect the project.
  • Environmental report

[edit] Set Up

[edit] Maintenance

Before implementing a monitoring system is important to establish:

  • Who should be responsible to gather and elaborate the data. It could be a project team, contractors, cost engineers or data could come from the company's ERP[4]
  • When the data will be assembled and communicated and which is going to be the reporting period (day, week, months, quarter...)

[edit] Setting a Baseline Plan

WBS packages time-phased costs are used to set a baseline for the report

The first action to implement progress and performance reporting is setting a baseline. The development of a project baseline is properly a part of planning process. However, since it constitutes the main input for the comparison with actual data, it constitutes the foundation for any reporting activity. The baseline is an written document that represents commitment to the achievement of some cost, schedule or other performance. The reference value are acquired from the work breakdown structure. The WBS provides discrete work packages tied to deliverables and organization unit. Furthermore, each work package defines the work, duration and budget. The project network schedule time-phase all work, resources and budget into a baseline plan. The costs included in the baseline are usually labor, equipment and materials. Also direct overhead costs are associated to different work packages. One of the most common methods to assign costs to the baseline is to divide in percentage the completion of the project. This is possible by identify a relevant measure unit that properly express the progression of the project. Units could be workdays, drawing completed, line or code or others.


[edit] Measuring Progress and Performance

Data acquisition (or capture) is the activity of selecting and collecting data that builds up the information in a report. This activity is performed adopting a time frequency that allows to appreciate the variations of the process .For instance sales number could be reported daily while financing cost could be displayed in a monthly report. At the same time the data contained in the report as to be enough recent to allow the project management to take corrective actions on the reported activities. The purpose of the metrics is to provide the management with the current situation overview and estimated future scenarios.

[edit] Time and cost Performance

The measured indicators can be qualitative or quantitative. Qualitative indicators can be performed by on-site-inspection or other kind of personal assetment. Quantitative measures regards mainly time and budget performance. Relevant measurement are made on the early or late actualization of the critical path. The slack of of near-critical path can be measured in relation with the arise of new critical activities. Economical measurement keeps track on the expenditure performance to compare it with the budget values. However, in order to realistically estimate the performance agains time phased budget, we have to consider earned value (budgeted cost of the work performed.) as well. The data are collected based on the performance that the manager or interested stakeholder want to keep track of. Typically the information that are expressed by the data are related to[5]:

  • Activity duration and completion status
  • Resource usage rate
  • Actual cost of resources and activities

Those measures are then compared with the expected duration, usage and costs defined before the activity execution. When projected and actual data are available is then possible to make a comparison and identify possible deviations.

[edit] Other Project Performance

However, the performance control process should not just take in account quantitative values. Also inconsistent issues and behaviors can be identified during the execution of project activities in different knowledge areas, such as Project Value, Quality, or Reputation[6]. Sometimes it is not possible to measure the intended metrics as they do not manifest in quantitative values. For this reason are introduced other metrics, used as proxy for measurement purpose. If some deviation manifests (in the schedule, resource, expenditure or other metrics) it should be possible to locate the problem in the organization. The report should be capable to explicate causes and responsibilities for overrun. Additionally the report should indicate the forecast for cost overrun in case of midway overrun.

[edit] Technical Performance

In many case technical performance are taken as granted. However, poor performance can have serious consequences on the execution of the project. The scope statement can contain technical specification about the necessary equipment, with indication of criteria and tolerance limits. In any case is usually good practice to monitor performance metrics. This measures may include weight, transaction times, number of delivered defects, storage capacity and other physically measurable indexes. Deviation demonstrate more or less functionality than planned at a milestone and can be used to forecast the degree of success in achieving the project's scope.

[edit] Human Performance

At operational level, managers has to create ad-hoc KPIs an monitor the specific working performance through project management information system. The purpose of these KPI is to measure the performance in the execution of specific activities, closely linked to the achievement of organizational goals. In this case, the are defined by the management and their achievement is usually linked with different kind of rewards. The desired target value for KPI has to be set high enough to challenge the employees to fulfill it. At the same time the targets have to be considered achievable by the personnel to be considered meaningful[7].

[edit] Comparing Plan against Actual

As the plans rarely manifest exactly as estimated, it is a priority to detect deviations in useful time. The management must be able take corrective actions as soon the deviation manifests. For this reason is imperative to measure periodically the status of the project to compare the actual toward the expected plans. Consequently, the timing of the status must have a frequency that allows early detection and correction of deviations. A good indication is to generate a status report every one to four weeks to be useful and allow to take proactive actions.

[edit] Time performance

Baseline and tracking Gantt Charts

The project network schedule derived from the WBS/OBS is used as baseline to monitor the current project status. The two graphical tools used for communicating the project schedule status are tracking Gantt chart and control charts. Tracking Gantt chart associates the baseline duration of each past activity to its actual completion. At the same time it displays the remaining duration for ongoing and future activities. Control chart is beneficial when is necessary to underline current and past schedule performance. This graph plots the reporting period on the x-axis and the positive or negative deviation respect the schedule on the y-axis. The result is an outline over time of the difference of the scheduled date in the critical path in the report date with the actual point on the critical path.

[edit] Cost Analysis

The traditional cost analysis measurement usually focus on the comparison of earned value (EV) with:

  • PV: Expected schedule value, cumulative value of the resource cost estimation in a time phased baseline.
  • AC: Actual costs, (of the work completed), the sum of the the cost incurred in accomplishing work.

In the analysis based on earned value and expected schedule value we need to assess planned cost of work scheduled, budgeted cost of work completed and actual cost of work completed. These values are used on periodical basis to calculate schedule variance and cost variance. Cost variance indicates if the work performed costed more or less than expected at any point in the project lifetime. This value can be calculated as difference between actual cost and earned value. Schedule Variance quantifies the progress of work packages in monetary terms. Schedule Variance is calculated by subtracting planned value from earned value[8].

[edit] Status Report

A status report is an overview of the process progression for the period in which it has been issued. In each time period are gathered information about each work package completion:

  • If the activity has not been performed yet will earn 0% of its PV (time phased value of the work scheduled).
  • If the activity has been completed it will earn 100% of its PV.
  • If the activity is in execution it will earn the corresponding completion percentage of PV.

Subsequently we can apply the same completion percentage to calculate the Earned Value. Once again it will be finally possible to compute the schedule variance. The data acquired in this way can be used to plot PV,EV and SV (together with actual cost) up to the current period.

[edit] Performance Indexes

Many indexes derived from the values mentioned in the previous section can give further insight on efficiency performance and completion in project execution.

Type Name Formula Meaning
Performance Index Cost Performance Index (CPI)=\dfrac{EV}{AC} Cost Efficiency of the work accomplished to date. This value represent the efficiency of each monetary unit spent in the project. For example if CPI=0.8,it means that for every 8 DKK of value,it was actually spent 10 DKK. The CPI is the most used and accepted index.
Scheduling Performance Index (SPI)=\dfrac{EV}{PV} Scheduling efficiency to date. This measurement express the percentage of value earned compared to the baseline. Value bigger than one will indicate projects ahead of schedule while value lower than 1 will point at project behind schedule.
Completion Index Percent complete index (Budget) PCIB=\dfrac{EV}{BAC} Completion percentage in terms of budget amounts. Where BAC is budgeted cost at completion.
Percent complete index (Actual) PCIB=\dfrac{AC}{EAC} Completion percentage in terms of actual costs. Where EAC is estimated cost at completion.

[edit] Final cost forecast

It is quite likely that a project incur in cost overrun. When this happen, is necessary to revise the final cost estimate and setting a new baseline. In some case examination from expert is sufficient to generate this valuation. This is usually the case for small projects. In larger project it can be applied a method based on the scaling up the remaing work cost by the cost performance index (CPI). The estimated cost to complete the remaining work is calculated as:
ECT=\dfrac{Work Remaining}{CPI}=\dfrac{BAC-EV}{EV/AC}
This value, summed with the cumulative cost of the work completed in the assessment date (AC), gives the estimation of total cost at completion. This method can be combined with the To complete performance index (TCPI): TCPI=\dfrac{BAC-EV}{BAC-AC}
This measure indicates which value should have each monetary unit to remain into the budget. This means that if TCPI is equal to 2, any DDK spent should worth the double to remain in the budget.

[edit] Risk limitation

The measurement of performances can both generate and identify criticality within a project. It is important to be aware which is the best measurement setup and how to use the indicators to spot and act on time on variations.

[edit] Data acquisition

Sometimes exists a trade-off between data detail and acquisition cost. Supervising the monitoring points used for percentage completion of the project can raise the costs when more personnel is required for the task. Smaller project can reduce this risk by adopting other earned value rules:

  • 0/100% rule, short duration work packages switch from 0 to 100 of earned value when the work is completed
  • 50/50% rule, half of the value of the work package budget is earned when the work starts, the other half is earned at completion of the work.

Nevertheless, in large process is necessary to use the percent rule to allocate earned value.

[edit] Scope variation

Variation of scope are vary common and sometimes unavoidable in the lifetime of a project. These changes can have both internal (e.g. Project Managers decide to change the scope) or external (e.g. due to regulatory change ) causes. Voluntary changes in the scope should occur just when they are necessary for the survival of the project or when they bring significant improvements. From the accounting point of view, past expenditures should not be edited as transfer from different costs account should not be allowed. Changes are often seen with suspicion as when they manifest the organization's cash flow requirement can increase, as effect of more resource needed. However, is not excluded that scope variation can be rewarding, having positive effect on cost and schedule performance.

[edit] Baseline variation

When significant variances occurs, managers has to take action to bring back the project in line with the original or revised plan. When the scope changes throughout the project, a new baseline must be set, so to include the new information.

[edit] Scope Creep

In some case the scope can undergo significant modification following minor refinements. This phenomenon is called Scope Creep and it is common in early project. Some factors that demands for scope modification can be:

  • Customer requirements for additional features
  • Embedding a new technology
  • Poor design assumption

The baseline is usually unchanged as this modification are not noticed until delay and cost overrun are observed.

[edit] Contingency reserve

Before the beginning of every project can be necessary to define a contingency reserve. This found has the purpose of covering unexpected expenses. Its size mirror the risk of the project and it should be directly proportional with the the novelty of the project for the firm.

[edit] Notes

  1. ↑ Project Management: Planning and Control Techniques, Third Edition, Wiley, Chichester, 1999, p. 191
  2. ↑ https://www.nap.edu/read/11344/chapter/4, 22/09/2017
  3. ↑ Project Management: Planning and Control Techniques, Third Edition, Wiley, Chichester, 1999, p. 193
  4. ↑ https://www.defactosoftware.com/erp-software/data-analysis-and-reporting
  5. ↑ Project Management: The Managerial Process, Third Edition, Clifford Gray and Eric Larson, Mc Graw Hill, 2006, p. 193
  6. ↑ Definition of a Project Performance Indicators Model: Contribution of Collaborative Engineering Practices, Marcelo Silva Pereira and Rui M. Lima, 2017
  7. ↑ Jones, G. R., & George, J. M. (2011). Essentials of contemporary management. Boston: McGraw-Hill/Irwin.
  8. ↑ https://pmstudycircle.com/2012/05/schedule-variance-sv-cost-variance-cv-in-project-cost-management/
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