Cost Change Control System

A cost change control system, documented in the cost management plan, defines the procedures by which the cost baseline can be changed. It includes the forms documentation, tracking systems, and approval levels necessary for authorizing changes. The cost change control system is integrated with the integrated change control process.

Performance Measurement Analysis

Performance measurement techniques help to assess the magnitude of any variance that will I invariably occur.  The earned value technique (EVT) compares the cumulative value of the budgets cost of work scheduled (planned) to the actual cost control, resource management, and production.

An important part of cost control is to determine the variance, the magnitude of the variance, and to decide if the variance requires corrective action.

The earned value technique uses the cost control contained in the project management plan to assess project progress and the magnitude of any variations that occur. The earned value technique involves developing these key values for each schedule activity, work package, or control account.

Planned value (PV)

PV is the budgeted cost for the work scheduled to be completed on an activity or WBS component up to a given point in time.

Earned value (EV)

EV is the budgeted amount for the work actually completed on the schedule activity or WBS component during a given time period.

Actual cost (AC)

AC is the actual cost incurred in accomplishing work on the schedule activity or WBS component during a given time period. This AC must correspond in definition and coverage to whatever was budgeted for the PV and the EV (e.g. direct hours only, direct cost only, or all costs including indirect costs).

Estimate to complete (ETC) and estimate at completion (EAC)

The PV, EV, and AC values are used in combination to provide performance measures of whether or not work is being accomplished as planned at any given point in time. The most commonly used measures are cost variance (CV) and schedule variance (SV). The amount of variance of the CV and SV values tend to decrease as the project reaches completion due to compensating effect of more work being accomplished. Predetermined acceptable completion can be established in the cost management plan.

Cost Variance (CV)

CV equals earned value (EV) minus actual cost (AC). The cost variance at the end of the project will be the difference between the budget at the completion (BAC) and the actual amount spent.

Formula: CV=EV-AC

Schedule Variance (SV):

SV equals earned value (EV) minus planned value (PV). Schedule variance will ultimately equal zero when the project is completed because all of the planned values will ultimately equal zero when the project is completed because all of the planned values will have been earned.

Formula: SV=EV-PV

These two values, the CV and SV, can be converted to efficiency indicators to reflect the cost and schedule performance of any project.

Cost performance index (CPI)

A CPI value less than 1.0 indicate accost overrun of the estimates. A CPI value greater than 1 indicates a cost under-run of the estimates. CPI equals the ratio of the EV to the AC. The CPI is the most commonly used cost-efficiency indicator.

Formula: CPI=EV/AC

Cumulative CPI (CPI^c):

The cumulative CPI is widely used to forecast project costs at completion. CPIC equals the sum of the periodic earned values (EV^c) divided by the sum of the individual actual costs (AC^c).

Formula: SPI=EV/PV

The earned vale technique in its various forms is a commonly used method of performance measurement. It integrates project scope, cost (or resource) and schedule measures to help the project team assess project performance.