The transcript discusses the concept of Earned Value Management (EVM) in project management, focusing on the topic of Estimate at Completion (EAC). The speaker, Phil, is a management training coach and is discussing this topic in the context of the PMP (Project Management Professional) exam.
EAC is a key concept in EVM, which is used to predict the cost of completing a project. It is calculated based on the actual cost of completed work, the remaining work, and the cost performance index (CPI). The speaker explains that EAC can be calculated using four different formulas, each of which is based on different assumptions about the project.
1. EAC based on original budget being flawed: This formula assumes that the original budget was incorrect and needs to be replaced with a new estimate. The formula is EAC = Actual Cost + New Bottom-Up ETC.
2. EAC based on cumulative CPI: This formula assumes that the CPI (Cost Performance Index) will remain constant. The formula is EAC = BAC / CPI, where BAC is the Budget at Completion.
3. EAC assuming original budget is still intact for remaining work: This formula assumes that the original budget is still applicable for the remaining work that needs to be completed. The formula is EAC = Actual Cost + (BAC - Earned Value).
4. EAC assuming CPI and SPI (Schedule Performance Index) are relevant: This formula assumes that both the CPI and SPI are relevant and will influence the final project cost. The formula is more complex and involves multiple calculations based on the CPI and SPI.
The speaker emphasizes the importance of understanding these formulas and how to apply them in different project scenarios. He also advises students to not rely on any single formula, but to understand the underlying concepts of EVM and EAC.
1. The discussion is about Earned Value Management (EVM), a project management technique used to control a project's scope, schedule, and cost.
2. EVM uses a technique called Percent Complete (PC), Planned Value (PV), Earned Value (EV), Actual Cost (AC), and the difference between these, known as Earned Value Analysis (EVA).
3. The instructor emphasizes the importance of studying EVM for the PMP exam, noting that it can predict future costs and save money.
4. The instructor provides a scenario of a project manager clearing a large area and discusses how EVM can be applied to this scenario.
5. The instructor introduces the concept of Earned Value at Completion (EAC), explaining that it is a measure of the total cost of the project.
6. The instructor explains that there are four types of EAC calculations:
- EAC based on a flawed original budget
- EAC based on a new bottom-up estimate
- EAC based on a constant cost performance index (CPI)
- EAC assuming the original budget remains intact for the remaining work
7. The instructor provides a detailed explanation of the third type of EAC calculation, which assumes that the SPI and CPI are relevant and will weigh into the calculation.
8. The instructor concludes the discussion by emphasizing the importance of understanding these EAC calculations for the PMP exam.