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Full text of "Completion cost trend analysis."

COMPLETION COST TREND ANALYSIS 



A Special Research Problem 
Presented to 

The Faculty of the Construction Engineering 

and Management Program 

Purdue University 



by 
John T. Baker 

In Partial Fulfillment 
of the Requirements for the Degree of 
Master of Science in Civil Engineering 



July 1990 



>pxc 



Approved: 



v 



T247832 



ABSTRACT 



J. Gordon Davis's article "Keeping Project Costs in Line" 
( Machine Design , December 1976) stated that managers who 
keep track of a project by analyzing cost reports are behind 
what is actually occurring on the site. Davis suggests the 
use of projected completion costs to analyze the project's 
cost control. He states that this method will better serve 
the project managers and allow them to respond to problem 
areas before they escalate. This paper will analyze Davis's 
approach through the use of simulation to determine if this 
method is reasonable in the construction industry. 



TABLE OF CONTENTS 



ABSTRACT i 

TABLE OF CONTENTS ii 

LIST OF FIGURES iii 

LIST OF TABLES iv 

LIST OF APPENDICES v 

CHAPTER I INTRODUCTION 1 

1.1 PROBLEM AND PURPOSE 1 

1.2 OBJECTIVE AND SCOPE 2 

1.3 REPORT FORMAT 2 

1.4 STUDY METHODOLOGY 3 

CHAPTER II CURRENT FORECASTING SYSTEMS 5 

2.1 UNDERLYING THEORIES OF FORECASTING 7 

2.2 METHODS OF FORECASTING 9 

CHAPTER III SPREADSHEET ANALYSIS 17 

3.1 SPREADSHEET DESCRIPTION AND COLUMN BREAKDOWN . . 17 

3.2 THE FORMULA 25 

3.3 SIMULATED RESULTS OF TYPICAL SITUATIONS 26 

3.4 SENSITIVITY OF THE WORKSHEET 4 2 

3.5 IMPROVING THE SPREADSHEET 61 

3.6 MACRO PROGRAM FOR EXCEL 66 

CHAPTER IV RESULTS 67 

CHAPTER V RECOMMENDATIONS 69 

CHAPTER VI CONCLUSIONS 7 

REFERENCES 7 3 

APPENDICES 74 



11 



LIST OF FIGURES 



Figure 1.1 - Study Methodology 4 

Figure 2.1 - Productivity Profile (Clark & Lorenzo, 1985) . 11 

Figure 2.2 - Trend Curve (Riggs, 1987) 16 

Figure 3.1 - Cost Trend Chart Worksheet 18 

Figure 3.2 - Project Cost Trend Chart 19 

Figure 3.3 - Original Spike, Increase in the Estimate ... 30 

Figure 3.4 - Original Spike, Decrease in the Estimate ... 32 

Figure 3.5 - Steadily Decreasing Estimate 3 4 

Figure 3.6 - Steadily Increasing Estimate 3 6 

Figure 3.7 - Double Spike 38 

Figure 3.8 - Increase Spike with a Following Decrease Spike 40 
Figure 3.9 - Sensitivity Analysis, Column 8 Factor Set at 

1.0 43 

Figure 3.10 - Sensitivity Analysis, Column 8 Factor Set at 

3.0 46 

Figure 3.11 - Sensitivity Analysis - Cost Slope Factor 

Changed to the Power of 4 50 

Figure 3.12 - Sensitivity Analysis - Cost Slope Factor 

Changed to the Power of 1 5 3 

Figure 3.13 - Sensitivity Analysis - Cost Slope Factor 

Analysis 56 

Figure 3.14 - Improvement Analysis 63 



in 



LIST OF TABLES 



Table 2.1 - Variance Analysis 10 

Table 3.1 - Results of the Sensitivity Analysis 59 



IV 



LIST OF APPENDICES 



A. COST TREND CHART WORKSHEET OPERATION MANUAL 

B. DAVIS'S ARTICLE 

C. MISCELLANEOUS PLOTS AND SPREADSHEETS 

D. EXCEL SPREADSHEET AND CHART MACRO 



CHAPTER I INTRODUCTION 



1.1 PROBLEM AND PURPOSE 

In 1976 Gordon J. Davis wrote an article in Machine Design 
which described a method to predict project completion costs. 
Davis established a spreadsheet with accompanying chart that 
showed the relationship between the estimated cost at completion 
(ECAC) with the spreadsheet generated predicted cost at 
completion (PCAC) . This method was to be used by project 
engineers to identify cost control problems in a project. Davis 
stated in his article that by analyzing periodic cost reports, 
the manager is at a disadvantage in that the reports are always 
lagging behind the actual progress of the project. His entire 
premise is that a new method must be instituted so that future 
costs can be forecasted and efforts undertaken prior to the 
escalation of a negative situation. 

The goal of this research project is to determine if Davis's 
method is reasonable. A reasonable cost control method would be 
evaluated on practicality, usefulness, ease of use, and 
manipulation and customization of the method. In addition to the 
practicality of this method, the method is also compared to other 



current forecasting methods. The method is then reviewed to 
determine what changes are necessary to customize the spreadsheet 
to a users various requirements. 

1.2 OBJECTIVE AND SCOPE 

The objective of this research paper is to determine the 
usefulness of Davis's worksheet formula in construction projects. 
First an analysis of Davis's worksheet and chart is presented 
then the basic equations of the spreadsheet are determined. This 
report subsequently conducts a sensitivity analysis to observe 
the results of the spreadsheet given different conditions. 
Finally the spreadsheet and the sensitivity analysis are compared 
to determine if the spreadsheet can be improved. 



1.3 REPORT FORMAT 

This report begins with a detailed introduction to the 
problem and states the purpose for this report. Next, a 
comprehensive collection of currently used trend and forecasting 
methods are presented in Chapter 2. Chapter 3 is the main focus 
of the research project and provides an explanation of the 
spreadsheet, sensitivity analysis of the spreadsheet and finally 
several different ways to improve the spreadsheet. Chapter 4 
summarizes the results of the research and Chapter 5 provides 



recommendations for the use of the spreadsheet and also suggests 
follow on research. Finally the report is concluded in Chapter 
6. 

1.4 STUDY METHODOLOGY 

As can be seen in Figure 1.1, the study of Davis's 
predicated cost completion method begins with an analysis of the 
spreadsheet and chart. The spreadsheet columns are analyzed 
individually and then the formulas that are used within the 
spreadsheet are determined. A sensitivity analysis of the 
spreadsheet is performed to show the reaction of the predicted 
cost at completion (PCAC) when given the estimated cost at 
completion (ECAC) . When reviewing these charts if must be 
understood that the ECAC is the best possible estimated cost at 
completion that the project manager can estimated after reviewing 
all available information. The PCAC is the predicted completion 
cost at completion provided with the assistance of Davis's 
spreadsheet. 

Finally the sensitivity analysis and the formulas are 
compared to develop an improved spreadsheet. 



THE PROBLEM: 
ANALYZE THE SPREADSHEET 



I 



REVIEW AND DESCRIBE 
THE SPREADSHEET 



I 



BREAKDOWN AND 
ANALYZE EACH COLUMN 



i 



ESTABLISH THE EQUATION 
USED IN THE SPREADSHEET 



I 



PERFORM A SENSITIVITY 
ANALYSIS 




Figure 1.1 - Study Methodology 



CHAPTER II CURRENT FORECASTING SYSTEMS 



In a typical construction project, the company cost 
estimator develops an estimate which reflects all costs that are 
required to complete a specific project. These costs are usually 
broken down into specific cost categories which ease in the 
development and periodic monitoring of the project. The 
development of the estimate or budget is produced by a 
knowledgeable and experienced estimator. The budget is 
continuously reviewed to ensure accuracy and to minimize 
omissions. This estimate is extremely important, the company 
profit margin and ultimately it's life expectancy rests in the 
hands of the estimating staff. If the estimate is too low, large 
cost overruns might occur, if the estimate is too high, the 
company will lose business in the competitiveness of the 
construction industry. 

Throughout the construction of the project, the project 
manager periodically reviews costs incurred and compares this 
data to the budget. Frequent monitoring of these costs are 
essential to control expenditures and insure that costs do not 
overrun the budget. This process of continuously monitoring, 
managing, reacting to variances and forecasting is termed cost 
control . 

Every project manager has a strong incentive to monitor 



costs on the project. The company profit is directly related to 
how well the estimated budget was developed and the manner in 
which the expenditures were managed. 

In this chapter, several different forecasting methods are 
presented. These methods are presented so that a comparison can 
be made between what is currently being used in the industry and 
what Davis's formula represents. 



2.1 UNDERLYING THEORIES OF FORECASTING 

In the past, cost reporting and control was performed by the 
on site field superintendent who also performed the forecasting 
of future costs. This function is now in the hands of the 
project manager due to the complexity and importance of cost 
control. 

Forecasting is the process of predicting the future by using 
the analysis of all available data trends to ultimately calculate 
the final results reguired. In the construction industry this 
ultimately results in determining the final construction cost of 
the project through the analysis of past trends, experience, and 
any and all available data. 

Forecasting in the construction industry can be broken into 
three separate theories, they are: 

1. The performance of the construction project over the 
balance of the project will follow the estimate/budget. 
Therefore the projects overruns or underruns will remain the same 
for the rest of the project as stated on the report date. For 
example, if the project is currently at 35% with a cost overrun 
of $3,000, this forecasting theory states that the remaining 65% 
of the project will not have any variances, that is no additional 
cost overruns or underruns and therefore the completion cost will 
have an overrun of $3,000. 



2. The performance of the construction project over the 
balance of the project will follow the overall past performance 
prior to the report date. For example, consider construction of 
a highway with a budget unit cost of $25,000 per mile, 12 mile 
project, for a total budget of $300,000. The current report 
shows 5 miles complete at a cost of $100,000, which is an average 
unit cost of $100,000/5 = $20,000 per mile. Therefore the 
forecasted completion cost of this project would by ($2 0,000 * 7 
miles) + $100,000 = $240,000, a total cost underrun of $60,000. 



3. The performance of the balance of the project is 
determined by the analysis of the productivity levels at the time 
of the report. Using the example in item 2 above, say the last 
mile completed, mile 5, cost $19,000 to construct. The 
forecasted completion cost of the project would then be ($19,000 
* 7) + $100,000 = $233,000, an underrun of $67,000. 



8 



2.2 METHODS OF FORECASTING 

Forecasting methods require a detailed cost summary produced 
periodically. These cost reports are usually produced on a 
monthly basis with each work item is broken down into a separate 
cost category for the purpose of recording and analyzing. Cost 
codes are frequently used and some companies have customized 
these codes to their specific requirements. 

The monthly updates are a detailed accumulation of actual 
costs incurred as of the report date. These costs are then 
cateqorized into the specific cost codes and reported through a 
computer system. 

The methods described in this section are a representation 
of currently used methods throughout the construction industry. 
Some of these methods have limited uses, some of the methods can 
be used in combination with other methods and others are 
customarily used by themselves. The optimum combination of the 
methods must be customized to the individual company 
requirements. But even with the best combination of the methods, 
the ultimate producer of the forecasted figure must apply 
experience and common sense to the final results. It should also 
be noted that many forecasting methods are not used until 2 to 
25% of the project is completed (Bessa, 1983) . 

A. VARIANCE ANALYSIS 

Variance analysis is the simple process of comparing the 



current performance with the expected performance. Typical items 
compared are: 

1. Budget Cost vs Actual Cost 

2. Budget Unit Cost vs Actual Unit Cost 

3 . Budget Manhours vs Actual Manhours 

4. Budget % Complete vs Actual % Complete 

This method is not meant to be used by itself but other 
contributing factors must be analyzed as well to obtain the whole 
picture. This method highlights cost categories that are not 
performing or are performing better than anticipated. To use 
this method, contributing factors such as the following must be 
scrutinized to affirm that there is trouble: 

1. Poor initial estimate 

2. Technical difficulties 

3. Unexpected labor or material costs 

4. Differing labor efficiencies. 

Forecasting is easily computed using any of the three theories 
above with the available cost data. Examples are provided in the 
previous subchapter and in Table 2.1 - Variance Analysis. 



Cost 
Code 






Expenditures 


Adjustments 


Costs to Date 


Estimate to ComDl»t» 




To Date 


Ad j .Amt. 


Quant. 


Unit 


Amount 


Quant . 


Unit 


IO 


CtW jcT fcXc Av' 


657' 




6 c/ - 


loe>0 


o.kS 


4 


4 


ii 


l ~vo<>> B<C'-tf""-<- 


Colo " 




?o~h>- 


500 


4.14- 


i 




— 


>1 


A<£« BA«fc -o^i 


14 2- SO 




az.n> 


°\° 


1 So 


t 


— 
















Forecast of Final Cost 


Original Estimate 


Amount 


% ' 




Amount 


Quant. 


Unit 


Amount 


Quant. 


Unit 


Over 


Under 




6ST 


|ooo 


o-W 


bOO ' 


\fSBt> 


o fc 


5"!" 




fo&To 




7t>*>- 


SbO 


4.i+ 


7Dtt>~ 


9*> 


4-OD 


?©- 




Ml"f« 




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to 


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Table 2.1 - Variance Analysis 



10 



B. PRODUCTIVITY PROFILES 

Experience shows that productivity does not remain constant 
throughout the term of a project but follows well established 
curves and patterns called productivity profiles. The typical 
curve begins with poor productivity rates and then increases to 
reach a maximum at the 30% to 80% range before tapering off to 
final completion. This slow start is sometimes called the 
learning curve of the process in that workers take time to 
organize and orientate themselves prior to becoming effective. 
The final 20 - 30% of the project is also a time of weak 
productivity as crew composition changes, rework and cleanup take 
an increased priority. 

In the analysis of direct labor, the productivity profile is 
one of the better methods of trend analysis and forecasting 
available. The profile is a graphical representation of the 
productivity rate vs the % physical completion, Figure 2.1 - 
Productivity Profile. Productivity is defined as the Budget Unit 
Rate divided by the Actual Unit Rate. 

% Budgeted Manhours Used 

Theoretical 9.7 18.2 26.3 35.4 44.6 54.5 64.2 74.8 86.5 100 
Actual 10.4 18.7 28.3 

1.2 -i 



1.1 - 



- 1.0 ,S S 

tj 0.9 -/ N 

3 ' ACTIIJ 



2 0.8 - 

B. 

0.7 - 
0.6 - 



CALIBRATION CURVE 

\ 



ACTUAL 



-I 1 1 1 1 1 —I 1 

SO 40 50 60 70 80 90 100 



Physical Completion (X) 

Figure 2.1 - Productivity Profile (Clark & Lorenzo, 1985) 



11 



Forecasting in this method involves the interpolation of the 
productivity profile with the latest cost report. The method 
begins with the comparison of the actual productivity rate and 
the estimated productivity rate. The difference is used to 
calculate the forecasted final productivity rate. For example, 
suppose the estimated productivity rate is 1.12 and the actual is 
1.06 the difference being 0.06. The % difference of the rates is 
0.06/1.12 = 5.4%. The final productivity rate would be 1.0-0.054 
= 0.94 6. Predicted manhours for the entire cost code would be 
50,000/0.946 = 52,854 manhours. 



C. MANPOWER PERFORMANCE FACTOR 

The manpower performance factor is a method of forecasting 
which relies on the theory that the future performance of a 
project can be measured by the average past performance of the 
project. The manpower performance factor is defined as (Riggs, 
1987) : 



ESTIMATED MANHOURS TOTAL-TO-DATE QUANTITY 
MPF = * 



ESTIMATED QUANTITY TOTAL-TO-DATE MANHOURS 

The manpower performance factor is the same as the Cost 

Performance Index which is defined as: 

EARNED MANHOURS OR DOLLARS 
CPI = 



ACTUAL MANHOURS OR DOLLARS 



12 



where , 

ESTIMATED MANHOURS 

EARNED VALUE = * ACTUAL QUANTITY 

ESTIMATED QUANTITY 



The MPF factor is simply a ratio between the estimated rate of 
production and the actual rate of production. The estimated 
manhours to complete the project is therefore the MANPOWER 
PERFORMANCE FACTOR multiplied by the remaining quantity. The 
total projected manhours to complete the project would therefore 
be the total of the estimated manhours to complete plus the 
manhours to date. Projected cost of the activity would then be 
the estimated manhours to complete the task multiplied by the 
actual cost per manhour added to the cost incurred to date. 

An example of this technique is described below (Riggs, 
1987) : 



GIVEN: 1. ESTIMATE: 

Quantity: 4,000 
Manhours: 3,080 
Cost: $29,280 

2. TOTAL TO DATE: 

Quantity: 3,990 
Manhours: 3,112 
Cost: $29,875 

MPF= 3080/4000 * (3990/3112) = 0.99 

ESTIMATED MANHOURS TO COMPLETE = MPF * REMAINING QUANTITY 

= 0.99(4200-3990) 
= 2 08 MANHOURS 

PROJECTED MANHOURS = ESTIMATED MANHOURS TO COMPLETE * MANHOURS TO 

DATE 
= 208 + 3112 
= 3 32 MANHOURS 

13 



ESTIMATED COST TO COMPLETE = ESTIMATED MANHOURS TO COMPLETE * 

ACTUAL $/MANHOURS 

= 208 MANHOURS (9.60) 
= $1,997 

PROJECTED COST = ESTIMATED COST TO COMPLETE + COST TO DATE 

= $1,997 + 29,875 
= $31,872 



D. COST PERFORMANCE INDEX 

This method is similar to the manpower performance index but 
instead of using manpower productivity ratios this method 
utilizes the cost index. This method compares the differences 
between the estimated cost of the activity and the actual cost of 
the activity, this ratio is then applied to the remaining portion 
of the contract to determine the forecasted completion cost. For 
example (Riggs, 1987) : 

BUDGET COST TO DATE: 7650 
ACTUAL COST TO DATE: 8 37 
TOTAL BUDGET COST: 21,000 

CPI = BUDGET COST / ACTUAL COST = 7650 / 8370 
= 0.914 < 1.0 therefore unfavorable 

BUDGET COST OF REMAINING WORK = 21,000 - 7,650 = 13,350 
ESTIMATE TO COMPLETE = 13,350 / 0.914 = $14,606 
FORECAST AMOUNT = 8370 + 14606 = $22,976 



14 



E. TREND CURVES 

Trend curves are curves plotted with the horizontal axis as 
percent complete and the vertical axis of manhours, cost or other 
productivity factors, Figure 2.2 - Trend Curve. It should be 
noted that this graph can be plotted directly from the 
productivity profile. By plotting dates with the percent 
complete the schedule can be integrated into the cost reporting 
aspect and a comparison can easily be made. 

Forecasting with the trend curve is best described by the 
use of an example (Riggs, 1987) : 

1. ACTUAL MANHOURS COMPLETED: 43,000 

2. LESS THEORETICAL MANHOURS 

AT 30% COMPLETE, (from the calibration curve) 40,700 

3. OVERRUN MANHOURS 2,3 00 

4. % OVERRUN = (2, 300/40, 700)*100 5.7% 

5. TOTAL ADJUSTED MANHOURS 12 0,000 

6. OVERRUN MANHOURS = 0.057(120,000) 6,800 

This method assumes that there is no action taken to correct the 
problem and that the problem continues to compound at the rate 
calculated. A second assumption is that the manhours will remain 
a constant percentage relationship with the calibration curve. 



15 




Figure 2.2 - Trend Curve (Riggs, 1987) 



16 



CHAPTER III SPREADSHEET ANALYSIS 



Davis's article as shown in Appendix A describes a 
completion cost worksheet. This worksheet requires several 
inputs including the estimated cost of completion (ECAC) , and 
determines the predicted cost of completion (PCAC) . This chapter 
reviews the formation and column breakdown of the worksheet, the 
inputs of the spreadsheet, the formula used to calculate the 
spreadsheet and finally the results of the spreadsheet. With an 
understanding of the spreadsheet different scenarios were 
developed to analyze the cause and effects of several situations. 
From these scenarios the sensitivity of the worksheet is analyzed 
and finally several improvements are recommended. 



3.1 SPREADSHEET DESCRIPTION AND COLUMN BREAKDOWN 

Figure 3.1 and 3.2 show the worksheet and the graphical 
representation of the results, called the Worksheet Chart. The 
top portion of the worksheet is set aside as the title. The 
worksheet consists of 12 numbered columns that are labeled on the 
top of each column. A title of each column and the formula for 
the column is also stated above the numerical data. Reference 
columns at the beginning and end of the worksheet are used for 

17 



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.... '.'.■.'.■.'.'.■.'.'.'.'.'.■..■. .'-..■ V.Y. '.".". - .'. . .*.' .■...'■ V. .".".'- . .V.'.Y. . 

DA VIS ORIGINAL ARTICLE 






ORIGINAL COST= : 5 


4 ■". - i C 

1 i. j *t -J j 


PREVIOUS i PROJECTED REMAINING ESTIMATED 


r.r-r-..— rf-.-r n r- r-. .— . rvr r*. r- r, .— . r.-r » ir.r. * tt" nr.kjni n"xii-".ki Tikjr r-nr-T * *r 

ncruni niruni rxcrum : jru.-.ic uunruLiiun uric luoi .'-. . ; 


NUMBER DATE DATE : INTERVAL ; DATE i TO COMPLETE ; COMPLETION 


ikii-ii rr .— —.i t .—-<—.» •» ikini t-r 


ECAC 


|NAL 8 5.00 


0RT1 10 16 5 5.00 


phi - i i oo y.ju 


ORT 3 3 2 1-3 5 5.50 


UPi 4 4 j 1 loud J.UJ d.Ud 


C iC T" 6 4 2 3.77 3 77 8 50 


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■_;.-<. I i l J.Oi ^.01 O.iJV 


OPT? 8 7 1 9.75 1.75 9.00 


.—. r-.-r .-. .-. a r. 

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ORT 3 9 3 -9 ! 


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Ljn. i iu :u o i -iu 


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COST SLOPE ADDiTlONAL COST aT REPORT 


nycpoMW OVERRUN ; COMPLETION NUMBER 


S-ORIGCOST 2(3x7] SUMS 9/1 "2 5x1 2 6+11 


j : __j _ ; 

;j ijij f; Qf) ij Qlj i'i mm j mm c , "if: REF'jRT 1 


50 i 00 1.00 0.25 1.50 7 00 REPORT 2 
50 1.00 2 00 22 111 6 61 REPORT 3 


1.00 2.00 4 00 0.25 2.27 8 27 REPORT 4 
■ 50 MOO 18.00 0.50 1 ''"' J 10 " J 9 REPORT 5 


•*00 8.00 26 00 58 1.42 10.42 REPORT 6 
4.00 8 00 3 J 00 0.53 0.33 8.33 REPORT 7 


-5.00 00 34.00 0.53 -4.25 REPORTS 


-5 00 00 34 00 42 -'■ 73 REPORT i 


-5 00 -10.00 24 00 0.24 -2.40 REPORT 10 



I 






12.00 



INDEPENDENT RESEARCH PROJECT 



DAVIS ORIGINAL ARTICLE 



10.00 + 



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? nn -L 



rL 



-ir" 



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! I 

r __ . _ i 
I -U- PUAU i 



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3 4 6 7 

MONTH 



8 8 



10 



. 






. 



reference of the specific rows. 

The chart shown in Figure 3.2 is a graphical representation 
of the two curves, the ECAC and the PCAC. The horizontal axis 
represents the update interval, usually in months. The vertical 
axis represents the completion costs. With every chart provided 
in the report, both a title and chart key are added. 

The most important columns of this worksheet are the input 
column number 6, the ESTIMATE COST AT COMPLETION (ECAC) and the 
resulting PREDICTED COST AT COMPLETION (PCAC) column 12. 

The following is a column by column breakdown and 
description of the spreadsheet: 

INITIATION OF THE WORKSHEET 

TITLE: this space is provided to input the title of the 
construction project and any pertinent comments. 
ORIGINAL COST: the original estimated cost at completion is 

inputed into this worksheet block. 

REPORT NUMBER 

Prior to column one, the worksheet presents a column showing 
the report number. In the analysis of this worksheet these 
updates are stated in monthly intervals. However the 
updates may be in any interval as long as the unit of the 
interval is consistent. 



20 



COLUMN 1: REPORT DATE 

This column is a restatement of the previous column. The 
value of this column is used later in the spreadsheet, the 
word "REPORT" is therefore eliminated in order for the value 
to be used in the spreadsheet program. Similar to the first 
column this column shows the report date as a monthly 
update. 



COLUMN 2: PREVIOUS REPORT DATE (INPUT) 

This column simply states the last report date and is 
inputed as the number of the last report date. 



COLUMN 3: UPDATE INTERVAL 

The update interval is the difference between the first 
column and the second column. This shows the amount of time 
that the updating of this spreadsheet has lapsed. 



COLUMN 4: PROJECTED COMPLETION DATE (INPUT) 

This value is inputed into the spreadsheet as the estimated 
time to compete the project. Note that this value is part 
of the periodic updating of the spreadsheet. This value 
represents the total duration of the project, not the 
remaining completion time. 

21 



COLUMN 5: REMAINING TIME TO COMPLETE 

This column is automatically calculated by subtracting 
COLUMN 1: REPORT DATE by COLUMN 5: PROJECTED COMPLETION 
DATE. 



COLUMN 6: ESTIMATED COST AT COMPLETION (INPUT) (ECAC) 

This input value is the most up-to-date completion cost 
estimate of the project. Usually a project manager uses a 
combination of the methods described in the previous chapter 
to determine this value. 



COLUMN 7: ESTIMATED COST OVERRUN 

Column 7 represents the estimated cost overrun for the given 
interval. This calculation is simply the difference between 
COLUMN 6: ESTIMATED COST AT COMPLETION and the ORIGINAL COST 
as imputed during the initiation phase of the setup. 



COLUMN 8: CALCULATIONS 

This calculation consists of multiplying the product of 
COLUMN 3: UPDATE INTERVAL and COLUMN 7: ESTIMATED COST 
OVERRUN by a factor of 2. 



22 



The reasons why the factor of 2 is applied is not apparent, 
in the sensitivity analysis section of this chapter this 
factor is discussed. 



COLUMN 9: CALCULATIONS 

This column is the summation of the previous column to the 
point of the update. For example, if the report date is 
number 5, then the value of this column would be the 
summation of the first five entries of COLUMN 8 . 



COLUMN 10: COST SLOPE 

The cost slope is derived by dividing COLUMN 9 by the square 
of COLUMN 1: REPORT DATE. As can be seen from the graphical 
representation of this spreadsheet, the cost slope is the 
slope of this line between the two update intervals. 
Without the square root of the denominator this equation is 
basically the average of the interval cost overruns. 

In Chapter 3.4 Sensitivity of the Worksheet, a discussion of 
why the denominator is squared is provided. 

COLUMN 11: PREDICTED ADDITIONAL OVERRUN 

This value is calculated by multiplying COLUMN 5: REMAINING 

23 



TIME TO COMPLETE by COLUMN 10: COST SLOPE. 

COLUMN 12: PREDICTED COST AT COMPLETION (PCAC) 

The final column represents the results of this spreadsheet 
and is calculated by the addition of COLUMN 6: ESTIMATED 
COST AT COMPLETION and COLUMN 11: PREDICTED ADDITIONAL 
OVERRUN . 



24 



3.2 THE FORMULA 

The formula used in the spreadsheet can easily be broken 
down into two equations. These equations are: 



PREDICTED COST = ECAC + REMAINING TIME * COST 
AT COMPLETION TO COMPLETE SLOPE 



COST 2 (UPDATE INTERVAL) (INTERVAL ESTIMATE COST OVERRUN) 
SLOPE = (REPORT DATE) A 2 



Two most important factors in these formulas are: 

1. the square of the report date in the denominator of the 
cost slope, and 

2. the factor of 2 in the numerator of the cost slope. 
Both of these factors will be discussed in detail during the 
worksheet sensitivity and worksheet improvement sections of this 
chapter. 



25 



3.3 SIMULATED RESULTS OF TYPICAL SITUATIONS 

To gain a better understanding of the spreadsheet and 
equations, several different scenarios were developed to show the 
cause and effect of the way in which the spreadsheet functions. 
The parameters of these simulations were held constant to enable 
comparisons of the different situations. The parameters for this 
simulation consisted of the following: 

1. The time frame is held constant at 10 months. 

2. The original cost is 20. 

3. All changes in the ECAC deviated from the original 20. 

4 . Every worksheet was updated constantly and no reports 
were omitted. 

All of the spreadsheet results are shown graphically on 
the accompanying chart. The graphing of the results allows the 
analysis of the different trends presented between the ECAC and 
the PCAC. In the graphs the horizontal scale represents the 
periodic intervals, in most cases this is on a monthly basis. 
The vertical scale represents the costs of the completed project. 
The two lines within the graph represent COLUMN 6: ESTIMATED COST 
AT COMPLETION referred to as the ECAC and COLUMN 12: PREDICTED 
COST AT COMPLETION referred to as the PCAC. 

A. ORIGINAL SPIKE WITH FOLLOWING CONSISTENT ESTIMATES 

1. INCREASE IN ESTIMATE: Figure 3.3 - Original Spike with 

26 



Consistent Following Estimates. This scenario was developed 
by changing an early ECAC at 20% and continuing this 
estimate for the remainder of the project. This would be 
similar to a project manager finding a problem in his 
estimate at an early date and then continuing with the 
revised estimate for the remainder of the project. In this 
simulation, the ECAC for the second interval increased 2 5% 
but the PCAC increased 125% over the initial estimated cost, 
from 20 to 45. 

2. DECREASE IN ESTIMATE: Figure 3.4 - Initial Spike with 
Consistent following Estimates. This plot was developed the 
same way the above "spike plot" was simulated. This plot is 
completely unreasonable in that the PCAC drops below zero, 
in other words, the predicted cost at completion of this 
project is zero. This plot shows one of the major flaws in 
Davis's premise, a PCAC less than zero. 



B. STEADILY CHANGING ESTIMATE 

1. DECREASING: Figure 3.6 - Steadily Increasing Estimate 
The ECAC was steadily decreased at a straight line rate of 
5% of the original cost estimate. The PCAC as plotted shows 
a drastic drop in the first interval and then differences 
between the ECAC and the PCAC in subsequent intervals are 

27 



not as drastic. This affect is also referred to the 
convergence to the PCAC curve to the ECAC as the update 
intervals approach the completion of the project. This 
would indicate that changes in the ECAC at an early date in 
the project are more critical then in the late stages of the 
pro j ect . 

2. INCREASING - This plot is similar to the preceding plot 
except the steady changes in the ECAC are increasing. Again 
the profile of a large deviation at the beginning is slowly 
minimized by the typical convergence of the PCAC to the ECAC 
towards the end of the project. 



C. THE DOUBLE SPIKE 

Figure 3.7 - Double Spike in the ECAC of Equal Magnitude 
details two jumps in the ECAC of equal magnitude at different 
times in the progress of the project. These jumps produce 
different results. The first jump in the ECAC of 25% (25/20) 
resulted in an increase of the PCAC by 64% (32.78/20) whereas the 
second jump increased the PCAC by only 24% (26.22/21.11). The 
differences between the ECAC in the first jump was 32.78 - 25 = 
7.78 or 31% of the ECAC in the second jump the difference was 
26.22 - 25 = 1.22 or 5% of the ECAC. This difference of 31% 
towards the beginning of the project and the 5% difference at the 
end of the project is also a factor of the convergence trait of 

28 



this spreadsheet formula. 



D. INCREASE SPIKE AND THEN A DECREASE SPIKE 

Figure 3.8 - Double Spoke int he ECAC, One Increase and One 
Decrease shows the behavior of the PCAC curve due to two jumps in 
the ECAC. The first jump is similar to the first jump in the 
preceding simulation but the second jump is the same magnitude 
however opposite directions. Note that the two curves (ECAC and 
the PCAC) converge at the second jump and continue with identical 
values throughout the remainder of the project. 



29 



INDEPENDENT RESEARCH PROJECT 



ORiGJNAL SPiKE WITH CONSiS I LN I hOLLGWiNG t3 S iMA I fcS 



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ure 3.T - Original 3|. ike, 
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COST TREND WORKSHEET 
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i 




< 




V. 


X 


ii 








i— 


o 


L 



,_2 



4- in 



T M 



u 



f/T 



n 



4- co 






-t" T- 



a 






r-j 






Lf) 



CO 
n 



e 3.G - St tadii; Ini . ■; Esti.T.aie 



P,i o e ', 6 



m 



m 



3 J 



MIT 

I*! 

: ; xvv] 



■ififc 



p 

x&x 



is 

ask 

. ; :«G: 
:#• 



■to 
■■$■ 

I- 

:>| 
>§fl 

xWi 

xsst 

::x'j 



I 

I 
i 

■; 
i 

: 



!<B 



N 



~J 



u 



i 



ioi 



(fl: 



-CO 



LU 

EC 



•Hi 



h- 



U 



;uj; 

i_ 

:<: 

Q 

a. 

D 



;«: 



■CM: 



in 



£0 



N 



'X' 



in: 



co- 



in 



m 



a>; 






■Wj 



:Q: 



CM 



:_J: 



D 
uJ 



SCMI 



;©; 



:co; 



:N 



h- 
rrv 



2 

UJ 



t_l l_l 

o 

CO 



■I 



uJ 



CJ 



CO 



LU 



Ui 



oia 



LU 



o 

Ml 



°l 

•— 'j 
CO I 



j 



- 

ci 
oil 



F 



iadii\ r i:c ;eas i 



INDEPENDENT RESEARCH PROJECT 



°.R nn 



qn nn 



DOUBLE SPiKE iN THE ECAC OF EQUAL MAGNITUDE 



n 



oc nn _L / a 



i \ n 






20.00 -a n ft 's 1 i "^ 



T 



5.00 •+ 



0.00 



Figure 3.7 - Double Spike 



? a § e 3 5 






COSTS i 

I j 

ic nn 

u.uu -j- 



41. or'Ar* 

i 



4 5 6 7 8 9 10 

MONTH 









COST TREND WORKSHEET 








^OU 


COS7TZ 
BLESPfKi 


i m wot 


WSHEET 

>m&QF THE SAME MAGNITUDE 




• i 

| 

i 

■•■! 

■ i 






ft *TC 


23-Mav-90 








ORIGINAL COST= 


20 












1 
1 




1 

i 


2 


^ 


4 


5 





1 

I 






! PREVIOUS 




PROJECTED 


REMAINING 


ESTIMATED 


1 


ncruni 


nrnnriT 

pcrun.i 


nrnnnr 

: ncruni 


i ir-.r- 1 » tt 

uruMi c 


rnkini r— n.—th.i 


Tlk AT- 

1 II'IC 


UUJ 1 .^ 1 




NUMBER 


DATE 


DATE 


INTERVAL i 


DATE 


TO COMPLETE ! 


COMPLETION 


! 










t - i r-, i rr 

niru i 




INPUT 


1 


ECAC 


atNAL 









10 




20.00 


| 


0RT1 


1 





1 


10 


9 


20.00 




,nnT n 

Uni - 


■ i. 


i 


i 


iu 





20.00 


; 

; 


Um d 




-■> 


1 


10 


7 


25.00 


! 


n-.nr .( 

UP.l *t 


4 





i 


■4 ft 

1 u 


b 


•-.ft nn 
iU.UU 


1 

1 


'CRT 5 


5 


4 


1 

j : 


10 


5 


20.00 






C 


C 
J 


\ 


4 r. 
IU 


*t 


^!u uu 


1 
j 


|RT 7 


7 


s 


i 


10 


j 


25.00 




ifil-iT .-i 


■j 


7 


I ■ 


Iu 


i ■ 


2u. : Ju 


1 

1 


: 'ORT 9 


3 


3 


1 


10 


1 


20.00 


1 


'Uru iu 


10 





1 


•4 r, 
1 U 


- 


20.00 


i 


: : : : • I 


J 





3 


! U 


i : 


1 J 






ESTIMATED 






'wwO 1 


PREDICTED 


PREDICTED 




; 


LUO i 






i-i .— h-vi- 

jLurc 


h r*. r-. m .—. k i * t 
nUUI 1 lUINrtL. 


i— -,— i-*T r.T 

i^LJ-JI .".1 


rirrvcirvr 

rcruni 


1 


OVERRUN 








OVERRUN 


COMPLETION 


NUMBER 


I 


S~ L'Kiu LLib i 


*%t*\..1\ 


ph ik 4 ft 


3/1 2 


c. . 4 r, 
JA 1 U 


8+1 1 




1 


PCAC 


: | j : J 


0.00 


0.00 


0.00 


0.00 


0.00 


20.00 


REPORT 1 


i 


u.liu 


u.bo 


': U.UU 


u.uu 


u.uu 


2 U.UU 


f-.r-r-,/-,r,T -. 

ncruni i 


I 

i 


5 00 


10.00 


10.00 


1 11 


"7 Ti-i 

f . f 


32.73 


REPORT 3 


1 


u.uu 


u.liu 


4 r. r.ft 

IU.UU 


u.b'o 


o.; j 


iO.iJ 


r. r* n .— t i-it * 

ncruni *t 


i 


0.00 


0.00 


10.00 


0.40 


2.00 


22.00 


REPORT 5 


j 


u uu 


L'.'u'u 


1 u.uu 


u'.-d 


i.ii j 


*,4 4 4 


nmnnT .*• 

ncruni o 


1 

1 


5.00 


10 00 


20.00 


0.41 


■* ■■ •"• 


26.22 


REPORT 7 


1 


U.OU 


.** r,r, 
U.UU 


>\r, ft ft 
..U.UU 


ft --.4 

U - j 1 


U . 


^'u'.b'j 


n r* n .— . r.T .*. 

ncruni o 


1 
1 


0.00 


0.00 


20.00 


0.25 


0.25 


20.25 


REPORT 9 


j 


u.uu 


J 'JiJ 


iu.Ou 


ft ■-..-. 
U.iU 


u.uu 


2 ! J 00 


REPORT 10 


1 



Figure 3.7 - joubie Spiki 



P-iop 33 



INDEPENDENT RESEARCH PROJECT 



DOUBLE SPIKE iN THE ECAC. ONE INCREASE AND ONE DECREASE 



45.00 -r g 

4n nn -i- / \ 



w nn 



25.00 4- 

! 

COSTS ! 

I 

20.00 I 



0.00 



/ 



30.00 4 I \ 



\ 



I 

! Lk 



; 

( 

/ / 


i 


l- 


~~~----r\ 

lt- — _n 

— i 1 r 




1 1 


i 1 


1 ! 


i_i 




u 


u 


1 

L_ 



15.00 4 C 

I 
! 

10.00 4- 

i 
i 

- „- i 

b.OU -+■ 



4 5 6 7 3 9 10 

MONTH 



Figure 1 . : , - Increase :pii:e - i ' i. . 
Folluwinu Decrease ^pike 

Pa«e 4 



nnsT Tr.FNn wrtRKSHFFT 






DOUBLE SPtKE IN THE ECAC ONE INCREASE AND ONE DECREASE 



URIGINAL COST= 



20 



rerun, i 



PREVIOUS 



PROJECTED 



REMAINING 



uruni c 



EST MATED 

•— - .— ■ .---r .'• t 

LUJ I .1 I 



NUMBER 



DATE 



O.-.TE 



INTERVAL 



DATE 



TO COMPLETE 



COMPLETION 



COL4 -CQL1 



UNA 



PRT1 



10 



fcUAL 
20.00 



10 



:i!.UU 



IQRT3 



10 



iJ.UU 

20.00 



10 



2U.UU 



OPT 7 



10 



15.00 



lU.'JU 



;'UPT 3 



i n 



2U.UU 



ESTIMATED 



OVERRUN 



CuST 



PREDICTED 



OVERRUN 



PREDICTED 



LUOI .". I 



COMPLETION 



NUMBER 



S- ORIG COST 



2!3x 



0.00 



0.00 



0.00 



0.00 



-'UAL 



IJ 00 



:0.00 



REPORT 1 



J.UU 

0.00 



Q.QO 

0.00 



0.00 



10.00 



REPOP; 



0.00 



10 00 



0.63 



u uu 



10 00 



0.40 



z.uu 



0.00 



1 o.oQ 



22.U0 



REPORT 4 
.REPORjT 

r-. r- r. .— i-.t .-■ 



-iu. oo 



o.oo 



0.00 



0.00 



ou 



REPORT 7 



o.uo 



o.oo 



o.ou 



00 



o.oo 



o oo 



20.00 



riruni o 

"reportT 






Figure 3 . S - Increase Spik" witii . 

Foil iwi;i? Dei raase Spike 



Pat>e H 



3.4 SENSITIVITY OF THE WORKSHEET 

The formula used in the worksheet is described in subpart 
3.2. The two most easily manipulated factors of the worksheet, 
without changing the integrity of the worksheet, are found in 
columns 8 and 10. Both of the factors are described below. 

COLUMN 8: Column 8 is a calculation column, it multiplies 
the product of the update interval by the estimated cost 
overrun by a factor of 2. This factor of 2 is interesting 
in that it increases the cost overrun which is later 
compounded and then averaged to determine the predicted cost 
at completion, PCAC. If this factor is reduced, the PCAC is 
reduced. This can be seen by reviewing Figure 3.8 - 
Sensitivity Analysis, Column 8 Factor Set at 1.0. By 
reducing the factor in Column 8, from 2 to 1 the PCAC is 
reduced. This is shown by comparing the Altered PCAC Column 
8 factor of 1 to the original PCAC, Column 8 factor of 2. 
When the factor was increased, from 2 to 3 , the PCAC 
increased, Figure 3.9 - Sensitivity Analysis, Column 8 
Factor Set at 3.0. This is shown graphically by comparing 
the Altered PCAC, Column 8 factor set at 3 and the original 
PCAC, Column 8 factor set at 2.0. 



42 





o 


i 




< 






o 






Q_ 






Q 






LLi 






■T 




o 


lL 





< 




h- 


< 

o 


HI 


< 


CL 


■ 


n 


4 




i_i 


' 1 

1 



V- 1 t- 

X 



i 

j 
t 

1 
n 
i 
ui 



A 



X m 



OJ 



LL 



5£ 



CO S= 
LLi H 



■U"\ 









\ \ \ 




">dra 




/ 1 i 
/ 1 1 




/ / 1 

i * a 




/ / i 


/ 


i 
/ i 







i - - 



T 



■_ 



LS 



*** 



T 






o 
d 



■—■ 


i — 


'_ 




c 




Q 




3 
CO 


CM 


CO 
u 




CM 




Lfl 


F Lgure 


3.9 - 


Sensit i 


. i t \ 


kna lysi 


Column - 


:".i. ; 


or 


Set 


at 


1.0 



\a 



?a«e 4 3 



COST TRPNP WflWCRHPPT 



COSTTRENO: '-'WDPKSMEEX 



SENSITIVITY ANALYtSlS - COLUMN: ft F ACTOR SET AT** 



fi * TT- AC ».#-•• AA 


ORIGINAL COST= : 20 


12 3 4 5 S 


: PREVIOUS: PROJECTED REMAINING ESTIMATED 


nmnnr nrnnnT nrnnnT i mn*Tr r--r-.kj(rn r—rifiki tuj^ r^nr^T at 

ncruhi ntruni ncrurvi . uruMtc uurtruc I iUiv uric luoi .-. i 


NUMBER DATE DATE ! INTERVAL : DATE ! TO COMPLETE ; COMPLETION 


ikini it r-r-.i a rni 4 >MC*I | " r 

iNrul luli'luLi iftrUi 


ECAC 


ilNAL 10 20.00 


0RT1 1 1 10 3 20.00 


i~.nT a a 4 4 4 a O ^^ ^f> 

)_;n.i i iii rj ij.uu 


OPT 3 3 2 1 10 7 20.00 


ir-irvr 1 * a 4 4 n a ^n aa 

uni *t *t J i iu o ..u.uu 


OPT 5 5 4 1 10 5 20.00 


orvr a r> c 4 4 a 4 r .c nn 
L'HI 0. J 1 IU t iJ.UU 


0RT7 7 6 1 10 3 20.00 


r~> fat n a -? 4 4 a a a a a a 

um oil : u l *u.uu 


OPT 3 3 3 1 10 1 20.00 


j— .FIT 4rt 4 A A 4 4 A A Aff AA 

uni 1 *j iu : 1 lu u iU.JU 


; 


■7 A A 4 A 44 4 A 

1 j IU II I £ 


ESTIMATED COST PREDICTED PREDICTED 


r^r-.r-T pi r-M-vr- »r,niTinkui r--r-.<--T /■ T r,r-r-.«— -tat 

wUJi OLurc rtuui 1 rjHrtL luoi .ni rcr uru 


OVERRUN OVERRUN i COMPLETION NUMBER 


» r->oir-> rnrr a*a.."v. n ih 4 a GM''** E«. in A .4 4 

D-urUbuuol ilOArJ oui'i o d/l i w iu o+l i 


PCAC 


! ! ■ ' '. 

■■ i 


0.00 00 0.00 0.00 0.00 20.00 REPORT 1 


C AA 4 A AA 4 A AA A CA AA AA »C AA FA f f* PA TAT A 

u.uu 1 u.uu 1 u.'j'j i.ou iu.uu nu.uu n.crum £ 


0.00 0.00 10.00 1.11 7.73 27 73 REPORT 3 


A aa A aa 4 a aa a aa a -?p aa ->e nrnnnT 4 

u.uu : u.uu mJ.Uu J. 00 j.i j xo.ru nrruni n 


0.G0 0.00 10.00 0.40 2.00 22.00 REPORTS 


C AA 4 A TiA AA AA A CA A AA A 1 ^ AA ft F~ TA PA FAT A 

j.uu iu.uu „u.uU u.uo i.zz ^r .ii her Uni o 


0.00 0.00 20.00 0.41 1.22 21.22 REPORT 7 


A AA A AA AA AA A A4 A AA AA AA ArnnPiT A 

u.'j'j u.uu iu.uu u.oi u.oo iu.oo ri^r'jPvi o 


0,00 0.00 20.00 0.25 0.25 20.25 REPORTS 


A AA A AA AA AA A AA A AA AA AA nmAHT 4 A 

U.UU u.uu iU.UU U.i.u u.uu *.u.uu r-cruru iu 



figure 3.9 - Sensitivity \\ 
"olumn S Factor 5^; nt 



ilvsis, 



'atie i-t 



nnsT TRPwn wdrushfet 

















•:•:•:•:•:•:•:•:•:•*:•:•:•:•:•••:• 










:•:•:•:•:•:•:•:•:•:•'■ • •■■•'•'•••••'••• :•:• • :•:• 


ESTIMATED 






COST 


PREDICTED 


PREDICTED 


COST 






SLOPE 


ADDITIONAL 


COST AT 


RfcPORl 


OVERRUN 








OVERRUN 


COMPLETION 


Kll IMP.CP. 

.WW. . 


- ORiG COST 


(3x7) 


SUM 8 


*/n 


5x10 


6+11 




ALTERED-PCAC 
















Q 00 


00 


■ 0.00 


0.00 


00 


20 00 


REPORT 1 


5.00 


5.00 


5.00 


1.25 


10.00 


35.00 


REPORT 2 


0.00 


0.00 


5.00 


0.56 


3.39 


23 S3 


BtrpfiRT ^ 


0.00 


0.00 


5.00 


0.31 


1 .00 


21.88 


REPORT 4 


i'i Qlj 


I Q yi] 


5.00 


20 


1 .00 


21 .00 


REPORT 5 


5.00 


5.00 


10.00 


0.28 


1.11 


26.11 


REPORT 6 


0.00 


0.00 


10.00 


0.20 


0.61 


20.61 


REPORT 7 


0.00 


0.00 


10.00 


0.1b 


0.31 


20.31 


REPORT 6 


00 


0.00 


1 00 


0.12 


0.12 


20.12 


PEPORT 9 


0.00 


0.00 


10.00 


0.1 


0.00 


20.00 


REPORT 1 



figure 3 . 3 
Co] umn 



Sensi i ^ v 1 1 \ Ana . ls, 
ict or Set at i . 



"age -ij 



INDEPENDENT P.E2EAP.CH PQGJECT 



60.00 j 
50.00 - 

40.00 -- 

! 

I 

^otq on no. 



SENSITIVITY ANALYSIS 



// 
// 



n 
u 

.1 \ 

/ \ 

/'♦ \ 
/ A \ 

\V 



COLUMN 8 FACTOR SET AT 3.0 



9 --" v -^ ^U ^-KjTvi-'''S*.."V _ 

20.00 s — jjp- ^ — a — ^r ^s=Sh-# 



1- ECAC 

J~L ii -nrncrr* nfJi 
i_T «L i L-ru-i^-rOM' 

-A- OpAp 



10.00 4- 



0.00 4- 



1 



4 5 6 7 
MONTH 



10 11 



Figure 3.10 - Sensitivity Anal-. i< 
Ci i i u:nii 3 Fai tor Set it 3.0 



16 



COST TREND WORKSHEET 



" VCOST.TREMT l^Mt 




'■'.":'.■■■■'■'■"■"■''■ 








P"> (.TT 


25-May-90 






ORIGINAL COST= i 


20 












i 


A 


a 



4 


c 


A 








PREVIOUS 




PROJECTED 


REMAINING 


ESTIMATED 


REPuRl 


ntruni 


rtr-r-ii—tr-t-r 

nirjRi 


i inn 4TP 

uruni c 


nnuni rnnM 
'-UI'iri_C HUH 


Tikir 
i iric 


r-nrT &T 


NUMBER 


date 


DATE 


INTERVAL ! 


DATE 


TO COMPLETE 


COMPLETION 


ikir-.i rr 

iwrul 


'wULI *LULI 


ikir-.i it 




ECAC 


ilNAL 









10 


20.00 


3RT1 


1 





1 


10 


3 


20.00 


Sot n 


a 


i 


1 : 


4 .-■ 


A 




AC AA 

iJ.UU 


DRT3 


i 


•> 


1 


10 


7 


20.00 


"ArVT 1 

_ini t 


4 


3 


1 


10 


A 



A A A A 

£U.UU 


DRT5 


5 


4 


1 


10 


5 


20.00 


JP.I 


a 




e 
j 


] 


4 A 

i u 


t 


AC AA 


DRT7 


7 

i : 


b 


1 


10 





20.00 


".RT .". 

jni o 


a 




i 


1 


4 a 

i u 


A 


A A A A 
-U.UU 


DRT3 


3 


3 


1 


10 


1 


20.00 


nr.T -4 a 
J hi iu 


4 A 

1 u 


3 


4 
1 


4 A 


A 
'J 


20.00 




1 


i : 


a 
O 


A 



10 


4 4 
1 1 


1 £ 


ESTIMATED 






COST 


PREDICTED 


PREDICTED 


nnrT 
LUO 1 






pm nnp 

dLurc 


* nnmnk i a i 
rtUUI 1 l'JI1.".L 


PT-.r^T AT 

LUJI .-.1 


r.r- ^-l^">r■^T 
Kc^'unl 


OVERRUN 








OVERRUN 


COMPLETION 


NUMBER 


S .— .nir"> nr.rT 

3- uruu luj 1 


A/ A. .-?> 
4oX( ] 


CM Ik J A 

OUI'1 


6f\ L 


5x10 


6+11 




PCAC 






0.00 


0.00 


00 


0.00 


0.00 


20.00 


REPORT 1 


c aa 
J.UU 


IU.UU 


4 a aa 
IU.UU 


A CA 
...w'U 


aa rtft 
iU.UU 


iC A A 

nu.Uu 


r.rnppiT a 

xruni ^ 


0.00 


0.00 


10 00 


1.11 


-J 70 

f Y o 


27.7S 


REPORT 3 


0.00 


A r>r, 

u.bu 


1000 


0.83 


O.f J 


AA "?C 


REPORT 4 


0.00 


0.00 


10.00 


0.40 


2.00 


22.00 


REPORT 5 


j.Oli 


10.00 


20.00 


0.58 


? **0 


•".-» A A 
♦if .LL 


p-i p" n (—< DT C 

ncruni o 


0.00 


0.00 


20.00 


0.41 


1.22 


t 1 ,Xx 


REPORT 7 


n a a 

U.'JU 


a ap. 

U.UU : 


A A A A 


.*■ A 4 

U.O 1 


p. a a 
V 00 


A A PA 

iU.OO 


nrnnnT a 

ncruni o 


0.00 


0.00 


20.00 


0.25 i 


0.25 


20.25 


REPORT 3 


0.00 


0.00 


a a r,r, 

iU.UU 


0.20 


A A A 

u.uu 


20 00 


REPORT 10 



Figure 3.10 
Co lumn 



Sen .. . t ; ■• i t v Ana lysis , 
Factor S^t at 3.0 



Pase J' 



mSTTRFWn WnRKRHFFT 



1 

::::::::::*:::::::::::x 

ESTIMATED COST PREDICTED PREDICTED 


COST SLOPE ADDITIONAL 


COST AT 


REPORT 


OVERRUN OVERRUN 


COMPLETION 


NUMBER 


rORIGCOST \3»{3x7) SUM 3 3/1 "2 5x10 


6+11 






ALTERED-PCAC 










0.00 0.00 0.00 0.00 0.00 


20.00 


REPORT 1 


5.00 15.00 15.00 3.75 30.00 


55. 0Q 


REPORT 2 


0.00 0.00 15.00 1.87 11.67 


j1 b7 


REPORT 3 


0.00 0.00 15 00 0.34 5 93 


25.63 


REPORT 4 


0.00 £#0 15.00 0.60 3 


00 


23.00 


REPORT 5 


5.00 /5100 30.00 0.83 3 


33 


28.33 


REPORT 8 


0.00 0.00 30.00 0.61 1 


34 


21.34 


REPORT 7 


Q.OQ 0.00 3000 0.47 


94 


20.34 


REPORT 3 


0.00 0.00 30.00 0.37 


37 


20.37 


REPORT 3 


0.00 0.00 30.00 0.30 


00 


20.00 


REPORT 10 



Figure 3.10 - Sensitivity Analysis, 
Column S Fictor Set it 3.0 



Taw,. 15 



COLUMN 10: Column 10 calculates the cost slope by dividing 
the sum of the estimated cost overruns by the report date 
squared. The factor to be considered in this column is the 
square of the report date. If the report date is raised to 
a power greater than two, the PCAC will be reduced further. 
If the report date is raised to a power less than two the 
PCAC will increase. Figures 3.11 and 3.12 show the change 
in the PCAC when the report date is raised to the power of 4 
and when the report date factor is not raised to any factor. 
Figure 3.13 - Sensitivity Analysis - Cost Slope Factor 
Analysis shows a one time increase in the ECAC with 
consistent ECAC's following. This figure shows that with a 
Cost Slope factor of 1, the profile of the Altered PCAC arcs 
shortly after the increase in the ECAC therefore continuing 
the amplification scare factor for 3 additional reports 
after the ECAC has increased. 



49 



INDEPENDENT RESEARCH PROJECT 



SENSITIVITY ANALYSIS 



.•US I e> 



45.00 T 

! 

40.00 4 

I 

35.00 -- 

30.00 -- 

I 
25.00 J. 

I 
20.00 # 



15.00 - 

iu.uO -f 

5.00 I 

0.00 4- 



1 



COST SLOPE FACTOR CHANGED TO THE POWER OF 4 

K 
\ 



! 



\ 



A 



\ 



/ 



i 



A 
•-'n\ 



/* 



/ / ■ \ 



4 5 6 7 
MONTH 



10 11 



+ ECAC 

-Lr ALTERED-PCAC 
+ PCAC 



Figure 3.11 - Sensilivity Analysis, 

:ost Sloj.e Factor Changed 

to tiip Power of 4 

Page 50 



COST TREND WORKSHEET 



:COSTtreno;: ^worksheet;. 



ifcaa^^ 


r-» 4TT- ac ki... aa 


ORIGINAL COST= j 20 




12 3 4 


C A 
J 


! PREVIOUS ; PROJECTED 


REMAINING ESTIMATED 


rvr~rtnr%T nrnnnr nrnnPiT i innaTr r-nkini rnnn 

nfcruhi rtruni rvcrurvi : uru. u .ic uurirLciiuii 


-m if rnrvr at 
iiimc uuoi r. i 


NUMBER DATE DATE | INTERVAL | DATE 


TO COMPLETE i COMPLETION 


INPUT 


C0L4 -C0L1 INPUT 




ECAC 


3INAL 10 


20.00 


0RT1 10 1 10 


3 20.00 


prvr a 4 4 i a 
uni £ £ 1:1 i u 


A ".C A A 

^C'.uu 


0RT3 3 2 1 10 


7 20.00 


f*rvr 4 4 a 4 4 o 

sni t 4 o 1 id 


b iU.uu 


0RT5 5 4 1 10 


5 20.00 


.nrvr a .a c * « ft 

uni o o j i iu 


4 AC AA 

4 ij.uu 


0RT7 7 6 1 10 


3 20.00 


r\rrr ft a i ^ * ■-, 

uru o o i l iu 


-i A A A A 

£ i'J.UU 


0RT3 9 3 1 10 


1 20.00 


nnr ha * a a * * a 

uni iu iu o i iu 


A A A A A 
U 4.U.UU 






*> A A 4 A « 4 

i J 1 U II 


12 


ESTIMATED i COST PREDICTED 


PREDICTED 


n>ri£T rn nnr * r-ir">mr-ikt * i 
UUOI JLUrC rtUUI 1 HJI1ML. 


,-*■ r-, „- t at r-. r- r-. .— . i-it 

uuoi m nfcruni 


OVERRUN OVERRUN 


COMPLETION NUMBER 


fi_ rvQif^ rnCT : A*A..-n r-i ik 4 r. a>4 a a c. . 4 a 

ur.ia luo i iioxi j auri 0/1 i ua iu 


6+11 




PCAC 






0.00 0.00 0.00 0.00 0.00 


20.00 REPORT 1 


P AA 4 A AA 4 A AA A CA AA AA 

J.UU 1 U.UU IU.UU : L.JV : iU.UU 


4C AA ni-r-.r". r-.T -. 

iu.uu Kcruni l 


0.00 0.00 10.00 1.11 7.73 


27.73 REPORT 3 


0.00 0.00 10.00 0.83 3.75 


23.75 REPORT 4 


0.00 0.00 1000 040 2.00 


22.00 REPORTS 


5.00 10.00 20.00 0.56 2.22 


27.22 REPORTS 


0.00 00 20.00 0.41 1.22 


21 .22 REPORT 7 


f\ ftfl ; A AA AA AA A A4 A AA 

u.uu u.uu id uu u.ji u.oo 


ft ft r»n r-.r-rw— .rvr n 

iu.oo ncruni s 


0.00 0.00 20.00 0.25 0.25 


20.25 REPORTS 


000 0.00 20.00 0.20 0.00 


20.00 REPORT 10 



Figure 3.11 - Sensitivity Analysis, 

Cost Slope Factor Changed 

to t, lu j Power of ! 

Page 51 



COST TREND WORKSHEET 



ESTIMATED : COST PREDICTED PREDICTED 


COST : SLOPE '\ ADDITIONAL 


COST AT REPORT 


OVERRUN OVERRUN 


COMPLETION NUMBER 


-ORIGCOST 2*f3x7l SUM 9 \ 9/1*4 5x10 


6+11 




ALTEREO-PCAC 






0.00 00 0.00 0.00 0.00 


20.00 REPORT 1 


5.00 10.00 10.00 0.S3 5.00 


30.00 REPORT 2 


0.00 0.00 10.00 0.12 0.88 


20.86 REPORT 3 


0.00 0.00 10.00 0.04 0.23 


20.23 REPORT 4 


0.00 0.00 10.00 0.02 0.08 


20.08 REPORTS 


5.00 10.00 20.00 0.02 0.06 


25.06 REPORTS 


0.00 0.00 20.00 0.01 0.02 


20.02 REPORT 7 


n nn qoq 20.00 O.QQ 0.01 


20.01 REPORTS 


0.00 0.00 20.00 0.00 0.00 


20.00 REPORT 9 


n nn n nn >n nn nn n nn 

W.WW W.WW ^W.wtj •#• •-# u w.ww 


'/n nn pcpnoT 1 n 



Figure 3.11 - Sensitivity Analysi ., 

Cost Slope "actor Changed 

to i he Power of 4 

Page 52 



INDEPENDENT RESEARCH PROJECT 



SENSITIVITY ANALYSIS 

COST SLOPE FACTOR CHANGED TO THE POWER OF 1 




-a- ECAC 









Figure 3.12 - Sensitivity Anal-, . 
"st Slope Factor Changed 
!' f lie Power >f 1 
Page " 



COST TREND WORKSHEET 



cost mem womsmer 

SEHSmVlW ANAW51S -COST SUJPE I^TOftCHiVMSEO TO THE POWER OP t 


DATE 25-May-90 


ORIGINAL COST= \ 20 




■* ^ A J 


C A 

"J O 


1 PREVIOUS ! PROJECTED 


REMAINING ESTIMATED 


T~,t-nr\r~»-r ni-r%o'~>T nrnnnT i irt-in*Tr~ rnkjni r— pr-.ki 

nfcrurxi n£runi rtrunl : urbnic UurlrLc.UUn 


uric Luoi r,\ 


NUMBER DATE DATE i INTERVAL ; DATE 


TO COMPLETE j COMPLETION 


ikini rr 

mrui 


CCL4 -CCL1 INPUT 




ECAC 


3INAL 10 


20.00 


0RT1 10 1 10 


9 20.00 


DRT 2 2 1 1 10 


A AC AA 

iJ.UU 


0RT3 3 2 1 10 


7 20.00 


0RT4 4 3 1 10 


6 20.00 


0RT5 5 4 1 10 


5 20.00 


nr.T r- a c < < a 

uni o o u i Iu 


4 25.00 


0RT7 7 6 1 10 


3 20.00 


nrvr a a -? « m 

un io o r i i u 


A AA AA 

i i.U.UU 


DRT 3 9 8 1 10 


1 20.00 


HOT HA 4 A A 4 4 A 

_*nl iu iu d i iu 


A AA A A 

u iU.UU 






"» A A HA 4 4 

( 1 U It 


1 L 


ESTIMATED COST PPEDICTED 


PREDICTED 




r^r-if-T at r-.r-r^r-ir^T 

luji .-,i ncruni 


OVERRUN OVERRUN 


COMPLETION NUMBER 


6-ORIGCCST 2(3x7] SUMS 3/1 "2 5x10 


6+11 




PCAC 






0.00 0.00 0.00 00 0.00 


20.00 REPORT 1 


J.uu ib.uu lu.uu i.ju iu.uu 


iC AA r-V^f-if-iflT A 

nu.uu rcruni l 


0.00 0.00 10.00 1.11 7.73 


27.73 REPORT 3 


A .*.A : A AA -1 A AA A A A A "?C 

U.'JU U.UU lU.UU U.OO O.IU 


aa fc nrnppT .4 


000 0.00 10.00 0.40 2.00 


22.00 REPORT 5 1 


5.00 10.00 20.00 0.56 2.22 


A-» AA J-iT-r-tr-.l-iT A 

ii .ll rcruni o 


00 0.00 20.00 0.41 1.22 


21 .22 REPORT 7 


A AA A AA AA AA A A4 A AA 

U.UU U.UU ilU.UU U.Jt u.oo 


AA AA P", p- TA rs r.T A 

*.u.oo nr.ruai o 


0.00 0.00 20.00 0.25 0.25 


20.25 REPORT 9 


0.00 0.00 20.00 0.20 0.00 


20.00 REPORT 10 



Figure 3.12 - Sensitivity Analysis, 
Cos1 Slope Factor Changed 

t i) r he Power or 1 
Pa me i>4 



rnsTTRFhin WORKSHEET 



7 v 

.Y.Y.Y. Y.TY. *.Y. Y.Y.Y .Y.Y.Y. 

ESTIMATED 


y"yX\y"?!y. y.y.y. 


WM&M 


mm 

COST 


Iff ." '. 

PRtUiCTED 


12 

PRhUiCTEU 


: -: : : : x : >: : : : >: : : : : : :y: : : : : : : : :y': : : : : : : : : 


COST 






SLOPE 


ADDITIONAL 


COST AT 


REPORT 


0VER8.UN 








OVERRUN 


COMPLETION 


NUMBER 


6- ORIG COST 


2*(3x7) 


SUM 3 


'9/1 


5x10 


6+11 




ALTERED-PCAC : 




i i 


0.00 


0.00 


0.00 


0.09 


0.00 


20.00 


hEPORT 1 


5.00 


10.00 


10.00 


5.99 


40.00 


65.00 


REPORT 2 


0.00 


0.00 


10.00 


3.33 


l-i.Si 


4d.oo 


REPORT 3 


0.00 


0.00 


10.00 


2.59 


15.00 


35.00 


REPORT 4 


0.00 


0.00 


10.00 


2.99 


10.00 


30.00 


REPORT 5 


5.00 


10.00 


20.00 


3.33 


13.33 


38.33 


REPORT 6 


0.00 


0.00 


20.00 


2.36 


8.57 


28.57 


REPORT 7 


00 


00 


20.00 


2.59 


5 00 


25.00 


nCPHPT 5 i 


0.00 


0.00 


20.00 


2.22 


2.22 


22.22 


REPORT 3 


00 


00 


20.00 


2.99 


0.00 


20 00 


REPORT 1 



Figure 3.12 - Sensitivity uial . »is, 

; .•■ Hope Fa to ( hanged 

to ' he Power of 1 



INDEPENDENT RESEARCH PROJECT 



p.n nn _ 
I 

I 
7n nn -i 

i 

60.00 + 

50.00 | 

I 

T 

I 

30.00 + 

20.00 I- 

i 

I 

10.00 + 



^r»IAITIUITV/ A It A I W/NI/* 

Oil!Mv>! ! IVM T MfMMLTOiO 

r*r\c*-r oi one c»o--iv-iri »n*i voio 



„-U — -TL 



rv-- 
U 






Uv. 



Lk. 



/ f ^ 

/ / . ^--- 

/ / (^ 



Ik 



if/ ^ I- 




I -I- ECAC 

i H> ALT A 1-Pf:AC: 

I 

I 

i + PCAC 

\ I 

^C I -0- ALT A 3-PCAC 



0.00 4- 



-i 1 h 

4 5 6 
MONTH 



10 



Figure 3.13 - Sensitivity Anal >i . 
Cost Slope Factor -Uialvsis 



TOST TREND WORKSHEET 


COST TREND WORKSHEET 


DATE 27-May-30 


ORIGINAL COST= j 20 


•* A A A P A 

1 L 1 1 


; PREVIOUS! PROJECTED REMAINING ESTIMATED 


nmnrvr rAi-p>r-.r.-r r-.r-r-.r-.r-iT i u-,r"\*TT- r--rik jr-.i r — nr.ki -tuji- rnrT at 

niruni ncruni ncruni : urunic uurirLC nun uric uu^i rti 


NUMBER DATE DATE ; INTERVAL j DATE j TO COMPLETE j COMPLETION 


ikir-.i rr t--r\\ j rni 4 ikir-ii rr 

irirul uuLi-Luli irtrul 


ECAC 


3NAL 10 20.00 


QRT1 10 1 10 3 20.00 


nnT a a ■* ■* ^ >*> **' *%c Tfrt 

uni ^. ^.ii i u o ij.uu 


0RT3 3 2 1 10 7 25.00 


r-ii-.x j j a ■< < n a ac .-.a 
uni n f o i iu o iJ.uU 


0RT5 5 4 1 10 5 25.00 


nrYT "■ ^ c 4 ■* a j nc a a 
UP.l J 1 1 U *t iJ.UU 


0RT7 7 6 1 10 3 25.00 


f.rVT n A -J 4 4 A A AC AA 

uni o o t t i u ^ ij.uu 


terra 3 3 1 10 1 25.00 


nrrr *n * a a 4 4 a a ac r.r. 

un.i iu iu j i iu u ij.uu 




■? A A 4 A 44 4 A 
1 1 U 1 1 \ L 


ESTIMATED COST PREDICTED j PREDICTED 


r-n^T r-i r^rAr- h nr.mr.k > 6 i r^r-vr'-r a -r n r- ia n, r.-r 

uuai jLurc MUUihur4.nL uuoi «i ncruni 


OVERRUN OVERRUN COMPLETION NUMBER 


a -.r-,ir^ r-'.—.r^T a/a..->'» nt iu a a.'4 A a c. 4a a, 4 4 

o uniu luo i uo/m I ouM o d,' i i ja iu o+ 1 I 


PCAC 


!!': ! 1 


0.00 0.00 0.00 0.00 0.00 20 00 REPORT 1 I 


C Art 4 A AA 4 A AA A CA AA AA (C AA nmnAT A 

j.uu iu.uu iu.uu *..ju -u.uu nj.uu rcruni i. 


5.00 10.00 20 00 2.22 15.56 40.56 REPORT 3 


c aa 4 a aa in aa 4 aa 4 4 ic ip ic npnnnr .* i 

j.uu iu.uu ou.uu 1.00 11. i3 00. i. j KfcrUfti 4 


5.00 10.00 40.00 1.60 3.00 33 00 REPORTS 


P Art 4 A AA CA AA 4 AA C CA AA CA T~, r~ ft f~ < AT A 

3.UU i'j.uu ju.uu i .od D.jd ou.uo rtruni o j 


5.00 10.00 60.00 1.22 3.67 23.67 REPORT 7 


C Art -1 A AA "?rt Art 4 rtA A 4 rt AT 4 A nrnnriT A 

-j.'ju iu.uu iu.uu i Mo i.io ir.io rcruni o 


5.00 10.00 30.00 0.33 0.33 25.33 REPORT 3 


C AA 4 A AA AiA AA A AA A AA ^C AA P"i P" O r"> HiT 4 A 

■j.u'j Iu.uu ju.ju u.ju u.uu £D.UU her uni iu i 



Figure 3.13 - Sensitivity Analysis, 
Cost Slope Facior Analysis 



rnsTTRFNn ■jdmsmfft 



yXy.y.y.t.y.y.y.y.y.y.y.y. 

ESTIMATED 


xxyX-x*X£x-xx 

.Y.V.Y.V.Y.V.W.Y. 


: : £u$T SiuPfc FACTtJH S£T AT f v y- 
W/M-i ■ '■ •••+*•• ••• ••'••'"•• • -»+ •• 

\Y \'XyX'X\y/Xy * ' * ' •'•"•'•'•'.y.'.t.y.y.y.y.y.y.y.y.y.y.y. '■ r.Y.Y.Y. y.y.y 

i COST PREDICTED 


x : : : x : : : : ; : : : : :x : :+*: : : : : : : : : : :v: : : : : ; :: : . 

v.v.v.v/.v.v.tjv.*. .y.y.v.v.v. 

PREDiCTED 


i 

••::.:.:v-.::.::.::V:::..| 
■xvxvx::vxxx:vx:x---x| 

I 


COST 






SLOPE 


ADDITIONAL 


COST AT 


pcpnPT 

nc. _. •.. | 


OVERRUN 








OVERRUN 


COMPLETION 


NUMBER 


r QPJG COST 


2*f3x?;i 


SUM 3 


'9/1 


5x 1 


6+11 














alTi-pcac 


i 


: : I : : 1 
: : : : : 1 


0.00 


0.00 


0.00 


O GO 


0.00 


20.00 


REPORT 1 


5.00 


10.00 


1 00 


5.00 


4(1.00 


65 00 


REPORT 2 


5.00 


10.00 


20.00 


S.S7 


46.67 


71.67 


PEPORT 3 


5.00 


10.00 


30.00 


7.50 


45.00 


70.00 


REPORT 4 


5.00 


10.00 


40.00 


3.00 


40.00 


65.00 


PEPORT 5 


5.00 


10.00 


50.00 


8.33 


33.33 


58.33 


REPORT 6 


5.00 


10.00 


60 00 


8.57 


25.71 


50.71 


REPORT 7 


5.00 


10.00 


70.00 


8.75 


17.50 


42.50 


PEPORT 3 


5.00 


10.00 


80.00 


3.39 


8.83 


33.39 


REPORT 3 


5 00 


10.00 


90.00 


9.00 


.00 


25.00 


REPORT 10 






ffiST <ii fl 


m FACTOR 


eprcraa/ff-sx-Xv 










. . uu-si jcl 


•:•:•:•:•:■:•:•:•:•:•:■):+:•:::•:•:■:■:•:■:•:•:• 
PREDiCTED 


t'/ 
PRtDiC ! tU 


i 








ESTIMATED 






COST 


COST 






SLOPE 


AOOmONAL 


COST AT 


PC PHOT 

. ,_. w. .. j 


OVERRUN 








OVERRUN 


! COMPLETION 


NUMBER 


r OPJG COST 


2**3x7) 


SUM 3 


'9/1*3 


5x 10 


6*11 


i 


AL1 3-PCAC 


: • ! : 

• : : : i 


0.00 


0.00 


0.00 


0.00 


0.00 


20.00 


REPORT 1 


5.00 


10.00 


1 00 


1.25 


10 00 


35.00 


REPORT 2 


5.00 


10.00 


20.00 


0.74 


5.19 


30.13 


PEPORT 3 


5 00 


10.00 


30.00 


0.47 


2 31 


27.81 


REPORT 4 


5.00 


10 00 


40.00 


0.32 


1.60 


26 60 


REPORT 5 


5 00 


10.00 


50.00 


0.23 


0.33 


25.93 


REPORT 6 


5.00 


10.00 


60.00 


9.17 


0.52 


25.52 


REPORT 7 


5. 00 


10.00 


70 00 


0.14 


0.27 


25.27 


REPORT 3 


5.00 


1 00 


30.00 


0.11 


0.11 


25.11 


REPORT 9 


5.00 


10.00 


90.00 


0.09 


0.00 


25 on 


REPORT 1 



Figure 3.13 - Sensitivity Anai\ ;i , 
Cost Slope Factor Anal 



'a^e 



Table 3.1 - Results of the Sensitivity Analysis tabulates 
the results of the Sensitivity charts and worksheets. For each 
different change in the worksheet a row is provided showing the 
percent change in the ECAC, percent change in the PCAC and the 
percent change in the Altered PCAC. For each item the percent 
change in the ECAC and the PCAC are kept constant therefore a 
comparison can be make to the Altered PCAC. The 3 0% and the 7 0% 
project completion status is also shown for each change in the 
different sensitivity analysis charts. 

By reviewing this table, it can be noted that changes at the 
30% level of completion can easily be manipulated to change the 
amplification factor. For example, be changing the Column 8 
factor from 1 to 3 the amplification factor increased from 75 to 
175%. The lowest amplification factor is 50% at the 30% complete 
time period for the Cost Slope Power equal to 4.0. 

SENSITIVITY ANALYSIS RESULTS 



CHANGE IN THE FORMULA 


% CHANGE 
IN THE ECAC 


% CHANGE 
IN THE PCAC 


% CHANGE IN THE 
ALTERNATE PCAC 


PERCENT COMPLETE 


30 % 


70% 


30% 


70% 


30% 


70% 


COLUMN 8, FACTOR - 1.0 


25% 


25% 


125% 


23% 


75% 


24% 


COLUMN 8, FACTOR ■ 3.0 


25% 


25% 


125% 


23% 


175% 


23% 


COST SLOPE, POWER = 1.0 


25% 


25% 


125% 


23% 


225% 


28% 


COST SLOPE, POWER = 4.0 


25% 


25% 


125% 


23% 


50% 


25% 



Table 3.1 - Results of the Sensitivity Analysis 



59 



Several deductions can be made by analyzing the sensitivity 
analysis: 

1. It is easy to manipulate this worksheet. 

2. Davis's intention was to have a large amplification 
factor, which would shock the project manager into action. 

3. Very small changes at the 70% level compared to changes 
at the 30% level. This is called the convergence of the 
PCAC to the ECAC. Davis is stating that the estimate 
"busts" at the beginning of the project are more critical 
that the same estimate "busts" towards the end of the 
project. 



60 



3.5 IMPROVING THE SPREADSHEET 

The two problems raised so far in the analysis of the 
spreadsheet is that the amplification factor is too large and 
that the convergence of the PCAC and the ECAC is not fast enough. 
Since we have determined that the worksheet is easily manipulated 
by changing the two factors in columns 8 and 10 as discussed 
earlier, we can now improve the spreadsheet with the ultimate 
goal of reducing the amplification factor and increasing the 
convergence . 

To reduce the amplification factor the Column 8 factor is 
held constant and Column 10 factor is increased to 3 . . It 
should be noted that the amplification factor can also be 
decreased by simply reducing the Column 8 factor, but this 
solution would do little to increase the convergence of the PCAC 
to the ECAC. Therefore the ultimate solution that would solve 
both of the improvement parameters is to increase the Cost Slope 
factor to 3.0. These results can be seen by reviewing Figure 
3.14 - Improvement Analysis. This chart shows the difference 
between the two options detailed below: 

Alternative A: Cost Slope Set at 3.0 and the Column 8 Factor 

set at 2.0. 

Alternative B: Cost Slope Set at 3 . and the Column 8 Factor 

set at 3.0. 
It would seem that Alternative B is the optimum solution due to 
the large scare factor but with an accelerated convergence. 

61 



Other factors to consider in improving the worksheet are the 
following items: 

1. ECAC reduction so large that PCAC becomes negative . 
There are several ways in which thus situation can be corrected: 

a. Program spreadsheet to decrease the PCAC only by a 
fraction of the normal amplification factor. Therefore 
have two methods one of increases in the ECAC and a 
less drastic method for decreases in the ECAC. 

b. A much more simpler method would be to decrease the 
amplification factor, but by doing this the original 
intent of Davis's spreadsheet is lost. 

2 . Begin method at the 20 to 255 work in place stage. In 
Chapter 2 several current methods of forecasting were introduced. 
In the majority of theses cases the project managers did not 
begin using the method until the 20 to 25% work in place stage of 
the project. This method should also be used in the same manner, 
if used prior to the 25% complete stage the amplification factor 
is largest and might be neglected by the project manager. 



62 



45.00 -r- 



40.00 



INDEPENDENT RESEARCH PROJECT 



i»/innr>v;r nr - kit amai v*"""'^ 
imr nwvizivirziN « nnnLioio 



iORTR 



00. UU -j- 



on pn i 
ju.uu -r 



25.00 



20.00 i- 



// \ 
i I , \ 
1 1 * \ 
// / \ \ 

i/ \ A s 

1/ / 

17/ a 



n 



w 



f 



i 

i 






u< 



"Ik 



Ik. 



s 1 a — $ *=£ 



"-fL 



i -■- tCAC 



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MONTH 



10 



Figure 3.14 - improvement Anal> 



Page 63 



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EMENT ANALYSIS 




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TIME 


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COST TREND WORKSHEET 



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REPORT 2 


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32.78 


REPORT 3 


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! 


5 00 


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REPORT 4 




5.00 


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REPORT 5 


1 


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0.35 


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REPORT 8 


1 

j 


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REPORT 7 


1 
1 


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REPORT 3 


1 

1 


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i 


^ 00 


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OH 


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I 

1 



Figure Z.\\ - Improvement Analysis 



P:\j-- S3 



3.6 MACRO PROGRAM FOR EXCEL 

A macro program was developed on an IBM Excel Spreadsheet. 
This macro was developed in conjunction with this research to aid 
the novice user of this forecasting method in the use of the 
spreadsheet and chart. The macro utilizes the customization 
assets of the Excel Spreadsheet to form interactive programmable 
boxes to guide the user throughout the initiation, periodic 
updating and printing of the results. The macro program is 
detailed in Appendix D. 



66 



CHAPTER IV RESULTS 



In Chapter III a detailed analysis of Davis's spreadsheet 
was presented. Several different scenarios were discussed as 
well as a detailed sensitivity analysis. The different results 
as discussed in the last chapter are summarized below: 

1. The spreadsheet is easy to learn, use and modify. 

2. The different scenarios used to analyze the spreadsheet 
all showed the special convergence feature of this process. The 
convergence of the ECAC to the PCAC reflects the idea that 
changes in the ECAC in the beginning of the project are more 
critical than the same changes at the end of the project. 

3. The different scenarios also showed the amplification 
factor of this process, this amplification factor is defined as 
the difference between the ECAC and the PCAC. This factor is 
extremely noticeable in the beginning of the project and is 
reduced as the project progresses. Amplification factors of 180% 
are common in the beginning whereas they reduce to at the 
completion of the project. 

4 . The macro developed in the research is extremely easy to 
use and can be given to a novice computer user to initiate the 
spreadsheet and to provide periodic updates as well as reports. 

5. The basic theory behind this spreadsheet is that changes 
in the ECAC will be continuous throughout the remainder of the 

67 



contract. These changes therefore should be calculated and then 
multiplied by the remaining portion of the contract to determine 
the PCAC. 

6. The spreadsheet does not function when faced with an ECAC 
that shows large decreases, the PCAC due to the amplification 
facto will reflect negative values. 

7. Additional modification of the spreadsheet increases the 
complexity and will require additional programming of the 
equations. This increase in complexity will be difficult to 
learn for the novice computer user and will decrease the user- 
friendliness of the current spreadsheet. 



68 



CHAPTER V RECOMMENDATIONS 



From the results section of this report several 
recommendations can be provided in the use of this worksheet. 
First, the spreadsheet should be customized to the individual 
company's requirements. The amplification factor should be 
analyzed and the factor should be discussed and agreed upon prior 
to using the spreadsheet. Along with the amplification factor 
other customizing factors should be considered including the cost 
slope and whether to include several different PCAC's on the 
chart . 

This spreadsheet should not be used alone in determining 
courses of action due to cost overruns. This process is only 
used to identify that a problem exists, it does not identify the 
location of the problem. Other methods discussed in Chapter 2 
should be used in addition to this process to determine the 
location and the extent of the problems. 

Future research in this area should include the combination 
of the methods described in Chapter 2 and this method and then 
programming this combination with the cost accounting of the 
project to derive a final predicted completion cost which can 
identify problem location and extent. The references provided in 
the Reference section of this paper will aid any new research. 



69 



CHAPTER VI CONCLUSIONS 



The main objective of this research paper was to analyze 
Davis's spreadsheet and chart to determine if this method of 
forecasting was reasonable and practical in the construction 
industry. Several currently used forecasting methods were 
discussed so that a comparison of Davis's method could be made. 
The equation and spreadsheet were discussed in detail and then a 
sensitivity analysis was performed on the spreadsheet and chart 
to determine the cause and affect of different scenarios. 

After the analysis of the simulation, several factors were 
identified in the spreadsheet that required changes. One of 
these changes was the amplification factor which is identified as 
the difference between the ECAC and the PCAC. Another change 
suggested was that the converfence of th ePCAC to the ECAC by 
accelerated. Both of these factors were combined to improve the 
function of the spreadsheet and make the spreadsheet more 
practical. 

In the results section of this paper several items were 
discussed including the ease of use of this particular 
forecasting method. Another advantage of this method is that it 
is easy to manipulate and therefore a project manager can easily 
change the equations within the spreadsheet so that the results 
can better show the trend of the project to date. 

70 



Another major problem of this spreadsheet is that the 
amplification factor is to large. This factor, if used too often 
can be a detriment to the project manager. If every little 
change in the ECAC produced a large change in the PCAC, the 
manager is more likely to look upon the PCAC as just another 
annoying factor of his job and will eventually ignore the warning 
signs. One way to reduce this problem is to limit the use of the 
forecast method to the last 80% of the project life, the 
amplification factor gets smaller as the project progresses. 

The convergence of the PCAC into the ECAC curve is an 
interesting aspect of this forecasting method. This convergence 
aspect shows that differentials early in the project's progress 
are more important that the same differentials in the later 
phases of the project. This part of Davis's equation is 
realistic, an estimate that has large cost differences in the 
beginning of the project is more likely to have additional cost 
differences throughout the term of the project thus compounding 
the problem. 

The underlying theory of this forecasting method is that a 
predicted cost at completion can be determined by analyzing 
differentials in the estimated cost at completion during specific 
times in the process of the project. This theory would be 
extremely hard to sell to any construction manager. Variance 
analysis of cost codes provide the same information without 
enlarging the variance due to the time of the estimate. The 
spreadsheet as presented is unreasonable and should never by used 

71 



as a sole source of forecasting. 

The formula used in conjunction with other methods however 
could be a valuable tool in alerting managers to future problems 
Other methods such as variance analysis, productivity curves and 
the managers experience could all be used together to establish 
an effective forecasting method. 



72 



REFERENCES 



Davis, J. G. (1975). "Keeping Project Costs in Line." Machine 
Design . Dec 11, 1975, 128-133. 

Clark, F.D. and Lorenzone, A.B. (1985) Applied Cost Engineering . 
2nd Edition, Marcel Dekker, Inc NY, NY. 

1987 Transactions. American Association of Cost Engineers, 31st 
Annual Meeting . Atlanta, Georgia 

Stevens, W. M. (1984) . "Cost Control: Integrated Cost/Schedule 
Performance." Journal of Management in Engineering . ASCE, 2(3), 
157-164. 

Riggs, L.S. (1987). "Project Control Techniques.", Project 
Controls; Needs and Solutions . Edited by C.W. Ibbs and D. B. 
Ashley, Prodeedings of a Special Conference Sponsored by the 
Construction Division of ASCE, Chicago, 111, June 8-9 1987. 

Bessa, J.L. (1983) . "Cost and Schedule Controls During 
Construction . " , Current Practice in Cost Estimating and Cost 
Control, Edited by V.F. Sporull and C. Popescu, Sponsored by the 
Construction Division of ASCE, Austin, Texas, April 13-15 1983, 
ASCE, NY, NY. 

McMackin, P.J. (1985). "Control of the Design Process.", Making 
Project Control Systems Work . Edited by P.M. Teicholz, ASCE, NY, 
NY. 



73 



APPENDICES 



A. COST TREND CHART WORKSHEET OPERATION MANUAL 

B. DAVIS'S ARTICLE 

C. MISCELLANEOUS PLOTS AND SPREADSHEETS 

D. EXCEL SPREADSHEET AND CHART MACRO 



74 



APPENDIX A 



COST TREND CHART WORKSHEET OPERATION MANUAL 



COST TREND CHART WORKSHEET 
OPERATION MANUAL 



INTRODUCTION 



In 1976 Gordon Davis developed a Cost Trend Chart and 
Worksheet that would calculate the Predicted Cost at 
Completion (PCAC) when provided with periodic updates of the 
Estimated Cost at Completion (ECAC) . This worksheet 
computes the difference between the Estimated Completion 
Cost (ECAC) inputed for the current period and the input for 
the previous period. This difference is then multiplied by 
the number of remaining periods in the project to determine 
the Predicted Completion Cost (PCAC) . Caution must 
excercised in the use of this spreadsheet and chart, other 
methods of trend analysis and forecasting must be utilized 
to formulate the final completion costs. This equation 
tends to yield early results that some may consider rather 
large completion costs due to minor differences in the 
estimated cost at completion. 

The spreadsheet and chart are provided in the next few 
pages. The spreadsheet is rather easy to intiate, first the 
title and original estimated cost are inputed at the 
beginning. Periodic updates only require that the update 
number, projected completion date, and the estiamted cost at 
completion be inputed. The final result is then 
automatically calculated through the equations and listed in 
Column 12, the predicted cost at completion. 

The chart is simply the graphical representation of the ECAC 
compared to the PCAC. The horizontal axis is the Cost 
Report Date and the vertical axis is the completion cost. 
The input and the result is plotted for the purpose of 
comparing the ECAC to the PCAC. 



SPREADSHEET EXPLANATION 



The following is a column by column breakdown and 
description of the spreadsheet: 

A. INITIATION OF THE WORKSHEET 

1. TITLE: this space is provided to input the title of the 

construction project and any pertinent comments. 

2. ORIGINAL COST: the original estimated cost at 



completion is imputed into this 
worksheet block. 

B. DESCRIPTION OF THE COLUMNS 

REPORT NUMBER 

Prior to column one, the worksheet presents a column showing 
the report number. In the analysis of this worksheet these 
updates are stated in monthly intervals. However the 
updates may be in any interval as long as the unit of the 
interval is consistent. 



COLUMN 1: REPORT DATE 

This column is a restatement of the previous column. The 
value of this column is used later in the spreadsheet, the 
word "REPORT" is therefore eliminated in order for the value 
to be used in the spreadsheet program. Similar to the first 
column this column shows the report date as a monthly 
update . 

COLUMN 2: PREVIOUS REPORT DATE (INPUT) 

This column simply states the last report date and is 
inputed as the number of the last report date. 



COLUMN 3: UPDATE INTERVAL 

The update interval is the difference between the first 
column and the second column. This shows the amount of time 
that the updating of this spreadsheet has lapsed. 

COLUMN 4: PROJECTED COMPLETION DATE (INPUT) 

This value is imputed into the spreadsheet as the estimated 
time to compete the project. Note that this value is part 
of the periodic updating of the spreadsheet. This value 
represents the total duration of the project, not the 
remaining completion time. 

COLUMN 5: REMAINING TIME TO COMPLETE 

This column is automatically calculated by subtracting 
COLUMN 1: REPORT DATE by COLUMN 5: PROJECTED COMPLETION 
DATE. 



COLUMN 6: ESTIMATED COST AT COMPLETION (INPUT) (ECAC) 

This input value is the most up-to-date completion cost 
estimate of the project. Usually a project manager uses a 
combination of the methods described in the previous chapter 
to determine this value. 



COLUMN 7: ESTIMATED COST OVERRUN 

Column 7 represents the estimated cost overrun for the given 
interval. This calculation is simply the difference between 
COLUMN 6: ESTIMATED COST AT COMPLETION and the ORIGINAL COST 
as imputed during the initiation phase of the setup. 



COLUMN 8: CALCULATIONS 

This calculation consists of multiplying the product of 
COLUMN 3: UPDATE INTERVAL and COLUMN 7: ESTIMATED COST 
OVERRUN by a factor of 2. 

The reasons why the factor of 2 is applied is not apparent, 
in the sensitivity analysis section of this chapter this 
factor is discussed. 



COLUMN 9: CALCULATIONS 

This column is the summation of the previous column to the 
point of the update. For example, if the report date is 
number 5, then the value of this column would be the 
summation of the first five entries of COLUMN 8 . 



COLUMN 10: COST SLOPE 

The cost slope is derived by dividing COLUMN 9 by the square 
of COLUMN 1: REPORT DATE. As can be seen from the graphical 
representation of this spreadsheet, the cost slope is the 
slope of this line between the two update intervals. 
Without the square root of the denominator this equation is 
basically the average of the interval cost overruns. 

In the sensitivity analysis of this spreadsheet formulas the 
discussion of why the denominator is squared is discussed. 

COLUMN 11: PREDICTED ADDITIONAL OVERRUN 

This value is calculated by multiplying COLUMN 5: REMAINING 
TIME TO COMPLETE by COLUMN 10: COST SLOPE. 

COLUMN 12: PREDICTED COST AT COMPLETION (PCAC) 

The final column represents the results of this spreadsheet 
and is calculated by the addition of COLUMN 6: ESTIMATED 
COST AT COMPLETION and COLUMN 11: PREDICTED ADDITIONAL 
OVERRUN. 



ZCST TREND WORKSHEET 





.•• a- ; :- : -::-z:::-"-7v" •"■".:•.' :, ::.i: ,.:::., ii'i: : ."i i. .:....: n,../ ... ■. * 

cost mem worksheet :.' j 

mvisornGMJiLAmmz 


DATE 25-May-9Q 


■ 


ORIGINAL COST= j 5 


1 L *l J O 




PREVIOUS; PROJECTED REMAINING ESTIMATED 


REPORT i REPORT i REPORT ; UPDATE COMPLETION TIME COST AT 


NUMBER DATE DATE : INTERVAL ! DATE j TO COMPLETE ; COMPLETION 


INPUT CCL4-CCL1 INPUT 


ECAC 


."JGINAL 6 5.00 


: PORT1 10 16 5 5.00 


: PORT2 2 118 8 5.50 


F PORT 3 3 2 1-3 5 5.50 


F PORT 4 4 3 1 13.09 9 09 8.00 


FPORT5 8 4 2 3.77 3.77 8.50 


FPORT6 7 8 1 3.87 2.67 3.00 


FPORT7 8 7 1 3.75 1.75 3.00 


PORTS 8 8 -8 


PORTS 9 9 -9 


PORT 10 10 3 1 -10 




7 i 9 iu 11 12 


ESTIMATED COST PREDICTED PREDICTED 


COST SLOPE ADDITIONAL j COST AT REPORT 


OVERRUN OVERRUN I COMPLETION i NUMBER 


b-ORiGCOST 2(3x7) SUMS 9/1*2 5x12 6+11 


PCAC 




0.00 0.00 0.00 0.00 0.00 5.00 REPORT 1 


050 1.00 1.00 0.25 150 7.00 REPORT 2 




0.50 1.00 2 00 0.22 1.11 8.81 REPORT 3 


100 2.00 4 00 ! 0.25 2.27 8.27 : REPORT 4 


350 14.00 18.00 0.50 1.89 10.33 REPORTS 


400 8 00 26.00 53 1.42 10.42 REPORT 6 


4 00 8 00 34 00 0.53 0.93 9 93 REPORT 7 


-500 0.00 34.00 0.53 -4.25 REPORTS 


-500 0.00 34.00 0.42 -3.73 REPORT 9 


-500 -10.00 24 00 0.24 -2.40 REPORT 10 



INDEPENDENT RESEARCH PROJECT 



DAVIS ORIGINAL ARTICLE 



12.00 -r 



10.00 -- 



8.00 -- 



COSTS 6.00 -- 




K. 



/ 



/ 



; 



4.00 -- 



2.00 4- 



0.00 



/ 



* 





*/ 







H 1 1 1 1 1 1 1 1 1 

123467889 10 
MONTH 



APPENDIX B 



DAVIS'S ARTICLE 




J. GORDON DAVIS 

Senior Partner 

Systems /Project Management 

Atlanta, Georgia 



Keeping Project 
Costs In Line 



For most projects, profitability depends 
upon effective cost control. Unfortunately, 
many cost-control systems are inadequate 
and even misleading. The reporting 
plan and analysis discussed here should 
go a long way toward eliminating 
these difficulties. 



Many engineering managers try to keep on top 
of project costs by merely reviewing cost reports 
as they become available. This procedure is forever 
lagging behind what is actually occurring. What is 
needed is a method for forecasting costs and 
completion dates so that efforts to keep costs in 
line can be launched before things get out of hand. 

It's The Trend That Counts 

The typical cost report contains a breakdown of 
project estimates into categories, as shown in Fig. 
1. The cost figures presented for each line item 
start with an Original Estimate, the estimate at the 
time the project was funded. The Current Estimate 
frequently includes only the Original Estimate plus 
any cbtnge ordfy K '- -"?r rr % -'' ' ' ■■ to label t u; : 

Currc-.i- Estima;. ;uov*..".g ^ = moa. .'eat estimtuc, 
funded nr nnt nf what thP itom should cost. Actual 



The Actual-To-Date figure should include all 
charges for work accomplished to date, not just 
payments actually made. The Committed-To-Date 
figure includes all contractural obligations for fu- 
ture delivery of work or products. The Estimate-To- 
Complete figure is the current estimate for the 
work neither completed nor under contract 

The Expected-Total-Cost figure is the sum of the 
Actual, Committed, and Esdmate-To-Complete fig- 
ures. Its deviation from the Current Estimate is a 
measure of performance." Its deviation from Funded 
Estimate is a measure of profitability, although 
many managers try to use this deviation figure to 
measure performance. Its deviation from Original 
Estimate is essentially meaningless. Yet, it is this 
comparison which some managers use exclusively. 

Many cost reporting systems omit the Estimate* 
To-Complete figure and, thus, give little indication 
of an impending cost overrun for a line item. Such 
systems may nevertheless be of some use if a large 
number of line items are involved because only » 
small percentage of the line items are ever in prog- 
ress at one time. 

Looking at one or even a series of cost report> 
will not give a good picture of what costs can be 
expected for a project, even if the report totals u? 
the expected total project cost It is the trend in 
this total cost figure which gives a basis for fore-,' 
casting the project cost at completion. ! 

' r '-- '"rpect-e-i -~ •■*■ »l-Cost grar^ >" a ti 



■><-..! 



dfc .... fuild proj ,;> shown i. . .£. £■•<■ ■^'•'•' 
first few project cost reports came throuph tr 



H30ST STATUS REPORT 


XYZ CORPORATION 


ALPHA PROJECT 




) 

(|>RY ORIGINAL CHG ORDERS 


CURRENT ACTUAL COMMITTED 


ESTIMATE EXPECTED 
TO COMPLETE TOTAL COST 


DEVIATION 

FROM 
CURRENT 
ESTIMATE 



tal 
e 



13.500 



850 



14 350 



5 150 



2 500 



8000 



15 650 



1.300 + 



pical cost report is a record of various esti- 
tning costs for each line item of a project, 
lortant indication of a project's performance 



provided by such a report is the deviation of Expected Total 
Cost from the Current Estimate. 



Actuol total cost ot completion - 



I icted totol cost as ot 6-2-74 




Actual completion date- 



Predicted completion date os of 6-1-74 
(from completion date trend chart) 



-L. 



s 



^UU 



10 5-5 6-30 8-25 10-20, 12-15; 2-9 ( 4-7 
I 4-7 6-2 7-28 9-22 11-17 1-12-75 3-7 
Cost Report Date 

npomnce of a forecasting procedure is illus- 

Expected-Total-Cost graph of an actual design/ 

:(a). - Instead of merely plotting cost figures 

I reported, the manager of this project could 

J the cost trend (dotted line) inherent in those 




11-1-73,1-1-74 3-1 5-1 j 7-1 9-1 11-1 ,1-1-75: 3-1 | 5-1 
12-1 2-1 4-1 6-1 8-1 10-1 12-1-74 2-1 4-1 
Report Date 
figures. By applying the same projection procedure to the 
scheduled completion date of the project (b), he would have 
had an early warning of the cost problems that were build- 
ing. Instead, his reports were always behind what was 
actually happening. j i 



i was strictly an engineering project at 
id the word soon came back from engi- 
: costs were under control. But the graph 
engineering hadn't really gotten control 

management had possessed a forecast- 
ire, it might have predicted a trend line 

dashed line shown on the graph. How 

the trend line be projected? To the 

ipletion date, of course. But the project 

date is having troubles too, Fig. 2b. If 

continues, the project completion 

:cur until the trend line crossed the iso- 

is this project completion date to which 
end line should be projected (see Fig. 

lalysis is crucial to controlling project j 
nds to remove the bias of tight or loose 
low or high cost estimates, and good or 
m8BB4 Th e typical result of trend analy- 
st management disturbed much earlier 
herwise would be. This early warning 
lanagement to invoke control measures 
;at number of options are open. 
step procedures for creating proper 
t-date and total-cost trend charts are de- 
the box entitled "Predicting Principal 
rameters." 



Down Total Costs 

ring-cost overruns are so commonplace 
is usually no uproar until the percentage 

1. 1975 



overrun reaches at least double-digit proportions. 
An attitude of "we'll just have to live with it" is 
frequently a cover for uncertainty as to whether 
there is something wrong with engineering per- 
formance or whether the estimate is bad, or both. 
This attitude may also indicate uncertainty as to 
what actions can be taken if the problem stems 
from poor engineering productivity. Engineering 
cost control also suffers from the fact thaf engi- 
neering costs are typically only a small percentage 
of total project cost. 

The magnitude of engineering cost overruns is 
all too often underestimated because the ripple ef- 
fects are not included. If an engineer takes 50 hours 
more for a task than estimated, the increase in cost 
will be insignificant on a million-dollar project. 
However, an increased number of man-hours is 
frequently the result of a change in a preliminary 
design feature. Such a change can lead to changes 
in the cost of materials and equipment, the cost 
of design modifications on related portions of the 
system, the cost of producing or constructing the 
system, and/or indirect costs which vary with 
project length. 

While these changes could be cost reductions, 
they usually are cost increases. The engineer is 
much more likely to beef up the preliminary de- 
sign than to trim it down. 

neering* changes can, bo accomplished through thek 

use of work breakdown packages^ These packages 
can be used from the proposal stage through project 



129 



Predicting 



Principal Project Parameters 



Completion Dates 

The Comp.etion Date Trend Xh.it is 
set up with one calendar date 
scale on the bottom ax.s and 
Kher on the .eft-han. ax,, £ a . 
dailv or weekly gnd. ine bw 
P„da, should start «*.£ 
Hate of the proiect. This scaie 
should be labe.ed Update Date 

initially scheduled for proiect 

1 Date An iso-date line is then 
Srawn. This is the straight line 
"passing through all points MFor wh.cn 
ooth calendar scales gwe the same 

date. This 45-deg line S the 
tareet line in the sense that trena 
SSTJai be projected to the.r 
intersection with the iso-date line. 
The points to be plotted on ^.s 

ulrt are the Earliest Scheduled 

activities being tracked. Each 
entry is made by finding, on the 

bottom axis, the date on wh.ch the 
,atest schedule update was 
accomplished, then movmg vert.cally 

to a point which shows the 
completion date resulting from the 

'TthTSal scheduie never had 
♦« hP revised — that is, actual 
Sog e« exttTy matched the initial 
schedule-the completion date 
trend line would develop as a 
horizontal line. This line , wou £ 
intersect the iso-date «'"••" *^, 
day that the milestone act.v.ty was 
completed. If progress towarf 
that milestone was slower than 

scheduled, the line would **™* 
positive slope. Conversely better 
than-scheduled performance would 




%"/ 5 



result in a negative slope to the 
trend line. Regardless of the 'evel 
of performance, the trend I line 
can be projected beyond the last 
pto^P^int to an intersection w.th 

the iso-date line. The po.nt of 
Intersection has a value on the 
Completion Date axis which i may 
be interpreted as the Pred.cted 

'Tsutr^fthat the performance 
.^whether high or low re.at.ve 
to scheduled performance, ^ .s a 
constant. This means that the 

trend line is straight and that a 
projection can be made by s-mply 

Sending the trend line. Thus. 
a project on which t.me est.mates 
were too low will show a trend 
,ine with a positive slope, and the 
projection will result in a predicted 

Completion date greater than the 



'/ 7 V 15 \z V 29 % Al 

Report Dote 

currently scheduled ear .est 
completion date. S.m.larl* a 
project on which time eshmates 
were too high will develop a trend 
line with a negative slope and t* 
predicted completion date wri I be 
earlier than that result.ng from 

the most recent update. 

The visual projection of the trend 

line formed by the Earliest- 
Scheduled-^mpletion-Date pom* 
is subject to a great deal of 
variation, To standards th.s 
projection, the following procedure 
should be used: 

1. Assign week numbers start, g 
with zero to each end-of-week 
point on each axis. Let X equal 
the week number on he Report 
Date axis and Y equal the week 
number on the Complet.cn Date 
axis. 



than-scheduiea pww»— — 

COMMON DATE TREND CHART WORKSHEET 

•. " 5 



Yong 




i 

2. 

Trent 
3. 
new 
Colui 

4. 



I 



)ject Cost Trend Chart 



e:ted cost at completion 




Project completion 
date predicted 
as of 12/24 



stimated cost at completion 



I 



! I 



2 3 4 5 6 7 8 9 10 11 12 13 
"/,2 % "/a; ' 2 /3 12 /10 12 /17 12 /24 ,2 /31 W V, 5 V 22 V 29 
Cost Report Date 



i Completion Date 
rksheet as shown, 
update, start a 
row by filling in 
4. 

he entries for each 
rtn in numerical 

12 is the projected 
t expressed in work 

start of the job. 
;r in Column 12 may 
le Completion Date 
assist in its 



lost Trend Chart 
i calendar data 
ottom axis and a 
le left axis of a 



rectangular grid. The calendar 
scale should start with the starting 
date of the project. This scale 
should be labeled Cost Report Date. 
The cost scale should start 
approximately 10% below the 
initial estimated project cost. This 
scale should be labeled Total 
Project Cost. 

The points to be plotted on this 
chart are the sum of Actual 
Costs to Date plus Committed 
Costs To Date plus Estimated 
Additional Costs to Complete. Refer 
to these points as Estimated Costs 
at Completion. These data are 
taken directly from the Job Cost 
Status Report (See Fig. 1). 

The resulting adjacent points may 
be joined by straight lines to 
make it easier to visualize the 
trend of these points. If the 



original estimate and the project 
execution were both perfect, this 
line would be horizontal. However, 
many factors tend to cause the 
Estimated Cost at Completion to 
rise from one cost report to the 
next. Projection of this trend to 
the anticipated project completion 
date will give a Predicted Cost at 
Completion. The anticipated project 
completion date should be the 
Predicted Completion Date from 
the Completion Date Trend Chart, 
rather than the Earliest Scheduled 
Completion-date — which could occur 
only if all factors causing project 
slippage were suddenly eliminated. 

The visual projection of the cost 
trend line is subject to a great 
deal of variation. This projection 
can be made mathematically by 
use of the accompanying Cost 
Trend Chart Worksheet. The 
following procedure should be used: 

1. On the Cost Trend Chart, 
assign week numbers starting with 
zero to each endofweek point on 
the Report Date axis. Let X equal 
the week number on this axis. 

Let C equal the cost figure on the 
Total Project Cost axis. 

2. After each update on the Job 
Cost Status Report, start a new 
worksheet row by filling in Columns 
1, 4, and 6. Column 12 of the 
Completion Date Trend Chart 
Worksheet is the source of Column 
4 of the Cost Trend Chart 
Worksheet. If a cost figure 

is generated for a date on which 
no schedule update has been made, 
the most recent Predicted 
Completion Date should be the 
Column 4 entry on the Cost^Trend 
Chart Worksheet. lS ' 

3. Calculate the entries for each 
remaining column in numerical 
order. Column 12 is the predicted 
project cost at completion. This 
figure may be plotted on the Cost 
Trend Chart to assist in its 
interpretation. 



1ART WORKSHEET 



2 


3 


4 


5 


6 


7 


8 


9 


10 


it 


12 


PREVIOUS 

REPORT 

OATE 


UPDATE 
INTERVAL 


PROJECTED 

COMPLETION 

DATE 


REMAINING 

TIME TO 
COMPLETE 


ESTIMATED 

COST AT 

COMPLETION 


ESTIMATED 

COST 
OVERRUN 


2|3 « 7| 


S 8 


COST 
SLOPE 


PREDICTED 

ADDITIONAL 

OVERRUN 


PREDICTED 

COST AT 

COMPLETION 




1 -2 


(INPUT) 


4 - t 


(INPUT) 


6 - C ong 






9 - 1» 


5 x 1C 


6 - ii 






60 




50 

















1 


60 


50 


50 


00 


00 


00 


00 


00 


50 


1 


1 


80 


60 


55 


05 


1 


I 


25 


i 5 


•o 


2 


1 


(8 0) 


50 


55 


05 


I 


20 


22 


i i 


66 


3 


t 


1309 


909 


60 


1 


:o 


40 


25 


2 27 


8 2* 


4 


2 


9 77 


3 77 


85 


35 


14 


180 


50 


i 89 


10 39 


6 


1 


9 67 


2 67 


90 


40 


80 


26 


0?3 


1 '2 


'0 J2 


7 


1 


9 75 


1 75 


90 


40 


80 


34 


53 


93 


9 93 







4> 



J75 



131 



low Well Do You Manage? 

>u can diagnose how well you manage your 
ojects by the pattern of frustration you 
:perience over the life of a given project. The 
10 basic patterns of frustration can be illustrated 
t the extremes of loosely-managed and tightly- 
anaged projects. The first curve in the graph 
lows the pattern of a loosely-managed project, 
uring the early stages — usually the period in 
hich most of the engineering takes place — the 
lanager lives in a condition of uninformed 
ptimism. A false sense of well-being exists 
ecause there is no data indicating anything amiss, 
his period draws to a close with the appearance 
If a vague concern. Here the project manager 
tarts issuing serially numbered memos in a 
rocess known as "cover your rear". 

As engineering winds down and production 
r construction gets underway, the frustration 
limbs at an increasing rate. The cost and schedule 
lata are beginning to filter through and the result 
> the start of an effort to "search for the guilty", 
ihis marks the start of the terminal phase, 
ailed "panic". As deadlines are missed and 
:ost overruns become real, the manager usually 
ndulges in the final rite of "punishing the 
nnocent". At this point traumatic changes in 
irganization take place, and the project is made 



None 




Proiect 
Stort 



to wallow to a conclusion — late, overspent, and 
disruptive to the organization. 

On the other hand, if a project is tightly 
managed, the manager will be keeping track of 
schedule and cost trends. If the initial data is 
bad, the manager's early informed pessimism will 
lead him to take action while many options are 
still open. If these actions are successful, his 
frustration will peak as the flow of new problems 
drops below the solution rate on the problems 
already discovered. 



etion to give a uniform basis for providing 
urrent Estimate. 

starting with an estimate which goes to a 
table level of detail, a basis is established 
:king up cost changes. Each engineer involved 
i design can be assigned tasks which relate 
specific set of one or more work packages, 
packages will carry cost estimates for di- 
mgineering costs, materials, and equipment 
ase prices as well as direct construction costs, 
package will be estimated in terms of unit 
ities and unit prices. Thus, an engineering 
:arries with it the requirement for quantify - 
I design decisions in terms of the cost deter- 
ions which result. 

se cost determinations must not only include 
;ering, procurement, and fabrication, but must 
over those same factors on work packages 
are affected by the package in question. The 
ier releases a work package only after sum- 
ng the total cost change which has resulted 
lis work on that package, 
advantage of this approach is that the de- 
has had a goal to shoot for, which is im- 
it in at least two waysJfRrstJ he is forced to 
ne the preliminary or proposal stage design 
effort to stay within its cost boundaries; thus, 
edback to the estimating system is much 
precise than would otherwise be the case, 
requently, the engineer strikes out afresh to 
t his portion of the project, taking the atti- 



tat the ori? ; -' 



do: 



merely to allow an estimate to be made. Second, 
the knowledge that a certain number of man-hours 
have been budgeted for his activity helps the engi- 
neer determine the quality level that can be af- 
forded on this activity. 

The engineer's release of a work package will 
be followed by its tentative updating in the cost 
control system. A threshold can be established such 
that increases of more than, say, 5% over the 
previous Current Estimate are singled out for man- 
agement review. Alternatively, the review threshold 
could be an absolute amount of cost increase in 
all related work packages. Management then has 
the option of rejecting costly design changes be- 
fore they are irretrievably assimilated into the to- 
tal system design. 

The completion of work packages within the 
estimated man-hours is dependent upon the ade- 
quacy of the estimate. Estimating standards which 
are too tight create an atmosphere in which the 
futility of staying within the estimate leads to an 
attitude of ignoring the estimate, because it is ob- 
viously invalid. If the tightness of standards is the 
result of a managerial decision to set high goals. 
an improper and ineffective use of the cost con- 
trol system results. 

Standards should represent expected values, sue. 
that the sum of all the estimates for each work 
package will lead to the expected project cost. !• 
management decides to compete with other organs 
zations for a project, and wishes to bid a '" v 
"it^! nri' norms' Tit'.rrate s'*-" 



exactly as it w 
profit margin, 
petitiveness of 
fined to the siz 
a conscious dec 
of work perforr 
Estimating st 
loose because f 
ance is not avai 
ing of the stan 
independent of 
cannot. The e.' 
what the organi 
expect for the i 
formance throug 
improvement, r 
should not be i 
tern unless actu 

Scheduling F< 

Assuming thai 
pineering cost c< 
performance wh 
ards. Whether w 
life or the life o; 
package, it is im 
of the work earl} 
the work for the 
tasks, this meai 
work in interval: 
engineering task 
man-hours by 01 
to consist of ph; 
end points. For 
broken down as f 
• Planning — 0. 
Review prop 
Preliminary 
Calculations- 
Review of si 
Final sketchf 
Specification 
With this kind 
better track his 
completion goal, 
exert control by 
each day, giving ; 
pated during th 
achieved during 
v 'sor never rejec 
'ual performance 
went will norma 

tivity. 

One factor that 
u| ing the 20 man 
^an-hours av?ilaV 



tli as it would for a project bid at a normal 
loargin. The managerial decision on com- 
j-ness of the bid should have its effect con- 
I ) the size of the mark-up for profit, unless 
r:ious decision is made to lower the quality 
k performed below existing standards, 
liiating standards may be too tight or too 
»>ecause feedback reflecting actual perform- 
. not available in a form that leads to updat- 
( the standards. Unit costs can be updated 
pdent of performance, but unit quantities 
1 The estimating standards should reflect 
the organization's performance leads one to 
I for the next project. Improvements in per- 
:ice through procedure analysis, management 
r'/ement, motivation, or any other factor 
i not be anticipated by the estimating sys- 
nless actual performance data is available. 

duling For The Short Haul 

uming that good standards are in effect, en- 
ing cost control then focuses on obtaining a 
•mance which meets or betters these stand- 
Whether we are talking about overall project 
r the life of an engineering task on one work 
ge, it is important to identify the components 
; work early and determine the implications of 
ork for the immediate future. In engineering 

this means the short-range scheduling of 
in intervals of as little as one-half hour. An 
eering task having an estimate of, say, 20 
lours by one man should be planned so as 
nsist of phases or activities with identifiable 
joints. For instance, such a task might be 
n down as follows: 
Manning — 0.5 hr 
leview proposal — 1.0 hr 
Veliminary sketches — 6.0 hr 
-alculations — 2.0 hr 
Review of supply catalogs — 1.5 hr 
'inal sketches — 7.0 hr 
Specifications — 2.0 hr 

th this kind of breakdown, the engineer can 
' track his own progress toward the 20-hour 
letion goal. The engineering supervisor can 
control by having the engineer report once 
toy, giving a statement of the progress antici- 

during the next day and the progress 

"ed during the past day. Even if the super- 

never rejects the goals set or criticizes ac- 

Pwformance, making a short-range commit- 

•ffl normally improve engineering produc- 

s factor that must be accounted for in sched- 
ule 20 man-hours of work is the number of 
tows available per day for unscheduled work. 
*ring the telephone, responding to questions 



from associates, handling correspondence, and other 
similar tasks frequently consume much of the en- 
gineer's day. In practice, it is advisable to assume 
that some negotiated figure, say 60%, is the proper 
factor to represent available time. Thus, one would 
expect the engineer to average 4.8 hr per day on 
scheduled production. This figure can be revised 
after the short-range scheduling system has been 
in effect long enough to be debugged. 

Work sampling by the engineers themselves can 
lead to a refinement in the estimate of nonsched- 
uled work load. For instance, each man can tally 
his activities into scheduled or nonscheduled cate- 
gories every half hour for a week. The category 
percentages will be good estimates of the total 
week's time distribution. Again, the effect is to 
make people more aware of the degree to which 
nonscheduled activities are allowed to interrupt 
scheduled work. The engineer may decide to group 
his nonscheduled activities to some extent, reduc- 
ing the effects of interruptions and shifts in type 
of activity. 

Assign A Project Manager 

A project is frequently allowed to wander 
through the various functional groups involved 
without a real advocate who is in close touch with 
current status and has the authority to make ex- 
pediting decisions. The project manager should be 
assigned during the proposal stage, even though 
the majority of such assignments will not lead 
to funded projects. This timing avoids the prob- 
lem of having an accepted proposal handed to a 
project manager who immediately begins to find 
flaws in the concept, the estimate, and^the sched- 
ule. 

The project manager must be given the oppor- 
tunity to set up the control system which allows 
him to accurately determine project status. He 
must be supported by an estimating system which 
is aligned to the realities of the organization and 
keeps the estimate revised to reflect current knowl- 
edge. He must also have the support of top man- 
agement so that he is a true project manager, not 
merely a coordinator w v ith no authority. 

Engineering cost control is not likely to succeed 
unless the system is thoroughly planned and de- 
bugged before implementation. Computerized es- 
timating systems are necessary if responsiveness 
to design changes is to be adequate and feedback 
for adjustment of standards is to be thorough. The 
systems should be designed so as to require as 
little input effort as possible from the individuals 
carrying out the activities. The rewards for pay- 
ing the initial price are large, with payout on initial 
costs, frequently being as short as six months into 
the first project. □ 



ihtr II 



APPENDIX C 



MISCELLANEOUS PLOTS AND SPREADSHEETS 



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»„■_■ ...... ...■....■.......■.■..........,.■■,.■..,...■■■........■..■.. .. . ■ . . . . . ...... ... . T— . . ...... ................ ..... ......■■■ ..1 

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DATE 25-MaHO 


ORIGINAL COST= ; 20 


1 L n J 


! PREVIOUS i PROJECTED REMAINING ESTIMATED 


ncruni ncruni rcruni : ururtic uurirLc nun t iric uuo i rt i 


NUMBER DATE DATE i INTERVAL ; DATE ! TO COMPLETE ; COMPLETION 


jkrr-ii it ,— <-,i .4 _j—-r^i ■* tkir*.i rr- 

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ESTIMATED COST PREDICTED j PREDICTED 


COST SLOPE ADDITIONAL COST AT REPORT 


OVERRUN OVERRUN COMPLETION NUMBER 


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APPENDIX D 



EXCEL SPREADSHEET AND CHART MACRO 



*_-«-'0 I flft'--.Al_l v l 



i it„„in.-.~~-,4< 
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10 



I I | =A0 I IV A \£\ " UU5I IKALS } 



12 



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14 i=D IALOG. BOX ( MENU) 



ir i=!F/!i?=i nnTn/iwrnATFU 



1b i=IF(M 2=2.GQ I Q(U PDA I E)) 



17 i=i F(H2=3.GOTO(preport)) 



1 fl ! = JF( ! 1 2=4 ,GOTO (PC HART)) 



19 !=1F(I12=5.G0T0(EX1T)) 



on - ! 

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22 !=1NPUT ("INPUT TH E PROJEC T NAM_E"Z'TO(^E^:TJITLE7 

23 ' =SELECt / "R1 1C3:R2 1 07'^ 

24 |=CLE/ 



25 =S ELECT("R30C1:R33CS") 



\ 



26 =C L£AR(3) j 

I 27 j=INRrr^lNRJTTHE ESTIMAT E COS T OF THE CO NTRACPM, "TOTAL ESTIMATE COST 1 ) 
! oq LiKjpi rrf'iMP! rr • FMTTH ^f Don 'FT 'M MPMTHO" i "I cwniTj dp Don ir:r*T"\~ 

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j 29 j =S ELECT (!C2)"" j 



30 j=FORM ULA(A 22) 
qi r 



32 |=SbU:C r(JB4) 
j3 |=FORMULA(A27) 



34 !=SFI FCTflF1?> 

■ ;-_-—--■ • v 1.- 



_35_j=FORMULAiA28) 

3S j =GOtO (MAINMENU) 



37 !=INPUTf"ENTERTHE REPORT DATE". 1. "REPORT DATE"} 



33 |=INPUT ("INPUT THE ESTIMATED COST AT COMPLETION", 1 /'ESTIMATED COST AT COMPLETIG 

39 j=iNpyTHNPUT THE PROJECTED COMPLETION TIME FRAME", 1 ."PROJECTED COMPLETION d! 

40 'REPORT DATE 



41 j=SELECT(!B12) 



■ -| 



4? i=iFfGFT OFI I ffiW'>A37 SFI FCTf"Rr+1im GOTO/PRFVIOUKU 



43 =GOTO (A42) 

44 ! PREVIOUS 



45 i =SELECT("R[-1iq+11") 



46 | =IF(GET. CELL(8)Q3,SELECTC'R[- 11C'1GQTQ(FQUND) 

47 pGOTO(A46) 



40 IhUUNU 



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l=GET.CELL(5) 




i 

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jiNSERT ALL VALUES 




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l-6pi POT/inio\ . 




1 
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53 l=IF(G ETCEL L(5 )<>A37,SELECT ("R[-t-1]C"),GOTO(INSERT )) 



a4 |=(.ici.OcLL^ b) 



! 55 !=GOTO(A53) 



56 



58 i=SELECT("RC[+ 1j") 
55 j=ALiGNMENT(3) 



SO = FORMUU (A50* 

61 1=SELECT("RC[+1]") 



62 I = IF(A37=1, FORMU LA (1),FQRMULA(A54- A50)) 

63 j= SELECf("RC[*l]") 



J 



-l 



64 j=r ORMULA(A39) 



S5 i=S ELECT("RC[+1]") 



66 | =FORMULA ("=RC[- 1 ] -RC[-4] ") 



I 67 j 

l cq !-Ofri irr*T/"Df~*rj.n"\ 



89 !=FORM UL A(A38) 



70 



71 !=sfi FnTrpr+iRirr-Ki"\ 



+-r 



! 72 l=GEJ.CELL(5J 

p3 |=FORMULA(A38-A72) 



74 l=SELECTf'RCr+n"\ 



75 



=FQRMUU("=RC[-1]*R[-18]C[+21»2") 



7S 



77 



78 |=3ELECT( "RC[+ 1]") 



7Q i=FnPMi ii A/"=nnr-i-unr-nr^ 

• " I •_r. , .r..jir-^i. , j : :~i,_u • *i ' J- / 



80 | i 

1 



ui i — oi_i_i_v^ i ^ rv-_<[+ i j i 



i rv i=FORMUi A/"=Rr:r-n,'fmr-imnr-?ir?VT 

-| ! ■ ■■■ y ■ - t -J'.U" 'k " ~J--A-JZX1 =i_X_ 



83 



QA 



85 l=SELECTf'RCr+in 



-r- 



86 j= FQRMULA(" =R[-18]C[+1]»RC[ - V^_ 

R7 I 



88 =3ELECT("RC[+13") 



|=FORMULA("=R[-18]C[-»-1]+RC[-1]") 



90 bAOTJVATFfnOSTTPE XI C:"\ 



51 i =CALCULA i E.NOWQ 



I 95 {preport 



I 93 !=GOTO(MAINMENU) 

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I 31 I 



9b i=ShLhCl(!A1:G39) 



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m Loct nniiiiT incin 
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98 j=PRINT(1,.,1,FALSE,FALSE.1) 



3a 



1 fin Ur:nTn.'U*lMUPkll l\ 

tuu i — *.4 »^ i »«* i i ■ i n 1 1 1 1 ■ 1 1— i < *_'y 



101 



102! 



1Q3! 



|04 print chart 

inc I 



106 



|107i __! 

iTOSi = ACTIVA TE ("C OS ffRE.XLC' ^ 



109; 



|110| =ATTACH.TEXT(1) 



ill !=FORMULA'A22^ 



1 1Z i=HKlN I {i„J,l-ALSt,l-ALSt.i) 



IIOLl r^TWI JTC/lir-nOTTn VI 0"\ 

[ i i j j — M'^- 1 i f rt 1 i_^ Owo i i rxAi-o / 



114 

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Thesis 
B16863 Baker 

c.l Completion cost trend 
analysis. '