Dr.

Atif Shahzad
_____________________
BE, MECHANICAL ENGINEERING
UNIVERSITY OF ENGINEERING & TECHNOLOGY, TAXILA, PAKISTAN, 2000

MCS, SOFTWARE ENGINEERING

SZABIST, ISLAMABAD, PAKISTAN, 2003

MS, AUTOMATION & PRODUCTION SYSTEMS

ECOLE CENTRALE DE NANTES, NANTES, FRANCE, 2007

PhD, AUTOMATION & APPLIED INFORMATICS

UNIVERSITE DE NANTES, NANTES, FRANCE, 2011

EMAIL: atifshahzad@Gmail.com

TEL: +92-333-5219846, +92-51-5179755

LINKEDIN: pk.linkedin.com/in/dratifshahzad
Dr. Atif Shahzad

1 Dr. Atif Shahzad 19-10-2017

 Dr. Atif Shahzad 2

ENGINEERING
MANAGEMENT
COURSE OBJECTIVES
19-10-2017
 COURSE OBJECTIVES
3

 Learn what project management is and the qualities of an effective

project manager.
 Understand the nine knowledge areas of project management and
how they can be applied to your project.
 Discover the phases of a project and what deliverables are expected
when.
 Identify a project’s key stakeholders.
 Understand the different types of business cases and how to create a
Statement of Work.
 Learn to be prepared for the unexpected by utilizing risk
management and change control.
 Learn how to organize project activities by creating a Work
Breakdown Structure.
Dr. Atif Shahzad

 Create a network diagram to track your project’s progress.

 Learn budgeting and estimating techniques.
 19-10-2017

Cost Management
10–4
Dr. Atif Shahzad
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Cost Management Processes

10–5

So each activity is
estimated for its
Estimate Budget Control time and materials
cost, and any other
known factors that
can be figured in.
figuring out Once you have
all of the tracking the
exactly how figured out the
estimates actual work baseline,
much you
are added according that’s what all future
expect expenditures are
up and to the
to cost. compared to.
Baselined. budget.
To see if any
Dr. Atif Shahzad

adjustments
need to be made
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6 Dr. Atif Shahzad 19-10-2017

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tools and techniques in the

Estimate Costs process

Bottom-Up Analogous Expert

Estimating Estimating Judgment

Parametric Three-Point
Estimating Estimates
Dr. Atif Shahzad

Analogous Estimating is sometimes called “Top-Down Estimating”

 19-10-2017

Try to figure out which one of them

Alice is using when she estimates costs.
Question 1
10–8

 The Starbuzz across the street opened just a few months ago. Alice sits
down with the contractor who did the work there and asks him to help her
figure out how much it will cost. He takes a look at the equipment Charles
and Jeff want to buy and the specs for the cabinets and seating and tells
her what she can afford to do with the budget she has.

Bottom-Up Analogous Expert

Estimating Estimating Judgment

Parametric Three-Point
Estimating Estimates
Dr. Atif Shahzad
 19-10-2017

Try to figure out which one of them

Alice is using when she estimates costs.
Question 2
10–9

 Alice creates a spreadsheet with all of the historical information from

similar remodeling projects that have happened on her block. She sits down
and types in the guys’ desired furnishings and the square footage of the
room to generate an estimated cost.

Bottom-Up Analogous Expert

Estimating Estimating Judgment

Parametric Three-Point
Estimating Estimates
Dr. Atif Shahzad
 19-10-2017

Try to figure out which one of them

Alice is using when she estimates costs.
Question 3
10–10

 Before Alice finishes her schedule, she gathers all of the information she has
about previous projects’ costs (like how much labor and materials cost). She
also talks to a contractor, who gives valuable input.

Bottom-Up Analogous Expert

Estimating Estimating Judgment

Parametric Three-Point
Estimating Estimates
Dr. Atif Shahzad
 19-10-2017

Try to figure out which one of them

Alice is using when she estimates costs.
Question 4
10–11

 Alice sits down and estimates each and every activity and resource that she
is going to need. Then she adds up all of the estimates into “rolled-up”
categories. From there she adds up the categories into an overall budget
number.

Bottom-Up Analogous Expert

Estimating Estimating Judgment

Parametric Three-Point
Estimating Estimates
Dr. Atif Shahzad
 19-10-2017

Try to figure out which one of them

Alice is using when she estimates costs.
Question 5
10–12

 Jeff sets up an appointment with the same contractor his friend used for
some remodeling work. The contractor comes to the house, takes a look at
the room, and then gives an estimate for the work.

Bottom-Up Analogous Expert

Estimating Estimating Judgment

Parametric Three-Point
Estimating Estimates
Dr. Atif Shahzad
 19-10-2017

Try to figure out which one of them

Alice is using when she estimates costs.
Question 6
10–13

 Alice figures out a best case scenario, a likely scenerio and a worst case
scenario. Then she used a formula to come up with an expected cost for the
project.

Bottom-Up Analogous Expert

Estimating Estimating Judgment

Parametric Three-Point
Estimating Estimates
Dr. Atif Shahzad
 19-10-2017

Rough Order of Magnitude (ROM)

10–14
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Rough Order of Magnitude (ROM)

10–15

 When you make an estimate really

early in the project and
 you don’t know much about it, that

estimate is called a
Rough Order of Magnitude (ROM)
estimate, or a
Dr. Atif Shahzad

ballpark estimate.
 19-10-2017

Benefit cost ratio (BCR)

10–16

 Amount of money a project is

going to make versus how much
it will cost to build it.
Generally, if the benefit is higher than the
cost, the project is a good investment.
Dr. Atif Shahzad
 19-10-2017

Net present value (NPV)

10–17

 Actual value at a given time of the

project minus all of the costs associated
with it.
Thisincludes the time it takes to build it and
labor as well as materials.
People calculate this number to see if it’s
worth doing a project.
Dr. Atif Shahzad
 Opportunity Cost
10–18

 It’s the money you don’t get

because you chose not to do a
project.
 When an organization has to choose between two
projects, they are always giving up the money they
would have made on the one they don’t do.
 That’s called opportunity cost.
Dr. Atif Shahzad
 19-10-2017

Internal rate of return (IRR)

10–19

 Amount of money the project will

return to the company that is funding
it.
It’s how much money a project is making.
 It’s usually expressed as a percentage of
the funding that has been allocated to it.
Dr. Atif Shahzad
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Depreciation
10–20

 Rate at which your project loses value

over time.
So, if you are building a project that will only be
marketable at a high price for a short period of
time, the product loses value as time goes on.
Dr. Atif Shahzad
 Lifecycle Costing
10–21

 Before you get started on a project,

it’s really useful to figure out how much
you expect it to cost—not just to
develop, but to support the product
once it’s in place and being used by
the customer.
Dr. Atif Shahzad
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Remember
10–22

Rough Order Benefit cost Net present

of Magnitude ratio (BCR) value (NPV)
(ROM)

Opportunity Internal rate

Cost of return Depreciation
(IRR)

Lifecycle
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Costing
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23 Dr. Atif Shahzad 19-10-2017

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Here’s where you measure how

your project is doing compared
to the plan. This involves using
theearned value formulas to
assess your project.
Dr. Atif Shahzad

24 Dr. Atif Shahzad 19-10-2017

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Budget at completion (BAC)

10–25

 Total budget that you have for your

project—how much you plan to spend on
your project.
 Once you add up all of the costs for every
activity and resource, you’ll get a final number...
and that’s the total project budget.
 If you only have a certain amount of money to
spend, you’d better make sure that you haven’t
Dr. Atif Shahzad

gone over!
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Planned % Complete
10–26

If the schedule says that your team should

have done 300 hours of work so far, and
they will work a total of 1,000 hours on the
project, then your Planned % Complete is
30%.
Dr. Atif Shahzad
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Planned value (PV)

10–27

 How much of your budget you planned

on using so far.
Ifyou look at your schedule and see
that you’re supposed to have done a
certain percentage of the work, then
that’s the percent of the total budget
that you’ve “earned” so far.
Dr. Atif Shahzad

PV=BAC x Planned % Complete

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Planned value (PV)

10–28

 How much of your budget you planned

on using so far.
 If the BAC is $200,000, and the schedule says your Planned % Complete is
30%, then the Planned Value is $200,000 × 30% = $60,000.
Dr. Atif Shahzad

PV=BAC x Planned % Complete

 19-10-2017

Net present value (NPV)

10–29

 Dollar value at a given time of the project

minus all of the costs associated with it(as
per schedule).
Thisincludes the time it takes to build it and
labor as well as materials.
People calculate this number to see if it’s
worth doing a project.
BAC x Planned % Complete = NPV
Dr. Atif Shahzad
 Earned Value (EV)
10–30

 How much of your project’s value has

been delivered to the customer so far.
You can do this by comparing the value of
what your schedule says you should have
delivered against the value of what you
actually delivered.
Dr. Atif Shahzad
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31 Dr. Atif Shahzad 19-10-2017

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Actual % Complete
10–32

 Say the schedule says that your team should

have done 300 hours of work so far, out of
a total of 1,000.
 But you talk to your team and find out they
actually completed 35% of the work.
 That means the actual % complete is 35%.
Dr. Atif Shahzad
 19-10-2017

Earned Value
10–33

EV = BAC x Actual % Complete

Dr. Atif Shahzad
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Earned Value
10–34

Think about your project the way your

sponsor thinks about it. If you put yourself
into the sponsor’s shoes, you’ll see that this
stuff actually makes sense!
Dr. Atif Shahzad
 19-10-2017

10–35

Is your project
behind or ahead
of schedule?
Dr. Atif Shahzad
 19-10-2017

Schedule Performance Index (SPI)

10–36

 If you want to know whether you’re ahead of

or behind schedule, use SPIs.
 The key to using this is that when you’re ahead
of schedule, you’ve earned more value than
planned! So EV will be bigger than PV.
𝐸𝐸𝐸𝐸
𝑆𝑆𝑆𝑆𝑆𝑆 =
𝑃𝑃𝑃𝑃
Dr. Atif Shahzad
 19-10-2017

Schedule Performance Index (SPI)

10–37

 If SPI is less than one, then

you’re behind schedule
 because the amount you’ve actually worked (EV)
is less than what you’d planned (PV).
Dr. Atif Shahzad
Dr. Atif Shahzad

10–38
19-10-2017
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Schedule Variance (SV)

10–39

How much ahead or

behind?
Dr. Atif Shahzad
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Schedule Variance (SV)

10–40

 The bigger the difference between

¤what you planned and
¤what you actually earned,
 the bigger the variance.

𝑆𝑆𝑆𝑆 = 𝐸𝐸𝐸𝐸 − 𝑃𝑃𝑃𝑃

Dr. Atif Shahzad
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Dr. Atif Shahzad

41 Dr. Atif Shahzad 19-10-2017

 Actual Cost (AC)
10–42

Amount of money that you’ve spent

so far on the project
Dr. Atif Shahzad
 19-10-2017

Cost Performance Index (CPI)

10–43

 If you want to know whether you’re over

or under budget, use CPI.

𝐸𝐸𝐸𝐸
𝐶𝐶𝐶𝐶𝐶𝐶 =
𝐴𝐴𝐴𝐴
Dr. Atif Shahzad
 19-10-2017

Cost Variance (CV)

10–44

 If you want to know how much under or

over budget you are, just take AC away
from EV.
 Thistells you the difference between what you
planned on spending and what you actually
spent.
𝐶𝐶𝐶𝐶 = 𝐸𝐸𝐸𝐸 − 𝐴𝐴𝐴𝐴
Dr. Atif Shahzad
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Dr. Atif Shahzad

46 Dr. Atif Shahzad 19-10-2017

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To-Complete Performance Index
(BAC based TCPI)
10–47

 How well your project will need to

perform to stay on your original budget.

𝐵𝐵𝐵𝐵𝐵𝐵−𝐸𝐸𝐸𝐸
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
𝐵𝐵𝐵𝐵𝐵𝐵−𝐴𝐴𝐴𝐴
Dr. Atif Shahzad

A high TCPI means a tight budget

 19-10-2017
To-Complete Performance Index
(EAC based TCPI)
10–48

 How well your project will need to

perform to stay on estimated at
completion budget.
𝐵𝐵𝐵𝐵𝐵𝐵−𝐸𝐸𝐸𝐸
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 =
𝐸𝐸𝐸𝐸𝐸𝐸−𝐴𝐴𝐴𝐴
Dr. Atif Shahzad
 19-10-2017

You’re within your budget if...

10–49

 CPI is greater than or equal to 1

and CV is positive.
 When this happens, your actual costs are less than Earned
Value, which means the project is delivering more value
than it costs.
Dr. Atif Shahzad
 19-10-2017

You’ve blown your budget if...

10–50

 CPI is less than 1 and CV is

negative.
When your actual costs are more than
earned value, that means that your
sponsor is not getting his money’s
worth of value from the project.
Dr. Atif Shahzad
 19-10-2017

Remember:
10–51

Lower = Loser
 If CPI or SPI is below 1, or
 if CV or SV is negative,

then you’ve got trouble!

Dr. Atif Shahzad
 19-10-2017
Dr. Atif Shahzad

53 Dr. Atif Shahzad 19-10-2017

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Estimate at Completion (EAC).

10–54

 If you know your CPI now, you can use it to predict

what your project will actually cost when it’s complete.
 Let’s say that you’re managing a project with a CPI of 0.8
today. If you assume that the CPI will be 0.8 for the rest of the
project—and that’s not an unreasonable assumption when
you’re far along in the project work—then you can predict
your total costs when the project is complete.
𝑩𝑩𝑩𝑩𝑩𝑩
𝑬𝑬𝑬𝑬𝑬𝑬 =
𝑪𝑪𝑪𝑪𝑪𝑪
Dr. Atif Shahzad
 19-10-2017

Estimate to Complete (ETC)

10–55

 Since EAC predicts how much money

you’ll probably spend,
 if you subtract the AC, you’ll find out
how much money the rest of the
project will end up costing.
𝐸𝐸𝐸𝐸𝐸𝐸 = 𝐸𝐸𝐸𝐸𝐸𝐸 – 𝐴𝐴𝐴𝐴
Dr. Atif Shahzad
 19-10-2017

Variance at Completion (VAC)

10–56

 If you end up spending more than

your budget, the VAC will be
negative… just like CV and SV!
𝑉𝑉𝑉𝑉𝑉𝑉 = 𝐵𝐵𝐵𝐵𝐵𝐵 – 𝐸𝐸𝐸𝐸𝐸𝐸
Dr. Atif Shahzad
 19-10-2017

Predict NOW
“the EV at completion”
10–57

You can use

 EAC,
 ETC, and

 VAC

to predict what your Earned Value

numbers will look like when your project
is complete.
Dr. Atif Shahzad
 QUESTION 1
10–58

 You are the project manager at an industrial design firm. You expect
to spend a total of $55,000 on your current project. Your plan calls
for six people working on the project eight hours a day, five days a
week for four weeks. According to the schedule, your team should
have just finished the third week of the project.
 When you review what the team has done so far, you find that they
have completed 50% of the work, at a cost of $25,000. Based on
this information, calculate the Earned Value numbers:

BAC,AC,SV,SPI
PV,EV,CV,CPI
Dr. Atif Shahzad
 19-10-2017

QUESTION 2
10–59

 Your current project is an $800,000 software development

effort, with two teams of programmers that will work for six
months, at a total of 10,000 hours. According to the project
schedule, your team should be done with 38% of the work.
You find that the project is currently 40% complete. You’ve
spent 50% of the budget so far. Calculate these numbers:

BAC,AC,SV,SPI
PV,EV,CV,CPI
Dr. Atif Shahzad
 Dr. Atif Shahzad 60

QUESTIONS

19-10-2017
 THANK YOU FOR YOUR INTEREST

19-10-2017