Apr 1999 PM217: Project Management (Question 5)

(a)	One possible method of cost estimation and work performance management is the fifty-fifty rule. With the support of a diagram, describe in some detail how this rule works.	[4]
	In a fifty-fifty rule, the contractor assume to get half of its value when the project phase start. It will not get the other half until the project phase has to be completed, no matter it is a delay, on time or earlier. The total earn is only $250 due to the phase 3 haven't finish.
(b)	A software development project initial planning has been budgeted to complete at $1,000,000, over a development time frame of 15 weeks in 3 phases. The three phases as originally planned are as follows: Phase 1, lasting 5 weeks, with a planned cost of $600,000. Phase 2, lasting 7 weeks, with a planned cost of $300,000. Phase 3, lasting 3 weeks, with a planned cost of $100,000. However, due to complications in the actual development, the following took place: After 8 weeks of development, phase 1 has been completed at a cost of $640,000. However, phase 2, although started, has yet to be completed, and expenditure so far for the phase is at $240,000. Now using the fifty-fifty rule, together with your knowledge of the earned value approach, calculate the following:
	(i) Schedule variance (SV), cost variance (CV), Cost performance index (CPI), and estimated cost at completion (EAC) for phase 1.	[4]
	(ii) Schedule variance (SV), cost variance (CV), Cost performance index (CPI), and estimated cost at completion (EAC) for phase 2. Ensure that you clearly indicate all working in the derivation of your answers.	[6]
	(i) SV = BCWP - BCWS = 600,000 - 640,000 = - 40,000 CV = BCWP - ACWP = 600,000 - 640,000 = - 40,000 CPI = BCWP/ACWP = 600 000 / 640 000 = 0.9375 EAC = BAC / CPI = 1,000 000 / 0.9375 = $1,066, 667 (ii) SV = BCWP - BCWS = (600 000 + 150 000) - (600 000 + 300 000) = 750 000 - 900 000 = - 150 000 CV = BCWP - ACWP = (600 000 + 150 000) - (640 000 + 240 000) = 750 000 - 880 000 = -130 000 CPI = BCWP / ACWP = 750 000 / 880 000 = 0.8523 EAC = 1000 000 / 0.8523 = $1, 173 256
(c)	Evaluation tests are frequently conducted in project management to see whether targets are met. Identify, and explain any three types of evaluation processes.	[6]
	Audits Financial audit is done by outside auditors, whose job is to review project account and check project cash flow. Quality Assurance A target is set and the project is check periodically to see whether the target is achieved. Bid/ No Bid Evaluation For a project undertaken on a contract environment, the company did not spend all resources on every contract. The Bid/ No Bid evaluation decision is made after studying a number if factor of the particular process.