PM FPX 5334 Assessment 2 Bausch + Lomb Project

PM FPX 5334 Assessment 2 Bausch + Lomb Project

Name

Capella university

PM-FPX5334 Project Risk Assessment and Control

Prof. Name

Date

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

Introduction

NearlyFree.com is currently grappling with a project that has exceeded its original budget of $25,000. At only 43% completion, the company has identified significant issues and is now seeking expert assistance in project management services. A comprehensive review of financial statements highlights a critical discrepancy regarding the earned value, which has been notably under-budgeted. The primary goal of NearlyFree.com’s project is to develop and implement an automated web-based training system for new employees. This initiative aims to streamline the New Employee Orientation (NEO) process, thereby reducing the workload and minimizing resource requirements.

Project Overview

The current project scope delineates a 92-day timeline alongside an approved budget of $22,300. This report provides a detailed evaluation of the earned value technique, assesses project success, and includes necessary earned value calculations to facilitate an effective turnaround.

Understanding the Earned Value Technique

The Earned Value (EV) technique is a crucial project management strategy that tracks the project plan, actual work performed, and the value of completed work. It enables project managers to assess whether the project is progressing as planned. By comparing the actual performance against the planned expenditure, this technique offers valuable insights into both time and budget management. Control measures are implemented relative to the cost baseline, relying on key calculations to report project progress effectively.

Key Inputs in Earned Value Analysis

• Earned Value (EV): This metric indicates the actual progress of tasks as of the analysis date.
• Planned Value (PV): Reflects the anticipated expenditure of funds aligned with the project schedule up to the analysis date.
• Actual Cost (AC): Represents the actual funds spent as of the analysis date.

Essential Calculations

Cost Variance (CV)

Cost variance reveals the budget deviation at the analysis point and is calculated using the following formula: [ \text{Cost Variance (CV)} = \text{Earned Value (EV)} – \text{Actual Cost (AC)} ]

Cost Performance Index (CPI)

This index reflects the project’s budget deviation relative to its total size: [ \text{Cost Performance Index (CPI)} = \frac{\text{Earned Value (EV)}}{\text{Actual Cost (AC)}} ]

Schedule Variance (SV)

Schedule variance indicates the project’s schedule deviation at the analysis point and is calculated as follows: [ \text{Schedule Variance (SV)} = \text{Earned Value (EV)} – \text{Planned Value (PV)} ]

Schedule Performance Index (SPI)

This index provides insight into the project’s progress relative to its planned schedule: [ \text{Schedule Performance Index (SPI)} = \frac{\text{Earned Value (EV)}}{\text{Planned Value (PV)}} ]

Key Metrics and Current Performance

Metric	Value
Budget Cost of Work Performed	$12,373.95
Budget Cost of Work Scheduled	$20,453.95
Actual Cost of Work Performed	$16,373.95
Schedule Variance (SV)	-$8,080.00
Cost Variance (CV)	-$4,000.00
Schedule Performance Index (SPI)	0.60
Cost Performance Index (CPI)	0.76

Analysis of Schedule Variance (SV)

The schedule variance indicates that the project is behind schedule: [ \text{Schedule Variance (SV)} = \text{Earned Value (EV)} – \text{Planned Value (PV)} ] [ \text{SV} = \$12,373.95 – \$20,453.95 = -\$8,080.00 ]

Cost Variance (CV) Insights

The cost variance reveals the financial discrepancies compared to the initial budget: [ \text{Cost Variance (CV)} = \text{Earned Value (EV)} – \text{Actual Cost (AC)} ] [ \text{CV} = \$12,373.95 – \$16,373.95 = -\$4,000.00 ]

Performance Indices Interpretation

• Schedule Performance Index (SPI): With a value of 0.60, the SPI suggests that the project is significantly behind schedule, as an SPI below 1 indicates delays.
• Cost Performance Index (CPI): A CPI of 0.76 indicates that for every dollar spent, less value is being achieved than planned, signaling potential financial overruns.

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

The Budget at Completion (BAC) for NearlyFree.com stands at $22,300. However, the Estimate at Completion (EAC), which predicts the total project cost based on current performance, is calculated as follows: [ \text{Estimate at Completion (EAC)} = \text{Actual Cost (AC)} + \frac{(\text{Budget at Completion (BAC)} – \text{Earned Value (EV)})}{\text{Cost Performance Index (CPI)}} ] [ \text{EAC} = \$16,373.95 + \frac{(\$22,300 – \$12,373.95)}{0.76} = \$29,434.54 ]

Strategic Budget Turnaround

Employing Earned Value Analysis (EVA) is essential for monitoring project progress, predicting completion time, and identifying budget and schedule variances. NearlyFree.com’s initial EVA for the NEO project shows it is over 50% behind schedule, leading to an overall budget overrun. A more precise EVA could have provided a clearer budget and timeline.

Conclusion

To ensure the project’s success, NearlyFree.com must extend the timeline and adjust the budget, increasing the Estimate at Completion from $22,300 to $29,434.54. These adjustments are vital as exceeding the initial budget or timeline could undermine stakeholder confidence, negatively impact stock market performance, and affect the company’s financial standing. A more detailed project schedule would mitigate the risk of further budget overruns and promote successful project completion.

References

Cullen, S. (2016, August 2). Earned value analysis. WBDG. WBDG%20is,budget%20as%20the%20project%20proceeds).

Haughey, D. (2020, July 26). What is earned value? ProjectSmart. ProjectSmart.

Peng, B. (2018, April 10). The earned value method. Project Engineer. Project Engineer.

PM FPX 5334 Assessment 2 Bausch + Lomb Project

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