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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)
8/16/2019 STR402-L07-Earned Value Method (Updated)
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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)
8/16/2019 STR402-L07-Earned Value Method (Updated)
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Indices
Forecasting
Term Description Equation
BAC Budget at Completion BAC = Original project estimate
ETC Estimate to CompleteETC =
BAC BCWP
CPI
EAC Estimate at Completion EAC = ACWP + ETC
Term Description Equation
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
8/16/2019 STR402-L07-Earned Value Method (Updated)
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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
8/16/2019 STR402-L07-Earned Value Method (Updated)
http://slidepdf.com/reader/full/str402-l07-earned-value-method-updated 5/16
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
8/16/2019 STR402-L07-Earned Value Method (Updated)
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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 ($)
10 100% Completed as scheduled 1,500
20 100% Completed as scheduled 2,200
30 100% Completed as scheduled 4,000
Parameter Value ($)
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.
8/16/2019 STR402-L07-Earned Value Method (Updated)
http://slidepdf.com/reader/full/str402-l07-earned-value-method-updated 7/16
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 $.
8/16/2019 STR402-L07-Earned Value Method (Updated)
http://slidepdf.com/reader/full/str402-l07-earned-value-method-updated 8/16
A status report after 20 working days includes the following information:
Activity Percent complete Status Actual cost to date ($)
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
Cost and Schedule deviations:
CV = BCWP – ACWP = 22,720 – 25,200 = – 2,480 $ (cost overrun)
Based on the status report, the actual cost is greater than earned by
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.
8/16/2019 STR402-L07-Earned Value Method (Updated)
http://slidepdf.com/reader/full/str402-l07-earned-value-method-updated 9/16
Cost and Schedule Performance:
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.
Forecasting cost at completion:
ETC = −
=
1, −22,2
.9= 138,644 $
Based on the status report, the forecasted remaining cost to
complete the project is 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 $.
8/16/2019 STR402-L07-Earned Value Method (Updated)
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A status report after 25 working days includes the following information:
Activity Percent complete Status Actual cost to date ($)
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
Cost and Schedule deviations:
CV = BCWP – ACWP = 33,000 – 36,600 = – 3,600 $ (cost overrun)
Based on the status report, the actual cost is greater than earned by
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.
8/16/2019 STR402-L07-Earned Value Method (Updated)
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Cost and Schedule Performance:
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.
Forecasting cost at completion:
ETC = −
=
1, −,
.9= 127,222 $
Based on the status report, the forecasted remaining cost to
complete the project is 127,222 $.
EAC = ACWP + ETC = 36,600 + 127,222 = 163,822 $
Based on this status report, the estimated cost of the project atcompletion is 163,822 $ which is 16,322 $ over the original budget
of 147,500 $.
8/16/2019 STR402-L07-Earned Value Method (Updated)
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A status report after 70 working days includes the following information:
Activity Percent complete Status Actual cost to date ($)
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
Cost and Schedule deviations:
CV = BCWP – ACWP = 56,830 – 65,080 = – 8,250 $ (cost overrun)
Based on the status report, the actual cost is greater than earned by
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.
8/16/2019 STR402-L07-Earned Value Method (Updated)
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Cost and Schedule Performance:
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.
Forecasting cost at completion:
ETC = −
=
1, −,
.= 104,218 $
Based on the status report, the forecasted remaining cost to
complete the project is 104,218 $.
EAC = ACWP + ETC = 65,080 + 104,218 = 169,298 $
Based on this status report, the estimated cost of the project atcompletion is 169,298 $ which is 21,798 $ over the original budget
of 147,500 $.
8/16/2019 STR402-L07-Earned Value Method (Updated)
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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
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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
8/16/2019 STR402-L07-Earned Value Method (Updated)
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1.10.5 0.6 0.7 0.8 0.9
CPI
SPI
1.1
0.9
0.8
0.7
1.0
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