11 Schedule and Cost Monitoring

11 Schedule and Cost Monitoring

Introduction

Depending on the size and complexity of a project, it can take on characteristics that define larger components of the project management plan. They include the development of the project schedule and budget during the initiating and planning processes versus the amount of time spent during the execution process on actual work activities. For some projects, the initiating and planning processes may take several months or years, whereas the overall time span for work activities in the execution process is very short. In other cases, the initiating and planning processes may be relatively short, but the time span for each work activity is drawn out over several years because of exhaustive and labor-intensive work required.

Regardless of how many work activities and how long the execution process takes, the project manager has the primary responsibility for monitoring and reporting on work activities and implementing controls to keep work activity on schedule and on budget. Even considering how much work was required in information gathering and developing the project schedule and budget, monitoring and controlling the project are ultimately the project manager’s most important roles.

To prepare for work activities to commence at the beginning of the execution phase, the project manager has to develop monitoring systems. He first needs to consider five fundamental characteristics of project activity monitoring:

• Why monitoring of work activities is important

• What activities to monitor

• What tools and techniques should be used to create monitoring systems for work activities

• What information should be expected

• How to use information gathered from monitoring work activities

This chapter explores why monitoring is important and what it means for the project manager as well as the organization to have monitoring systems in place for work activities conducted on a project. It also presents several of the more common tools and techniques used for monitoring and troubleshooting and includes typical results illustrating what is required from monitoring systems. These tools and techniques can be used on very small projects to very large and complex projects because they are fundamental in nature; therefore, they can be easily implemented for use at any level of work activity within a project.

During the initiating and planning process, the project manager and possibly project staff expend a great deal of time breaking down a project deliverable to understand its smallest components, gather as much detailed information as possible for each work activity, and develop a master schedule and proposed budget of all work activities. This work creates the foundation for the project and defines how a deliverable will be completed to accomplish a project objective. It would be incomprehensible to think that, given all the work performed to define and develop a project master plan and budget, in the course of executing the project activities, there was little or no oversight as to whether the activities were being performed correctly, on schedule, and within the budget allocated. With most organizations, organizing work activities into projects to complete an objective would not be very successful if monitoring and controlling work activities were not included in the overall project process.

Integrated Monitoring

When the project manager considers how to monitor project work activities, the first level of assessment relates to the size and complexity of the project and what type of monitoring is really required. In very small projects where there are only a few work activities and a small handful of resources, setting up a monitoring system can be as simple as using some basic observation and data recording tools, which are covered later in this chapter. In much larger and more complex projects, much more sophisticated and elaborate forms of monitoring must be implemented; they also are covered later in this chapter. In both cases, the project manager needs to develop a system to manage information collected from work activities or observations so that he can assess project performance; this is called a project monitoring information system.

Depending on the size and structure of an organization, the project manager may choose to use a majority of the monitoring information system components independently within the organization and simply report status.

Example: On a construction project, the project manager may monitor work activity progress and record updates on something as simple as a Microsoft Excel spreadsheet. A work breakdown structure (WBS) might even be documented on a similar spreadsheet, and between these two spreadsheets, the project manager can run the project and report status. In this example, the project manager can independently manage monitoring functions and require little, if any, organizational assets as resources for monitoring processes.

In other cases, projects performed within the organization may use human resources that require scheduling for utilization, equipment and facilities, and materials procurements that must be coordinated. In these cases, monitoring these activities may require integrating these monitoring functions within the organization. This is called an integrated monitoring information system.

Example: Consider a project to develop a piece of telecom equipment for a customer. This project utilizes several types of human resources with skill sets required from several different departments. It also requires an exhaustive bill of materials that includes monitoring procurements for critical components, scheduling facilities such as laboratory space for development of a prototype, and scheduling manufacturing resources to perform pilot production. All these processes require connections throughout the organization, including the network, to properly and successfully manage monitoring functions. This is when information from monitoring requires the integration of tools used in the organization to collect, store, analyze, and communicate information within the organization.

Project Monitoring Information System

For all projects, regardless of how large or small, work activities must be carried out to complete the deliverable required in the project objective. After gathering information for each work activity and developing estimates for individual activity durations and associated cost with each activity, the project manager needs to create a system of monitoring work activity to ensure actual work activity durations and costs are being performed for the project plan. To develop a monitoring information system, the project manager must first look at the reasons monitoring has to be performed:

• Why monitoring of work activities is important—First and foremost, the project manager must have a clear understanding why monitoring work activities is even required. During the initial conceptual phase of a project, general agreements, assumptions, and expectations are outlined in the form of a project objective. This objective may be further defined in a specific project schedule and budget on which contractual agreements can be based. The expectation, then, is that the agreed-upon deliverables will be accomplished at an expected quality level and at the expected completion date for the agreed-upon price.

It is now the project manager’s responsibility to ensure the organization holds true to its commitment in what it is delivering, the completion date, and the agreed-upon price. This goal typically is realized only if the project manager has properly identified and documented all work activity requirements, and specific schedule and budget estimates have also been documented to establish the project plan. The project manager now has to monitor and control each work activity to ensure the deliverable is being produced per the project plan.

• What to monitor—Because the project plan typically has an outline of all specific work activities, and it is important that each work activity be performed per the project plan, the project manager needs to monitor all work activities. He also needs to ensure that monitoring each work activity includes the actual quality of work being performed, the duration of each activity, and the overall actual cost of each activity. In addition to these three primary components of work activities, other items that should be monitored can include the scope of work, human resource performance, potential risks, and information to derive activity value and stakeholder involvement.

• What tools and techniques are used to create monitoring systems—As mentioned previously, the project manager, depending on the type of project, can use a variety of tools and techniques to monitor systems. They can be simple in form and implementation, or can be more complex and need to be more integrated within the organization. Specific tools and techniques used for various types of monitoring are covered in great detail in the next section, “Monitoring and Analysis Tools.”

• How to use information gathered from monitoring work activities—As each work activity is performed, and monitoring systems yield information for each work activity, the next question is what to do with the information that has been gathered. It is the project manager’s responsibility to ensure information is being documented properly and is being effectively analyzed and communicated to those interested in the outcome of project activities. The primary use of information gathered is in the comparison of actual data against the project plan’s estimated data to ensure quality and completeness of work, activity duration, and compliance of activity costs with the original project plan. The project manager typically arranges this information in a form that can be communicated in status updates to others in the organization who require this information. In some cases, the customer may require certain status information from project activities. The project manager’s role is to effectively and accurately collect project activity data, record and analyze data, and communicate project activity status.

Monitoring and Analysis Tools

The task of monitoring project activities can be broken down into two primary functions: gathering information on project activities and analyzing information to determine the status of each component of work activity. To perform these two functions, the project manager refers to the project plan or WBS to identify the specific requirements of each work activity. Understanding this information is important because it defines the scope of what work will be accomplished for each activity. The master schedule also has information regarding the estimated time duration required to complete each work activity, and the budget has an estimated cost of everything required to accomplish each work activity. This forms the basis of information the project manager uses in comparing against actual accomplishments and procurements for each work activity. The following sections identify some of the commonly used project management tools and techniques for both gathering information and analyzing information to determine project status.

Information Gathering Tools

The project manager first sets out to establish various ways to derive information for what’s actually happening on project activities. This task can take several forms depending on what’s available to the project manager through the organization and with technology, but it can be in the form of simply observing project activities to derive information, attending meetings where activity updates are being reported, and soliciting information from monitoring systems that have been put in place to derive status of work activity. As with all information-gathering exercises, the integrity of the information and its reliability are of utmost importance, so this is a good reason the project manager should utilize multiple forms of information gathering.

Status Meetings

Meetings within the organization serve two primary functions: to report information to other members and to derive or solicit information from meeting attendees for a project’s requirements. The project manager can call project status meetings at regular intervals to derive information directly relating to the status of a work activity. This is an excellent form of information gathering provided those offering the information have first-hand knowledge of a specific work activity so that it is accurate and reliable. Information that should be gathered or discussed within project status meetings include

• Progress of work activity accomplished since last update

• Status of current work activity relative to activity schedule

• Reporting of actual costs from procurements for work activity

• Discussion of problems or risks that have occurred or might be imminent

Subject Matter Experts

The project manager can also solicit specific work activity information from those skilled and experienced with specific knowledge of work activities; they are called subject matter experts (SMEs). These individuals are typically tasked with performing the actual work of the activity or those directly overseeing the individuals performing the work activity. Individuals actually performing work activity have first-hand information regarding the progress and any problems related to a specific activity; this information is usually considered accurate and reliable. This may be the case in construction projects, for example, where project managers can gain first-hand information directly on the job site from those performing work activities. In other cases, the project manager may solicit an informal one-on-one meeting with an individual who might not be able to attend a status meeting but can offer accurate and reliable first-hand information.

Check Charts

Another form of basic information gathering is the use of check charts. They list project activities and provide workers a device to check off completion points and record duration and, in some cases, cost elements of specific work activity. This type of data can be recorded on a piece of paper within a work environment or can be in the form of a spreadsheet that is available in the work area for updates. On regular intervals, the project manager collects these check charts or pulls up the spreadsheets within an organization’s network to record status of work activities, schedule, and any cost information that might be included. Using check charts is a way to collect direct activity information without requiring scheduling meetings. The use of check charts is also more successful on simple work activities, where updates can be easily documented. Check charts are a good source of project status information for simple work activities, as shown in Figure 11.1.

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Figure 11.1 Project activity check chart

Information Analysis Tools

After the project manager implements monitoring tools and techniques to gather data on work activities, the next step is to analyze what the information really says. It’s important to note that there is more to monitoring than just gathering data and reporting status. The project manager is selected not only to oversee all the activities required within the project, but also to “manage” activities to compliance of the project plan. If the project manager has effectively communicated the expectation of a work activity to those performing the functions of that activity and has developed a baseline of estimates for schedule duration and cost, he must “manage” work for that activity to hit those estimated values. This task requires gathering information about the status of the work activity and analyzing what that information reveals about it. There are several ways to analyze information produced from a work activity depending on how the information will be analyzed and/or compared to other parameters that would suggest the status of work, schedule, or cost.

Project S-Curve Analysis

One basic analysis tool takes information regarding one parameter as it relates to a second parameter within either the work activity itself or the rest of the project as a whole. The project S-curve analysis can take information on parameters such as cost as a function of time or work activity progress and time and, using a simple grid, display an analysis. A simple S-curve analysis is used to compare actual performance to estimated performance. In the example shown in Table 11.1, data points that have been gathered show recorded cost per function along with time duration in weeks; a corresponding S-curve in Figure 11.2 shows the comparison of actual cost to project budgeted cost.

Table 11.1 Budgeted versus Actual Activity Cost over Time

Project Cost Budget

Duration (Weeks)

Activity

2

4

6

8

10

12

14

16

Design

4

8

6

Development

2

15

21

10

4

Test

14

12

6

4

2

Installation

2

7

3

Total Cost

4

10

21

35

22

12

11

5

Cum. Total

4

14

35

70

92

104

115

120

Actual Costs

3

10

31

74

99

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Figure 11.2 Project S-curve analysis

Milestone Analysis

Another form of analysis is the assessment of project status against major stop points or evaluation points designed into the project plan; these points are called milestones. Milestones can be designed into a project plan or WBS as major stop points or evaluation points of project status. In some cases, they may be regulatory inspection points that have to be designed in; they could also be engineering design review stop points where no further action can be continued unless a consensus is reached as to what has been completed. In other cases, the project manager may simply put a stopping point at the completion of major components of the project to identify significant accomplishments to the customer and/or upper management and to assess project performance for status reporting. An example of milestone status points using diamond-shaped icons is shown in the Microsoft Project illustration in Figure 11.3.

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Figure 11.3 Milestone analysis in a WBS

Control Charts

Another simple form of analysis that can graphically illustrate the performance of cost or schedule is the use of control charts. They indicate variances of actual performance relative to a reference point. A chart is set up with two axes that indicate two parameters that are being evaluated where the zero point on the chart represents the estimate or baseline, and the plotted data represents actual performance relative to a zero point baseline. Control charts are typically used to identify a trend of information, indicating that a parameter is progressively increasing in variance in one particular direction. It is important to note that project managers have to evaluate project performance not as a function of gaining the best performance possible, but performance relative to the expected baseline or original estimate.

Control charts can be used in trend analysis. Where data reveals a trend going in a negative direction, this would obviously indicate poor performance is increasing, and controls need to be implemented to improve performance. Control charts can also indicate abnormal improvement in performance that may require further investigation. For instance, if a control chart is being used to track schedule and cost performance, and both indicate an abnormally high performance status, further investigation might indicate that the quality of delivered work has decreased and thus the reason that cost and schedule have improved. Control charts are excellent for revealing abnormal performance in either positive or negative directions relative to expected performance. Figure 11.4 illustrates the basic construction of a control chart given the center line is the average or mean performance (–x). The actual control component of this chart incorporates an upper control limit (UCL) and lower control limit (LCL) that represent three standard deviations (–x ± 3σ) from the mean in both positive and negative directions, respectively. In addition to control limits, it is best to establish the actual specified limits that indicate a failure or out-of-spec condition; these are included on the chart designated as the upper specification limit (USL) and lower specification limit (LSL), as shown in Figure 11.4.

Image

Figure 11.4 Control chart analysis of project schedule

In the case shown in Figure 11.4, using this type of monitoring tool, you can see that the status during day 6 indicates the activity is falling behind schedule. The benefit of a control chart is that the project manager can use both control limits and specification limits to determine the magnitude of the problem and how much and what kinds of controls are appropriate. This monitoring tool allows direct activity feedback to be translated into control requirements.

Create Baseline

In the course of analyzing project activities for performance, actual performance is analyzed in comparison to information gathered and documented in the project plan. This information needs to include all the work package requirements in a time-phased sequence, schedule durations for each work activity, and cost estimates for everything required within each work activity. This information can be used to form the criteria for comparison called the baseline.

In performing monitoring analysis, the project manager requires, at a minimum, the three criteria for performance grading as well as controlling the triple constraint: quality of the deliverable, schedule/time, and cost. These three elements are the primary information gathered on each work activity and are used at the beginning of the project to create the baseline criteria. It is important that this information is used at the beginning of the project to form the baseline, because it is derived from all estimates and information gathered before project activities commence. This information also represents the expectations agreed upon between the organization and customer. After the project has begun, actual work activity has started, and procurements have begun, this data cannot be used in the formation of a baseline because it is now actual data and will skew any performance comparison.

If project software such as Microsoft Project is used after the creation of the WBS, predecessor relationships have been established, and cost estimates have been included, the project manager can establish a baseline simply and easily by clicking a button, as shown in Figure 11.5.

Image

Figure 11.5 Setting the baseline in Microsoft Project

Tracking Gantt

Another tool that the project manager can use to track performance of work activities in a time-phased structure is a Tracking Gantt chart. This tool, as shown in Figure 11.6 using Microsoft Project, allows the user to view work activities on the left side of the screen. As updates of project status are included, it shows percentage of completion in reference to time. The Tracking Gantt chart is great for comparing actual performance to plan performance to help communicate, graphically, to project staff the outcome of performance analysis as a function of completed work activity. Figure 11.6 shows a WBS of activities for a construction project; the pull-down menu on the left shows how to turn on the Tracking Gantt function.

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Figure 11.6 MS Project Tracking Gantt chart

Earned Value Analysis

One of the more popular forms of performance analysis used in project management today is the method of earned value analysis (EVA), which is more commonly referred to as earned value management (EVM). Most tools easily incorporate parameters such as schedule/time and cost for comparison of actual against estimates, but most typically do not easily incorporate a quantifiable analysis of work performance. The primary feature associated with the use of earned value is the ability to incorporate the progress of work activity along with schedule and cost performance. To understand how to use earned value for analysis in monitoring work activity of performance, we start with the basic terminology and associated formulas:

Planned value (PV)—Sometimes referred to as budgeted cost of work scheduled (BCWS), planned value is the budgeted cost for work scheduled for a particular work activity within a specified time frame. This represents the planned budget value at a given point in time during the activity. This can define one specific work activity or be the cumulative sum of all costs for a project.

PV = (Activity Total Budget) × (Scheduled % of Completion)

Example: For a single activity scheduled to be at 80% of completion:

PV = $9630 × 0.80 = $7704

Earned value (EV)—Sometimes referred to as budgeted cost of work performed (BCWP), earned value is the amount of actual work completed versus the budgeted cost of the same work over a specified time frame.

EV = (Activity Total Budget) × (Actual % of completion)

Example: For a single activity scheduled to be at 80% completion but actually at 65% completion:

EV = $9630 × 0.65 = $6260

Actual cost (AC)—Sometimes referred to as actual cost of work performed (ACWP), actual cost represents the actual expenditure within a specified time frame.

Cost variance (CV)—This value represents the cost variance in reference to the budget. This value is derived by subtracting actual cost from earned value. A negative value of cost variance indicates the activity or project is over budget.

CV = EV−AC

Schedule variance (SV)—This value represents a variance in schedule. This value is derived by subtracting the planned value from the earned value. A negative value in schedule variance indicates the activity or project is behind schedule.

SV =EV−PV

Cost performance index (CPI)—This value represents a ratio of earned value to actual cost. As a ratio, if the actual cost matches the earned value, the ratio value equals 1 (one), indicating the actual cost was on budget. If CPI is less than 1, the activity or project is over budget. If CPI is greater than 1, the activity or project is under budget.

CPI=EVAC

Schedule performance index (SPI)—This value represents a ratio of earned value to planned value. As a ratio, if the planned value matches the earned value, the ratio value equals 1, indicating the activity is on schedule. If SPI is less than 1, the activity or project is behind schedule. If SPI is greater than 1, the activity or project is ahead of schedule.

SPI=EVPV

Budget at completion (BAC)—This value represents the sum total of all estimated activity costs to form the total budgeted project cost.

Estimate to completion (ETC)—This value represents the estimate of remaining costs required to complete a project. This value is used to define the unfinished portion of a project, or from a particular point in the project to completion. ETC can be stated in the following equations:

ETC=EAC−ACETC=(BAC−EV)CPI

Estimate at completion (EAC)—This value represents the sum total of all actual costs to date plus the estimates to complete the project. This value can be derived for various project conditions as stated in the following equations:

EAC=AC+ETCEAC=AC+BAC−EV(no expected BAC variances)EAC=(BAC)CPI (variances will continue at current CPI)

Variance at completion (VAC)—This value represents the total variance in budget at the completion of the project. This value can be derived by subtracting the budget at completion from the estimate at completion.

VAC = BAC−EAC

You can now utilize data from a sample project to see how to use earned value in analyzing information derived from project activities.

Example: Initial Project Baseline Information (Schedule and Budget) Tables 11.2 through 11.4 illustrate typical project information that can be used in earned value analysis calculations to derive project performance.

Table 11.2 Project Scheduled Durations and Predecessors

Project Starting Durations and Budget

Task

Activity Duration (Days)

Predecessor

Budget

A

3

$3,620

B

6

$8,975

C

3

A

$12,150

D

2

B

$5,160

E

3

B

$5,630

F

2

C

$2,250

Table 11.3 Project Duration in Days

Project Duration in Days (Status at end of day seven)

Task

1

2

3

4

5

6

7

8

9

10

A

B

C

D

E

F

Table 11.4 Earned Value Calculations

Image

Based on the earned value calculation in Table 11.4, you can see that activities C, D, and E are over budget and activity E is behind schedule.

Troubleshooting Tools

As the project manager collects data on the performance of work activities, there will no doubt be occasions that the outcome of analysis reveals problems or trends that are occurring. In that case, the project manager needs to determine the cause before implementing corrective actions or controls. It is important that the root cause of a problem be determined before actions are taken so as not to overlook the actual root of a problem and implement actions on components of work activity that do not solve the actual problem. In some cases, incorrectly implementing actions or controls in the hopes of solving a problem may actually create more problems. It is important the project manager determine the actual root cause of a problem so that efforts, actions, or controls are directed at the root cause for an efficient and effective resolution.

The project manager uses the analysis tools as described in this chapter to uncover trends or potential problems but also needs analysis tools and techniques for troubleshooting to help pinpoint the root cause of a problem. The following sections describe some of the fundamental tools used in project management to utilize information gathered and analyzed from work activities to perform root cause analysis; the purpose is to uncover an actual problem or problems that affect the quality of work, schedule, or impact to budget within a work activity.

Root Cause Analysis

The first tool used to analyze information produced from work activity monitoring is called root cause analysis. This simple technique starts from the indication, produced by analyzing monitored information, that suggests a problem or undesired trend is present. The second component of this technique requires individuals knowledgeable in the work activity to identify all possible scenarios or “root causes” that could produce the problem. This may include one single root cause, multiple root causes, or the presence of a risk event that has occurred.

Through expert opinion, review of conditions, and further testing, the primary root cause can be determined and action can be taken to accurately address the issue. Root cause analysis is typically the most common tool used in the first pass of troubleshooting, and it has the advantage of being simple and easy to implement, producing surprisingly accurate results. A disadvantage of this technique is in the lack of knowledgeable individuals who could identify root cause scenarios; another issue could be that the work activity is too complex, requiring more sophisticated troubleshooting techniques.

Fault Tree Analysis

Fault tree analysis (FTA) is another relatively simple tool to understand and implement. It is designed to narrow down problem event scenarios through the use of an AND/OR gate fault tree to determine a root cause. This technique requires the project manager to solicit specific information from individuals knowledgeable of the work activity, review the information gathered, analyze the results that suggest a problem is occurring, and then use this information to develop the fault tree. The advantage of using the fault tree analysis is not only identifying possible problem scenarios, but also identifying the relationships that scenarios can have in creating problems. Another advantage is being able to use the fault tree in a meeting with subject matter experts participating; they can brainstorm various scenarios that might not have been otherwise considered. Figure 11.7 shows how a fault tree can be constructed.

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Figure 11.7 Fault tree analysis

Monitoring Results

The final step in the process of monitoring work activities is to determine how to use the information that was gathered and analyzed and who will need this information. Because projects utilize human and other organizational resources, the project manager must understand the importance of communicating project status to stakeholders and others requiring this information. If a particular work activity is falling behind schedule, or issues with procurements may cause problems with the schedule or budget, others affected by these problems need to know their magnitude and whether or not there may be a resolution. The underlying theme is that projects produce information, and it’s the project manager’s role to gather this information, analyze it, and determine what actions need to be performed as a result.

It may be determined that other actions are required, depending on the outcome of the analysis of work activity monitoring that may generate corrective actions, change requests, or the implementation of controls to adjust the performance of work activities. It may also be determined that other departments need to implement changes in schedules to adjust for problems on work activities within the project. The communication of information and status is of utmost importance, and the project manager must ensure that project activity monitory maintains a steady flow of information that can be analyzed for project performance.

Work Performance Reports

The first order of business the project manager has upon collecting data from monitoring work activities is to prepare work performance reports. The reports apprise stakeholders and other managers as to work activity progress and performance. Depending on the size and complexity of a project and the organizational structure, reporting of work activity progress and performance may take different forms and may be required based on milestones or other situations of reporting project status. In most cases, work performance reports communicated to the appropriate individuals generate discussions, decisions, and actions based on what the information reveals.

On larger projects, the project manager may have assistants and staff who perform analysis and take actions to mitigate or eliminate problems or risks internal to the project. Status is reported to stakeholders or upper management on the general condition of the project as a whole. In other project scenarios, the project manager may communicate the outcome of information and basic analysis to others within the organization to escalate a problem for help outside the project. This can be in the form of reports, memos, or change requests that might be required to resolve a problem situation. The project manager then looks to others within the organization for help in troubleshooting and problem resolution.

With any project scenario, the collection and analysis of data and the reporting of project activity status are of utmost importance not only because these reports provide general communication of work activity progress, but also because they inform appropriate individuals of the need to resolve problems correctly and efficiently. Performance reports can be in the form of handwritten documents or memos, or spreadsheet or text documents outlining general status information. They can be hand-delivered and/or emailed in soft copy to other project staff, stakeholders, or individuals requiring this information. Project activity status is also typically conveyed in meetings where project staff and others requiring this information can review and discuss details. These types of meetings can also facilitate off-site conference calls or videoconferencing where other project staff, management, or individuals can be informed of work activity progress and can discuss project issues. The project manager can utilize electronic whiteboards and other tools that help convey work activity details or in the discussion and analysis of information regarding problems with a particular work activity. It is important the project manager understand basic communication concepts and forms of communication to effectively and efficiently convey project information and status to individuals and stakeholders who have interest or responsibility on the project.

New Risk Assessment

Another result of project activity monitoring is in the discovery of new risks and the additional challenge that a new risk will present to project scheduling and budget control. As you have seen in this chapter, monitoring project activities reveals anomalies, problems, or trends based on information of project activities that have already occurred. The same information may reveal the potential for a new risk that has not occurred but can be planned for. It is important that the project manager and those who help analyze work activity information understand that information not only documents what has happened, but also can inform those who are looking that a possible risk event may be imminent. This is a very important element of activity monitoring because it gives the project manager and project staff the rare opportunity to plan for a potential problem before it happens.

New risk potential typically is discovered in analyzing project activity data. This is the point at which the project manager or project staff need to be knowledgeable and pay attention to what the information is actually telling them to detect a problem that has not already occurred. This may be an opportunity for the project manager to train other project staff who assist in analyzing information from monitoring work activities. He can help them see how the information can show the difference between problems that have already occurred versus a problem that has the potential to occur in the future. This type of training is invaluable for project staff because it maximizes the use of information gathered from work activities.

Corrective Action Requirements

Based on the outcome of information that has been gathered and analyzed from project work activities, determinations can be made as to whether a work activity is on budget and on schedule and requires no further action. Determinations also can be made whether some form of problem is influencing the activity that needs to be corrected to keep a work activity on schedule and on budget and within the quality expected. When the project manager prepares and communicates work performance reports that indicate a problem is occurring on a specific activity, these reports typically generate discussion and further root cause analysis to determine what can be done to correct the problem. The outcome of these discussions and analysis will, one hopes, produce a corrective action requirement that is documented and implemented on the work activity. This is another important reason that work activities are monitored and information is gathered and analyzed. The purpose is not only to understand the status of work activity, but to provide information the project manager can use to “manage” the quality of work performed and to ensure activities are on schedule and on budget. More about corrective action control of work activities is covered in Chapter 12, “Schedule and Cost Control.”

Forecasting Adjustment Requirements

As the project manager monitors work activity and reviews and analyzes information gathered on activity progress, either work activities are on schedule and on budget, producing the expected quality of work, and require no further action; or the information suggests a problem or trend that requires corrective action. Such action can impact either the budget or the schedule, so adjustments in forecasting the remaining work activities in the project plan may be required. Forecasting is based on the original project plan, which includes estimates of schedule duration, estimates of work activity costs, and definition of work to produce the expected deliverable, which formulates the baseline of the project. This is the expected plan the project manager follows and uses as a baseline to compare actual work, activity duration, and cost to measure activity progress.

If corrective action or controls that have to be implemented have an unavoidable influence on the schedule or budget, the project manager has to make adjustments and publish updated expectations for completion. If adjustments influence the schedule, the updated forecast is derived from the variation of actual duration compared to the baseline called schedule variance (SV), which can be calculated and communicated in the estimate to completion (ETC). If adjustments influence the budget, the updated forecast is derived from the variation of actual costs compared to the baseline called cost variance (CV), which can be calculated and communicated in the estimate to completion (ETC). The project manager then needs to effectively and efficiently communicate the updated forecast or estimate to completion to the project staff and other individuals within the organization who need to know critical updates to the project plan.

Change Validation Analysis

We have discussed the importance of monitoring work activities to collect information on the quality of work, duration of work activity, and cost of work activity to compare against a baseline as to the progress and status of work activities. Monitoring also plays another very important role: in the event a change to a work activity is implemented, the effects of that change also need to be monitored to validate the change is producing the desired outcome. Just because a change is implemented doesn’t mean it always works as anticipated, so monitoring the activity with the change implemented produces new information that can be analyzed regarding the effect the change has produced.

The reason for monitoring work activity is for the continued collection of information for activity progress, and this is an ongoing process until the work activity has been completed. Changes to work activities can produce other anomalies or new problems, or they can introduce a potential risk. Monitoring the effects of a change on a work activity is very important because the change can produce either the positive effect that was anticipated or a negative effect that creates more problems. If a negative effect is produced, the project manager must know immediately so that information can be analyzed and a new course of action can be taken quickly to mitigate or eliminate further impact to the schedule or budget.

Monitoring project activities is the means by which a project manager derives information and analyzes what is actually happening in comparison to what is expected as documented in the project plan. Through the implementation of monitoring tools and techniques, the project manager can “manage” activities instead of simply reporting on status.

Review Questions

1. Discuss what is meant by integrated monitoring.

2. Explain the primary reason that project managers monitor project work activities.

3. Discuss how information-gathering tools would be implemented on a project. Use your own sample project.

4. Why is information analyzed, and what specific pieces of data would be of interest to the project manager?

5. If analyzing activity information reveals a problem, explain why a root cause analysis is needed.

Applications Exercise

JP Phentar Construction: Case Study

JP Phentar has owned and operated his construction company for 27 years and is currently interested in building a custom home for his own family. Phentar Construction has specialized in large and exotic custom homes built in areas that present challenges, such as heavily wooded and rocky terrain, hillsides, and sandy beach sites. Phentar Construction has built large custom homes for executives, heads of state, and movie stars around the world; those projects generally include interesting and challenging amenities for construction companies to manage in the course of building homes.

Phentar is pulling out all the stops on this construction project to include things in his own home that his family can enjoy although they are typically out of the norm for most family residences. Phentar has purchased three acres of foothill terrain that include several large rock outcroppings that have to be removed for the construction of an 8,500 square foot six-bedroom, six-bathroom home. This home will also include an elaborate game room with professional pool table and arcade games, a large family room with rock fireplace, and a fully functional home theater room with large-screen TV and surround sound and theater seating. The home will also feature as its primary centerpiece a 35,000-gallon saltwater fish tank that will start at the main floor in the center of the house and extend for two stories to the ceiling. This fish tank will include a large rock wall covered with all manner of coral and sea urchins, flowing water movement, and it will be stocked with an elaborate display of tropical fish. The exterior of the home will include a large pool with spa and a covered patio with full outdoor kitchen, including a fully functional brick fire oven.

Because Phentar has built homes with similar amenities in the past, he knows all too well several of the contractors required to outfit these types of amenities can present challenges in cost estimation, level of quality, and ability to stay on schedule. Concerns with this particular project lie within clearing the initial acreage of large rock, and specialized amenities such as the game room, theater room, and fish tank that can present challenges during the scheduling of these activities in the course of building the home. There can be serious issues in the timing of these activities because they can affect other areas of the home during construction. Phentar is confident this project can be completed if proper project management tools and techniques are implemented to monitor and control critical activities through the course of this project life cycle.

Case Study Exercise for Chapter 11

1. Determine what information-gathering tools would be most effective on this project and what activities would need to be monitored.

2. Based on data that would be generated from work activities, what types of analytical tools could be used to determine project status?

3. Can any corrective actions be initiated?


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