“S” Curve and Earned Value Concept

Tools for project monitoring and control

By Prof. B.P. Nansi

CONSTANT MONITORING AND controlling of a project under implementation is one of thekey functions of the Project Manager. This is because, once it gets underway, a projectmay or may not perform as planned. Variations in time and cost can take place. Wherethe project managing contracts are on a ‘cost-plus’ basis, the adherence to time andcost is important, but not critical. In recent times, project-managing companies have toenter into time bound contracts and any slippage will attract penalty.

For this reason it is necessary for the senior team members to have a periodicprogress report. Also, the top management and stakeholders constantly want to knowthe progress. They ask crucial questions:• How much work is actually done?• How much work was planned?• Will the project be completed as scheduled?• Is it delayed?• What is the expected date of completion as at present rate?• How much cost is incurred as on date?• What is the budgeted cost for the work done?• Is the incurred cost as per the budget?• Is there a cost over-run?• What will be the total cost on completion at present rate?There are other reasons that a project is monitored and controlled. These are:• Progressive payments to contractors• Project manager’s billing to the customer• Decisions of project completion and job closureSo progress monitoring and controlling is vital. And you must measure what you wishto control. Progress measuring is a crucial part of project management. It is here thatthe “S” curve and the earned value concept are used.

What is an “S” Curve?For “S” curve, let us understand WBS. WBS (Work Breakdown Structure) is thebreakdown of the work into systematic and logical component packages. Eachpackage is further sub divided. This process is continued up to manageable suitablecomponent packages are decided. Each final component is called an activity. When allactivities are complete, the project is complete.Each activity is then assigned the following parameters.1. Start date2. End date3. Cost4. Weightage (Its contribution to the project progress. The sum of wieghtages of allactivities is 100%)

5. Responsible agency6. ResourcesAfter WBS, draw the “S” curve for the project. The curve shows the time duration onthe horizontal axis and the cumulative per cent progress of the project on the verticalaxis. The curve begins at ‘Project start date, 0%’ point and completes on ‘Projectend date, 100%’ point. It is observed that, in a project, the work progresses slowly inthe beginning, picks up speed somewhere 1/3 the duration and then slows down againcreeping to 100%. The curve looks like an “S” and is popularly known as Project “S”Curve. (See figure.)

How to use the “S” curve• Select a day for the report. This date is generally month end.• Measure the work actually preformed on each activity. Then calculate the progress

achieved on each activity.• Calculate the contribution of each activity to the project progress, using the

weightage value.• Sum up activity contributions and find the total project progress.• Read from the “S” curve the work scheduled as on the report day.

So you know the work performed versus work scheduled. That tells whether theproject is on the schedule, early or delayed. You may plot the actual work done curvealong side the “S” curve. That will be Actual curve. Then plot the remaining workalong the actual curve and you have the forecast.

Find out the budgeted cost of the actual work. This budgetedcost of the actual work is the earned value, regardless of the actualcost.

Earned Value ConceptThe same process is carried out for the cost of each activity and the total cost of theproject. Here the concept of “Earned value” is useful.You have calculated the actual work done as on the report date. Find out the budgetedcost of the actual work. This budgeted cost of the actual work is the earned value,regardless of the actual cost. This is known as ‘Earned value’. Compare the earnedvalue with the actual cost and you know whether the project has incurred any costover-runs.For the project monitoring, controlling and forecasting, the following vital parametersare calculated as on the report date:• AWP - Actual work performed (Achieved progress)• SWP - Scheduled work to be performed (Scheduled progress)• ACWP- Actual cost of work performed• BCWP - Budgeted cost of work performed (EV-Earned value)• BCWS - Budgeted cost of work scheduled• SPI - Schedule performance index (EV / BCWS) (<1 is over run)• CPI - Cost performance index (EV/ ACWP) (<1 is over run))• ETC - Estimated time to completion (Planned project duration/SPI)• ECC - Estimated cost to completion (Project budgeted cost/CPI)• CV - Cost variance (EV - ACWP) (negative is cost over run)

The “S” curve and the earned value are necessary to enable the management to taketimely decisions, of reinforcing the project team for ensuring that the project getscompleted on time and within the budgeted cost. The management will weigh thecosts of reinforcement versus timely implementation to avert the penalty. Otheractions can be any of the following.• Activity crashing i.e. reducing the critical activity duration• Cost and spending plan modifications• Cash flow adjustments• Resources allocation revision• Change in project specifications• Change in executing agency• Change in suppliers, contractors, and so on• Abandon the project?Or you may find that the project is on time and it is as per the budgeted cost.Congratulations. Now everything is okay. Then all you have to do is to ensure that theproject does not deteriorate. Remember, the principle is that, if you sleep, the projectwill slip.

(The author worked for Tata Consulting Engineers, Mumbai, for 21 years, ondifferent aspects of Project Management. He can be contacted at bp.nansi@projectsmonitor.com)