earned value method

Earned Value

Elements of Project Control

Creation of a Baseline Schedule

Measurement of Performance

Effective Corrective Actions

Schedule Updating

1. Schedule durations and sequences often vary from actual durations and sequences

Subcontractors might use different methods

Force Majeure events delay the project

Etc

2. Participants would like to know how the project is progressing

Owners When can I move in? How much should I pay this month? What milestones have been met?

Designers When do I release drawings

Subcontractors when do I come on to the site?

Usefulness of frequent schedule

updating

Current state of the project is always known

Updates provide a valuable record of project status at a given time

Can document changes, responsibilities and delays throughout the project

Useful during claims proceedings

Schedule is a document that can be followed

More on updates

Schedules should be updated periodically

Especially if a major event such as a logic change occurs

Updates should show

New start and completion dates

Completed activities

Percentage progress on activities

Percentage Complete

Planned Vs. Actual

Updating a Precedence Diagram

0 0

Start

0 0 0

0 4

F (3)4

3 3 7

0 3

A 3

0 0 3

3 9

B (4)6

3 0 9

6 8

D 2

7 1 9

3 6

E 3

4 1 7

9 9

Finish

9 0 9

6 8

C 2

7 1 9

Earned Value

We have spent 60% of the time for an activity but have completed 40% of the

work. We are on schedule since we have

completed the most time consuming parts

of the activity

Evaluating Progress on an Activity

Units completed

Length of pipe laid, length of trench dug

Effort expended

Plastering = 50%, Painting = 50% effort

3 walls plastered, two painted out of 4 walls

Percentage complete = (3x0.5+2x0.5)/4 = 62.5%

Expert opinion

Amount spent

Time taken (?)

Project Monitoring

Project Monitoring

Planning and scheduling play an important role in project management

But without monitoring the project, chances of completing the project on schedule is difficult

Two parameters are monitored

Cost

Time

The following graph shows the Time-cost relationship for a project

Project Monitoring

This graph shows Project Progress

Co

st

Time

Cost over-run with schedule

Time over-run

Ideal

Curve

Project Monitoring

Cost is not proportional to the time/man-hours spent on each activity

Eg:- Installation of a projector in a classroom Cost of the projector is very high

Man-hours spent on installation are not significant

Neither expenditure nor man-hours spent can be used to measure the project progress

Expenditure and man-hours are inputs

Progress in terms of input does not indicate progress in terms of output

Project Monitoring

Quantities installed can give information regarding project progress, but is limited to very few activities and

cannot be applied to the entire project as it involves

various activities

Thus with the help of above mentioned parameters, it is difficult to measure the project progress.

Hence the use of EARNED VALUE of time or cost

Concepts of Earned Value

Concept of Earned Value

Consider the following example:

Wall construction Wall is divided into 4 sections

For 4-sections - 100 man-hours are required

Hence if 2-sections are completed,

(2/4) 100

= 50 man-hours

We say that 50 man-hours have been EARNED

The actual man-hours spent to construct these two sections can be more than or less than the Earned

Value of man-hours


Wall construction

If 4 sections cost Rs. 1000/-

then the cost of constructing 2 sections = Rs. 500/-

We say that Rs. 500/- is the EARNED value of money

The actual cost incurred in constructing these two sections can

be more than or less than the Earned Value of money

It is important to note that Earned Value is based on the Actual

quantities installed or Actual quantity of work done

Hence output is considered in the Earned Value concept


Calculation of Earned Value

Earned Value of man-hours or money for an activity can be calculated as follows:

Example 1

Example 1

Determination of planned % complete:

Consider the following example

Draw % complete with respect to man-hours and money.

Activity A

Activity B

300

5000

700 (man-hours)

5000 (money)

500

10000

800 (man-hours)

70000 (money)

Example 1

Determination of planned % complete based on man-hours.

Activity A

Activity B

300

5000

700 (man-hours)

5000 (money)

500

10000

800 (man-hours)

7000 (money)

Daily Cumulative

Total Cumulative

% Complete

300 1200 800

300 1500 2300

300 1200 300 2300 2300 2300

= 1.0 = 0.65 = 0.13

Example 1

Determination of planned % complete based on money.

Activity A

Activity B

300

5000

700 (man-hours)

5000 (money)

500

10000

800 (man-hours)

27000 (money)

Daily Cumulative

Total Cumulative

% Complete

5000 15000 7000

5000 20000 27000

= 1.0 = 0.741 = 0.185

5000 20000 90000 27000 27000 27000

Example 1 P

erc

en

tag

e

Stages

Example 1

BCWS Man-hours

Stages 1 2 3 Total

Activity A 300 700 0 1000

Activity B 0 500 800 1300 2300

Stage Total 300 1200 800

Cumulative Total 300 1500 2300

Project % Complete 0.13 0.65 1.0

Example 1

BCWS Money

Stages 1 2 3 Total

Activity A 5000 5000 0 10000

Activity B 0 10000 7000 17000 27000

Stage Total 5000 15000 7000


Project % Complete 0.185 0.741 1.0

Determination of Earned Value of Man-hour.

Consider the previous problem (man-hours)

Example 1

500 800

700 300 Activity A

Activity B

% Complete

0.25 0.95 1.0

0.6 0.95

Activity A

Activity B

scheduled

Example 1


Stage 1: EMh (A)

EMh (B)

Total Man-hours = 2300

% complete of project: % complete = 250 / 2300

% complete = 0.11

Example 1


Stage 2: EMh (A)

EMh (B)



% complete = 0.752

Example 1


Stage 3: EMh (A)

EMh (B)



% complete = 0.97

Determination of Earned Value of Man-hour:

Earned Value (man-hours)

500 800

700 300 Activity A

Activity B

% Complete

0.25 0.95 1.0

0.6 0.95

Activity A

Activity B

scheduled

250 700 50 Man-hours

780 455 Man-hours

0.108 0.752 0.971 Project - % Complete

Example 1

Example 1


BCWP

Stages 1 2 3

% complete

Activity A

Activity B

0.25

0

0.95

0.6

1.0

0.95

Earned Value (man-hours)

Activity A

Activity B

Stage total

250

0

250

700

780

1480

50

455

505

Activity A (cum)

Activity B (cum)

250

0

950

780

1000

1235

Total cumulative 250 1730 2235

Project % complete 0.109 0.752 0.972

Example 1

Determination of Earned Value of Man-hour: ACTUAL MAN-HOURS

Actual (man-hours)

500 800

700 300 Activity A

Activity B scheduled

400 500 100 Man-hours

450 1000 Man-hours

Example 1


ACWP

Stages 1 2 3

Activity A

Activity B

400

0

500

450

100

1000

Stage Total 400 950 1100


Example 1


Stage 1 Stage 2 Stage 3

BCWS SCHEDULED MAN-HOUR (Cumulative) 300 1500 2300

BCWP EARNED MAN-HOUR (Cumulative) 250 1730 2235

ACWP ACTUAL MAN-HOUR (Cumulative) 400 1350 2450

SV BCWP-BCWS -50 230 -65

CV BCWP-ACWP -150 380 -215

SPI BCWP/BCWS 0.83 1.15 0.97

CPI BCWP/ACWP 0.63 1.28 0.9122

Example 1

Determination of Earned Value of Man-hour: Earned Value

Ma

n-h

ou

r

Stages

Example 1

Determination of Earned Value of Money

Consider the previous problem (money)

10000 7000

5000 5000 Activity A

Activity B

% Complete

0.25 0.95 1.0

0.6 0.95

Activity A

Activity B

scheduled

Determination of Earned Value of Money.

Stage 1: EMh (A)

EMh (B)


Example 1


% complete = 0.093

Example 1


Stage 2: EMh (A)

EMh (B)



% complete = 0.730

Example 1


Stage 3: EMh (A)

EMh (B)



% complete = 0.969

Example 1


Earned Value (money)

10000 7000


Activity B

% Complete

0.25 0.95 1.0

0.6 0.95

Activity A

Activity B

scheduled

2500 7000 500 Money

10200 5950 Money

0.093 0.730 0.969 Project - % Complete

Example 1


BCWP

Stages 1 2 3

% complete

Activity A

Activity B

0.25

0

0.95

0.6

1.0

0.95

Earned Value (money)

Activity A

Activity B

Stage total

2500

0

2500

7000

10200

17200

500

5950

6450

Activity A (cum)

Activity B (cum)

2500

0

9500

10200

10000

16150

Total cumulative 2500 19700 26150

Project % complete 0.093 0.730 0.969

Example 1

Determination of Earned Value of Money. ACTUAL MONEY

Actual (money)

10000 7000


Activity B scheduled

4500 6000 5000 Money

8500 7500 Money

Example 1


ACWP

Stages 1 2 3

Activity A

Activity B

4500

0

6000

8500

5000

7500

Stage Total 4500 14500 12500


Example 1


Stage 1 Stage 2 Stage 3

BCWS SCHEDULED MONEY (Cumulative) 5000 20000 27000

BCWP EARNED MONEY (Cumulative) 2500 19700 26150

ACWP ACTUAL MONEY (Cumulative) 4500 19000 31500

SV BCWP-BCWS -2500 -300 -850

CV BCWP-ACWP -2500 700 -5350

SPI BCWP/BCWS 0.5 0.99 0.97

CPI BCWP/ACWP 0.56 1.04 0.83

Example 1

Determination of Earned Value of Money. Earned Value

Mo

ne

y

Stages

Example 2

Example 2

Determination of planned % complete:

Draw % complete with respect to Man-hours and Money.

MAN-HOURS

20 20 20 20 20

12.5 12.5 12.5 12.5

10 10

MONEY

8000 8000 8000 8000 8000

10000 10000 10000 10000

75000 75000

Sch. Qty. Sch. Mhrs

Flooring 400 100

Electrical 100 50

AV systems 20 20

Sch. Money

40000

40000

150000

Example 2

Determination of planned % complete based on Man-hours:

Sch. Mhrs.

Flooring 100

Electrical 50

AV systems 20

170

20 20 20 20 20

12.5 12.5 12.5 12.5

10 10

20 20 32.5 32.5 32.5 32.5 10 10

20 40 72.5 105 137.5 150 160 170

20

170

40

170

72.5

170

105

170

137.5

170

150

170

160

170

170

170

0.118 0.235 0.426 0.618 0.809 0.882 0.941 1.0

Total Mhrs.

Cuml. Mhrs.

% complete

Stage 1 Stage 2 Stage 3 Stage 4

Example 2

Determination of planned % complete based on money:

Sch. Money

Flooring 40000

Electrical 40000

AV systems 150000

230000

8000 8000 8000 8000 8000

10000 10000 10000 10000

75000 75000

8000 8000 18000 18000 18000 10000 75000 75000

8000 16000 34000 52000 70000 80000 155000 230000

8000

230000

16000

230000

34000

230000

52000

230000

70000

230000

80000

230000

155000

230000

230000

230000

0.034 0.069 0.147 0.226 0.304 0.347 0.673 1.0

Total Money

Cuml. Money

% complete

Stage 1 Stage 2 Stage 3 Stage 4

Example 2

Scheduled-percentage complete

Pe

rce

nta

ge

Days

Example 2

Determination of Earned Value of Man-hour UPDATE 1

Quantity Installed

50 70

12.5 17.5 0 0 0 0 0 0

12.5 30 30 30 30 30 30 30

0.074 0.176 0.176 0.176 0.176 0.176 0.176 0.176

Sch. Mhrs Inst. Qty.

Flooring 100 120

Electrical 50

AV Systems 20

170

Actual Man-hours

20 20

20 20 0 0 0 0 0 0

20 40 40 40 40 40 40 40

Earned Mhrs.

Cuml. Earned Mhrs.

% complete

Total Mhrs.

Cuml. Mhrs.

Update 1

Example 2 M

an

-ho

urs

Stages

Example 2


Quantity Installed

50 70 80 80

25 30

12.5 17.5 32.5 35 0 0 0 0

12.5 30 62.5 97.5 97.5 97.5 97.5 97.5

0.074 0.176 0.368 0.574 0.574 0.574 0.574 0.574

Sch. Qty. Sch. Mhrs Inst. Qty.

Flooring 400 100 280

Electrical 100 50 55

AV Systems 20 20

170

Actual Man-hours

20 20 30 30

15 15

20 20 45 45 0 0 0 0

20 40 85 130 130 130 130 130

Earned Mhrs.

Cuml. Earned Mhrs.

% complete

Total Mhrs.

Cuml. Mhrs.

Example 2

Update 2

Ma

n-h

ou

rs

Days

Example 2


Quantity Installed

50 70 80 80 90 30

25 30 35 10

12.5 17.5 32.5 35 0 0 0 0

12.5 30 62.5 97.5 137.5 150 150 150

0.074 0.176 0.368 0.574 0.809 0.882 0.882 0.882

Sch. Qty. Sch. Mhrs Inst. Qty.

Flooring 400 100 400

Electrical 100 50 100

AV Systems 20 20 0

170

Actual Man-hours

20 20 30 30 30 15

15 15 15 15

20 20 45 45 45 30 0 0

20 40 85 130 175 205 205 205

Earned Mhrs.

Cuml. Earned Mhrs.

% complete

Total Mhrs.

Cuml. Mhrs.

Example 2

Update 3

Ma

n-h

ou

rs

Days

Components of Earned Value

Components of Earned value Analysis

Budgeted Cost of Work Scheduled (BCWS)

It is the budgeted cost of work scheduled to be performed

It is also called the Planned Value (PV)

It tells how much work have been completed


Budgeted Cost of Work Performed (BCWP)

It is the budgeted cost of work actually performed

The Earned Value for the work actually completed

It tells how much work is actually completed


Actual Cost of Work Performed (ACWP)

It is the amount actually spent on the work completed

This could be more or less than the Earned Value


Scheduled Variance (SC)

It compares work completed vs work planned

It helps to identify whether the project is ahead or behind schedule

Negative value indicated that the project is behind schedule


Scheduled Performance Index (SPI)


Less than 1 indicates that the project is behind schedule

It can be used to forecast how long it will take for the project to complete


Cost Varience (CV)

It compares what was planned to be spent on the work completed vs. what was actually spent


Negative value indicates that the project is over budget


Cost Performance Index (CPI)

It helps to identify weather the project is above or below budget

Less than 1 means the project is over budget

It can be utilised to forecast how much amount will be required to complete the project


Budget at Completion (BAC)

It is the amount that was originally budgeted to complete the project


Estimate at Completion (EAC)

It is the estimated amount required to complete the project


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earned value method

Documents

project project

project useful

project management

entire project

project progress expenditure

value of time

timecost relationship

activities percentage