Commercial Management

Question 1

What is Earned Value Management?

Answer 1

Project cost management tool to understand and control the cost and time performance of a project.

EVM can also be used to compare the actual work that has been performed to the work that was estimated and planned for the project at a certain time during the project, EVM can also be used to forecast projected performance.

http://wiki.doing-projects.org/index.php/Earned_Value_Management_(EVM)_in_construction_projects

Question 2

What is Earned Value (EV)?

Answer 2

cumulative value that has been earned for the work completed at a certain point in time

Formula: Earned value(EV)=total budget for activity*completed proportion

Question 3

What is Planned Value (PV)?

Answer 3

budget baseline that has been established for a project/work package/activity - is a function of cost and time

Question 4

What is Actual Cost (AC)?

Answer 4

cumulative actual cost that has been spent on a project/work package/activity.

Question 5

What is Budget at Completion (BAC)?

Answer 5

AC is the final point and the highest value of the cumulative Planned value curve. BAC represents the total budget for the project/work package/activity.

Question 6

What is Cost Performance Index?

Answer 6

The ratio of approved budget for work performed(EV) to what was actually spent on the work(AC)

Cost efficiency of a project

Question 7

How is CPI calulated?

Answer 7

Formula = Earned Value / Actual Cost.

> 1 means better progress for the money spent
< 1 means less progress for the money spent

Question 8

What is Schedule Performance Index (SPI)

Answer 8

The ratio of approved budget for work performed to the actual approved budget for work performed(EV) to what was budgeted for the project(PV).

Question 9

How is SPI calculated

Answer 9

Formula = Earned Value / Planned Value

> 1 means more work performed than had been scheduled
< 1 means less work performed than had been scheduled

Question 10

What is Project Percent Complete and how calculated?

Answer 10

Percent of project work complete at a given time.

Formula = (EV/BAC) *100

Question 11

What is To Complete Performance Index (TCPI) and how calculated?

Answer 11

The cost performance index required to complete the project on the predetermined budget or the required future cost efficiency that is needed to achieve the target Budget at completion (BAC).

Formula = (BAC-EV)/(BAC-AC)

Question 12

What is Estimate at Completion (EAC) and how calculated?

Answer 12

The estimated total cost at project completion. The formula for EAC is based on the assumption that the current performance gives a fair indication of future performance

Formula = BAC/CPI