Question

6. Industrial Building, Inc., has two project teams installing virtually identical, four-story commercial buildings for a customer in two separate cities. Both projects have a planned daily cost of 100 and a planned daily earned value of 100 The first 6 days for each team have progressed as follows: Team A: Team B Day Earned Value Earned Value Cost Cost 95 95 98 94 101 102 106 109 6 99 126 118 90 92 94 98 104 112 90 2 95 101 89 105 Compare the two projects in terms of general progress and according to critical ratios.

Answer 1

For Team A summary table is as follows:

Row No	Day	Formula Applied	Day 1	Day 2	Day 3	Day 4	Day 5	Day 6	General Progress (Summation of 6 Days)
1	Planned Cost Value (PV)		100	100	100	100	100	100	600
2	Actual Cost (AC)		95	98	101	106	116	126	642
3	Earned Value (EV)		90	92	94	98	104	112	590
4	Schedule Variance	EV - PV	-10	-8	-6	-2	4	12	-10
5	Cost Variance	PV - AC	5	2	-1	-6	-16	-26	-42
6	Schedule Performance Index (SPI)	EV/PV	0.9	0.9	0.9	1.0	1.0	1.1	0.98
7	Cost Performance Index (CPI)	EV/AC	0.9	0.9	0.9	0.9	0.9	0.9	0.92
8	Critical Ratio (CR)	SPI*CPI	0.9	0.9	0.9	0.9	0.9	1.0	0.90

In project management, value earned takes a precedence over planned earnings in the process. In the above case Team A has a planned earning of 100 every day but it eventually surpasses it's targets. Thus, tracking earned value viz a viz the planned costs & actual costs gives us a clearer overview of the performance.

The Schedule Variance (Row 4) shows us how over the days, Team A has been able to surpass it's planned costs and earn more than it. If at the place of keeping an eye on the daily trends, we just look at the general progress column, it is -10, which shows an incorrect picture of the performance. Hence, a daily analysis helps us understand that Team A has performed well with regards to it's schedule. The same can be observed in Schedule Performance Index (Row 6) that SPI has grown from 0.9 to 1 and hence, moved from the region of behind the project schedule to ahead of the project schedule.

Similarly, the cost variance (Row 5) shows us how Team A stacks against the costs it is incurring to earn the values. Considering the ratio remains at 0.9 through out the days and also, in the general progress column. We can hence say that Team A has been performing over it's budget costs(as CPI is less than 1). This can be seen in absolute terms in Cost Variance (Row 5) or relative terms in Cost Performance index (Row 7)

Critical Ratio (Row 8) is able to combine the results from CPI & SPI to give us a snapshot of overall performance. Based on CR we can observe that Team A has shown poor project management (as CR ratio <1 is an indication of poor project management) till Day 5 & on an overall basis. Yet, in Day 6 we see CR becoming 1 showing that the project is shifting to be on target.

Similarly we can create a summary table for Team B as well:

Row No	Day	Formula Applied	Day 1	Day 2	Day 3	Day 4	Day 5	Day 6	General Progress (Summation of 6 Days)
1	Planned Cost Value (PV)		100	100	100	100	100	100	600
2	Actual Cost (AC)		95	94	102	109	99	118	617
3	Earned Value (EV)		90	88	95	101	89	105	568
4	Schedule Variance	EV - PV	-10	-12	-5	1	-11	5	-32
5	Cost Variance	PV - AC	5	6	-2	-9	1	-18	-17
6	Schedule Performance Index (SPI)	EV/PV	0.9	0.9	1.0	1.0	0.9	1.1	0.95
7	Cost Performance Index (CPI)	EV/AC	0.9	0.9	0.9	0.9	0.9	0.9	0.92
8	Critical Ratio (CR)	SPI*CPI	0.9	0.8	0.9	0.9	0.8	0.9	0.87

The summary table of Team B gives us similar results that SPI has been mostly flat for Team B with the numbers oscillating between 0.9 & 1.1. Thus, Team B has been on & off targeted schedule so far in it's progress. In terms of performance against budget, CPI shows us that Team B has performed poorly due to it's <1 ratio across the days. Critical Ratio for Team B has stayed <1 and thus, it has shown poor project management so far.

Thus, an overall comparison(based on general progress of 6 days) is as follows:

	Team A	Team B
SPI	0.98	0.95
CPI	0.92	0.92
CR	0.90	0.87

Hence, Team A has performed better than Team B due to it's scheduling efficiency resulting in a higher Critical Ratio.