{"id":1497,"date":"2019-08-16T09:10:22","date_gmt":"2019-08-16T16:10:22","guid":{"rendered":"https:\/\/opentextbc.ca\/projectmanagement\/chapter\/chapter-12-budget-planning-project-management\/"},"modified":"2023-02-01T11:26:19","modified_gmt":"2023-02-01T19:26:19","slug":"chapter-12-budget-planning-project-management","status":"publish","type":"chapter","link":"https:\/\/opentextbc.ca\/projectmanagement\/chapter\/chapter-12-budget-planning-project-management\/","title":{"raw":"12. Budget Planning","rendered":"12. Budget Planning"},"content":{"raw":"Click play on the following audio player to listen along as you read this section.\r\n\r\nhttps:\/\/media.bccampus.ca\/id\/0_0gqj5t6h?width=608&amp;height=70&amp;playerId=23449753\r\n\r\nEvery project boils down to money. If you had a bigger budget, you could probably get more people to do your project more quickly and deliver more. That\u2019s why no project plan is complete until you come up with a budget. But no matter whether your project is big or small, and no matter how many resources and activities are in it, the process for figuring out the bottom line is always the same.\r\n\r\nIt is important to come up with detailed estimates for\u00a0all the project costs. Once this is compiled, you add up the cost estimates into a budget plan. It is now possible to track the project according to that budget while the work is ongoing.\r\n\r\nOften, when\u00a0you come into a project, there is already an expectation of how much it will cost or how much time it will take. When you make an estimate early in the project without knowing\u00a0much about it, that estimate is called a rough order-of-magnitude estimate (or a ballpark estimate). This estimate will become more refined as time goes on and you learn more about the project. Here are some tools and techniques for estimating\u00a0cost:\r\n<ul>\r\n \t<li><b>Determination of resource cost rates<\/b>: People who will be working on the project all work at a specific rate. Any materials you use to build the project (e.g., wood or wiring) will be charged at a rate too. Determining resource costs\u00a0means figuring out what the rate for labour and materials will be.<\/li>\r\n \t<li><b>Vendor bid analysis:<\/b> Sometimes you will need to work with an external contractor to get your project done. You might even have more than one contractor bid on the job. This tool is about evaluating those bids and choosing the one you will accept.<\/li>\r\n \t<li><b>Reserve analysis<\/b>: You need to set aside some money for cost overruns. If you know that your project has a risk of something expensive happening, it is better to have some cash available\u00a0to deal with it. Reserve analysis means putting some cash away in case of overruns.<\/li>\r\n \t<li><b>Cost of quality<\/b>: You will need to figure the cost of all your quality-related activities into the overall budget. Since it\u2019s cheaper to find bugs earlier in the project than later, there are always quality costs associated with everything your project produces. Cost of quality is just a way of tracking the cost of those activities. It is the amount of\u00a0money it takes to do the project right.<\/li>\r\n<\/ul>\r\nOnce you apply all the tools in this process, you will arrive at an estimate for how much your project will cost. It\u2019s important to keep all of your supporting estimate information. That way, you know the assumptions made when you were coming up with the\u00a0numbers. Now you are ready to build your budget plan.\r\n<h1>Estimating Costs to Compare and Select Projects<\/h1>\r\nDuring the conceptual phase when project selection occurs, economic factors are an important consideration in\u00a0choosing between competing projects. To compare the simple paybacks or internal rates of return between projects, an estimate of the cost of each project is made. The estimates must be accurate enough so that the comparisons are meaningful, but the amount of time and resources used to make the estimates should be appropriate to the size and complexity of the project. The methods used to estimate the cost of the project during the selection phase are generally faster and consume fewer resources than those used to create detailed estimates in later phases. They rely more on the expert judgment of experienced managers who can make accurate estimates with less detailed information. Estimates in the earliest stages of project selection are usually based on information from previous projects that can be adjusted\u2014<b>scaled<\/b>\u2014to match the size and complexity of the current project or developed using\u00a0standardized formulas.\r\n<h2>Analogous Estimate<\/h2>\r\nAn estimate that is based on other project estimates is an <b>analogous estimate<\/b>. If a similar project cost a certain amount, then it is reasonable to assume that the current project will cost about the same. Few projects are exactly the same size and complexity, so the estimate must be adjusted upward or downward to account for the differences. The selection of projects that are similar and the amount of adjustment needed is up to the judgment of the person who makes the estimate. Normally, this judgment is based on many years of experience estimating projects, including incorrect estimates that were learning experiences for the expert.\r\n\r\nLess-experienced managers who are required to make analogous estimates can look through the documentation that is available from previous projects.\u00a0 If projects were evaluated using the Darnall-Preston Complexity Index (DPCI), the manager can quickly identify projects that have profiles\u00a0similar to the project under consideration, even if those projects were managed by other people.\r\n\r\nThe\u00a0DPCI assesses project attributes, enabling better-informed decisions in creating the project profile. This index assesses the complexity level of key components of a project and produces a unique project profile. The profile indicates the project complexity level, which provides a benchmark for comparing projects and information about the characteristics of a project that can then be addressed in the project execution plan. It achieves this objective by grouping 11\u00a0attributes into four broad categories: internal, external, technological complexity, and environmental.\r\n\r\nComparing the original estimates with the final project costs on several previous projects with the same DPCI ratings gives a less-experienced manager the perspective that it would take many years to acquire by trial and error. It also provides references the manager can use to justify the estimate.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Analogous Estimate for John's Move<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n\r\nJohn sold his apartment and purchased another one.\u00a0 It is now time to plan for the move. John asked a friend for advice about the cost of his move. His friend replied, \u201cI moved from an apartment a little smaller than yours last year and the distance was about the same. I did it with a 14-foot truck. It cost about $575 for the truck rental, pads, hand truck, rope, boxes, and gas.\u201d Because of the similarity of the projects, John\u2019s initial estimate of the cost of the move was less than $700 so\u00a0he decided that the cost would be affordable and the project could go forward.\r\n\r\n<\/div>\r\n<\/div>\r\n<h2>Parametric Estimate<\/h2>\r\nIf the project consists of activities that are common to many other projects, average costs are available per unit. For example, if you ask a construction company how much it would cost to build a standard office building, the estimator will ask for the size of the building in square feet and the city in which the building will be built. From these two factors\u2014size and location\u2014the company\u2019s estimator can predict the cost of the building. Factors like size and location are <b>parameters<\/b>\u2014measurable factors that can be used in an equation to calculate a result. The estimator knows the average cost per square foot of a typical office building and adjustments for local labour costs. Other parameters such as quality of finishes are used to further refine the estimate. Estimates that are calculated by multiplying measured parameters by cost-per-unit values are <b>parametric estimates<\/b>.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Parametric Estimate for John's Move<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n\r\nTo estimate the size of the truck needed for John\u2019s move, the parameter used by a truck rental company is the number of bedrooms (Figure 12.1).\u00a0The company assumes that the number of bedrooms is the important parameter in determining how big a truck is needed for a move. John has a one-bedroom apartment, so he chooses the 14-foot truck. Once the size is determined, other parameters, such as distance and days, are used to estimate the cost of the truck rental.\r\n\r\n[caption id=\"attachment_1487\" align=\"aligncenter\" width=\"844\"]<a href=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/parametric-cost-estimate.jpg\"><img class=\"wp-image-1487 size-full\" src=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/parametric-cost-estimate.jpg\" alt=\"U-Haul estimates that their 14-foot truck will work for moving a house with 1 to 2 bedrooms\" width=\"844\" height=\"240\" \/><\/a> Figure 12.1 Parametric Cost Estimate[\/caption]\r\n\r\n<\/div>\r\n<\/div>\r\n<h2>Bottom-Up Estimating<\/h2>\r\nThe most accurate and time-consuming estimating method is to identify the cost of each item in each activity of the schedule, including labour and materials. If you view the project schedule as a hierarchy where the general descriptions of tasks are at the top and the lower levels become more detailed, finding the price of each item at the lowest level and then summing them to determine the cost of higher levels is called <b>bottom-up estimating<\/b>.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Bottom-Up Estimate for John's Move<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n<table style=\"border-collapse: collapse; width: 99.9589%; height: 224px;\" border=\"0\"><caption>Table 12.1 Detailed Cost Estimate<\/caption>\r\n<thead>\r\n<tr style=\"height: 16px;\">\r\n<th style=\"width: 20%; height: 16px;\" scope=\"col\">Category<\/th>\r\n<th style=\"width: 20%; height: 16px;\" scope=\"col\">Description<\/th>\r\n<th style=\"width: 9.95893%; height: 16px;\">Activity<\/th>\r\n<th style=\"width: 10%; height: 16px;\" scope=\"col\">Quantity<\/th>\r\n<th style=\"width: 20%; height: 16px;\" scope=\"col\">Unit Price<\/th>\r\n<th style=\"width: 20%; height: 16px;\" scope=\"col\">Cost<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Small Boxes<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">10<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$1.70<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$17.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Medium Boxes<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">15<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$2.35<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$35.25<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Large Boxes<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">7<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$3.00<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$21.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Extra-Large Boxes<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">7<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$3.75<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$26.25<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Short-Hanger Boxes<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">3<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$7.95<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$23.85<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Box Tape<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">2<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$3.85<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$7.70<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Markers<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">2<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$1.50<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$3.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Mattress\/Spring Bags<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">2<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$2.95<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$5.90<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Life Straps per Pair<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">1<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$24.95<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$24.95<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Bubble Wrap<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">1<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$19.95<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$19.95<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Furniture Pads<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\r\n<td style=\"width: 10%; height: 16px;\">4<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$7.95<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$31.80<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Truck<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Rental<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.2<\/td>\r\n<td style=\"width: 10%; height: 16px;\">-<\/td>\r\n<td style=\"width: 20%; height: 16px;\">-<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$400.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 20%; height: 16px;\">Truck<\/td>\r\n<td style=\"width: 20%; height: 16px;\">Gas at 10mpg<\/td>\r\n<td style=\"width: 9.95893%; height: 16px;\">2.2<\/td>\r\n<td style=\"width: 10%; height: 16px;\">200<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$2.25<\/td>\r\n<td style=\"width: 20%; height: 16px;\">$45.00<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nAfter evaluating the bids by the moving companies, John decides the savings are worth his time if he can get the packing done with the help of his friends. He decides to prepare a detailed estimate of costs (Table 12.1) for packing materials and use of a rental truck. He looks up the prices for packing materials and truck rental costs on company websites and prepares a detailed list of items, quantities, and costs.\r\n\r\nThis type of estimate is typically more accurate than an analogous or parametric estimate. In this example, the sum of packing materials and truck expenses is estimated to be $661.25.\r\n\r\nThe estimate\u00a0can be rolled up\u2014subtotaled\u2014to display less detail. This process is made easier using computer software. On projects with low complexity, the cost estimates can be done on spreadsheet software. On larger projects, software that manages schedules can also manage costs and display them\u00a0by activity and category. For example, the subtotal feature could be used in Excel and collapsed to show the subtotals for the two categories of costs (Figure 12.2).\r\n\r\n[caption id=\"attachment_97\" align=\"aligncenter\" width=\"624\"]<a href=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2013\/05\/17-1-3-1-2-Sum-of-Detailed-Costs-by-Type.jpg\"><img class=\"wp-image-97 size-full\" src=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2013\/05\/17-1-3-1-2-Sum-of-Detailed-Costs-by-Type.jpg\" alt=\"Packing materials total=$216.65. Truck total=$445.00. Grand total=$661.65\" width=\"624\" height=\"147\" \/><\/a> Figure 12.2 Sum of detailed costs by type[\/caption]\r\n\r\n<\/div>\r\n<\/div>\r\n<h2>Activity-Based Estimates<\/h2>\r\nAn activity can have costs from multiple vendors in addition to internal costs for labour and materials. Detailed estimates from all sources can be reorganized so those costs associated with a particular activity can be grouped by adding the activity code to the detailed estimate (Table 12.2).\r\n<table style=\"border-collapse: collapse; width: 100%;\" border=\"0\"><caption>Table 12.2 Costs Associated with Activities<\/caption>\r\n<thead>\r\n<tr>\r\n<th style=\"width: 33.3333%;\" scope=\"col\">Category<\/th>\r\n<th style=\"width: 33.3333%;\" scope=\"col\">Activity<\/th>\r\n<th style=\"width: 33.3333%;\" scope=\"col\">Cost<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td style=\"width: 33.3333%;\">Packing Materials<\/td>\r\n<td style=\"width: 33.3333%;\">2.1<\/td>\r\n<td style=\"width: 33.3333%;\">$216.65<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 33.3333%;\">Truck<\/td>\r\n<td style=\"width: 33.3333%;\">2.2<\/td>\r\n<td style=\"width: 33.3333%;\">$445.00<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nThe detailed cost estimates can be sorted and then subtotaled by activity to determine the cost for each activity.\r\n<h1>Managing the Budget<\/h1>\r\nProjects seldom go according to plan in every detail. It is necessary for the project manager to be able to identify when costs are varying from the budget and manage those variations.\r\n<h2>Managing Cash Flow<\/h2>\r\nIf the total amount spent on a project is equal to or less than the amount budgeted, the project can still be in trouble if the funding for the project is not available when it is needed. There is a natural tension between the financial people in an organization, who do not want to pay for the use of money that is just sitting in a checking account, and the project manager, who wants to be sure that there is enough money available to pay for project expenses. The financial people prefer to keep the company\u2019s money working in other investments until the last moment before transferring it to the project account. The contractors and vendors have similar concerns, and they want to get paid as soon as possible so they can put the money to work in their own organizations. The project manager would like to have as much cash available as possible to use if activities exceed budget expectations.\r\n<h2>Contingency Reserves<\/h2>\r\nMost projects have something unexpected occur that increases costs above the original estimates. If estimates are rarely exceeded, the estimating method should be reviewed because the estimates are too high. It is impossible to predict which activities will cost more than expected, but it is reasonable to assume that some of them will. Estimating the likelihood of such events is part of risk analysis, which is discussed in more detail in a later chapter.\r\n\r\nInstead of overestimating each cost, money is budgeted for dealing with unplanned but statistically predictable cost increases. Funds allocated for this purpose are called <b>contingency reserves<\/b>. Because it is likely that this money will be spent, it is part of the total budget for the project. If this fund is adequate to meet the unplanned expenses, then the project will complete within the budget.\r\n<h2>Management Reserves<\/h2>\r\nIf something occurs during the project that requires a change in the project scope, money may be needed to deal with the situation before a change in scope can be negotiated with the project sponsor or client. It could be an opportunity as well as a challenge. For example, if a new technology were invented that would greatly enhance your completed project, there would be additional cost and a change to the scope, but it would be worth it. Money can be made available at the manager\u2019s discretion to meet needs that would change the scope of the project. These funds are called <b>management reserves<\/b>. Unlike contingency reserves, they are not likely to be spent and are not part of the project\u2019s budget baseline, but they can be included in the total project budget.\r\n<h2>Evaluating the Budget During the Project<\/h2>\r\nA project manager must regularly compare the amount of money spent with the budgeted amount and report this information to managers and stakeholders. It is necessary to establish an understanding of how this progress will be measured and reported.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Reporting Budget Progress on John's Move<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n\r\nIn the John\u2019s move example, he estimated that the move would cost about $1,500 and take about 16 days. Eight days into the project, John has spent $300. John tells his friends that the project is going well because he is halfway through the project but has only spent a fifth of his budget. John\u2019s friend Carlita points out that his report is not sufficient because he did not compare the amount spent to the budgeted amount for the activities that should be done by the eighth day.\r\n\r\n<span class=\"Apple-style-span\">As John\u2019s friend pointed out, a budget report must compare the amount spent with the amount that is expected to be spent by that point in the project. Basic measures such as percentage of activities completed, percentage of measurement units completed, and percentage of budget spent are adequate for less complex projects, but more sophisticated techniques are used for projects with higher complexity.<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n<h2>Earned Value Analysis<\/h2>\r\nA method that is widely used for medium- and high-complexity projects is the <b>earned value management (EVM)<\/b> method. EVM is a method of periodically comparing the budgeted costs with the actual costs during the project. It combines the scheduled activities with detailed cost estimates of each activity. It allows for partial completion of an activity if some of the detailed costs associated with the activity have been paid but others have not.\r\n\r\nThe <b>budgeted cost of work scheduled (BCWS)<\/b> comprises the detailed cost estimates for each activity in the project. The amount of work that should have been done by a particular date is the <b>planned value (PV)<\/b>. These terms are used interchangeably by some sources, but the planned value term is used in formulas to refer to the sum of the budgeted cost of work up to a particular point in the project, so we will make that distinction in the definitions in this text for clarity.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Planned Value on Day Six of John's Move<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n\r\nOn day six of the project, John should have taken his friends to lunch and purchased the packing materials. The portion of the BCWS that should have been done by that date (the planned value) is shown in Table 12.3. This is the planned value for day six of the project.\r\n<table style=\"border-collapse: collapse; width: 100%; height: 208px;\" border=\"0\"><caption>Table 12.3 Planned Value for Lunch and Packing Materials<\/caption>\r\n<thead>\r\n<tr style=\"height: 16px;\">\r\n<th style=\"width: 33.3333%; height: 16px;\" scope=\"col\">Description<\/th>\r\n<th style=\"width: 33.3333%; height: 16px;\" scope=\"col\">Quantity<\/th>\r\n<th style=\"width: 33.3333%; height: 16px;\" scope=\"col\">Cost<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Lunch<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">3<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$45.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Small Boxes<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">10<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$17.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Medium Boxes<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">15<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$35.25<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Large Boxes<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">7<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$21.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Extra Large Boxes<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">7<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$26.25<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Short Hanger Boxes<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">3<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$23.85<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Box Tape<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">2<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$7.70<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Markers<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">2<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$3.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Mattress\/Spring Bags<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">2<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$5.90<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Life Straps per Pair<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">1<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$24.95<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Bubble Wrap<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">1<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$19.95<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 33.3333%; height: 16px;\">Furniture Pads<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">4<\/td>\r\n<td style=\"width: 33.3333%; height: 16px;\">$31.80<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p style=\"text-align: right;\"><strong>Total: $261.65<\/strong><\/p>\r\n\r\n<\/div>\r\n<\/div>\r\nThe <b>budgeted cost of work performed (BCWP)<\/b> is the budgeted cost of work scheduled that has been done. If you sum the BCWP values up to that point in the project schedule, you have the <b>earned value (EV)<\/b>. The amount spent on an item is often more or less than the estimated amount that was budgeted for that item. The <b>actual cost (AC)<\/b> is the sum of the amounts actually spent on the items.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Comparing PV, EV, and AC in John\u2019s Move on Day Six<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n\r\nDion and Carlita were both trying to lose weight and just wanted a nice salad. Consequently, the lunch cost less than expected. John makes a stop at a store that sells moving supplies at discount rates. They do not have all the items he needs, but the prices are lower than those quoted by the moving company. They have a very good price on lifting straps so he decides to buy an extra pair. He returns with some of the items on his list, but this phase of the job is not complete by the end of day six. John bought half of the small boxes, all of five other items, twice as many lifting straps, and none of four other items. John is only six days into his project, and his costs and performance are starting to vary from the plan. Earned value analysis gives us a method for reporting that progress (Table 12.4).\r\n<table style=\"border-collapse: collapse; width: 100%; height: 241px;\" border=\"0\"><caption>Table 12.4 Planned Value, Earned Value, and Actual Cost<\/caption>\r\n<tbody>\r\n<tr style=\"height: 33px;\">\r\n<th style=\"width: 12.731%; height: 33px;\"><\/th>\r\n<th style=\"width: 13.0535%; height: 33px;\" colspan=\"2\">Budgeted Cost of Work Scheduled (BCWS)<\/th>\r\n<th style=\"width: 7.93126%; height: 33px;\" colspan=\"2\">Budgeted Cost of Work Performed (BCWP)<\/th>\r\n<th style=\"width: 7.80931%; height: 33px;\" colspan=\"2\">Actual Cost (AC)<\/th>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<th style=\"width: 12.731%; height: 16px;\" scope=\"col\">Description<\/th>\r\n<th style=\"width: 2.05347%; height: 16px;\" scope=\"col\">Quantity<\/th>\r\n<th style=\"width: 11.653%; height: 16px;\" scope=\"col\">Cost<\/th>\r\n<th style=\"width: 7.93126%; height: 16px;\">Quantity<\/th>\r\n<th style=\"width: 10.5878%; height: 16px;\">Cost<\/th>\r\n<th style=\"width: 7.80931%; height: 16px;\">Quantity<\/th>\r\n<th style=\"width: 13.0454%; height: 16px;\">Cost<\/th>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Lunch<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">3<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$45.00<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\">3<\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\">$45.00<\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\">3<\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\">$35.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Small Boxes<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">10<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$7.00<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\">5<\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\">$8.50<\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\">5<\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\">$9.50<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Medium Boxes<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">15<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$35.25<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\">15<\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\">$35.25<\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\">15<\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\">$28.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Large Boxes<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">7<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$21.00<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\"><\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\"><\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\"><\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\"><\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Extra-Large Boxes<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">7<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$26.25<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\"><\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\"><\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\"><\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\"><\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Short-Hanger Boxes<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">3<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$23.85<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\"><\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\"><\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\"><\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\"><\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Box Tape<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">2<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$7.70<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\">2<\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\">$7.70<\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\">2<\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\">$5.50<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Markers<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">2<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$3.00<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\">2<\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\">$3.00<\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\">2<\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\">$2.00<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Mattress\/Spring Bags<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">2<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$5.90<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\">2<\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\">$5.90<\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\">2<\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\">$7.50<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Life Straps per Pair<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">1<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$24.95<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\">1<\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\">$24.95<\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\">2<\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\">38.50<\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Bubble Wrap<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">1<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$19.95<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\"><\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\"><\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\"><\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\"><\/td>\r\n<\/tr>\r\n<tr style=\"height: 16px;\">\r\n<td style=\"width: 12.731%; height: 16px;\">Furniture Pads<\/td>\r\n<td style=\"width: 2.05347%; height: 16px;\">4<\/td>\r\n<td style=\"width: 11.653%; height: 16px;\">$31.80<\/td>\r\n<td style=\"width: 7.93126%; height: 16px;\">4<\/td>\r\n<td style=\"width: 10.5878%; height: 16px;\">$31.80<\/td>\r\n<td style=\"width: 7.80931%; height: 16px;\">4<\/td>\r\n<td style=\"width: 13.0454%; height: 16px;\">28.50<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nThe original schedule called for spending $261.65 (PV) by day six. The amount of work done was worth $162.10 (EV) according to the estimates, but the actual cost was only $154.50 (AC).\r\n\r\n<\/div>\r\n<\/div>\r\n<h2>Schedule Variance<\/h2>\r\nThe project manager must know if the project is on schedule and within the budget. The difference between planned and actual progress is the <b>variance<\/b>. The <b>schedule variance (SV)<\/b> is the difference between the earned value (EV) and the planned value (PV). Expressed as a formula, SV = EV \u2212 PV. If less value has been earned than was planned, the schedule variance is negative, which means the project is behind schedule.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Schedule Variance on John's Move<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n\r\nPlanning for John\u2019s move calls for spending $261.65 by day six, which is the planned value (PV). The difference between the planned value and the earned value is the scheduled variance (SV). The formula is SV = EV\u00a0\u2212 PV. In this example, SV = $162.10 \u2212 $261.65 = ($99.55) A negative SV indicates the project is behind schedule.\r\n\r\n<\/div>\r\n<\/div>\r\nThe difference between the earned value (EV) and the actual cost (AC) is the <b>cost variance (CV)<\/b>. Expressed as a formula, CV = EV \u2212AC. A positive CV indicates the project is under budget.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Cost Variance on John's Move<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n\r\nThe difference between the earned value of $162.10 and the actual cost of $154.50 is the cost variance (CV). The formula is CV = EV \u2212 AC. In this example, CV = $162.10 \u2212 $154.50 = $7.60.\r\n\r\n<\/div>\r\n<\/div>\r\n<h2>Variance Indexes for Schedule and Cost<\/h2>\r\nThe schedule variance and the cost variance provide the amount by which the spending is behind (or ahead of) schedule and the amount by which a project is exceeding (or not fully using) its budget. They do not give an idea of how these amounts compare with the total budget.\r\n\r\nThe ratio of earned value to planned value gives an indication of how much of the project is completed. This ratio is the <b>schedule performance index (SPI)<\/b>. The formula is SPI = EV \u00f7 PV. In the John\u2019s move example, the SPI equals 0.62 (SPI = $162.10 \u00f7 $261.65 = 0.62) An SPI value less than 1\u00a0indicates the project is behind schedule.\r\n\r\nThe ratio of the earned value to the actual cost is the <b>cost performance index (CPI)<\/b>. The formula is CPI = EV \u00f7 AC.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Cost Performance Index of John's Move<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n\r\nIn the John\u2019s move example, CPI = $162.10 \u00f7 $154.50 = 1.05. A value greater than 1 indicates that the project is under budget.\r\n\r\n[caption id=\"attachment_1494\" align=\"aligncenter\" width=\"500\"]<a href=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/schedule-variance-cost-variance.jpg\"><img class=\"wp-image-1494\" src=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/schedule-variance-cost-variance.jpg\" alt=\"A line graph showing greater schedule variance than cost variance after day 5\" width=\"500\" height=\"266\" \/><\/a> Figure 12.3 Schedule variance and cost variance.[\/caption]\r\n\r\nThe cost variance of positive $7.60 and the CPI value of 1.05 tell John that he is getting more value for his money than planned for the tasks scheduled by day six. The schedule variance (SV) of negative $99.55 and the schedule performance index (SPI) of 0.62 tell him that he is behind schedule in adding value to the project (Figure 12.3).\r\n\r\n<\/div>\r\n<\/div>\r\nDuring the project, the manager can evaluate the schedule using the schedule variance (SV) and the schedule performance index (SPI), and the budget using the cost variance (CV) and the cost performance index (CPI).\r\n<h2>Estimated Cost to Complete the Project<\/h2>\r\nPart way through the project, the manager evaluates the accuracy of the cost estimates for the activities that have taken place and uses that experience to predict how much money it will take to complete the unfinished ativities\u2014<b>the estimate to complete (ETC)<\/b>.\r\n\r\nTo calculate the ETC, the manager must decide if the cost variance observed in the estimates to that point are representative of the future. For example, if unusually bad weather causes increased cost during the first part of the project, it is not likely to have the same effect on the rest of the project. If the manager decides that the cost variance up to this point in the project is atypical\u2014not typical\u2014then the estimate to complete is the difference between the original budget for the entire project\u2014the <b>budget at completion (BAC)<\/b>\u2014and the earned value (EV) up to that point. Expressed as a formula, ETC = BAC \u2212 EV.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Estimate to Complete John's Move<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n\r\nFor his\u00a0move, John was able to buy most of the items at a discount house that did not have a complete inventory, and he chose to buy an extra pair of lift straps. He knows that the planned values for packing materials were obtained from the price list at the moving company where he will have to buy the rest of the items, so those two factors are not likely to be typical of the remaining purchases. The reduced cost of lunch is unrelated to the future costs of packing materials, truck rentals, and hotel fees. John decides that the factors that caused the variances are atypical. He calculates that the estimate to complete (ETC) is the budget at completion ($1,534) minus the earned value at that point ($162.10), which equals $1,371.90. Expressed as a formula, ETC = $1,534 \u2212 $162.10 = $1,371.90.\r\n\r\n<\/div>\r\n<\/div>\r\nIf the manager decides that the cost variance is caused by factors that will affect the remaining activities, such as higher labour and material costs, then the estimate to complete (ETC) needs to be adjusted by dividing it by the cost performance index (CPI). For example, if labour costs on the first part of a project are estimated at $80,000 (EV) and they actually cost $85,000 (AC), the cost performance (CPI) will be 0.94. (Recall that the CPI = EV \u00f7 AC.)\r\n\r\nTo calculate the estimate to complete (ETC), assuming the cost variance on known activities is typical of future cost, the formula is ETC = (BAC \u2212 EV) \u00f7 CPI. If the budget at completion (BAC) of the project is $800,000, the estimate to complete is ($800,000 \u2212 $80,000) \u00f7 0.94 = $766,000.\r\n<h2>Estimate Final Project Cost<\/h2>\r\nIf the costs of the activities up to the present vary from the original estimates, this\u00a0will affect the total estimate of\u00a0the project cost. The new estimate of the project cost is the estimate at completion (EAC). To calculate the EAC, the <b>estimate to complete (ETC)<\/b> is added to the actual cost (AC) of the activities already performed. Expressed as a formula, EAC = AC + ETC.\r\n<div class=\"textbox textbox--examples\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Example: Estimate at Completion for John's Move<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">\r\n\r\nThe revised estimate at completion (EAC) for John\u2019s move at this point in the process is EAC = $154.50 + $1,371.90 = $1,526.40.\r\n<table style=\"border-collapse: collapse; width: 100%;\" border=\"0\"><caption>Table 12.5 Summary of Terms and Formulas for Earned Value Analysis<\/caption>\r\n<thead>\r\n<tr>\r\n<th style=\"width: 20%;\" scope=\"col\">Term<\/th>\r\n<th style=\"width: 20%;\" scope=\"col\">Acronym<\/th>\r\n<th style=\"width: 20%;\" scope=\"col\">Description<\/th>\r\n<th style=\"width: 20%;\" scope=\"col\">Formula<\/th>\r\n<th style=\"width: 20%;\" scope=\"col\">John's Move<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td style=\"width: 20%;\">Actual Cost<\/td>\r\n<td style=\"width: 20%;\">AC<\/td>\r\n<td style=\"width: 20%;\">The money actually spent on projects up to the present.<\/td>\r\n<td style=\"width: 20%;\">-<\/td>\r\n<td style=\"width: 20%;\">$154.50<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 20%;\">Budget at Completion<\/td>\r\n<td style=\"width: 20%;\">BAC<\/td>\r\n<td style=\"width: 20%;\">Original budget for the project (same sa BCWS)<\/td>\r\n<td style=\"width: 20%;\">-<\/td>\r\n<td style=\"width: 20%;\">$1,534.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 20%;\">Cost Performance Index<\/td>\r\n<td style=\"width: 20%;\">CPI<\/td>\r\n<td style=\"width: 20%;\">Ratio of earned value to actual cost<\/td>\r\n<td style=\"width: 20%;\">CPI = EV \u00f7 AC<\/td>\r\n<td style=\"width: 20%;\">1.05<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 20%;\">Cost Variance<\/td>\r\n<td style=\"width: 20%;\">CV<\/td>\r\n<td style=\"width: 20%;\">Difference between earned value and actual cost<\/td>\r\n<td style=\"width: 20%;\">CV = EV \u2212 AC<\/td>\r\n<td style=\"width: 20%;\">$7.60<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 20%;\">Earned Value<\/td>\r\n<td style=\"width: 20%;\">EV<\/td>\r\n<td style=\"width: 20%;\">Sum of estimates for work actually done up to the present<\/td>\r\n<td style=\"width: 20%;\">-<\/td>\r\n<td style=\"width: 20%;\">$162.10<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 20%;\">Estimate at Completion<\/td>\r\n<td style=\"width: 20%;\">EAC<\/td>\r\n<td style=\"width: 20%;\">Revised estimate of total project cost<\/td>\r\n<td style=\"width: 20%;\">EAC = AC + ETC<\/td>\r\n<td style=\"width: 20%;\">$1,526.40<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 20%;\">Estimate to Complete<\/td>\r\n<td style=\"width: 20%;\">ETC<\/td>\r\n<td style=\"width: 20%;\">Money to complete the project if early cost variance is atypical<\/td>\r\n<td style=\"width: 20%;\">ETC = (BAC \u2212 EV) \u00f7 CPI<\/td>\r\n<td style=\"width: 20%;\">n\/a<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 20%;\">Planned Vale<\/td>\r\n<td style=\"width: 20%;\">PV<\/td>\r\n<td style=\"width: 20%;\">Sum of the estimates for work done up to the present<\/td>\r\n<td style=\"width: 20%;\">-<\/td>\r\n<td style=\"width: 20%;\">$261.65<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 20%;\">Schedule Performnce Index<\/td>\r\n<td style=\"width: 20%;\">SPI<\/td>\r\n<td style=\"width: 20%;\">Ratio of earned value to planned value<\/td>\r\n<td style=\"width: 20%;\">SPI = EV \u00f7 PV<\/td>\r\n<td style=\"width: 20%;\">0.62<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 20%;\">Schedule Variance<\/td>\r\n<td style=\"width: 20%;\">SV<\/td>\r\n<td style=\"width: 20%;\">Difference between earned value and planned value<\/td>\r\n<td style=\"width: 20%;\">SV = EV \u2212 PV<\/td>\r\n<td style=\"width: 20%;\">$99.55<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<\/div>\r\nTo summarize (Table 12.5):\r\n<ul>\r\n \t<li>Extra money is allocated in a contingency fund to deal with activities where costs exceed estimates. Funds are allocated in a management reserve in case a significant opportunity or challenge occurs that requires change of scope but funds are needed immediately before a scope change can typically be negotiated.<\/li>\r\n \t<li>Schedule variance is the difference between the part of the budget that has been spent\u00a0so far (EV) versus the part that was planned to be spent\u00a0by now (PV). Similarly, the cost variance is the difference between the EV and the actual cost (AC).<\/li>\r\n \t<li>The schedule performance index (SPI) is the ratio of the earned value and the planned value. The cost performance index (CPI) is the ratio of the earned value (EV) to the actual cost (AC).<\/li>\r\n \t<li>The formula used to calculate the amount of money needed to complete the project (ETC) depends on whether or not the cost variance to this point is expected to continue (typical) or not (atypical). If the cost variance is atypical, the ETC is simply the original total budget (BAC) minus the earned value (EV). If they are typical of future cost variances, the ETC is adjusted by dividing the difference between BAC and EV by the CPI.<\/li>\r\n \t<li>The final budget is the actual cost (AC) to this point plus the estimate to complete (ETC).<\/li>\r\n<\/ul>\r\n<h1>Establishing a Budget<\/h1>\r\nOnce you have broken your project down into activities, you will be able to calculate your overall project costs by estimating and totaling the individual activity costs.\r\n\r\nThis process of subtotaling costs by category or activity is called <b>cost aggregation<\/b>.\r\n<h2>Budget Timeline<\/h2>\r\nCosts are associated with activities, and since each activity has a start date and a duration period, it is possible to calculate how much money will be spent by any particular date during the project. The money needed to pay for a project is usually transferred to the project account shortly before it is needed. These transfers must be timed so that the money is there to pay for each activity without causing a delay in the start of the activity. If the money is transferred too far in advance, the organization will lose the opportunity to use the money somewhere else, or they will have to pay unnecessary interest charges if the money is borrowed. A schedule of money transfers is created that should match the need to pay for the activities. The process of matching the schedule of transfers with the schedule of activity payments is called <b>reconciliation<\/b>. Refer to Figure 12.4, which shows the costs of 10\u00a0major activities in a project. Funds are transferred into the project account four times. Notice that during most of the project, there were more funds available than were spent except at activity 6 when all the available funds were spent.\r\n\r\n[caption id=\"attachment_1496\" align=\"aligncenter\" width=\"500\"]<a href=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/fund-transfers-expenditures.jpg\"><img class=\"wp-image-1496\" src=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/fund-transfers-expenditures.jpg\" alt=\"&quot;&quot;\" width=\"500\" height=\"384\" \/><\/a> Figure 12.4: Fund transfers and expenditures.[\/caption]\r\n\r\nIn the project budget profile shown in Figure 12.4, there is no margin for error if the total of the first six activities exceeds the amount of funding at that point in the project.\r\n\r\nContractual agreements with vendors often require partial payment of their costs during the project. Those contracts can be managed more conveniently if the unit of measure for partial completion is the same as that used for cost budgeting. For example, if a graphic designer is putting together several pieces of artwork for a textbook, their contract may call for partial payment after 25% of their total number of drawings is complete.\r\n<h3>Text Attributions<\/h3>\r\nThis chapter adapted and remixed by Adrienne Watts from the following sources:\r\n<ul>\r\n \t<li>Introductory text was adapted from \"Budget Planning\" in <em><a href=\"http:\/\/archive.org\/stream\/ost-business-projectmanagementforallcareersedition2\/ProjectManagementforAllCareersEdition2_djvu.txt\" target=\"_blank\" rel=\"noopener\">Project Management for Skills for All Careers<\/a><\/em> by Project Management Open Resources and TAP-a-PM. Licensed under a <a href=\"https:\/\/creativecommons.org\/licenses\/by\/3.0\/\" rel=\"noopener\">CC BY 3.0 licence<\/a>.<\/li>\r\n \t<li>Text under \"Estimating Costs\" and \"Managing the Budget\"\u00a0 was adapted from \"Costs and Procurement\" in <a href=\"https:\/\/pm4id.org\/pm4id\"><em>Project Management for Instructional Designers<\/em><\/a> by Amado, M., Ashton, K., Ashton, S., Bostwick, J., Clements, G., Drysdale, J., Francis, J., Harrison, B., Nan, V., Nisse, A., Randall, D., Rino, J., Robinson, J., Snyder, A., Wiley, D., &amp; Anonymous.\u00a0 Licensed under a <a class=\"external-link\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\" rel=\"nofollow\">CC BY-NC-SA (Attribution-NonCommercial-ShareAlike) licence<\/a>.<\/li>\r\n \t<li>Text under \"Budget Timeline\" was adapted from \"<a href=\"https:\/\/open.lib.umn.edu\/projectmanagement\/chapter\/9-1-estimating-costs\/\">Estimating Costs<\/a>\" in <a href=\"https:\/\/open.umn.edu\/opentextbooks\/textbooks\/project-management-from-simple-to-complex\" target=\"_blank\" rel=\"noopener\"><em>Project Management From Simple to Complex<\/em><\/a> by author whose name has been removed at the request of the original publisher. Licensed under <a href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA 4.0 licence<\/a>.<\/li>\r\n<\/ul>","rendered":"<p>Click play on the following audio player to listen along as you read this section.<\/p>\n<p><iframe loading=\"lazy\" id=\"kaltura_player\" title=\"Chapter 12 - Budget Planning\" src=\"https:\/\/api.ca.kaltura.com\/p\/148\/sp\/14800\/embedIframeJs\/uiconf_id\/23449753\/partner_id\/148?iframeembed=true&#38;playerId=kaltura_player&#38;entry_id=0_0gqj5t6h&#38;flashvars[leadWithHTML5]=true&#38;flashvars[streamerType]=auto&#38;flashvars[localizationCode]=en&#38;flashvars[sideBarContainer.plugin]=true&#38;flashvars[sideBarContainer.position]=left&#38;flashvars[sideBarContainer.clickToClose]=true&#38;flashvars[chapters.plugin]=true&#38;flashvars[chapters.layout]=vertical&#38;flashvars[chapters.thumbnailRotator]=false&#38;flashvars[streamSelector.plugin]=true&#38;flashvars[EmbedPlayer.SpinnerTarget]=videoHolder&#38;flashvars[dualScreen.plugin]=true&#38;flashvars[Kaltura.addCrossoriginToIframe]=true&#38;wid=0_khd149uc\" width=\"608\" height=\"70\" allowfullscreen=\"allowfullscreen\" sandbox=\"allow-downloads allow-forms allow-same-origin allow-scripts allow-top-navigation allow-pointer-lock allow-popups allow-modals allow-orientation-lock allow-popups-to-escape-sandbox allow-presentation allow-top-navigation-by-user-activation\" frameborder=\"0\"><\/iframe><\/p>\n<p>Every project boils down to money. If you had a bigger budget, you could probably get more people to do your project more quickly and deliver more. That\u2019s why no project plan is complete until you come up with a budget. But no matter whether your project is big or small, and no matter how many resources and activities are in it, the process for figuring out the bottom line is always the same.<\/p>\n<p>It is important to come up with detailed estimates for\u00a0all the project costs. Once this is compiled, you add up the cost estimates into a budget plan. It is now possible to track the project according to that budget while the work is ongoing.<\/p>\n<p>Often, when\u00a0you come into a project, there is already an expectation of how much it will cost or how much time it will take. When you make an estimate early in the project without knowing\u00a0much about it, that estimate is called a rough order-of-magnitude estimate (or a ballpark estimate). This estimate will become more refined as time goes on and you learn more about the project. Here are some tools and techniques for estimating\u00a0cost:<\/p>\n<ul>\n<li><b>Determination of resource cost rates<\/b>: People who will be working on the project all work at a specific rate. Any materials you use to build the project (e.g., wood or wiring) will be charged at a rate too. Determining resource costs\u00a0means figuring out what the rate for labour and materials will be.<\/li>\n<li><b>Vendor bid analysis:<\/b> Sometimes you will need to work with an external contractor to get your project done. You might even have more than one contractor bid on the job. This tool is about evaluating those bids and choosing the one you will accept.<\/li>\n<li><b>Reserve analysis<\/b>: You need to set aside some money for cost overruns. If you know that your project has a risk of something expensive happening, it is better to have some cash available\u00a0to deal with it. Reserve analysis means putting some cash away in case of overruns.<\/li>\n<li><b>Cost of quality<\/b>: You will need to figure the cost of all your quality-related activities into the overall budget. Since it\u2019s cheaper to find bugs earlier in the project than later, there are always quality costs associated with everything your project produces. Cost of quality is just a way of tracking the cost of those activities. It is the amount of\u00a0money it takes to do the project right.<\/li>\n<\/ul>\n<p>Once you apply all the tools in this process, you will arrive at an estimate for how much your project will cost. It\u2019s important to keep all of your supporting estimate information. That way, you know the assumptions made when you were coming up with the\u00a0numbers. Now you are ready to build your budget plan.<\/p>\n<h1>Estimating Costs to Compare and Select Projects<\/h1>\n<p>During the conceptual phase when project selection occurs, economic factors are an important consideration in\u00a0choosing between competing projects. To compare the simple paybacks or internal rates of return between projects, an estimate of the cost of each project is made. The estimates must be accurate enough so that the comparisons are meaningful, but the amount of time and resources used to make the estimates should be appropriate to the size and complexity of the project. The methods used to estimate the cost of the project during the selection phase are generally faster and consume fewer resources than those used to create detailed estimates in later phases. They rely more on the expert judgment of experienced managers who can make accurate estimates with less detailed information. Estimates in the earliest stages of project selection are usually based on information from previous projects that can be adjusted\u2014<b>scaled<\/b>\u2014to match the size and complexity of the current project or developed using\u00a0standardized formulas.<\/p>\n<h2>Analogous Estimate<\/h2>\n<p>An estimate that is based on other project estimates is an <b>analogous estimate<\/b>. If a similar project cost a certain amount, then it is reasonable to assume that the current project will cost about the same. Few projects are exactly the same size and complexity, so the estimate must be adjusted upward or downward to account for the differences. The selection of projects that are similar and the amount of adjustment needed is up to the judgment of the person who makes the estimate. Normally, this judgment is based on many years of experience estimating projects, including incorrect estimates that were learning experiences for the expert.<\/p>\n<p>Less-experienced managers who are required to make analogous estimates can look through the documentation that is available from previous projects.\u00a0 If projects were evaluated using the Darnall-Preston Complexity Index (DPCI), the manager can quickly identify projects that have profiles\u00a0similar to the project under consideration, even if those projects were managed by other people.<\/p>\n<p>The\u00a0DPCI assesses project attributes, enabling better-informed decisions in creating the project profile. This index assesses the complexity level of key components of a project and produces a unique project profile. The profile indicates the project complexity level, which provides a benchmark for comparing projects and information about the characteristics of a project that can then be addressed in the project execution plan. It achieves this objective by grouping 11\u00a0attributes into four broad categories: internal, external, technological complexity, and environmental.<\/p>\n<p>Comparing the original estimates with the final project costs on several previous projects with the same DPCI ratings gives a less-experienced manager the perspective that it would take many years to acquire by trial and error. It also provides references the manager can use to justify the estimate.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Analogous Estimate for John&#8217;s Move<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<p>John sold his apartment and purchased another one.\u00a0 It is now time to plan for the move. John asked a friend for advice about the cost of his move. His friend replied, \u201cI moved from an apartment a little smaller than yours last year and the distance was about the same. I did it with a 14-foot truck. It cost about $575 for the truck rental, pads, hand truck, rope, boxes, and gas.\u201d Because of the similarity of the projects, John\u2019s initial estimate of the cost of the move was less than $700 so\u00a0he decided that the cost would be affordable and the project could go forward.<\/p>\n<\/div>\n<\/div>\n<h2>Parametric Estimate<\/h2>\n<p>If the project consists of activities that are common to many other projects, average costs are available per unit. For example, if you ask a construction company how much it would cost to build a standard office building, the estimator will ask for the size of the building in square feet and the city in which the building will be built. From these two factors\u2014size and location\u2014the company\u2019s estimator can predict the cost of the building. Factors like size and location are <b>parameters<\/b>\u2014measurable factors that can be used in an equation to calculate a result. The estimator knows the average cost per square foot of a typical office building and adjustments for local labour costs. Other parameters such as quality of finishes are used to further refine the estimate. Estimates that are calculated by multiplying measured parameters by cost-per-unit values are <b>parametric estimates<\/b>.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Parametric Estimate for John&#8217;s Move<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<p>To estimate the size of the truck needed for John\u2019s move, the parameter used by a truck rental company is the number of bedrooms (Figure 12.1).\u00a0The company assumes that the number of bedrooms is the important parameter in determining how big a truck is needed for a move. John has a one-bedroom apartment, so he chooses the 14-foot truck. Once the size is determined, other parameters, such as distance and days, are used to estimate the cost of the truck rental.<\/p>\n<figure id=\"attachment_1487\" aria-describedby=\"caption-attachment-1487\" style=\"width: 844px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/parametric-cost-estimate.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-1487 size-full\" src=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/parametric-cost-estimate.jpg\" alt=\"U-Haul estimates that their 14-foot truck will work for moving a house with 1 to 2 bedrooms\" width=\"844\" height=\"240\" srcset=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/parametric-cost-estimate.jpg 844w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/parametric-cost-estimate-300x85.jpg 300w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/parametric-cost-estimate-768x218.jpg 768w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/parametric-cost-estimate-65x18.jpg 65w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/parametric-cost-estimate-225x64.jpg 225w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/parametric-cost-estimate-350x100.jpg 350w\" sizes=\"auto, (max-width: 844px) 100vw, 844px\" \/><\/a><figcaption id=\"caption-attachment-1487\" class=\"wp-caption-text\">Figure 12.1 Parametric Cost Estimate<\/figcaption><\/figure>\n<\/div>\n<\/div>\n<h2>Bottom-Up Estimating<\/h2>\n<p>The most accurate and time-consuming estimating method is to identify the cost of each item in each activity of the schedule, including labour and materials. If you view the project schedule as a hierarchy where the general descriptions of tasks are at the top and the lower levels become more detailed, finding the price of each item at the lowest level and then summing them to determine the cost of higher levels is called <b>bottom-up estimating<\/b>.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Bottom-Up Estimate for John&#8217;s Move<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<table style=\"border-collapse: collapse; width: 99.9589%; height: 224px;\">\n<caption>Table 12.1 Detailed Cost Estimate<\/caption>\n<thead>\n<tr style=\"height: 16px;\">\n<th style=\"width: 20%; height: 16px;\" scope=\"col\">Category<\/th>\n<th style=\"width: 20%; height: 16px;\" scope=\"col\">Description<\/th>\n<th style=\"width: 9.95893%; height: 16px;\">Activity<\/th>\n<th style=\"width: 10%; height: 16px;\" scope=\"col\">Quantity<\/th>\n<th style=\"width: 20%; height: 16px;\" scope=\"col\">Unit Price<\/th>\n<th style=\"width: 20%; height: 16px;\" scope=\"col\">Cost<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Small Boxes<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">10<\/td>\n<td style=\"width: 20%; height: 16px;\">$1.70<\/td>\n<td style=\"width: 20%; height: 16px;\">$17.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Medium Boxes<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">15<\/td>\n<td style=\"width: 20%; height: 16px;\">$2.35<\/td>\n<td style=\"width: 20%; height: 16px;\">$35.25<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Large Boxes<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">7<\/td>\n<td style=\"width: 20%; height: 16px;\">$3.00<\/td>\n<td style=\"width: 20%; height: 16px;\">$21.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Extra-Large Boxes<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">7<\/td>\n<td style=\"width: 20%; height: 16px;\">$3.75<\/td>\n<td style=\"width: 20%; height: 16px;\">$26.25<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Short-Hanger Boxes<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">3<\/td>\n<td style=\"width: 20%; height: 16px;\">$7.95<\/td>\n<td style=\"width: 20%; height: 16px;\">$23.85<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Box Tape<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">2<\/td>\n<td style=\"width: 20%; height: 16px;\">$3.85<\/td>\n<td style=\"width: 20%; height: 16px;\">$7.70<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Markers<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">2<\/td>\n<td style=\"width: 20%; height: 16px;\">$1.50<\/td>\n<td style=\"width: 20%; height: 16px;\">$3.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Mattress\/Spring Bags<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">2<\/td>\n<td style=\"width: 20%; height: 16px;\">$2.95<\/td>\n<td style=\"width: 20%; height: 16px;\">$5.90<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Life Straps per Pair<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">1<\/td>\n<td style=\"width: 20%; height: 16px;\">$24.95<\/td>\n<td style=\"width: 20%; height: 16px;\">$24.95<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Bubble Wrap<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">1<\/td>\n<td style=\"width: 20%; height: 16px;\">$19.95<\/td>\n<td style=\"width: 20%; height: 16px;\">$19.95<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Packing Materials<\/td>\n<td style=\"width: 20%; height: 16px;\">Furniture Pads<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.1<\/td>\n<td style=\"width: 10%; height: 16px;\">4<\/td>\n<td style=\"width: 20%; height: 16px;\">$7.95<\/td>\n<td style=\"width: 20%; height: 16px;\">$31.80<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Truck<\/td>\n<td style=\"width: 20%; height: 16px;\">Rental<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.2<\/td>\n<td style=\"width: 10%; height: 16px;\">&#8211;<\/td>\n<td style=\"width: 20%; height: 16px;\">&#8211;<\/td>\n<td style=\"width: 20%; height: 16px;\">$400.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 20%; height: 16px;\">Truck<\/td>\n<td style=\"width: 20%; height: 16px;\">Gas at 10mpg<\/td>\n<td style=\"width: 9.95893%; height: 16px;\">2.2<\/td>\n<td style=\"width: 10%; height: 16px;\">200<\/td>\n<td style=\"width: 20%; height: 16px;\">$2.25<\/td>\n<td style=\"width: 20%; height: 16px;\">$45.00<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>After evaluating the bids by the moving companies, John decides the savings are worth his time if he can get the packing done with the help of his friends. He decides to prepare a detailed estimate of costs (Table 12.1) for packing materials and use of a rental truck. He looks up the prices for packing materials and truck rental costs on company websites and prepares a detailed list of items, quantities, and costs.<\/p>\n<p>This type of estimate is typically more accurate than an analogous or parametric estimate. In this example, the sum of packing materials and truck expenses is estimated to be $661.25.<\/p>\n<p>The estimate\u00a0can be rolled up\u2014subtotaled\u2014to display less detail. This process is made easier using computer software. On projects with low complexity, the cost estimates can be done on spreadsheet software. On larger projects, software that manages schedules can also manage costs and display them\u00a0by activity and category. For example, the subtotal feature could be used in Excel and collapsed to show the subtotals for the two categories of costs (Figure 12.2).<\/p>\n<figure id=\"attachment_97\" aria-describedby=\"caption-attachment-97\" style=\"width: 624px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2013\/05\/17-1-3-1-2-Sum-of-Detailed-Costs-by-Type.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-97 size-full\" src=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2013\/05\/17-1-3-1-2-Sum-of-Detailed-Costs-by-Type.jpg\" alt=\"Packing materials total=$216.65. Truck total=$445.00. Grand total=$661.65\" width=\"624\" height=\"147\" srcset=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2013\/05\/17-1-3-1-2-Sum-of-Detailed-Costs-by-Type.jpg 624w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2013\/05\/17-1-3-1-2-Sum-of-Detailed-Costs-by-Type-300x70.jpg 300w\" sizes=\"auto, (max-width: 624px) 100vw, 624px\" \/><\/a><figcaption id=\"caption-attachment-97\" class=\"wp-caption-text\">Figure 12.2 Sum of detailed costs by type<\/figcaption><\/figure>\n<\/div>\n<\/div>\n<h2>Activity-Based Estimates<\/h2>\n<p>An activity can have costs from multiple vendors in addition to internal costs for labour and materials. Detailed estimates from all sources can be reorganized so those costs associated with a particular activity can be grouped by adding the activity code to the detailed estimate (Table 12.2).<\/p>\n<table style=\"border-collapse: collapse; width: 100%;\">\n<caption>Table 12.2 Costs Associated with Activities<\/caption>\n<thead>\n<tr>\n<th style=\"width: 33.3333%;\" scope=\"col\">Category<\/th>\n<th style=\"width: 33.3333%;\" scope=\"col\">Activity<\/th>\n<th style=\"width: 33.3333%;\" scope=\"col\">Cost<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"width: 33.3333%;\">Packing Materials<\/td>\n<td style=\"width: 33.3333%;\">2.1<\/td>\n<td style=\"width: 33.3333%;\">$216.65<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 33.3333%;\">Truck<\/td>\n<td style=\"width: 33.3333%;\">2.2<\/td>\n<td style=\"width: 33.3333%;\">$445.00<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The detailed cost estimates can be sorted and then subtotaled by activity to determine the cost for each activity.<\/p>\n<h1>Managing the Budget<\/h1>\n<p>Projects seldom go according to plan in every detail. It is necessary for the project manager to be able to identify when costs are varying from the budget and manage those variations.<\/p>\n<h2>Managing Cash Flow<\/h2>\n<p>If the total amount spent on a project is equal to or less than the amount budgeted, the project can still be in trouble if the funding for the project is not available when it is needed. There is a natural tension between the financial people in an organization, who do not want to pay for the use of money that is just sitting in a checking account, and the project manager, who wants to be sure that there is enough money available to pay for project expenses. The financial people prefer to keep the company\u2019s money working in other investments until the last moment before transferring it to the project account. The contractors and vendors have similar concerns, and they want to get paid as soon as possible so they can put the money to work in their own organizations. The project manager would like to have as much cash available as possible to use if activities exceed budget expectations.<\/p>\n<h2>Contingency Reserves<\/h2>\n<p>Most projects have something unexpected occur that increases costs above the original estimates. If estimates are rarely exceeded, the estimating method should be reviewed because the estimates are too high. It is impossible to predict which activities will cost more than expected, but it is reasonable to assume that some of them will. Estimating the likelihood of such events is part of risk analysis, which is discussed in more detail in a later chapter.<\/p>\n<p>Instead of overestimating each cost, money is budgeted for dealing with unplanned but statistically predictable cost increases. Funds allocated for this purpose are called <b>contingency reserves<\/b>. Because it is likely that this money will be spent, it is part of the total budget for the project. If this fund is adequate to meet the unplanned expenses, then the project will complete within the budget.<\/p>\n<h2>Management Reserves<\/h2>\n<p>If something occurs during the project that requires a change in the project scope, money may be needed to deal with the situation before a change in scope can be negotiated with the project sponsor or client. It could be an opportunity as well as a challenge. For example, if a new technology were invented that would greatly enhance your completed project, there would be additional cost and a change to the scope, but it would be worth it. Money can be made available at the manager\u2019s discretion to meet needs that would change the scope of the project. These funds are called <b>management reserves<\/b>. Unlike contingency reserves, they are not likely to be spent and are not part of the project\u2019s budget baseline, but they can be included in the total project budget.<\/p>\n<h2>Evaluating the Budget During the Project<\/h2>\n<p>A project manager must regularly compare the amount of money spent with the budgeted amount and report this information to managers and stakeholders. It is necessary to establish an understanding of how this progress will be measured and reported.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Reporting Budget Progress on John&#8217;s Move<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<p>In the John\u2019s move example, he estimated that the move would cost about $1,500 and take about 16 days. Eight days into the project, John has spent $300. John tells his friends that the project is going well because he is halfway through the project but has only spent a fifth of his budget. John\u2019s friend Carlita points out that his report is not sufficient because he did not compare the amount spent to the budgeted amount for the activities that should be done by the eighth day.<\/p>\n<p><span class=\"Apple-style-span\">As John\u2019s friend pointed out, a budget report must compare the amount spent with the amount that is expected to be spent by that point in the project. Basic measures such as percentage of activities completed, percentage of measurement units completed, and percentage of budget spent are adequate for less complex projects, but more sophisticated techniques are used for projects with higher complexity.<\/span><\/p>\n<\/div>\n<\/div>\n<h2>Earned Value Analysis<\/h2>\n<p>A method that is widely used for medium- and high-complexity projects is the <b>earned value management (EVM)<\/b> method. EVM is a method of periodically comparing the budgeted costs with the actual costs during the project. It combines the scheduled activities with detailed cost estimates of each activity. It allows for partial completion of an activity if some of the detailed costs associated with the activity have been paid but others have not.<\/p>\n<p>The <b>budgeted cost of work scheduled (BCWS)<\/b> comprises the detailed cost estimates for each activity in the project. The amount of work that should have been done by a particular date is the <b>planned value (PV)<\/b>. These terms are used interchangeably by some sources, but the planned value term is used in formulas to refer to the sum of the budgeted cost of work up to a particular point in the project, so we will make that distinction in the definitions in this text for clarity.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Planned Value on Day Six of John&#8217;s Move<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<p>On day six of the project, John should have taken his friends to lunch and purchased the packing materials. The portion of the BCWS that should have been done by that date (the planned value) is shown in Table 12.3. This is the planned value for day six of the project.<\/p>\n<table style=\"border-collapse: collapse; width: 100%; height: 208px;\">\n<caption>Table 12.3 Planned Value for Lunch and Packing Materials<\/caption>\n<thead>\n<tr style=\"height: 16px;\">\n<th style=\"width: 33.3333%; height: 16px;\" scope=\"col\">Description<\/th>\n<th style=\"width: 33.3333%; height: 16px;\" scope=\"col\">Quantity<\/th>\n<th style=\"width: 33.3333%; height: 16px;\" scope=\"col\">Cost<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Lunch<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">3<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$45.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Small Boxes<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">10<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$17.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Medium Boxes<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">15<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$35.25<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Large Boxes<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">7<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$21.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Extra Large Boxes<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">7<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$26.25<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Short Hanger Boxes<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">3<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$23.85<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Box Tape<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">2<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$7.70<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Markers<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">2<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$3.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Mattress\/Spring Bags<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">2<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$5.90<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Life Straps per Pair<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">1<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$24.95<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Bubble Wrap<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">1<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$19.95<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 33.3333%; height: 16px;\">Furniture Pads<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">4<\/td>\n<td style=\"width: 33.3333%; height: 16px;\">$31.80<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p style=\"text-align: right;\"><strong>Total: $261.65<\/strong><\/p>\n<\/div>\n<\/div>\n<p>The <b>budgeted cost of work performed (BCWP)<\/b> is the budgeted cost of work scheduled that has been done. If you sum the BCWP values up to that point in the project schedule, you have the <b>earned value (EV)<\/b>. The amount spent on an item is often more or less than the estimated amount that was budgeted for that item. The <b>actual cost (AC)<\/b> is the sum of the amounts actually spent on the items.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Comparing PV, EV, and AC in John\u2019s Move on Day Six<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<p>Dion and Carlita were both trying to lose weight and just wanted a nice salad. Consequently, the lunch cost less than expected. John makes a stop at a store that sells moving supplies at discount rates. They do not have all the items he needs, but the prices are lower than those quoted by the moving company. They have a very good price on lifting straps so he decides to buy an extra pair. He returns with some of the items on his list, but this phase of the job is not complete by the end of day six. John bought half of the small boxes, all of five other items, twice as many lifting straps, and none of four other items. John is only six days into his project, and his costs and performance are starting to vary from the plan. Earned value analysis gives us a method for reporting that progress (Table 12.4).<\/p>\n<table style=\"border-collapse: collapse; width: 100%; height: 241px;\">\n<caption>Table 12.4 Planned Value, Earned Value, and Actual Cost<\/caption>\n<tbody>\n<tr style=\"height: 33px;\">\n<th style=\"width: 12.731%; height: 33px;\"><\/th>\n<th style=\"width: 13.0535%; height: 33px;\" colspan=\"2\">Budgeted Cost of Work Scheduled (BCWS)<\/th>\n<th style=\"width: 7.93126%; height: 33px;\" colspan=\"2\">Budgeted Cost of Work Performed (BCWP)<\/th>\n<th style=\"width: 7.80931%; height: 33px;\" colspan=\"2\">Actual Cost (AC)<\/th>\n<\/tr>\n<tr style=\"height: 16px;\">\n<th style=\"width: 12.731%; height: 16px;\" scope=\"col\">Description<\/th>\n<th style=\"width: 2.05347%; height: 16px;\" scope=\"col\">Quantity<\/th>\n<th style=\"width: 11.653%; height: 16px;\" scope=\"col\">Cost<\/th>\n<th style=\"width: 7.93126%; height: 16px;\">Quantity<\/th>\n<th style=\"width: 10.5878%; height: 16px;\">Cost<\/th>\n<th style=\"width: 7.80931%; height: 16px;\">Quantity<\/th>\n<th style=\"width: 13.0454%; height: 16px;\">Cost<\/th>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Lunch<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">3<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$45.00<\/td>\n<td style=\"width: 7.93126%; height: 16px;\">3<\/td>\n<td style=\"width: 10.5878%; height: 16px;\">$45.00<\/td>\n<td style=\"width: 7.80931%; height: 16px;\">3<\/td>\n<td style=\"width: 13.0454%; height: 16px;\">$35.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Small Boxes<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">10<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$7.00<\/td>\n<td style=\"width: 7.93126%; height: 16px;\">5<\/td>\n<td style=\"width: 10.5878%; height: 16px;\">$8.50<\/td>\n<td style=\"width: 7.80931%; height: 16px;\">5<\/td>\n<td style=\"width: 13.0454%; height: 16px;\">$9.50<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Medium Boxes<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">15<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$35.25<\/td>\n<td style=\"width: 7.93126%; height: 16px;\">15<\/td>\n<td style=\"width: 10.5878%; height: 16px;\">$35.25<\/td>\n<td style=\"width: 7.80931%; height: 16px;\">15<\/td>\n<td style=\"width: 13.0454%; height: 16px;\">$28.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Large Boxes<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">7<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$21.00<\/td>\n<td style=\"width: 7.93126%; height: 16px;\"><\/td>\n<td style=\"width: 10.5878%; height: 16px;\"><\/td>\n<td style=\"width: 7.80931%; height: 16px;\"><\/td>\n<td style=\"width: 13.0454%; height: 16px;\"><\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Extra-Large Boxes<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">7<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$26.25<\/td>\n<td style=\"width: 7.93126%; height: 16px;\"><\/td>\n<td style=\"width: 10.5878%; height: 16px;\"><\/td>\n<td style=\"width: 7.80931%; height: 16px;\"><\/td>\n<td style=\"width: 13.0454%; height: 16px;\"><\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Short-Hanger Boxes<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">3<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$23.85<\/td>\n<td style=\"width: 7.93126%; height: 16px;\"><\/td>\n<td style=\"width: 10.5878%; height: 16px;\"><\/td>\n<td style=\"width: 7.80931%; height: 16px;\"><\/td>\n<td style=\"width: 13.0454%; height: 16px;\"><\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Box Tape<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">2<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$7.70<\/td>\n<td style=\"width: 7.93126%; height: 16px;\">2<\/td>\n<td style=\"width: 10.5878%; height: 16px;\">$7.70<\/td>\n<td style=\"width: 7.80931%; height: 16px;\">2<\/td>\n<td style=\"width: 13.0454%; height: 16px;\">$5.50<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Markers<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">2<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$3.00<\/td>\n<td style=\"width: 7.93126%; height: 16px;\">2<\/td>\n<td style=\"width: 10.5878%; height: 16px;\">$3.00<\/td>\n<td style=\"width: 7.80931%; height: 16px;\">2<\/td>\n<td style=\"width: 13.0454%; height: 16px;\">$2.00<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Mattress\/Spring Bags<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">2<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$5.90<\/td>\n<td style=\"width: 7.93126%; height: 16px;\">2<\/td>\n<td style=\"width: 10.5878%; height: 16px;\">$5.90<\/td>\n<td style=\"width: 7.80931%; height: 16px;\">2<\/td>\n<td style=\"width: 13.0454%; height: 16px;\">$7.50<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Life Straps per Pair<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">1<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$24.95<\/td>\n<td style=\"width: 7.93126%; height: 16px;\">1<\/td>\n<td style=\"width: 10.5878%; height: 16px;\">$24.95<\/td>\n<td style=\"width: 7.80931%; height: 16px;\">2<\/td>\n<td style=\"width: 13.0454%; height: 16px;\">38.50<\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Bubble Wrap<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">1<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$19.95<\/td>\n<td style=\"width: 7.93126%; height: 16px;\"><\/td>\n<td style=\"width: 10.5878%; height: 16px;\"><\/td>\n<td style=\"width: 7.80931%; height: 16px;\"><\/td>\n<td style=\"width: 13.0454%; height: 16px;\"><\/td>\n<\/tr>\n<tr style=\"height: 16px;\">\n<td style=\"width: 12.731%; height: 16px;\">Furniture Pads<\/td>\n<td style=\"width: 2.05347%; height: 16px;\">4<\/td>\n<td style=\"width: 11.653%; height: 16px;\">$31.80<\/td>\n<td style=\"width: 7.93126%; height: 16px;\">4<\/td>\n<td style=\"width: 10.5878%; height: 16px;\">$31.80<\/td>\n<td style=\"width: 7.80931%; height: 16px;\">4<\/td>\n<td style=\"width: 13.0454%; height: 16px;\">28.50<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The original schedule called for spending $261.65 (PV) by day six. The amount of work done was worth $162.10 (EV) according to the estimates, but the actual cost was only $154.50 (AC).<\/p>\n<\/div>\n<\/div>\n<h2>Schedule Variance<\/h2>\n<p>The project manager must know if the project is on schedule and within the budget. The difference between planned and actual progress is the <b>variance<\/b>. The <b>schedule variance (SV)<\/b> is the difference between the earned value (EV) and the planned value (PV). Expressed as a formula, SV = EV \u2212 PV. If less value has been earned than was planned, the schedule variance is negative, which means the project is behind schedule.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Schedule Variance on John&#8217;s Move<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<p>Planning for John\u2019s move calls for spending $261.65 by day six, which is the planned value (PV). The difference between the planned value and the earned value is the scheduled variance (SV). The formula is SV = EV\u00a0\u2212 PV. In this example, SV = $162.10 \u2212 $261.65 = ($99.55) A negative SV indicates the project is behind schedule.<\/p>\n<\/div>\n<\/div>\n<p>The difference between the earned value (EV) and the actual cost (AC) is the <b>cost variance (CV)<\/b>. Expressed as a formula, CV = EV \u2212AC. A positive CV indicates the project is under budget.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Cost Variance on John&#8217;s Move<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<p>The difference between the earned value of $162.10 and the actual cost of $154.50 is the cost variance (CV). The formula is CV = EV \u2212 AC. In this example, CV = $162.10 \u2212 $154.50 = $7.60.<\/p>\n<\/div>\n<\/div>\n<h2>Variance Indexes for Schedule and Cost<\/h2>\n<p>The schedule variance and the cost variance provide the amount by which the spending is behind (or ahead of) schedule and the amount by which a project is exceeding (or not fully using) its budget. They do not give an idea of how these amounts compare with the total budget.<\/p>\n<p>The ratio of earned value to planned value gives an indication of how much of the project is completed. This ratio is the <b>schedule performance index (SPI)<\/b>. The formula is SPI = EV \u00f7 PV. In the John\u2019s move example, the SPI equals 0.62 (SPI = $162.10 \u00f7 $261.65 = 0.62) An SPI value less than 1\u00a0indicates the project is behind schedule.<\/p>\n<p>The ratio of the earned value to the actual cost is the <b>cost performance index (CPI)<\/b>. The formula is CPI = EV \u00f7 AC.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Cost Performance Index of John&#8217;s Move<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<p>In the John\u2019s move example, CPI = $162.10 \u00f7 $154.50 = 1.05. A value greater than 1 indicates that the project is under budget.<\/p>\n<figure id=\"attachment_1494\" aria-describedby=\"caption-attachment-1494\" style=\"width: 500px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/schedule-variance-cost-variance.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-1494\" src=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/schedule-variance-cost-variance.jpg\" alt=\"A line graph showing greater schedule variance than cost variance after day 5\" width=\"500\" height=\"266\" srcset=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/schedule-variance-cost-variance.jpg 845w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/schedule-variance-cost-variance-300x160.jpg 300w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/schedule-variance-cost-variance-768x409.jpg 768w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/schedule-variance-cost-variance-65x35.jpg 65w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/schedule-variance-cost-variance-225x120.jpg 225w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/schedule-variance-cost-variance-350x186.jpg 350w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-1494\" class=\"wp-caption-text\">Figure 12.3 Schedule variance and cost variance.<\/figcaption><\/figure>\n<p>The cost variance of positive $7.60 and the CPI value of 1.05 tell John that he is getting more value for his money than planned for the tasks scheduled by day six. The schedule variance (SV) of negative $99.55 and the schedule performance index (SPI) of 0.62 tell him that he is behind schedule in adding value to the project (Figure 12.3).<\/p>\n<\/div>\n<\/div>\n<p>During the project, the manager can evaluate the schedule using the schedule variance (SV) and the schedule performance index (SPI), and the budget using the cost variance (CV) and the cost performance index (CPI).<\/p>\n<h2>Estimated Cost to Complete the Project<\/h2>\n<p>Part way through the project, the manager evaluates the accuracy of the cost estimates for the activities that have taken place and uses that experience to predict how much money it will take to complete the unfinished ativities\u2014<b>the estimate to complete (ETC)<\/b>.<\/p>\n<p>To calculate the ETC, the manager must decide if the cost variance observed in the estimates to that point are representative of the future. For example, if unusually bad weather causes increased cost during the first part of the project, it is not likely to have the same effect on the rest of the project. If the manager decides that the cost variance up to this point in the project is atypical\u2014not typical\u2014then the estimate to complete is the difference between the original budget for the entire project\u2014the <b>budget at completion (BAC)<\/b>\u2014and the earned value (EV) up to that point. Expressed as a formula, ETC = BAC \u2212 EV.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Estimate to Complete John&#8217;s Move<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<p>For his\u00a0move, John was able to buy most of the items at a discount house that did not have a complete inventory, and he chose to buy an extra pair of lift straps. He knows that the planned values for packing materials were obtained from the price list at the moving company where he will have to buy the rest of the items, so those two factors are not likely to be typical of the remaining purchases. The reduced cost of lunch is unrelated to the future costs of packing materials, truck rentals, and hotel fees. John decides that the factors that caused the variances are atypical. He calculates that the estimate to complete (ETC) is the budget at completion ($1,534) minus the earned value at that point ($162.10), which equals $1,371.90. Expressed as a formula, ETC = $1,534 \u2212 $162.10 = $1,371.90.<\/p>\n<\/div>\n<\/div>\n<p>If the manager decides that the cost variance is caused by factors that will affect the remaining activities, such as higher labour and material costs, then the estimate to complete (ETC) needs to be adjusted by dividing it by the cost performance index (CPI). For example, if labour costs on the first part of a project are estimated at $80,000 (EV) and they actually cost $85,000 (AC), the cost performance (CPI) will be 0.94. (Recall that the CPI = EV \u00f7 AC.)<\/p>\n<p>To calculate the estimate to complete (ETC), assuming the cost variance on known activities is typical of future cost, the formula is ETC = (BAC \u2212 EV) \u00f7 CPI. If the budget at completion (BAC) of the project is $800,000, the estimate to complete is ($800,000 \u2212 $80,000) \u00f7 0.94 = $766,000.<\/p>\n<h2>Estimate Final Project Cost<\/h2>\n<p>If the costs of the activities up to the present vary from the original estimates, this\u00a0will affect the total estimate of\u00a0the project cost. The new estimate of the project cost is the estimate at completion (EAC). To calculate the EAC, the <b>estimate to complete (ETC)<\/b> is added to the actual cost (AC) of the activities already performed. Expressed as a formula, EAC = AC + ETC.<\/p>\n<div class=\"textbox textbox--examples\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Example: Estimate at Completion for John&#8217;s Move<\/p>\n<\/header>\n<div class=\"textbox__content\">\n<p>The revised estimate at completion (EAC) for John\u2019s move at this point in the process is EAC = $154.50 + $1,371.90 = $1,526.40.<\/p>\n<table style=\"border-collapse: collapse; width: 100%;\">\n<caption>Table 12.5 Summary of Terms and Formulas for Earned Value Analysis<\/caption>\n<thead>\n<tr>\n<th style=\"width: 20%;\" scope=\"col\">Term<\/th>\n<th style=\"width: 20%;\" scope=\"col\">Acronym<\/th>\n<th style=\"width: 20%;\" scope=\"col\">Description<\/th>\n<th style=\"width: 20%;\" scope=\"col\">Formula<\/th>\n<th style=\"width: 20%;\" scope=\"col\">John&#8217;s Move<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"width: 20%;\">Actual Cost<\/td>\n<td style=\"width: 20%;\">AC<\/td>\n<td style=\"width: 20%;\">The money actually spent on projects up to the present.<\/td>\n<td style=\"width: 20%;\">&#8211;<\/td>\n<td style=\"width: 20%;\">$154.50<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20%;\">Budget at Completion<\/td>\n<td style=\"width: 20%;\">BAC<\/td>\n<td style=\"width: 20%;\">Original budget for the project (same sa BCWS)<\/td>\n<td style=\"width: 20%;\">&#8211;<\/td>\n<td style=\"width: 20%;\">$1,534.00<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20%;\">Cost Performance Index<\/td>\n<td style=\"width: 20%;\">CPI<\/td>\n<td style=\"width: 20%;\">Ratio of earned value to actual cost<\/td>\n<td style=\"width: 20%;\">CPI = EV \u00f7 AC<\/td>\n<td style=\"width: 20%;\">1.05<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20%;\">Cost Variance<\/td>\n<td style=\"width: 20%;\">CV<\/td>\n<td style=\"width: 20%;\">Difference between earned value and actual cost<\/td>\n<td style=\"width: 20%;\">CV = EV \u2212 AC<\/td>\n<td style=\"width: 20%;\">$7.60<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20%;\">Earned Value<\/td>\n<td style=\"width: 20%;\">EV<\/td>\n<td style=\"width: 20%;\">Sum of estimates for work actually done up to the present<\/td>\n<td style=\"width: 20%;\">&#8211;<\/td>\n<td style=\"width: 20%;\">$162.10<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20%;\">Estimate at Completion<\/td>\n<td style=\"width: 20%;\">EAC<\/td>\n<td style=\"width: 20%;\">Revised estimate of total project cost<\/td>\n<td style=\"width: 20%;\">EAC = AC + ETC<\/td>\n<td style=\"width: 20%;\">$1,526.40<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20%;\">Estimate to Complete<\/td>\n<td style=\"width: 20%;\">ETC<\/td>\n<td style=\"width: 20%;\">Money to complete the project if early cost variance is atypical<\/td>\n<td style=\"width: 20%;\">ETC = (BAC \u2212 EV) \u00f7 CPI<\/td>\n<td style=\"width: 20%;\">n\/a<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20%;\">Planned Vale<\/td>\n<td style=\"width: 20%;\">PV<\/td>\n<td style=\"width: 20%;\">Sum of the estimates for work done up to the present<\/td>\n<td style=\"width: 20%;\">&#8211;<\/td>\n<td style=\"width: 20%;\">$261.65<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20%;\">Schedule Performnce Index<\/td>\n<td style=\"width: 20%;\">SPI<\/td>\n<td style=\"width: 20%;\">Ratio of earned value to planned value<\/td>\n<td style=\"width: 20%;\">SPI = EV \u00f7 PV<\/td>\n<td style=\"width: 20%;\">0.62<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20%;\">Schedule Variance<\/td>\n<td style=\"width: 20%;\">SV<\/td>\n<td style=\"width: 20%;\">Difference between earned value and planned value<\/td>\n<td style=\"width: 20%;\">SV = EV \u2212 PV<\/td>\n<td style=\"width: 20%;\">$99.55<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n<p>To summarize (Table 12.5):<\/p>\n<ul>\n<li>Extra money is allocated in a contingency fund to deal with activities where costs exceed estimates. Funds are allocated in a management reserve in case a significant opportunity or challenge occurs that requires change of scope but funds are needed immediately before a scope change can typically be negotiated.<\/li>\n<li>Schedule variance is the difference between the part of the budget that has been spent\u00a0so far (EV) versus the part that was planned to be spent\u00a0by now (PV). Similarly, the cost variance is the difference between the EV and the actual cost (AC).<\/li>\n<li>The schedule performance index (SPI) is the ratio of the earned value and the planned value. The cost performance index (CPI) is the ratio of the earned value (EV) to the actual cost (AC).<\/li>\n<li>The formula used to calculate the amount of money needed to complete the project (ETC) depends on whether or not the cost variance to this point is expected to continue (typical) or not (atypical). If the cost variance is atypical, the ETC is simply the original total budget (BAC) minus the earned value (EV). If they are typical of future cost variances, the ETC is adjusted by dividing the difference between BAC and EV by the CPI.<\/li>\n<li>The final budget is the actual cost (AC) to this point plus the estimate to complete (ETC).<\/li>\n<\/ul>\n<h1>Establishing a Budget<\/h1>\n<p>Once you have broken your project down into activities, you will be able to calculate your overall project costs by estimating and totaling the individual activity costs.<\/p>\n<p>This process of subtotaling costs by category or activity is called <b>cost aggregation<\/b>.<\/p>\n<h2>Budget Timeline<\/h2>\n<p>Costs are associated with activities, and since each activity has a start date and a duration period, it is possible to calculate how much money will be spent by any particular date during the project. The money needed to pay for a project is usually transferred to the project account shortly before it is needed. These transfers must be timed so that the money is there to pay for each activity without causing a delay in the start of the activity. If the money is transferred too far in advance, the organization will lose the opportunity to use the money somewhere else, or they will have to pay unnecessary interest charges if the money is borrowed. A schedule of money transfers is created that should match the need to pay for the activities. The process of matching the schedule of transfers with the schedule of activity payments is called <b>reconciliation<\/b>. Refer to Figure 12.4, which shows the costs of 10\u00a0major activities in a project. Funds are transferred into the project account four times. Notice that during most of the project, there were more funds available than were spent except at activity 6 when all the available funds were spent.<\/p>\n<figure id=\"attachment_1496\" aria-describedby=\"caption-attachment-1496\" style=\"width: 500px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/fund-transfers-expenditures.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-1496\" src=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/fund-transfers-expenditures.jpg\" alt=\"&quot;&quot;\" width=\"500\" height=\"384\" srcset=\"https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/fund-transfers-expenditures.jpg 881w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/fund-transfers-expenditures-300x231.jpg 300w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/fund-transfers-expenditures-768x590.jpg 768w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/fund-transfers-expenditures-65x50.jpg 65w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/fund-transfers-expenditures-225x173.jpg 225w, https:\/\/opentextbc.ca\/projectmanagement\/wp-content\/uploads\/sites\/3\/2019\/08\/fund-transfers-expenditures-350x269.jpg 350w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-1496\" class=\"wp-caption-text\">Figure 12.4: Fund transfers and expenditures.<\/figcaption><\/figure>\n<p>In the project budget profile shown in Figure 12.4, there is no margin for error if the total of the first six activities exceeds the amount of funding at that point in the project.<\/p>\n<p>Contractual agreements with vendors often require partial payment of their costs during the project. Those contracts can be managed more conveniently if the unit of measure for partial completion is the same as that used for cost budgeting. For example, if a graphic designer is putting together several pieces of artwork for a textbook, their contract may call for partial payment after 25% of their total number of drawings is complete.<\/p>\n<h3>Text Attributions<\/h3>\n<p>This chapter adapted and remixed by Adrienne Watts from the following sources:<\/p>\n<ul>\n<li>Introductory text was adapted from &#8220;Budget Planning&#8221; in <em><a href=\"http:\/\/archive.org\/stream\/ost-business-projectmanagementforallcareersedition2\/ProjectManagementforAllCareersEdition2_djvu.txt\" target=\"_blank\" rel=\"noopener\">Project Management for Skills for All Careers<\/a><\/em> by Project Management Open Resources and TAP-a-PM. Licensed under a <a href=\"https:\/\/creativecommons.org\/licenses\/by\/3.0\/\" rel=\"noopener\">CC BY 3.0 licence<\/a>.<\/li>\n<li>Text under &#8220;Estimating Costs&#8221; and &#8220;Managing the Budget&#8221;\u00a0 was adapted from &#8220;Costs and Procurement&#8221; in <a href=\"https:\/\/pm4id.org\/pm4id\"><em>Project Management for Instructional Designers<\/em><\/a> by Amado, M., Ashton, K., Ashton, S., Bostwick, J., Clements, G., Drysdale, J., Francis, J., Harrison, B., Nan, V., Nisse, A., Randall, D., Rino, J., Robinson, J., Snyder, A., Wiley, D., &amp; Anonymous.\u00a0 Licensed under a <a class=\"external-link\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\" rel=\"nofollow\">CC BY-NC-SA (Attribution-NonCommercial-ShareAlike) licence<\/a>.<\/li>\n<li>Text under &#8220;Budget Timeline&#8221; was adapted from &#8220;<a href=\"https:\/\/open.lib.umn.edu\/projectmanagement\/chapter\/9-1-estimating-costs\/\">Estimating Costs<\/a>&#8221; in <a href=\"https:\/\/open.umn.edu\/opentextbooks\/textbooks\/project-management-from-simple-to-complex\" target=\"_blank\" rel=\"noopener\"><em>Project Management From Simple to Complex<\/em><\/a> by author whose name has been removed at the request of the original publisher. Licensed under <a href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA 4.0 licence<\/a>.<\/li>\n<\/ul>\n<div class=\"media-attributions clear\" prefix:cc=\"http:\/\/creativecommons.org\/ns#\" prefix:dc=\"http:\/\/purl.org\/dc\/terms\/\"><h2>Media Attributions<\/h2><ul><li about=\"http:\/\/pm4id.org\/9\/1\"><a rel=\"cc:attributionURL\" href=\"http:\/\/pm4id.org\/9\/1\" property=\"dc:title\">Parametric Cost Estimate<\/a>      is licensed under a  <a rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA (Attribution NonCommercial ShareAlike)<\/a> license<\/li><li about=\"https:\/\/pm4id.org\/chapter\/9-1-estimating-costs\/\"><a rel=\"cc:attributionURL\" href=\"https:\/\/pm4id.org\/chapter\/9-1-estimating-costs\/\" property=\"dc:title\">Sum of Detailed Costs by Type<\/a>  &copy;  Wiley, et al    is licensed under a  <a rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA (Attribution NonCommercial ShareAlike)<\/a> license<\/li><li about=\"http:\/\/pm4id.org\/9\/1\/\"><a rel=\"cc:attributionURL\" href=\"http:\/\/pm4id.org\/9\/1\/\" property=\"dc:title\">Schedule Variance Cost Variance<\/a>  &copy;  Wiley et al    is licensed under a  <a rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA (Attribution NonCommercial ShareAlike)<\/a> license<\/li><li about=\"http:\/\/pm4id.org\/9\/1\/\"><a rel=\"cc:attributionURL\" href=\"http:\/\/pm4id.org\/9\/1\/\" property=\"dc:title\">Fund Transfers and Expenditures<\/a>  &copy;  Wiley et al    is licensed under a  <a rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA (Attribution NonCommercial ShareAlike)<\/a> license<\/li><\/ul><\/div>","protected":false},"author":123,"menu_order":11,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":["adrienne-watt","project-management-open-resources","tap-a-pm","david-wiley-et-al"],"pb_section_license":"cc-by-nc-sa"},"chapter-type":[],"contributor":[48,73,68,69],"license":[57],"class_list":["post-1497","chapter","type-chapter","status-publish","hentry","contributor-adrienne-watt","contributor-david-wiley-et-al","contributor-project-management-open-resources","contributor-tap-a-pm","license-cc-by-nc-sa"],"part":1427,"_links":{"self":[{"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/pressbooks\/v2\/chapters\/1497","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/wp\/v2\/users\/123"}],"version-history":[{"count":17,"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/pressbooks\/v2\/chapters\/1497\/revisions"}],"predecessor-version":[{"id":1853,"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/pressbooks\/v2\/chapters\/1497\/revisions\/1853"}],"part":[{"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/pressbooks\/v2\/parts\/1427"}],"metadata":[{"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/pressbooks\/v2\/chapters\/1497\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/wp\/v2\/media?parent=1497"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/pressbooks\/v2\/chapter-type?post=1497"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/wp\/v2\/contributor?post=1497"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/opentextbc.ca\/projectmanagement\/wp-json\/wp\/v2\/license?post=1497"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}