There have been a lot of challenges in the areas of project tracking and controlling that have been plaguing project managers for a long time. Let us get a better perspective as to what these are.
There are fundamental questions that project managers ask / get asked; some of which include:
- What the current status of the project is?
- What the overall health of the project looks like?
- How should the data be interpreted?
- Should a flag be raised under the existing circumstances?
Given this backdrop, we need to understand the basic approaches that are used for project tracking and controlling. Broadly, there are four perspectives that are used. They are:
- The Duration Perspective
- The Physical Progress Perspective
- The Accrued Costs (or Revenues) Perspective
- The Expenses Perspective
Each of these give a different perspective to the project. Let me now explain how this works. For those who are not aware, the EVA is an accrued cost mechanism.
A Simple Case
Imagine a project activity involves 1000 mandays. Now let us assume that the duration of the project activity is 10 days. Therefore, the number of men who have to work on the project activity can be calculated as 100. A typical project baseline would show that these are evenly distributed over the time period.
Now, supposing that we have had only 50 persons working for the first five days. That means, we are creating a ‘backlog’ of 50 persons x 5 days or 250 mandays for the next 5 days. But we are informed that the activity would have a ramp-up and 150 persons would work over the next 5 days. In which case, we now are comfortable that this would be completed on schedule.
So, at the end of the first week, when we go by the remaining duration perspective, therefore, we still see that the project would be completed on time. Current progress, at the end of the first week, is 50%. In other words, no red flag would be raised by the program manager.
However, if we are using the physical progress perspective, the readings are different. Here, the report would state a progress of 50% at the end of the first week. And when extrapolated, it would indicate a potential slippage of 2 weeks.
The simple point for the project manager is: Is it justified to raise a flag based on physical progress? Are we unnecessarily wasting management bandwidth in this case?
Another Simple Case
Now imagine that we have a crane required for a particular project activity and the mobilization of the crane itself is a huge cost (typically crane utilization times are around 10% of the overall costs in a project). Given this scenario, if the crane now has done lesser progress than scheduled, the accrued costs would be high, but the progress in physical terms would be lower.
A lot depends on the accuracy of the cost elements and the reliability of the cost capturing mechanism. Now, from a project perspective, let us assume that the activity was to erect a column. So, the crane was to be brought from another location and the column was supposed to be lifted, and the crane was to sent to yet another location. Let us assume 5 weeks of travel for the crane (mobilization time), 10 days for our activity, and another 5 weeks of travel for the crane (demobilization time and redeployment).
So, if the project progress at the end of 5 days is say 50%, the costs would still be 5 x 5 = 25 days of rental in mobilization and 5 days of activity deployment. So, the accrued cost would still be at 50%, despite the project progress being lower. When we link cost to the activity, it would mean that the cost would be 25 days + 50% of 5 days activity (as the progress is only half of what is expected) or 27.5 days of rent vs. 30 days of rent required. So, the variance is just less than 10%, while the progress is far lower.
This again distorts the progress measurement.
Yet Another Case
Now if we assume that the contractor is indeed slow, even if he is accruing costs, he may not be paid until he is at the point when he has to raise an invoice for billing. In other words, his invoice cycle doesn’t match the accruing cycle.
Whats worse is that, if the contractor is delayed, the likelihood of his being paid lower than what he expects through the accrual system is very high. So, the awarding agency could withhold his payments or get another contractor to do the job or make partial payments. In such a case, the planned vs actual expenses would also show significant discrepancies from both the actual costs and the physical progress.
The PMO is kept busy, when multiple disconnected perspectives are brought into the project planning practices. Further, mindless extrapolation of data to describe potential future trends, often lead to unending discussions.
We have a solution for this approach. But would like to hear your views before we take this further. Do connect with us on the same.