Example 13.

A project has a budget of ₹ 250 Crores and is scheduled to complete in a period

of 80 weeks. A review of the project at the end of 50 weeks gave the following
addition details:

Budgeted cost of work performed (BCWP): ₹ 170 Crores

Actual cost of work performed (ACWP): ₹ 180 Crores
Budgeted cost of work scheduled (BCWS): ₹ 187 Crores

Find the following:

(i) Cost Variance

(ii) Scheduled variance in cost terms
(iii) CPI
(iv) SPI
(v) Cost of completion
(vi) Time of completion
 Solution:

Total project budget cost - ₹ 250 Crores

Scheduled completion - 80 weeks
Date of reporting - End of 50 weeks

(i) Cost variance = BCWP – ACWP

Budgeted cost of work performed = 170 Crores
Actual cost of work performed = 180 Crores
Cost variance = 170 – 180 = - 10 Crores

As the cost variance is negative, the cost incurred on the project is more than
budgeted cost.

(ii) Schedule variance in cost terms = BCWS

Budgeted cost of work scheduled = 170 Crores
Scheduled variance = 170 – 187 = - 17 Crores

As the schedule variance is negative, it indicates that the project is running

behind schedule.
BCWP 170
(iii) Cost performance index (CPI) = ---------- = ------ = 0.944
ACWP 180

BCWP 170
(iv) SP1 performance index (SPI) = ---------- = ------ = 0.91
BCWS 187

BCTW 250
(v) Cost of completion = = ------ = ------- = Rs 264.72
cr.
CPI 0.944

Scheduled duration
(vi) Time of completion = --------------------------- = 87.91weeks – 88 weeks
0.91
Till the date reporting, the actual cost of work performed has exceeded the
budgeted cost by ₹ 10 Crores. The cost of completion would exceed the
scheduled completion period of 80 weeks by 8 weeks.

Example 13.5

The following data (Table 13.4) are known about a project when the project
review was conducted:

Table 13.4 Project data details

% Completion Cost in ₹ Lakhs

Activity
Scheduled Actual Budgeted Actual
1 100 100 10.0 12.0
2 100 100 12.0 12.5
3 70 60 18.0 12.0
4 55 50 25.0 13.0
5 30 25 20.0 6.0
6 10 0 15.0 0
7 0 0 10.0 0
8 0 0 8.5 0
9 0 0 6.5 0
10 0 0 5.0 0

The project is expected to be completed in 35 days. Find the following:

(i) Budgeted cost for work scheduled

(ii) Budgeted cost for work performed
(iii) Cost variance
(iv) CPI
(v) SPI
(vi) Cost of completion of the project
(vii) Time of completion of the project
 Solution:

BCWS (Budgeted cost of work scheduled)

= % of scheduled completion X budgeted cost for that activity.

BCWP (Budgeted cost of work performed)

= % of actual completed X budgeted cost for that activity.

The analysis is shown in Table 13.5.

Table 13.5 Analysis Table

% Completion Cost in ₹ Lakhs

Cost
Activity Budgete BCWS BCWP
Scheduled Actual Actual Variance
d
BCWP –
(A) (B) (C) (D) (AxC) (BxC)
(D)
1 100 100 10.0 12.0 10 10 -2
2 100 100 12.0 12.5 12 12 -0.5
3 70 60 18.0 12.0 12.6 10.8 -1.2
4 55 50 25.0 13.0 13.75 12.5 -0.5
5 30 25 20.0 6.0 6 5 -1
6 10 0 15.0 0 1.5 0 0
7 0 0 10.0 0 0 0 0
8 0 0 8.5 0 0 0 0
9 0 0 6.5 0 0 0 0
10 0 0 5.0 0 0 0 0
Total 130.0 55.5 55.85 50.3 -5.2

BCWS = ₹ 55.85 lakhs

BCWP = ₹ 50.3 lakhs

Cost variance = BCWP – ACWP = 50.3 – 55.5 = -5.20

CPI = BCWP / ACWP = 50.3 / 55.5 = 0.91
SPI = BCWP / BCWS = 50.3 / 55.85 = 0.90

Cost of completion = Budgeted cost / CPI = 130/0.91 = ₹ 142.86 lakhs

Time of completion = Scheduled duration / SPI = 35 / 0.90 = 38.89 – 39 weeks.

Hence, the project is likely to be completed in 39 weeks instead of the

scheduled 35 weeks and the project cost is likely to escalate up to ₹ 142.86
lakhs.

Example 13.6

The following information (Table 13.6) is available at the end of day 40 of a

new plant erection project. Determine if the project is under control based on
earned value evaluation system, and if not, what is the likely extent of cost and
time overruns at completion.

Table 13.6 project related details

Total
Predecessor Duration Actual Cost Actual % of
Activity Budgeted (₹’
(s) (Days) till Date Completion
000)
A - 10 300 250 100
B A 8 400 450 100
C A 12 350 380 100
D C 0 0 0 0
E B,D 18 405 400 70
F E 16 450 - 0
 Solution:

We need to know the project duration to calculate the time overrun.

Moreover, to calculate the earned value, we must know how many activities
have been completed and how many activities are partially completed. Hence,
construction of a network diagram, activity early start (ES) and early finish (EF)
times and project duration must be calculated at the beginning. The network
diagram is shown in figure 13.1 Table 13.7 Table gives us the ES, EF times.

4
B8
E 18
A 10
1 2
F 16
D0 6
5
C 12

Figure 13.1 Network diagram

Path 1 : A – B – E – F, duration = 52 days.

Path 2: A – C – D – E – F, duration = 56 days.

Table 13.7 project-related details

Total
Predecessor Duration Actual Cost Actual % of
Activity ES EF Budgeted
(s) (Days) till Date Completion
(₹’ 000)
A - 10 0 10 300 250 100
B A 8 10 18 400 450 100
C A 12 10 22 350 380 100
D C 0 22 22 0 0 0
E B, D 18 22 40 405 400 70
F E 16 40 56 450 - 0

At the end of day 40, activities A, B, C, D and E should have been completed.
Activities A, B, C and D are completed but only 70% of activity E has been
completed.

Budgeted cost of work performed = 100% X budgeted for activity A

+ 100% X budget for activity B + 100% X budget for activity C + 100%
Budget for activity D + 70% X budget for activity E = ₹1,333.50 (₹’ 000)

Budgeted cost of work Scheduled = 100% X budgeted for activity A

+ 100% X budget for activity B + 100% X budget for activity C + 100%
Budget for activity D + 100% X budget for activity E = ₹1,455 (₹’ 000)

Actual cost of work performed = Sum of actual cost till date = 250
+ 450 + 380 + 400 = ₹ 1,480 (₹’ 000)

Cost variance = BCWP – ACWP = 1,333.50 – 1,480 = - 146.5 ( ₹’ 000)

This indicates that the project is behind schedule.

BCWP 1,333.50
CPI -------- = ------------- = 0.90
ACWP 1,480

BCWP 1,333.50
SPI -------- = ------------- = 0.92
BCWS 1,455

Budgeted cost for project 1,905

Project cost = ---------------------------------- = ----------
CPI 0.90

= 2,116.67 (₹ ‘000)

Hence, the project cost overrun is 2,116,67 - 1,905 = ₹ 211.67 ( ₹ ‘000)

Project time – Project duration / SPI = 56/0.92 = 60.87 ≈ 61 days. Hence,
project time overrun = 61 – 56 = 5 days.