str402-l07-earned value method (updated)

8/16/2019 STR402-L07-Earned Value Method (Updated)

http://slidepdf.com/reader/full/str402-l07-earned-value-method-updated 1/16

STR 402: Quantity Surveying & CostControl of Construction Projects

Earned Value Method

Dr. Ahmed Saad Eldin Eldieb

Earned-Value MethodIt is a management tool is used to monitor and measure the project

performance in terms of scope, time and cost.

EVM characteristics• Point in Time Evaluation

• How much work did you PLAN to complete? (Planned Value)

• How much work did you ACTUALLY complete? (Earned Value)

• How much did you SPEND to complete the work? (Actual Cost)



Earned Value provides the basis for cost performance analysis. If you

want to know what’s happening to the cost of your project before it

is completed, you need to know what the planned cost at any time

was and also what the cost of the completed work is.

Should this project manager be happy or concerned? It seems that

the actual costs are considerably below the planned cost. Thisappears to be good news. However, unless you look at the planned

cost of the completed work, you don’t really know if this is good

news or not. That is exactly the missing information that Earned

Value provides.

C o s t

TimeToday

Term Description

BCWS Budgeted cost of work scheduled

(Planned)

It represents the cumulated budget of

the activities that are planned or

scheduled to be completed at any point

of time.

BCWP Budgeted cost of work performed

(Earned)

It is a measure of the physical progress of

works expressed by cumulated planned

cost of works actually done.

ACWP Actual cost of work performed

(Actual)

It is the actual cumulated amount

payable for works done at any point oftime.

Earned Value Analysis

Variances

Term Description Equation

CV Cost Variance CV = BCWP – ACWP (CV = Earned – Actual)

SV Schedule Variance SV = BCWP – BCWS (CV = Earned – Planned)



Indices

Forecasting


BAC Budget at Completion BAC = Original project estimate

ETC Estimate to CompleteETC =

BAC BCWP

CPI

EAC Estimate at Completion EAC = ACWP + ETC


CPI Cost Performance IndexCPI =

BCWP

ACWP

=Earned

Actual

SPI Schedule Performance IndexSPI =

BCWP

BCWS=

Earned

Planned

The CPI is used to predict the magnitude of possible cost overrun or

underrun. It adjusts the budget based on past performance. The SPI

is used to predict the magnitude of possible time advance or delay.

It adjusts the schedule based on past performance.

CV

SV

BAC (Budget at completion)

EAC (Estimate at completion)

ETC

FACT Estimate

t

Today

T

Scheduled

Finish

T’

Estimated

Finish

Cost

Time

Estimate of

duration variance



Example

BCWS = 5,000 (1) + 6,500 (1) + 12,000 (0.8) + 14,000 (0.4) + 8,250 (0.1)

+ 9,000 (0)

= 27,525 EGP

BCWP = 5,000 (1) + 6,500 (0.6) + 12,000 (0.7) + 14,000 (0.15)

+ 8,250 (0) + 9,000 (0)

= 19,400 EGP

ACWP = 35,000 EGP (from your actual cost records of project tracking)

Activity A 5,000

6,500

12,000

14,000

8,250

9,000

Activity B

Activity C

Activity D

Activity E

Activity F

Today

100%

60%

70%

15%

80%

40%

10%

100%

100%

0%

Budgeted Cost

at completion

(EGP)

54,750

CV = BCWP – ACWP = 19,400 – 35,000 = – 15,600 EGP

SV = BCWP – BCWS = 19,400 – 27,525 = – 8,125 EGP

CPI =

=

19,

,= 0.554

SPI =

=

19,

2,2= 0.705

BAC = 54,750 EGP

ETC = −

=

, −19,

.= 63,808.7 EGP

EAC = ACWP + ETC = 35,000 + 63,808.7 = 98,808.7 EGP



CV

SV

BAC = 54,750

EAC = 98,808.7

FACT Estimate

tToday

TScheduled

Finish

T’ Estimated

Finish

Cost (EGP)

Time

19,400

27,525

35,000

ETC = 63,808.7

This project is currently (“today”) over budget and behind schedule.

Example

The following diagram shows a CPM diagram for construction phase of a

sewer and water lines project



Provide an Earned Value Analysis to evaluate the progress of the sewer

and water lines project. The original budget is $ 147,000 and the project

is scheduled to be completed in 94 working days.

A status report after 10 working days includes the following information:

Activity Percent complete Status Actual cost to date ($)

10 100% Completed as scheduled 1,500



Parameter Value ($)

BCWP 7,600

ACWP 7,700

BCWS 7,600

BAC 147,500

Cost and Schedule deviations:

CV = BCWP – ACWP = 7,600 – 7,700 = – 100 $ (cost overrun)

Based on the status report, the actual cost is greater than earned by

100 $.

SV = BCWP – BCWS = 7,600 – 7,600 = 0 $

(on schedule)

Based on the status report, the project is on schedule, because the

earned value is equal to the planned.



Cost and Schedule Performance:

CPI =

=

,

,= 0.987

The CPI is < 1.0, indicating a reduced cost performance.

SPI =

=

,

,= 1.0

The SPI =1.0, indicating that the schedule performance is

progressing precisely as planned.

Forecasting cost at completion:

ETC = −

=

1, − ,

.9= 141,743 $

Based on the status report, the forecasted remaining cost to

complete the project is 141,743 $.

EAC = ACWP + ETC = 7,700 + 141,743 = 149,443 $

Based on the status report, the estimated cost of the project atcompletion is 149,443 $ which is 1,943 $ over the original budget of

147,500 $.





40 100% two days delayed 8,000

50 60% two days delayed 3,200

60 50% Started out of sequence 6,300

Parameter Value ($)

BCWP 22,720

ACWP 25,200

BCWS 22,400

BAC 147,500


CV = BCWP – ACWP = 22,720 – 25,200 = – 2,480 $ (cost overrun)


2,480 $.

SV = BCWP – BCWS = 22,720 – 22,400 = 320 $

(ahead of schedule)

Based on the status report, the project is ahead of schedule,

because the earned value is greater than planned.




CPI =

=

22,2

2,2= 0.90

The CPI is < 1.0, indicating a poor cost performance. The cost

performance is significantly worse compared to the previous status

report.

SPI =

=

22,2

22,= 1.01

The SPI > 1.0, indicating that the schedule performance is

progressing better than planned. The project is ahead of schedule,

which is slightly better than the previous status report.


ETC = −

=

1, −22,2

.9= 138,644 $



EAC = ACWP + ETC = 25,200 + 138,644 = 163,844 $

Based on this status report, the estimated cost of the project atcompletion is 163,844 $ which is 16,344 $ over the original budget

of 147,500 $.





50 100% One more day delayed 6,200

60 100% no additional delays 12,600

70 100% no delays 2,100

Parameter Value ($)

BCWP 33,000

ACWP 36,600

BCWS 31,740

BAC 147,500




3,600 $.

SV = BCWP – BCWS = 33,000 – 31,740 = 1,260 $

(ahead of schedule)

Based on the status report, the project is ahead of schedule,

because the earned value is greater than planned.




CPI =

=

,

,= 0.90

The CPI is < 1.0, indicating a poor performance. The cost

performance is about the same compared to the previous status

report.

SPI =

=

,

1,= 1.04

The SPI > 1.0, indicating that the schedule performance is

progressing better than planned. The project is ahead of schedule,

and better than the previous status report.


ETC = −

=

1, −,

.9= 127,222 $



EAC = ACWP + ETC = 36,600 + 127,222 = 163,822 $


of 147,500 $.





80 100% no delays 14,000

90 100% no delays 800

100 100% no delays 1,400

110 100% no delays 5,000

130 100% no delays 4,500

140 20% as scheduled 680

160 30% as scheduled 2,100

Parameter Value ($)

BCWP 56,830

ACWP 65,080

BCWS 102,800

BAC 147,500




8,250 $.

SV = BCWP – BCWS = 56,830 – 102,800 = – 45,970 $

(behind schedule)

Based on the status report, the project is substantially behind

schedule, because the earned value is less than planned.




CPI =

=

,

,= 0.87

The CPI is < 1.0, indicating a poor performance. The cost

performance is worse compared to the previous status report.

SPI =

=

,

12,= 0.55

The SPI < 1.0, indicating that the schedule performance is

significantly worse than planned. The project is behind schedule,

and which indicates the project will be completed significantly later

than planned.


ETC = −

=

1, −,

.= 104,218 $



EAC = ACWP + ETC = 65,080 + 104,218 = 169,298 $


of 147,500 $.



Monitoring Project Performance

The CPI and SPI provide a quantity measurement of the progress of a

project. Values of CPI and SPI that are greater than 1.0 indicate goodproject performance, whereas values of CPI and SPI that are less

than 1.0 indicate poor project performance. These values can be

plotted on a graph to evaluate project performance during routine

reporting periods.

Although, minor deviations are expected, major deviations from one

report period to the next should alert the project manager to

investigate the reason(s) for the significant change in the project

performance.

1.1 1.2 1.3 1.4 1.50.5 0.6 0.7 0.8 0.9

CPI

SPI

1.1

1.2

1.3

1.4

1.5

0.9

0.8

0.7

0.6

0.5

1.0

Behind Schedule

and Under Budget

Ahead of Schedule

and Under Budget

Behind Schedule

and Over Budget

Ahead of Schedule

and Over Budget



Causes of Cost/Schedule Variances

The Earned Value Method identifies the magnitude of cost and

schedule deviations from the original project plan. However, it doesnot identify the cause(s) of the deviations.

The factors causing the cost and schedule variances are, but not

limited to:

• estimating errors

• technical problems

• design errors

• equipment problems

•

management problems• scope control (change orders)

• resources availability

• economic/inflation

• delayed materials deliveries

• delayed equipment deliveries

• poor production rates

• subcontractor interference and

delays

•

acts of God (weather, fire, flood,strikes, etc)

• accidents during construction

Example

Using the CPI and SPI data in the progress reports in the previous

example, plot the CPI/SPI performance graph

Progress Report CPI SPI

1 (at day 10) 0.987 1.0

2 (at day 20) 0.90 1.01

3 (at day 25) 0.90 1.04

4 (at day 70) 0.87 0.55



1.10.5 0.6 0.7 0.8 0.9

CPI

SPI

1.1

0.9

0.8

0.7

1.0

str402-l07-earned value method (updated)

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