By the end of this course, students will be able to understand and apply core Project Cost Control and Earned Value Management (EVM) principles in real project environments. They will develop practical skills to monitor, analyze, and control project cost and schedule performance using industry-standard tools and techniques.

The Expense Report:

Now, let’s analyse the Expense report and expenditure and Variance in detail. The six-month Expense Report covers the Design and Pre-Construction phase of the project.

Here is a breakdown of the findings:

The Architecture and Engineering Design Firm was budgeted at $120,000 but incurred $130,000, with an overrun of $10,000, which is 108% of the planned budget. This was due to the complexity of the final design.

The Geotechnical Survey, was budgeted at $25,000, was completed for $22,000, producing a positive variance of $3,000, which translates to 88% of planned budget.

Permits were budgeted at $5,000, but reached $5,500, an overrun of $500, which is 110% of planned budget. This resulted from additional state Department of Transportation charges.

The City Project Manager’s salary was budgeted at $45,000, with $22,500 spent to date, reflecting a $22,500 saving. This is 50% utilization due to only half the allocated time has been used.

Overall, the total spending planned for the six months preconstruction work stands at $183,000, against a budget of $195,000, producing a positive variance of $12,000.

This is 94% budget utilization. The Design and Pre-Construction phase work that was planned for the 6 months was fully completed.

We can see that while design and permit costs exceeded their budgets, these were offset by savings in the survey and project management salary categories.

This analysis confirms that the project is financially healthy and under budget at the six-month point.

Now let’s discuss our next section of our budget performance and cost control.

Burn Rate

The Burn Rate Report is a key component of cost control. Burn rate measures how quickly the project budget is being spent relative to the elapsed timeline. Six months into the 18-month Northfield Pedestrian Overpass project, this report provides insight into whether spending is on track, ahead, or behind schedule. The first phase, Design and Pre-Construction, has been completed.

• Total planned budget at completion (BAC) for the 18-month project, is $1,575,000.

• Actual cost (AC) spent over the first six months is $183,000.

• Time elapsed is 6 months.

• Total project duration is 18 months.

How to Calculate the Burn Rate Percentage

First, we calculate the percentage of total budget spent. This is done by dividing the actual cost, (183,000) by the budget at completion (1,575,000), our percentage of total budget spent is 0.116 or 11.6%.

183,000 ÷ 1,575,000 = 0.116, or 11.6%

Next, we calculate the time elapsed percentage. This is done by dividing the time elapsed (6 months) by the total project duration (18 months), our time elapsed percentage is = 0.333, or 33.3%.

6 ÷ 18 = 0.333, or 33.3%

Now to finalize the burn rate calculation. We divide the time elapsed percentage by the percentage of budget spent, the burn rate is 0.34, or 34%.

33.3% ÷ 11.6% = 0.34, or 34%

What Does This Mean?

Before answering, let's note the following:

• A burn rate of 1 means spending is on schedule.

• Below 1 indicates slower spending than planned.

• Above 1 indicates faster spending than planned.

Our burn rate is below 1 at 0.34. This means spending is occurring at only 34% of the expected pace relative to the time that has passed. This indicates a slow and controlled spending rate, which is typical for early project phases when costs tend to be lower.

Planned Value

Let's discuss Planned Value and its purpose. Planned value is the total budget to be spent on an activity over a given period. Our planned value (budget) for the six-month Design and Pre-Construction phase is $195,000.

Earned Value

Earned value is the percentage of work completed during a given period. It is calculated by multiplying the percentage of work completed by the planned value.

The first phase of work, Design and Pre-Construction, has been 100% fully completed over the six months. To calculate the earned value, we multiply the percentage of work completed (100%) by the planned value (195,000). This gives us an earned value of (195,000).

This earned value figure tells us that the project has completed what was planned, as 100% of the planned work has been completed.

Next let's discuss the Cost Performance Index (CPI) and Schedule Performance Index (SPI). These are called efficiency indicators.

Cost Performance Index (CPI), It measures how efficiently a project turns money spent into value earned.

Formula to calculate is, the Cost Performance Index is Earned Value divided by Actual Cost, which is, 195,000 divided by 183,000, the Cost Performance Index is 1.066.

A CPI equal to one or 100% means the planned and actual costs are equal or the costs equal the budget.

Our Cost Performance Index is more than 1, at 1.066.

This means the project generated value of 6.6% more than planned.

Cost efficiency is 6.6% above plan. Corrective action (if below 1.0) would be to review procurement costs, reduce rework, or improve productivity.

The project team has done well. The project manager needs to ensure this efficiency continues into remaining work.

Schedule Performance Index (SPI), measures how well the project keeps up with its schedule.

Formula to calculate is, the Schedule Performance Index is Earned Value divided by Planned Value: 195,000 divided by 195,000 divided by 195,000 equals 1.000.

This means the project is progressing exactly as planned.

The project is on schedule. Corrective action (if below 1.0) would be to accelerate critical activities, add shifts, or remove bottlenecks. The project team has done well.

The project manager needs to maintain this rhythm into the next phases.

Earned Value Management is a project management technique that focuses on schedule and cost performance, providing early warning of performance problems while also delivering useful progress updates to stakeholders.

EVM answers two fundamental questions:

Are we getting the value we planned for the money spent? (Cost performance).

Are we completing work at the rate we planned? (Schedule performance).

Conclusion.

The cost control analysis of the Northfield Pedestrian Overpass highlights both strengths and potential risks at this early stage.

While the project has achieved savings in some areas, the design phase exceeded its budget by $10,000.

First Phase was on schedule as planned.

Earned Value Management forecasts a potential under budget of approximately $103,037.

The recommended action plan provides a clear roadmap to maintain financial discipline as the project enters the more resource-intensive Construction phase.

By proactively addressing these issues, the project manager can strengthen financial oversight and preserve the contingency fund.

This also increases the likelihood of completing the project within scope, budget, and schedule.

Thank you for enrolling in this course on Project Cost Control and Earned Value Management.

Your commitment to learning and professional development is highly appreciated.

Throughout this course, you have gained practical knowledge and skills to measure, analyze, and control project cost and schedule performance.

You are now better equipped to apply Earned Value Management techniques in real project environments and support effective project decision-making.

Continue practicing these concepts to strengthen your confidence and capability in project controls.

We sincerely thank you for choosing this course and wish you continued success in your projects and career growth.

How to Compile a Project Budget. Key Steps for Success

A well-prepared project budget is essential for successful project management.

It converts plans into a clear financial roadmap, ensuring that resources, timelines, and risks are properly considered.

This lecture explains the key steps in compiling a project budget.

It covers how to estimate costs for labour, materials, equipment, and services, and how to include contingency funds for unexpected issues.

It also introduces practical methods for linking the budget to the Work Breakdown Structure.

By the end, you will be able to develop a reliable budget.

The budgeting process is divided into six parts, in which we will explain step by step.

The first part is setting SMART Objectives, commonly known as S.M.A.R.T, to clearly define project goals.

The second part is defining the project scope.

The third part is to create a Work Breakdown Structure, commonly known as WBS.

The fourth part is making up a list of required resources.

The fifth part is to estimate amounts using multiple methods.

And then the sixth, and the last one, is setting aside a contingency fund.

We will use the Northfield Pedestrian Overpass project as our example, targeting to build a bridge for pedestrians over a busy highway.

How to Compile a Project Budget. Key Steps for Success

A well-prepared project budget is essential for successful project management.

It converts plans into a clear financial roadmap, ensuring that resources, timelines, and risks are properly considered.

This lecture explains the key steps in compiling a project budget.

It covers how to estimate costs for labour, materials, equipment, and services, and how to include contingency funds for unexpected issues.

It also introduces practical methods for linking the budget to the Work Breakdown Structure.

By the end, you will be able to develop a reliable budget.

The budgeting process is divided into six parts, in which we will explain step by step.

The first part is setting SMART Objectives, commonly known as S.M.A.R.T, to clearly define project goals.

The second part is defining the project scope.

The third part is to create a Work Breakdown Structure, commonly known as WBS.

The fourth part is making up a list of required resources.

The fifth part is to estimate amounts using multiple methods.

And then the sixth, and the last one, is setting aside a contingency fund.

We will use the Northfield Pedestrian Overpass project as our example, targeting to build a bridge for pedestrians over a busy highway.

Defining Clear Project Objectives Using SMART.

Let’s take a closer look at how the SMART approach breaks the Northfield Pedestrian Overpass project into clear parts that connect directly to the budget.

The first element is Specific. This defines the details of the project. The bridge will be constructed over the Northfield Highway.

Key features include a raised bridge deck, stairs and ramps for accessibility, non-slip walking surfaces, weather protection, clear signage, and wide walkways.

The next part is Measurable.

This part sets clear targets like size, strength, and safety, which helps determine the right materials and engineering costs.

The bridge measurables are.

The bridge length is forty five meters.

Width is four meters.

Load capacity is five thousand tons.

Height is one comma four meters.

Lifespan is forty years.

The bridge will withstand wind speeds of up to hundred and twenty kilometres per hour.

Available budget is one million two hundred thousand dollars from the Northfield municipality.

Construction period is eighteen months.

The third part is Achievable.

For the Achievable component, you want indicators that demonstrate the project can realistically be delivered.

Here are some indicators that demonstrate the project is realistic.

Five prequalified, competent contractors are available.

90% of the required technical skills are available locally or in-house.

Selected contractors can operate below 80% of workload.

At least 80% of labour and materials will be sourced locally.

At least 90% of the required equipment is available in short lead time.

Key suppliers can deliver within the required schedule windows.

A contingency of 15% is included in the budget to cover uncertainties.

The fourth part is Relevant.

For the Relevant component, you are showing that the project is aligned with real city needs and stakeholder’s expectations.

Here are the items of relevance.

Project is aligned with city transport and safety plans.

Reduction in high-risk pedestrian crossing zones.

Contribution to accident reduction targets of 20%.

Proximity to key public transport nodes.

Support for peak pedestrian traffic demand.

The fifth and last one is Time-bound.

The project duration is 18 months.

Critical material will be ordered within the first 3 months.

There will be monthly progress reviews.

15% contingency is built into total timeline.

Commissioning and handover will be completed within the final 2 weeks.

We have covered the SMART objectives, and the project goals are clear.

That takes us smoothly to the second part of our budget.

Defining the project scope.

A clear project scope explains exactly what will be done.

What will not be done.

And how the project will deliver value to the business.

It helps make sure the work supports the main business goals and the stakeholder’s expectations.

If the scope is not clearly defined, the project can quickly go off track, costs can increase, and deadlines can be missed.

First, the project scope defines the work the project team will carry out.

This includes geotechnical surveys, architectural and engineering design, and the construction of the bridge.

It also covers the installation of safety lighting.

Closed Circuit TV systems.

And landscaping after completion.

These activities form the core budget items for the project.

This is the approved project scope agreed upon by the Northfield Municipality, and key stakeholders.

With the scope firmly defined, we can now move on to the third part of our budget.

How to Create a Work Breakdown Structure, WBS.

Let’s now examine the third part.

Creating a Work Breakdown Structure.

Work Breakdown Structure breaks a large project scope into smaller, manageable tasks and sub-tasks.

The Work Breakdown Structure for our overpass bridge consists of four high-level sections.

First, Project management.

Second, Design and Pre-Construction.

Third, Construction activity.

And last one, the project Closeout.

A Work Breakdown Structure ensures that all tasks, big and small, are included, helping to avoid missed costs.

Listing Required Resources.

Let’s move on to part four of the six.

This section lists required resources.

This part of the budgeting process identifies all resources needed to complete the tasks defined in the Work Breakdown Structure.

This ensures that all associated costs, such as salaries.

Equipment rentals.

Materials.

Permits.

And professional fees, are fully captured in the budget, this reduce the risk of omissions.

The resource list includes.

City Project Manager to manage the project.

Permits and regulatory compliance costs.

Geotechnical engineering services.

Foundation construction resources, such as pile drivers.

Excavators.

Mixers.

Cranes.

Structure installation resources such as pre-fabricated steel spans.

Crane operators.

And ironworkers.

Lighting and Closed Circuit TV installation materials and services such as.

Fixtures.

Conduit.

Wiring

And cameras.

The list of required resources acts as a checklist to ensure nothing is missed.

With that checklist in hand, let’s move on to our fifth part of the budget.

Cost Estimating.

What is Cost Estimating?

Let’s now focus on cost estimating.

Cost estimating is a key control function in project management.

It converts the Work Breakdown Structure into financial values by assigning realistic costs to all activities, resources, and deliverables.

Since project success depends on cost, time, and scope, accurate estimating is essential.

Reliable estimates are developed using multiple methods such as expert judgment, historical data, unit rates, supplier quotations, and bottom-up calculations.

Combining these approaches improves accuracy and reduces uncertainty.

For the Northfield Pedestrian Overpass project, estimated costs are.

City Project Manager budgeted for eighteen months. Forty five thousand dollars. This is based on municipality internal costing.

Design and Pre-Construction. One hundred and forty five thousand dollars, this is based on vendor quotes.

Construction. One million two hundred thousand dollars, this is based on historical contractor bids data.

Contingency is one hundred and eighty thousand dollars, which is 15% of one million two hundred thousand dollars.

The total estimated cost is one million two hundred and forty five thousand dollars.

However, this amount reveals a key issue.

The estimate exceeds the municipality’s budget allocation of one million two hundred thousand dollars, resulting in an overrun of forty five thousand dollars.

This indicates the need for corrective action such as value engineering, cost reduction strategies, or requesting additional funding.

As a project manager, you will need to resolve this, or alternatively, you may wait for a further lecture on how to request additional funding.

Now, let’s turn to our last part, part six of our budget.

Contingency Fund.

Let’s consider the contingency fund.

A contingency fund is a planned financial reserve used to manage known risks that cannot be precisely predicted.

It is not extra spending money, but a controlled allowance to protect the project’s cost and schedule.

In construction projects, common risks include weather delays, ground conditions, design changes, and minor scope adjustments.

Setting aside a contingency helps the project absorb these disruptions without exceeding the budget.

A typical benchmark is around 15% of the total project cost.

Let’s consider the contingency fund for the Northfield Pedestrian Overpass project.

Our construction cost is one million two hundred thousand dollars.

Contingency is one hundred and eighty thousand dollars, which is 15% of the allocated construction budget of one million two hundred thousand dollars.

This means one hundred and eighty thousand dollars is allocated to protect the main construction budget from unforeseen costs.

This completes the full project budget process, covering all six stages of budgeting with practical application.

Consistent practice using the templates will strengthen your understanding and improve budgeting accuracy over time.