Deltek Cobra Tools to Assist Your CAMs with Updates
It is interesting that the heart of earned value management is the forecasting function, yet this is arguably the weakest aspect of project management. The challenges are not minimal and the expectations must align with the fact that remaining effort is somewhat an unknown, even where there is historical data to refer to.
Most projects that have an EVM requirement are by definition projects that have inherent risk relating to both cost and schedule, not to mention executing the scope of the project. For this reason, these projects are typically cost-plus, an acknowledgment of this risk.
When developing forecasts, it is helpful to utilize calculated forecasts as a tool to “lead the witness” if you will. CAMs are under pressure to successfully execute their tasks on time and within budget, often causing them to create forecasts that tend toward the optimistic.
This is sometimes exacerbated by the organizational climate that considers cost and schedule variances a sure sign that the CAM is not effectively managing their control accounts. This counter-productive expectation encourages unrealistic forecasts that often show recovery of unfavorable cost and schedule variances.
Cost variances do not generally recover. Save your howls of disapproval, as this is a proven fact. One can conceivably stop the bleeding, but the recovery of unfavorable cost variances is rare indeed.
Schedule variances, however, can be recovered, although this often requires either incurring increased costs or some form of relief on the scope of the work. Organizations that establish an expectation that CAMs should recover cost variances are beyond help when it comes to forecasting. Even the Cobra Guy can’t help!
For those who understand that cost and schedule challenges are a normal, although understandably undesirable aspect of project management, please read on.
Enter Deltek Cobra Tools
Using the Deltek Cobra Tools, gives you many options for updating forecasts. There are three types of forecasts:
- Calculated Forecasts
- Manual Forecasts
- Frozen Forecasts
The focus of this blog is to explore the calculated forecast and the many associated options available to the user. The Cobra Guy uses these forecasts to aid the CAM in developing updates to the forecast, with the intent of causing the CAM to acknowledge what the forecast would look like if performance continues as it has in the past.
While a calculated forecast alone is never a satisfactory final answer, it does often provide a good starting point for updates. Applying human intelligence to a forecast is mandatory, as many factors can affect future performance besides the past. For example, a design challenge that has required several iterations may finally have been resolved, with the remaining effort generally routine. To rely on past performance in preparing this forecast would not be applicable.
That said, acknowledge past performance where appropriate (this is where the calculated forecast can help) and equally, acknowledge other factors that Cobra would not be able to consider, such as obstacles that have been resolved, opportunities identified that will affect the remainder of the effort or other factors that only the CAM can address.
The recommendation here is to start with three calculated forecasts that will be provided to the CAMs for each of their control accounts:
- Forecast based on the cumulative to date CPI (Earned/Actuals=Cost Performance Index)
- Forecast where the CPI calculation is based on the last 6 months
- Forecast where the CPI calculation is based on the last 3 months
Note: It is extremely important the user understand the rationale used for each forecast method. Cobra does not “consider” anything, it just does what it is told. This will be explained more fully later in this blog.
Creation and Calculations of CPI Based Forecasts
In calculating a forecast, it is important to understand the impact of several of the settings. Using the CPI Cumulative to Date as our example, the process of creating and utilizing the forecast follows. The settings are the same for each of the three calculated forecast methods, only the basis of the forecast changes:
Step 1: Open project properties from the Edit menu and navigate to the Classes tab. Select “New”.
Step 2: Provide an intuitive name for the cost class and make sure to select the class type as forecast.
Step 3: The Level selection reflects where the values are stored; at the control account or work package. If the user desires to calculate the CPI at the same level as actuals are loaded, it is required to have the forecast class be at the same level. If actuals are loaded at the work package, create the calculated forecast cost class there as well.
The calendar set is typically set 00.
Step 4: Select the calculation option desired. For this example, we are setting up the forecast cost class based on cumulative to date CPI.
The Forecast dates can be Early, Late or Forecast dates. This option opens up a different can of worms and will be addressed in a future blog. For our example, we have chosen Forecast Dates, which are the schedule dates (not baseline) uploaded from the schedule.
The Performance Factor Level does add an unfortunate dilemma. This is the level where the CPI calculation occurs. For example, if one selects the Control Account option, this will be the CPI calculation based on the sum total of each underlying work package.
In other words, each work package, regardless of its individual CPI will have the summary level CPI applied to the remaining effort.
Another aspect of this is that those work packages that haven’t yet started will have the control account level CPI applied to them as well, even though there is not yet any performance for those work packages. This isn’t necessarily wrong, but the user will need to determine if this is applicable on a case-by-case analysis.
Conversely, if the user chooses the Work package level, the CPI will be calculated at the work package. This is the most accurate CPI calculation for those work packages that are in progress, but no calculation will be applied to the work packages that have yet to begin, as there is no CPI calculation possible where there is no BCWP.
Again, not necessarily wrong, just that the user needs to understand this.
There is always the option to run one calculation at the work package level and another at the control account level. It will be up to the CAM to analyze the different calculations and determine the one that is the best fit for each work package. Forecast cost classes and their calculations are cheap. No reason to limit the Forecast cost classes to just 3. The objective here is to provide the CAM with useful starting point for their monthly ETC updates.
The general recommendation is to create a cost class for any calculation that might be useful in updating the ETC. If it is useful to have six forecast cost classes, where there are two classes for each of the three types; Cumulative, last six months and last three months, then create six. Three at the control account level and 3 at the work package level.
There also is the option to select a level of a hierarchical code file (see below), such as the WBS, but this option often deviates too far away from where the performance occurs and is rarely utilized. We are trying to assist, not confuse. That said, it is recommended to calculate forecasts at no higher a level than the control account.
When completed, the cost class screen should appear as shown below. Note that this isn’t the cost class that will be used for the EAC.
In our example, the following three cost classes have been added. Note that each is set to be calculated at the work package level, although other forecast classes can be created that perform the calculation at the control account level.
Now that the cost classes have been created, they can be populated at month end by the calculate forecast process. Once the forecast cost classes have been updated by this process, the Assignment Export function can be utilized to create Excel files that the CAM can update and return to the Project Controls folks. To create these reports, take the following steps:
Step 1: Under Integration, select the Assignments option on the Export section as shown below.
Step 2: Choose the appropriate project.
Step 3: Select the cost class (unfortunately, only one at a time). It is recommended that the “First Result” option is used, as this will create a report that provides hours for labor and direct dollars, units or whichever unit is the basis for non-labor. “Total Currency” is often too difficult to analyze for the CAM, as it includes Direct plus any burdens applied.
One other option is to select FTE under the “Selected Result” option, as some CAMs are more comfortable analyzing by heads vs. hours. This also automatically considers the different working hours per period, where the first result option will not. For example, if one period has 160 working hours and the next period has 200, the FTE may be the same for each period, where the hours would not.
Step 4: Select a save location for the file, as it will be saved down as well as open in Excel at the end of the process.
The file will open as each is exported. Once all the forecast cost class reports have been run, the reports can be sent out to the CAMs for update. Important note: while the dates can be changed, the resources assigned must fall within those dates. Additionally, resource names can be added as needed.
Do not delete resources that are no longer required, but retain them and enter 0 for each period where there are values. This will effectively delete unneeded resources.
The CAM should select for each work package the most applicable calculated forecast. Using the calculated values as a starting point, an analysis can take place. While a different calculation scenario may be used for various work packages, it makes sense for the CAM to consolidate the final ETC updates in one file and return to Project Controls.
As shown below, the forecast updates will all be imported into the one forecast cost class used for project level ETC and EAC. The cost class field can be edited to reflect this as shown below. It is too confusing and prone for error using more than one forecast cost class for a project’s ETC and EAC.
In this example, the CAM can submit changes on whichever file they choose, but the cost class will need to be changed prior to importing. In this example, the official forecast cost class is “Forecast”, thus the name is changed as shown.
The following sheet has the original cost class name.
The next sheet has been changed to the official forecast cost class, into which all the updated forecasts from each CAM will be imported.
At the end of the day, there will likely be several forecast cost classes that are calculated and distributed to the CAMs. The CAM selects the forecast class for each work package that best reflects their own understanding of what the remaining effort looks like and makes the necessary adjustments.
There may be cases where none of the forecasts are applicable and they will rely on their own knowledge to provide an update. The CAM should consolidate their changes into one report and return to Project Controls.
Summary
Calculated forecasts alone are not the final answer, nor is ignoring past performance. Updating the ETC is also not the final answer. The intent is to assist the CAM in acknowledging what the forecast looks like if current performance levels continue. It is up to them to make the adjustments that take into account the other factors that will affect future performance.
Forecasts are often wrong until the end of the work package and ultimately until the end of the project. Forecasts change as work progresses and new challenges and opportunities arise.
An environment where variances are considered anathema are never conducive to an effective forecast process. The cause and impact of unfavorable variances should be analyzed and mitigated where possible, but understanding the inevitability of variances will encourage a forthright approach to estimating remaining efforts.
Using the Deltek Cobra tools to assist in preparing forecasts and the effort put forth to achieve this goal should be aligned with the overall importance of this most important aspect of Earned Value Management.