Trend Analysis [Technique] – Project Management Knowledge

Trend Analysis

Trend Analysis an analytical technique that uses mathematical models to forecast future outcomes based on historical results.

Where Applied?

Within the PMBOK^® Guide, Trend Analysis technique is used in the following processes:

MONITOR AND CONTROL PROJECT WORK

Trend analysis is used to forecast future performance based on past results. It looks ahead in the project for expected slippages and warns the project manager ahead of time that there may be problems later in the schedule if established trends persist. This information is made available early enough in the project timeline to give the project team time to analyze and correct any anomalies. The results of trend analysis can be used to recommend preventive actions if necessary.

CONTROL COSTS

Trend analysis examines project performance over time to determine if performance is improving or deteriorating. Graphical analysis techniques are valuable for understanding performance to date and for comparison to future performance goals in the form of BAC versus estimate at completion (EAC) and completion dates. Examples of the trend analysis techniques include but are not limited to:

EV Charts. In earned value analysis, three parameters of planned value, earned value, and actual cost can be monitored and reported on both a period-by-period basis (typically weekly or monthly) and on a cumulative basis uses S-curves to display EV data for a project that is performing over budget and behind the schedule.

Forecasting. As the project progresses, the project team may develop a forecast for the estimate at completion (EAC) that may differ from the budget at completion (BAC) based on the project performance. If it becomes obvious that the BAC is no longer viable, the project manager should consider the forecasted EAC. Forecasting the EAC involves making projections of conditions and events in the project’s future based on current performance information and other knowledge available at the time of the forecast. Forecasts are generated, updated, and reissued based on work performance data that is provided as the project is executed. The work performance information covers the project’s past performance and any information that could impact the project in the future. EACs are typically based on the actual costs incurred for work completed, plus an estimate to complete (ETC) the remaining work. It is incumbent on the project team to predict what it may encounter to perform the ETC, based on its experience to date. Earned value analysis works well in conjunction with manual forecasts of the required EAC costs. The most common EAC forecasting approach is a manual, bottom-up summation by the project manager and project team. The project manager’s bottom-up EAC method builds upon the actual costs and experience incurred for the work completed, and requires a new estimate to complete the remaining project work.

Equation: EAC = AC + Bottom-up ETC.

The project manager’s manual EAC is quickly compared with a range of calculated EACs representing various risk scenarios. When calculating EAC values, the cumulative CPI and SPI values are typically used. While EVM data quickly provide many statistical EACs, only three of the more common methods are described as follows:

• EAC forecast for ETC work performed at the budgeted rate. This EAC method accepts the actual project performance to date (whether favorable or unfavorable) as represented by the actual costs, and predicts that all future ETC work will be accomplished at the budgeted rate. When actual performance is unfavorable, the assumption that future performance will improve should be accepted only when supported by project risk analysis.

Equation: EAC = AC + (BAC – EV).

• EAC forecast for ETC work performed at the present CPI. This method assumes that what the project has experienced to date can be expected to continue in the future. The ETC work is assumed to be performed at the same cumulative cost performance index (CPI) as that incurred by the project to date.

Equation: EAC = BAC / CPI.

• • EAC forecast for ETC work considering both SPI and CPI factors. In this forecast, the ETC work will be performed at an efficiency rate that considers both the cost and schedule performance indices. This method is most useful when the project schedule is a factor impacting the ETC effort. Variations of this method weight the CPI and SPI at different values (e.g., 80/20, 50/50, or some other ratio) according to the project manager’s judgment.

Equation: EAC = AC + [(BAC – EV) / (CPI × SPI)].

CONTROL PROCUREMENTS

Trend analysis can develop a forecast estimate at completion (EAC) for cost performance to see if performance is improving or deteriorating for more detail on EAC methods.

CONTROL RESOURCES

As the project progresses, the project team may use trend analysis, based on current performance information, to determine the resources needed at upcoming stages of the project. Trend analysis examines project performance over time and can be used to determine whether performance is improving or deteriorating.

CONTROL SCHEDULE

Trend analysis examines project performance over time to determine whether performance is improving or deteriorating. Graphical analysis techniques are valuable for understanding performance to date and for comparing to future performance goals in the form of completion dates.

CONTROL SCOPE

Trend analysis examines project performance over time to determine if performance is improving or deteriorating.

CLOSE PROJECT OR PHASE

Trend analysis can be used to validate the models used in the organization and to implement adjustments for future projects.

References:

PMBOK^® GUIDE SIXTH EDITION

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