PM FPX 5334 Assessment 2 Bausch + Lomb Project

Optimizing Project Management: An In-Depth Analysis of NearlyFree.com’s Budget Challenges

Introduction

The project that NearlyFree.com is working on right now has gone over its original budget of $25,000.  The company has found major problems and is now looking for expert help with project management services because the project is only 43% done.  A full review of the financial statements shows a major difference in the earned value, which has been significantly under-budgeted.  The main goal of NearlyFree.com’s project is to make and use an automated online training system for new employees.  The goal of this project is to make the New Employee Orientation (NEO) process easier, which will cut down on the amount of work that needs to be done and the number of resources that are needed.

Project Overview

 The current project scope includes a timeline of 92 days and a budget of $22,300 that has been approved.  This report goes into great detail about the earned value technique, how to measure project success, and includes the calculations needed for an effective turnaround.

Understanding the Earned Value Technique

 The Earned Value (EV) technique is an important way to manage a project. It keeps track of the project plan, the work that has been done, and the value of the work that has been done.  It helps project managers figure out if the project is going as planned.  This method gives you useful information about how to manage your time and money by comparing how well you did with how much you planned to spend.  Control measures are put in place based on the cost baseline, and key calculations are used to accurately report on the project’s progress.

Key Inputs in Earned Value Analysis

• Earned Value (EV): This number shows how much work has actually been done on tasks as of the date of the analysis.
• Planned Value (PV): This shows how much money is expected to be spent according to the project schedule up to the date of the analysis.
• Actual Cost (AC): This is the amount of money that has been spent as of the date of the analysis.

Cost Variance (CV)

 Cost variance shows how much the budget has changed at the point of analysis. To find it, use the following formula:  Cost Variance (CV) is the difference between Earned Value (EV) and Actual Cost (AC).

Cost Performance Index (CPI)

 This index shows how much the project’s budget is off from its total size:  [ \text{Cost Performance Index (CPI)} = \frac {Earned Value (EV)}{Actual Cost (AC)}

Schedule Variance (SV)

 Schedule variance shows how much the project’s schedule has changed at the analysis point. It is calculated like this:  Schedule Variance (SV) = Earned Value (EV) – Planned Value (PV)

Schedule Performance Index (SPI)

 This index shows how the project is going compared to its planned schedule:  [ \text{Schedule Performance Index (SPI)} = \frac {\text{Earned Value (EV)}}{\text{Planned Value (PV)}}

Key Metrics and Current Performance

Analysis of Schedule Variance (SV)

The schedule variance shows that the project is behind schedule:  [ \text{Schedule Variance (SV)} = \text{Earned Value (EV)} – \text{Planned Value (PV)} ]  [ \text{SV} = -\$8,080.00 ]

Cost Variance (CV) Insights

 The cost variance shows how much money is different from the original budget:  Cost Variance (CV) = Earned Value (EV) – Actual Cost (AC)  [ \text{CV} = -\$4,000.00 ]

Performance Indices Interpretation

• Schedule Performance Index (SPI): The SPI value of 0.60 means that the project is very behind schedule, since an SPI below 1 means that there are delays.
• Cost Performance Index (CPI): A CPI of 0.76 means that for every dollar spent, less value is being achieved than planned. This could mean that the project will go over budget.

Budget at Completion (BAC) and Estimate at Completion (EAC)

The Budget at Completion (BAC) for NearlyFree.com is $22,300.  The Estimate at Completion (EAC), on the other hand, is based on how well the project is going right now and tells you how much it will cost in total.  [ \text{Estimate at Completion (EAC)} = \text{Actual Cost (AC)} + \frac{(\text{Budget at Completion (BAC)} – \text{Earned Value (EV)})} {Cost Performance Index (CPI)}  [ \text{EAC} = \$16,373.95 + \frac{(\$22,300 – \$12,373.95)} [0.76] = $29,434.54

Strategic Budget Turnaround

 Using Earned Value Analysis (EVA) is important for keeping track of how a project is going, guessing when it will be done, and finding differences between the budget and the schedule.  The first EVA for the NEO project from NearlyFree.com shows that it is more than 50% behind schedule, which means that the overall budget is over.  A more accurate EVA could have made the budget and timeline clearer.

Conclusion

 To make sure the project is a success, NearlyFree.com needs to change the budget and extend the deadline. The Estimate at Completion needs to go up from $22,300 to $29,434.54.  These changes are very important because going over the original budget or timeline could make stakeholders less confident, hurt the stock market, and hurt the company’s financial situation.  A more detailed project schedule would lower the chance of going over budget again and help the project finish on time.

PM FPX 5334 Assessment 2 Bausch + Lomb Project

Usmani, F. (2020, August 18). Planned value (pv), earned value (ev) & actual cost (ac) in project cost management. PM Study Circle. PM Study Circle