Eight-cost project forecasting methods exist, which rely on four possible performance factors and a general formula. 3 min read.
Most cost forecasting methods have been validated in the literature and make use of the following generic cost forecasting formula written as follows,
EVM Cost Forecasting Methods
Like time performance methods, each cost forecasting method relies on one of the possible four performance factor (PF) values, which make assumptions about future cost performance.
- PF = 1: Assumes remaining work is done according to the baseline schedule.
- PF = SPI: Assumes remaining work is done according to SPI trend.
- PF = SPI(t): Assumes remaining work is done according to SPI(t) trend.
- PF = CPI: Assumes remaining work is done according to CPI trend.
- PF = CPI and SPI: Assumes remaining work is doing according to CPI and SPI tend.
- PF = CPI and SPI(t): Assumes remaining work is doing according to CPI and SPI(t) tend.
All methods provide an estimate for the total predicted cost at the end of the project. These methods offer a range of possibilities and provide a lower and upper bound on what the project manager expects to spend on the project, which is shown below,
Microsoft Project Demonstration Project
Shown below is a Microsoft Project demonstration project, which is fully resourced and costed. This project has a schedule duration of 9-weeks and a cost budget of $150. The delivered project and the resulting tracking information, show a final duration of 11-weeks and an actual cost of $210.
EVM Cost Forecasting Method Results
Shown below are the eight-cost forecasting method results,
EVM Cost Forecasting Method Conclusion
Comparing each of the forecast methods it is clear the most reliable methods are,
- PF = 1
- PF = SPI(t)
- PF = SPI
The PF=1, which assumes remaining work is done according to the baseline schedule indicates past behaviour has no bearing on future behaviour. Although the SPI trends do indicate that from a cost perspective time performance has a bearing on cost outcomes, which makes intuitive sense. Interestingly, cost trends have no bearing on cost forecasts!
EVM Cost Forecasting Summary
It is clear from the results that cost forecast accuracy during the initial third of project progress is less information and false positive early-warning signals tend to be provided. Fortunately, as the project progresses to the half-way point, forecast variations begin to settle down and during the last third of the project accuracy significantly improves.
Unfortunately, conclusions drawn for this schedule can’t be generalised because each project is unique and characteristics from one project to another differ significantly.
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