Posts

Showing posts from October, 2014

Variance At Completion

In project management a variance is the difference between a planned cost and the actual cost incurred and, normally, this leads to corrective actions. A more general definition of Variance Analysis can be found in Wikipedia and in many other web sites that specialize in this topic.
Variance Analysis

At Time Now:
Ei= Initial Estimate (Planned or Estimated Budget) Actuals = A = Actual amount incurred Et-c = Estimate To Complete Ea-c = Estimate At Completion = A + Et-c Va-c = Variance At Completion = Ei  - Ea-c At New Time (Time Now + T): If the variance is high (too much error or discrepancy), then it will be appropriate to assign Ea-c as the new Ei. 
Hence, Ei (new time) = Ea-c (time now) 

Project Cost Estimate vs. Cash Flow Analysis

A follow up based on my previous post: analyzing graph of planned project cost against cash flow. 
A simple comparison can be done using the WBS (Work Breakdown Structure) elements that contain all the tasks (the work to be done) of the project not yet realized. Each task has a cost assumption. Since WBS have a child / parent relationship, it's possible to roll up and summarize the cost information from the lower levels and upwards. The summarized total cost is the project cost estimate (or budget).

As the project advances, it's possible to validate the project cost estimate against the cash flow (actual cost). A good estimate makes a better forecast of project cost at completion (close to the final actual cost).

Project Cost Estimate and Cash Flow Analysis **The above graph illustrates three curves and is based on a hypothetical project with a number of tasks with an equal amount of work distributed equally over time,
The green curve is the ideal case. In an ideal situation the…