# Project Finance & Control — Quick Review

**Liam Smith · Robert Caldwell · Five lectures, September 16–30, 2026 · Workbook v8.0**  
Version 1.1 · 5 October 2026. Includes the supplied Modules 1/2, 3 and 4 reviews. References below are PDF-viewer pages; lecture times are recording positions. Use the complete guide for explanations and the source index for corrections.

## The course in one pass

Financial management: **plan → estimate → budget → control**. Procurement: **plan → conduct → control**. Control setup: **factors/thresholds → actual-data collection → change process → responsibilities → document/communicate**. Ongoing control: **collect → compare/analyze → act → make authorized revisions → report**. *(Workbook, PDF pp. 19, 139, 141, 179.)*

Strategic objectives concern future organizational position; financial objectives concern financial performance. Use both. Numeric does not automatically mean financial. Project outcomes and benefits can continue after delivery. WACC represents financing cost/required return, not actual project ROI. *(Workbook, PDF pp. 21–28.)* *(Sep 16, 01:06:04–01:46:33; segments 90–116.)*

## Formula card

| Topic | Formula | Remember |
|---|---|---|
| WACC | \(w_Dk_D(1-T)+w_Ek_E\) | Financing proportions sum to 1 |
| Capital charge | Capital × WACC | Specify the period |
| Present value | \(F/(1+r)^t\) | Discounted future amount |
| NPV | \(-C_0+\sum C_t/(1+r)^t\) | Includes initial outflow |
| Triangular estimate | \((O+M+P)/3\) | Equal weighting |
| PERT estimate | \((O+4M+P)/6\) | Four weights on most likely |
| PERT spread approximation | \((P-O)/6\) | Same units as estimate |
| Risk expected value | Probability × impact | Use a decimal probability |
| Course contingency | Sum of residual risk expected costs | Expected amount, not worst-case loss |
| Cost baseline | Work budget + contingency | Management reserve excluded |
| Total project budget | Baseline + management reserve | Separate authorization |

*(Workbook, PDF pp. 28–29, 61–63, 76, 79–81.)*

## Estimates and quality costs

| Estimate class | Course range |
|---|---|
| ROM | −50% / +100% |
| Budgetary | −10% / +25% |
| Definitive | −5% / +10% |

Analogous = compare similar previous work. Parametric = quantity/rate or calibrated historical model. Bottom-up = detailed estimates rolled upward. Modified Delphi = independent expert estimates, discussion and revision toward consensus. Method and estimate class are different ideas. *(Workbook, PDF pp. 60–61, 76–77.)*

**Conformance:** prevention (training/planning) and appraisal (testing/inspection). **Nonconformance:** internal failure (scrap/rework before delivery) and external failure (returns/warranty after delivery). Extra precision is not extra accuracy. Check overhead bases and avoid counting the same contingency twice. *(Sep 21, 01:13:49–03:00:51; segments 128–150, 192–203.)*

## Earned-value card — highest recall priority

PV = **budget for scheduled work**. EV = **budget value of performed work**. AC = **actual cost**. BAC = total approved baseline budget; BD = total baseline duration. Compare all three at the same status date. Financial PV means present value; EVM PV means planned value. Risk expected value is not earned value. *(Workbook, PDF pp. 89–91.)* *(Sep 23, 01:13:50–01:22:00; segments 90–97.)*

| Schedule | Cost |
|---|---|
| **SV = EV − PV** | **CV = EV − AC** |
| **SPI = EV / PV** | **CPI = EV / AC** |
| **RTD = BD / SPI** | **EAC = BAC / CPI** |

EV first in variances and indices. Positive variance or index >1 is favorable on that dimension; negative or <1 unfavorable. SV/CV are currency, indices are ratios, RTD is time, EAC currency. RTD/EAC are **total forecasts**, not amounts remaining. Use unrounded indices. Their continuation assumptions need checking. *(Workbook, PDF pp. 111–113.)*

| SPI | CPI | Meaning |
|---|---|---|
| >1 | >1 | Ahead; favorable cost efficiency |
| <1 | >1 | Behind; favorable cost efficiency |
| >1 | <1 | Ahead; unfavorable cost efficiency |
| <1 | <1 | Behind; unfavorable cost efficiency |

For graphs: EV versus PV gives schedule; EV versus AC gives cost. **Actual spending versus planned spending without EV is insufficient for CPI/SPI.** *(Workbook, PDF pp. 107–113, 213.)*

### Checked anchor examples

- **Widgets:** PV=$5,000, EV=$3,000, AC=$7,000; BAC=$10,000, BD=10 weeks. SV=−$2,000; SPI=.60; CV=−$4,000; CPI=3/7; EAC=$23,333.33; RTD=16.67 weeks.
- **Workbook Practice 5:** EV65/PV50/AC45, in $m; BAC100m, BD100 weeks. SPI=**1.30**, RTD=**76.92 weeks**, CPI=65/45, EAC=**$69.23m**. The printed SPI denominator 40 is wrong.
- **Workbook Practice 6:** EV45/PV50/AC55; SPI=.90, CPI=45/55, EAC=$122.22m, RTD=111.11 weeks.

*(Sep 23, 00:10:35–01:10:22; segments 41–89.)* *(Workbook, PDF pp. 105–106.)*

**Percentage trap:** SPI=.60 means 60% of planned budgeted work achieved; a BD/SPI projection is 66.67% longer, not 40% longer. CPI=.428571 means 42.86 cents earned per dollar spent. 1−CPI is a shortfall measured against AC; spending above EV is \(1/CPI-1\), here 133.33%. Specify the denominator.

## Controls and decisions

A factor states **what to measure**; a threshold states **acceptable deviation**. “Cost” alone is not a metric. Define measurement point, comparator, units, owner, data source and cadence. Measurable effort has a tangible result and completion schedule. Levels mean activities, deliverables, milestones and phases, not severity tiers. *(Workbook, PDF pp. 128–130, 139–142.)* *(Sep 28, 00:18:09–01:16:58; segments 37–77.)*

At ±5%, +7% is **2 percentage points** beyond the band. “40% complete ±5 percentage points” means 35–45%. Numeric thresholds are project-specific. Workbook reserve ranges and CPI alert levels are illustrations, not mandatory rules. *(Workbook, PDF pp. 63, 79, 92, 114.)*

**Executing:** do work. **Monitoring:** collect, measure, report. **Controlling:** compare, analyze, decide and take authorized action. A forecast update does not automatically change the baseline. *(Workbook, PDF pp. 150, 157.)*

Change: **document/log → evaluate need → analyze effects → accept/reject/defer → notify → integrate approved change → implement/verify/close**. CCB = authorized decision maker(s). Defer = postpone; escalation = refer for authority. Configuration control keeps product characteristics, versions and records aligned. Scope creep and gold plating are warning signs. *(Workbook, PDF pp. 132–134, 144–146.)*

Corrective action must respect scope, time, cost, quality, resources, risk and current stakeholder priorities. Review the critical path before moving people or crashing. Preserve essential acceptance testing; if priorities are unclear, get stakeholder agreement. “Cheapest” and “fastest” are not self-sufficient justifications. *(Workbook, PDF pp. 161–164, 217–220, 247.)*

## Procurement card

Buyer = purchaser/client; seller = vendor/contractor. Make/buy compares internal and external options. SOW describes clear, measurable work; it may be part of a contract. *(Workbook, PDF pp. 168–170, 181–183.)*

| Type | Recall |
|---|---|
| FFP | Fixed agreed price for defined scope; seller bears more cost-overrun risk |
| FPIF | Fixed-price incentive structure |
| FP-EPA | Defined economic price adjustment; workbook addition |
| CPFF | Reimbursed allowable costs plus fixed fee; total price is not fixed |
| CPIF | Reimbursed allowable costs with formula/objective incentive fee |
| CPAF | Reimbursed allowable costs with evaluated performance award |
| CPP/CPPC | Fee as percentage of costs; US federal FAR prohibition |
| T&M | Fixed labor rates, variable hours/materials; manage quantities and ceilings |

Risk allocation follows actual terms; “all risk” or “no risk” is too absolute. The federal prohibition is for cost-plus-percentage, not all cost reimbursement. *(Workbook, PDF pp. 171–172, 185–186.)* See [FAR 16.102](https://www.acquisition.gov/far/16.102).

IFB = comparable specified work, commonly price driven. RFP = proposed solutions evaluated across criteria. RFQ = quotation. RFI = information. Bidder conference = **buyer-led clarification before bid submission**, not seller pitches. Validate bids before consistent evaluation; establish criteria in advance. *(Workbook, PDF pp. 173–174, 188–191.)*

BATNA = **best alternative to a negotiated agreement**, your best option if no deal occurs. Prepare interests, limits and alternatives; seek a fair relationship. Privity identifies contractual parties. Recognize pressure tactics without assuming deception is good practice. *(Workbook, PDF pp. 192, 197.)*

Contract control tracks performance and authorized amendments. Closeout = verify acceptance, settle financial obligations, complete records/reports, review and retain lessons. *(Workbook, PDF pp. 176, 194–196.)*

## New module-review recall

Cost-management benefits: **expectations, efficient resources, profit, capacity for further projects, learning**. Implementation costs: **infrastructure, training, time**. CBA: identify → monetize costs → monetize benefits → discount as appropriate → evaluate. *(Module review: Finance M1 M2 Review MASTER.docx, body blocks 44–53, 151–156.)*

| Review case | Answer to remember |
|---|---|
| $100,000 estimate | ROM $50k–$200k; budgetary $90k–$125k; definitive $95k–$110k |
| Gym: minimum 2, most likely 3, maximum 5 | Triangular 3.33; PERT 3.17 visits/week |
| $200m headquarters, five listed risks | Contingency $15.9m; baseline $215.9m if work excludes reserve |
| Three risks: 10%/$200k, 20%/$100k, 35%/$40k | Contingency $54k |

*(Module review: Finance M3 Review MASTER.docx, body blocks 50–81.)*

The Module 4 answer key is incorrect for several terms: **performed budget = EV; incurred cost = AC; scheduled budget = PV; completion budget = BAC**. Its EAC expression should be **BAC/CPI** when current efficiency continues. A definitive estimate is still a forecast, and EVM means **Earned Value Management**. *(Module review: Finance M4 Review MASTER.docx, body blocks 20–22, 29.)* *(Module review: Finance M3 Review MASTER.docx, body blocks 5, 18.)*

## Last-minute corrections to retain

1. WACC is not actual ROI; capital plus a charge is not NPV.
2. Refinery discounted inflows=$93.264m; true NPV after $100m outlay=**−$6.736m**.
3. Practice 5 SPI=**65/50**, not 65/40.
4. EV does not tell you actual cost; AC/PV alone does not tell you earned-value performance.
5. Management reserve is outside the course baseline.
6. Percentage shortfalls need denominators; duration forecasts use reciprocal SPI.
7. Deferred change is not necessarily escalated change.
8. A sponsor's suggested scope cut still requires impact analysis and authorization.
9. Fixed unit rates do not fix a T&M total; CPFF fixes the fee, not the costs.
10. BATNA is the no-deal alternative, not your list of concessions.

Work the practice set from memory, then review its explained answers.