Tuesday, February 28, 2012

Practical Method for Determining Project % Complete


How many times do you ask this question of one of your vendors and receive an answer that you don’t believe? What percentage of the project is complete? This is a simple question that allows you to compare this figure against the percent budget spent to see how likely it is that this project will finish on budget. Your vendors will make up all sorts of reasons for you to believe their statistics that show how complete the project is. Wouldn’t you like an objective calculation that gives you this number exactly?

I have been using a simple technique that allows me to plan projects, forecast their costs and communicate their weekly status with complete accuracy. My clients are always happy with the information they receive. This is not to say my projects always come in under budget. My projects are plagued with the same uncertainties any other projects face, some causing budget overruns. The difference is that I communicate these overruns weekly, honestly, can pinpoint the causes and allow my clients to make business decisions based on them. I don’t wait until the project is 75% complete and all the money is spent to ask for more money.

There is no magic behind the technique. The federal government mandates that projects run for them use a technique known as Earned Value Project Management to report time against task.  But not many laymen understand it without some intensive training in the technique. Everyone understands what it means when a project is 2 weeks behind schedule, but most would be confused if told it is $10,000 behind schedule.

It is possible, however, to salvage some of the official earned value calculations to generate two numbers that are meaningful to customers: Percentage of the project that is complete and percentage of the budget that has been spent.
Below is an excerpt from a status report that shows these two numbers in the budget portion:
So how do I generate and then justify these numbers?

The Planning Phase


I plan each project in front of the clients,
with their active participation. This makes it possible to obtain their buy-in for the tasks for which they take responsibility. From this planning activity, I can generate a Gantt chart in MS Project detailing Duration, Start and Finish, Percentage Complete, Responsibility and Percentage Time spent on each task. By filling out the hourly rates for the assigned personnel on the Resource sheet I obtain a Project Budget (in the Cost column).

Once agreement is reached between the PM and the clients on the cost for each task and the overall project cost and schedule, a few columns can be added to the project plan. Baseline Start and Finish and Actual Start and Finish.

The same is done with the cost columns adding Baseline and Actual costs and renaming Cost to Current Working View (CWV) cost. The Gantt chart now looks like this:


The Implementation Phase


At each status meeting with the project team, I ask for percentage complete on each task and the number of hours spent on each task. The percentage complete is entered on the Gantt Chart, then the hours spent are multiplied by the hourly rate and this is entered into the Actual Cost column. The Actual Start and Finish dates are entered in their respective columns.

At this point, the Gantt chart is yielding some very important data for the client. Baseline End Date and CWV End Date show any schedule delay. Baseline Cost and CWV Cost show over or under budget predictions. It also shows some very poor data: percentage project complete. Experimentation with MS Project has shown that this is not correct, especially if some resources are shown as costing dollars and others are not (e.g., when a consultant shows their tasks on the same Project Schedule as the client tasks).


For each task, the Baseline Cost is the Value earned when it is complete. The Percentage Complete times the Baseline Cost is the Earned Value that is earned for a partially completed task.

Simply adding up all these partial earned values, and dividing them by the Baseline Project Cost can generate the Percentage Complete for the project. And by dividing the Actual Project Cost (summed by MS Project) by the Baseline Project Cost, I can determine the Percentage Budget Spent. These numbers make sense and are meaningful to a client. I use a simple Excel spreadsheet to make this calculation easier.

The two key values can be copied onto a status report: Percentage Complete and Percentage Budget Spent. The client can examine any discrepancies in these figures for the reasons behind the cost changes. The Gantt chart shows which task is coming in way above or below budget and the project manager can usually explain why this occurred.

The importance of Earned Value is that when a project using it is 15% complete, one can predict within 90% accuracy how much above or under budget it will be at completion. Any discrepancy found at 15% project completion holds through until the end of the project within 90% accuracy. This calculation has been proven by auditing thousands of government projects, small to large, using earned value calculations for decades.

It is possible to finesse these numbers to make the project look more complete than it really is. Only on partially completed tasks though. If a task is really only 10% complete and one claims it as 90% complete, an unscrupulous vendor can exaggerate project % Complete. But this will only work a couple of times and the vendor will be found out long before the project is complete. This is not a good way to run a business and these vendors will be weeded out quickly.

I encourage you to ask your vendors to use these calculations to give you meaningful weekly project status. You need to know early on how much over budget your projects are likely to be so you can budget accordingly or get rid of the inefficient vendors.

Anybody else have ideas that work well in this realm?

8 comments:

  1. great post, very succinct!

    ReplyDelete
    Replies
    1. Thanks! My customers love this method. I'll have to post about when I used it to predict to a customer we would finish $10,000 over budget after the first week of work. They were upset but, after hearing about their options, it turned out to be a big win for us.

      Delete

    2. Tag: PM201A53. Let me share all of you about #5 Tips for Project Management Success,, I hope you enjoy it

      1. Plan your day using time management techniques

      As a project manager, time management skills are essential because you are dealing with a wide range of tasks that demand a quick turnaround time. Planning your day will go a long way in keeping you organized and increasing your productivity. Assist your task planning by using project management software which helps you track the work of you and your team.

      If you are not very tech savvy, a simple to-do list can also be a great organizational tool. Prioritize your most important tasks by putting them at the top of the list and less important ones at the bottom. Having a visual plan of your daily tasks helps to keep you on track and aware of time.

      Related post: Free ebook 104 secrets to become a great project manager

      2. Include stakeholders in important project conversations

      While you will have plenty of responsibilities regarding the project, don’t neglect your clients.

      Good communication is essential is keeping both parties informed of project progression, curtailing scope creep, and apprised of changing requirements. Some clients may have different expectations when it comes to communication, so make sure to establish the frequency and type of communication (like emails, phone calls, and face-to-face conversations) at the beginning of your project.

      Establishing communication expectations early helps alleviate stakeholder uncertainty about communication frequency and delivery.

      3. Regularly communicate with your team

      Daily team communication helps keep misunderstandings and unclear requirements under control. Keeping your team informed in every step of the project is essential to project management success.

      For example, a study published by Procedia Technology found that good communication skills were the cornerstone of project management. The study examined over 300 “construction project managers, architects, construction managers, engineers and quantity surveyors” and their successes and failures on various construction projects.

      4. Anticipate project setbacks

      Even the best-laid plans often go awry.

      Remember that even with a high amount of planning and attention to detail, your project may still encounter some challenges. Pay attention to complaints from stakeholders or colleagues, and other warning signs, like a missed deadline or cost overrun, that there may be a problem.

      Preventing a crisis will keep your project running smoothly, save you a lot of time, and keep you, your team, and your stakeholders confident in progressing with the project.

      Unfortunately not every complication can be avoided. Crisis management skills are essential for dealing with the unexpected. Project managers need to be flexible and pragmatic. Improvise and make sharp decisions when needed.

      Related post: 92 free project management templates

      5. Stay focused on the details

      A common problem project managers encounter is having the project aims not aligned with the organization’s objectives. A great project manager will strategize a plan for the project to lead back to the overall success of the business.

      Know your project’s scope by heart and avoid wandering outside of the project’s requirements. It’s too easy to get lost in minor details and forget what your focus is, so a well-planned project scope is essential for success.

      And final, you should use KPI to measure effectiveness of the project, here are full list: 76 project management KPIs



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  2. My reaction to this is its a great way to do things as long as your client buys into the process. You say your clients love it. I can imagine times when a client doesn't want to be that involved and just wants "progress reports" until the project is done. Do you ever have to take time to explain and and make sure they're on board to actively participate in order for this to succeed? -Killer Bee

    ReplyDelete
    Replies
    1. Kevin,

      I always explain my process during the first status meeting and have never had a client uninterested in gathering budget numbers throughout the project life. It's either an easy sell or I'm good at convincing people they want this information.

      Bruce

      Delete
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