Review of Work Progress by Earned Value Analysis

DOI : 10.17577/IJERTCONV3IS29025

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Review of Work Progress by Earned Value Analysis

Mithun Murali M

UG Student Department of Civil Engg

TKMCE

Kollam, India

Prof. Mohamed Asim Associate Professor Department of Civil Engg TKMCE

Kollam, India

Abstract Project control tools are commonly used in the construction industry. Unfortunately, many projects run over budget and behind schedule, which suggests that there is something wrong in our project control system. The earned- value method (EVM) is a project control technique that provides a quantitative measure of work performance. It is considered the most advanced technique for integration of schedule and cost. This paper attempts to evaluate work progress in a quantitative manner. Through Earned Value Analysis project cost and time at completion is forecasted and also the performance needed to bring the project back to planned cost and time is also calculated

  1. INTRODUCTION

    A successful project is one that is completed in time, that is within budget, and that satisfies the appropriate technical and safety standards. The successful delivery of a project depends on the proper management of the project. A well planned project may be a failure if it is not managed properly. It is here that we recognize the importance of Project Management. It is the application of knowledge, skills, tools and techniques to the project activities to meet or exceed the needs and expectations of stakeholders. Although- several systems and techniques are available to support project management efforts, the task of tracking costs and durations of a project is still difficult and challenging. This difficulty is perhaps due to the fact that the three basic categories of project data (i.e., cost, scheduling, and progress) are intimately interrelated, and they are also time dependent. This makes independent tracking of any one category of little or no value unless it is integrated with the other two. This shows the need for a practical quantitative method for measuring work progress, which would eliminate a major cause for this difficulty.

    The objective is to present an outline for a comprehensive and practical system to measure work progress on a construction project objectively. The proposed system employs two principles. The Construction schedule bar chart is used to integrate cost and scheduling data, and the earned value concept is used to serve as the yardstick for measuring progress.

    Earned Value Management (EVM) is a project management technique for measuring project progress in an objective manner. EVM has the ability to combine measurements of scope, schedule, and cost in a single integrated system. When properly applied, EVM provides an early warning of performance problems. Additionally, EVM

    promises to improve the definition of project scope, prevent scope creep, communicate objective progress to stakeholders, and keep the project team focused on achieving progress.

  2. KEY COMPONENTS OF EVM

EVM uses cost as the common measure of project cost and schedule performance. It allows the measurement of cost in currency, hours, worker-days, or any other similar quantity that can be used as a common measurement of the values associated with project work. EVM uses the following project parameters to evaluate project performance.

  1. Planned value

    The approved budget for the work scheduled to be completed by a specified date; also referred to as the budgeted cost of work scheduled (BCWS). The total PV of a task is equal to the tasks budget at completion (BAC) the total amount budgeted for the task.

  2. Earned value

    The approved budget for the work actually completed by the specified date; also referred to as budgeted cost of work performed (BCWP).

  3. Actual cost

    The costs actually incurred for the work completed by specified date; also referred to as actual cost of work performed (ACWP).

  4. Schedule variance (SV)

    The difference between the amounts budgeted for the work you actually did and for the work you planned to do. The SV shows whether and by how much your work is ahead of or behind your approved schedule.

  5. Cost variance (CV)

    The difference between the amount budgeted and the amount actually spent for the work performed. The CV shows whether and by how much you are under or over your approved budget.

  6. Schedule performance index (SPI)

    The ratio of the approved budget for the work performed to the approved budget for the work planned. The SPI reflects the relative amount the project is ahead of or behind schedule, sometimes referred to as the projects schedule efficiency.

  7. Cost performance index (CPI)

    The ratio of the approved budget for the work performed to what you actually spent for the work. The CPI reflects the relative value of work done compared to the amount paid for it, sometimes referred to as the projects cost efficiency.

  8. Time estimate at completion (TEAC)

    Using the assumption that past schedule performance is a good predictor of future schedule performance, and that schedule efficiencies, or inefficiencies, observed to date will prevail to completion, then the Time Estimate at Completion (TEAC) is the sum of the cumulative actual time plus the original scheduled time for the remaining work modified by the cumulative schedule performance index (SPI).

  9. Estimate at completion (EAC)

    EAC is the manager's projection of total cost of the project at completion.

  10. Estimate to complete (ETC)

The estimate of the amount of funds required to complete all work still remaining to be done on the task.

  1. Variance at completion (VAC)

    Variance at completion shows the variance of the total cost of the work and expected cost.

    1. EVM IMPLEMENTATION

      There are many more small and simple projects than there are large and complex ones, yet historically only the largest and most complex have enjoyed the benefits of EVM. Still, lightweight implementations of EVM are achievable by any person who has basic spreadsheet skills. In fact, spreadsheet implementations are an excellent way to learn basic EVM skills.

      The first step is to define the work. This is typically done in a hierarchical arrangement called a work breakdown structure (WBS) although the simplest projects may use a simple list of tasks. In either case, it is important that the WBS or list be comprehensive. It is also important that each element be mutually exclusive, so that work is easily categorized in one and only one element of work. The most detailed elements of a WBS hierarchy (or the items in a list) are called terminal elements of work.

      The second step is to assign a value, called planned value (PV), to each terminal element. For large projects, PV is almost always an allocation of the total project budget, and may be in units of currency (e.g. Dollars or Euros) or in labor hours, or both. However, in very simple projects, each terminal element may be assigned a weighted point value" which might not be a budget number. Assigning weighted values and achieving consensus on all PV quantities yields an important benefit of EVM, because it exposes misunderstandings and miscommunications about the scope of the project, and resolving these differences should always occur as early as possible. Some terminal elements cannot be known (planned) in great detail in advance, and that is expected, because they can be further refined at a later time. The third step is to define earning rules for each terminal element. The implest method is to apply just one earning

      rule, such as the 0/100 rule, to all terminal elements. Using the 0/100 rule, no credit is earned for an element of work until it is finished. A related rule is called the 50/50 rule, which means 50% credit is earned when an element of work is started, and the remaining 50% is earned upon completion. Other fixed earning rules such as a 25/75 rule or 20/80 rule are gaining favor, since they assign more weight to finishing work than for starting it, but they also motivate the project team to identify when an element of work is started, which can improve awareness of work-in-progress. These simple earning rules work well for small or simple projects because generally each terminal element tends to be fairly short in duration.

      These initial three steps define the minimal amount of planning for simplified EVM. The final step is to execute the project according to the plan and measure forward progress. When terminal elements are started and/or finished, EV is accumulated according to the earning rule. This is typically done at regular intervals (e.g. weekly or monthly).

      In many projects, schedule performance (completing the work on time) is equal in importance to technical performance. EVM skill can be very helpful in managing the schedule performance. The project manager may employ a critical path or critical chain to build a project schedule model. The project manager must define the work comprehensively, typically in a WBS hierarchy. He/she will construct a project schedule model that describes the precedence links between elements of work.

      In addition to managing technical and schedule performance, large and complex projects require that cost performance is monitored and reviewed at regular intervals. To measure cost performance, planned value (or BCWS – Budgeted Cost of Work Scheduled) and earned value (or BCWP – Budgeted Cost of Work Performed) must be in units of currency (the same units that actual costs are measured).

    2. PROJECT PERFORMANCE TRACKING

      The project taken for the study was a commercial building in Prathibha Jn, Kollam, Kerala. The total estimated amount for the entire project was Rs. 46.35 million. Our work was limited to the project tracking for 6 months ie; from September 2014 to February 2015. The estimated amount of the work from January 2014 to February 2015 was Rs 2,12,84,000 which includes skeleton work only. The concerned part of project was scheduled for 20 months with planned start date on 16th Jan, 2014, ie, 14 months for skeleton work and 6 months for other finishing works. Since it is water logged area, each floor is constructed in two halves. The details of entire project are given below.

      Total built-up area = 38628.4 Sq.ft.

      Type of Building = Commercial Building Number of floors = Cellar + G + 3

      Total estimated construction cost = Rs. 46.35 million Total cost per Sq.ft. = Rs. 1200

      Planned start date = 16th Jan 2014 Completion period = 20 months

      Activities

      Scheduled duration (days)

      Total cost for individual activities (Rs)

      Beam and Roof slab

      37

      26,11,597

      Second Floor

      Column work

      48

      4,95,333

      Fire and Main stair

      32

      1,58,974

      Beam and Roof slab

      37

      26,11,597

      Third Floor

      Column work

      48

      4,95,333

      Fire and Main stair

      32

      1,58,974

      Beam and Roof slab

      37

      26,11,597

      Budget at completion

      2,12,84,000

      Masonry and other Finishing works

      198

      2,50,70,000

      Activities

      Scheduled duration (days)

      Total cost for individual activities (Rs)

      Beam and Roof slab

      37

      26,11,597

      Second Floor

      Column work

      48

      4,95,333

      Fire and Main stair

      32

      1,58,974

      Beam and Roof slab

      37

      26,11,597

      Third Floor

      Column work

      48

      4,95,333

      Fire and Main stair

      32

      1,58,974

      Beam and Roof slab

      37

      26,11,597

      Budget at completion

      2,12,84,000

      Masonry and other Finishing works

      198

      2,50,70,000

      1. Photos taken during the construction phase

        Activities

        Planned schedule

        Actual schedule

        PCC and Pile work

        Jan 16-Mar 04

        Up to Sep

        Column @ Cellar Ist half

        Mar 05-Mar 08

        Roof slab and Roof beam

        @ Cellar Ist half

        Mar 29-Apr 16

        Column @ GF Ist half

        Apr 17-May 10

        Roof slab and Roof beam

        @ GF Ist half

        May 11-May 28

        Sep 12-Oct 04

        Fire stair @ GF

        May 18-May 28

        Sep 17-Oct 04

        Retaining wall

        May 29-June 26

        Oct 04-Oct 29

        Column @ FF Ist half

        June 27- July 20

        Oct 27-Nov 16

        Column @ Cellar IInd half

        July 05-July 28

        Nov 16-Dec 17

        Roof slab and Roof beam

        @ Cellar IInd half

        July 29- Aug 17

        Dec 22-Jan 14

        Main stair @ Cellar

        Aug 06-Aug 17

        Dec 28-Jan 14

        Roof slab and Roof beam

        @ FF Ist half

        Aug 11-Aug 29

        Jan 15-Jan 28

        Fire stair @ FF

        Aug 18-Aug 29

        Jan 18-Jan 28

        Column @ GF IInd half

        Aug 18-Sep 10

        Jan 19-Feb 01

        Roof slab and Roof beam

        @ GF IInd half

        Sep 11-Sep 29

        Feb 02-Feb 16

        Main stair @ GF

        Sep 18-Sep 29

        Feb 08-Feb 16

        Column @ SF Ist half

        Sep 15-Oct 08

        Jan 29-Feb 20

        Column @ FF IInd half

        Sep 30-Oct 23

        Feb 20-Mar 04

        Roof slab and Roof beam

        @ SF Ist half

        Oct 09-Oct 27

        Feb 21- Mar 06

        Activities

        Planned schedule

        Actual schedule

        PCC and Pile work

        Jan 16-Mar 04

        Up to Sep

        Column @ Cellar Ist half

        Mar 05-Mar 08

        Roof slab and Roof beam

        @ Cellar Ist half

        Mar 29-Apr 16

        Column @ GF Ist half

        Apr 17-May 10

        Roof slab and Roof beam

        @ GF Ist half

        May 11-May 28

        Sep 12-Oct 04

        Fire stair @ GF

        May 18-May 28

        Sep 17-Oct 04

        Retaining wall

        May 29-June 26

        Oct 04-Oct 29

        Column @ FF Ist half

        June 27- July 20

        Oct 27-Nov 16

        Column @ Cellar IInd half

        July 05-July 28

        Nov 16-Dec 17

        Roof slab and Roof beam

        @ Cellar IInd half

        July 29- Aug 17

        Dec 22-Jan 14

        Main stair @ Cellar

        Aug 06-Aug 17

        Dec 28-Jan 14

        Roof slab and Roof beam

        @ FF Ist half

        Aug 11-Aug 29

        Jan 15-Jan 28

        Fire stair @ FF

        Aug 18-Aug 29

        Jan 18-Jan 28

        Column @ GF IInd half

        Aug 18-Sep 10

        Jan 19-Feb 01

        Roof slab and Roof beam

        @ GF IInd half

        Sep 11-Sep 29

        Feb 02-Feb 16

        Main stair @ GF

        Sep 18-Sep 29

        Feb 08-Feb 16

        Column @ SF Ist half

        Sep 15-Oct 08

        Jan 29-Feb 20

        Column @ FF IInd half

        Sep 30-Oct 23

        Feb 20-Mar 04

        Roof slab and Roof beam

        @ SF Ist half

        Oct 09-Oct 27

        Feb 21- Mar 06

        TABLE 2. COMPARISON OF SCHEDULE

      2. Scheduling

      TABLE1. SCHEDULED DURATION AND ESTIMATED COST

      Activities

      Scheduled duration (days)

      Total cost for individual activities (Rs)

      Cellar Floor

      PCC And Pile work

      47

      40,15,868

      Retaining wall

      28

      12,60,480

      Column work

      48

      4,95,333

      Main stair

      12

      45,046

      Beam and Roof slab

      39

      24,01,029

      Ground Floor

      Column work

      48

      4,95,333

      Fire and Main stair

      32

      1,58,974

      Beam and Roof slab

      37

      26,11,597

      First Floor

      Column work

      48

      4,95,333

      Fire and Main stair

      32

      1,58,974

      TABLE 3. COMPARISON OF COST

      Activities

      Planned cost (Rs)

      Actual cost (Rs)

      PCC and Pile work

      40,15,868

      66,00,000

      Column @ Cellar Ist half

      2,47,666

      Roof slab and Roof beam

      @ Cellar Ist half

      12,00,514

      Column @ GF Ist half

      2,47,666

      Roof slab and Roof beam

      @ GF Ist half

      13,05,798

      16,35,000

      Fire stair @ GF

      1,13,928

      1,42,000

      Retaining wall

      12,60,480

      17,20,000

      Column @ FF Ist half

      2,47,666

      3,12,500

      Column @ Cellar IInd half

      2,47,666

      3,23,000

      Roof slab and Roof beam

      @ Cellar IInd half

      12,00,514

      16,35,000

      Main stair @ Cellar

      45,046

      88,000

      Roof slab and Roof beam

      @ FF Ist half

      13,05,798

      17,20,000

      Fire stair @ FF

      1,13,928

      1,44,000

      Column @ GF IInd half

      2,47,666

      3,14,300

      Roof slab and Roof beam

      @ GF IInd half

      13,05,798

      15,87,000

      Main stair @ GF

      45,046

      78,500

      Column @ SF Ist half

      2,47,666

      3,19,000

      Column @ FF IInd half

      2,47,666

      3,20,500

      Roof slab and Roof beam

      @ SF Ist half

      13,05,798

      16,45,000

      Month

      Cumulative planned % of completion

      Cumulative actual % work completed

      Jan 2014

      6

      29

      Feb

      16

      Mar

      21

      Apr

      28

      May

      32

      Jun

      37

      Jul

      46

      Aug

      55

      Sep

      64

      32

      Oct

      73

      37

      Nov

      85

      44

      Dec

      92

      47

      Jan 2015

      98

      57

      Feb

      100

      71

      Month

      Cumulative planned % of completion

      Cumulative actual % work completed

      Jan 2014

      6

      29

      Feb

      16

      Mar

      21

      Apr

      28

      May

      32

      Jun

      37

      Jul

      46

      Aug

      55

      Sep

      64

      32

      Oct

      73

      37

      Nov

      85

      44

      Dec

      92

      47

      Jan 2015

      98

      57

      Feb

      100

      71

      TABLE 4. COMPARISON OF PERCENTAGE COMPLETION OF WORK

    3. EARNED VALUE ANALYSIS

      1. EVM Calculations

        The earned value analysis is carried out for the months, September 2014 February 2015.

        Planned Value (PV) = Planned % completion x BAC Earned Value (EV) = Actual % work completed x BAC BAC = 21284000

        TABLE 5. CUMULATIVE PV, EV, AND AC

        Month

        Planned value

        Earned value

        Actual cost

        Upto

        0.55 x

        0.29 x

        Sep

        21284000

        21284000

        66,00,000

        2014

        = 1,17,06,200

        = 61,72,360

        0.64 x

        0.32 x

        Sep

        21284000

        21284000

        83,77,000

        = 1,36,21,760

        = 68,10,880

        0.73 x

        0.37 x

        Oct

        21284000

        21284000

        1,01,59,500

        = 1,55,37,320

        = 78,75,080

        0.85 x

        0.44 x

        Nov

        21284000

        21284000

        1,06,03,300

        = 1,80,91,400

        = 93,64,960

        0.92 x

        0.47 x

        Dec

        21284000

        21284000

        1,13,06,833

        = 1,95,81,280

        = 1,00,03,480

        Jan 2015

        0.98 x 21284000

        = 2,08,58,320

        0.57 x 21284000

        = 1,21,31,880

        1,46,33,800

        1 x 21284000

        0.71 x

        Feb

        = 2,12,84,000

        21284000

        1,76,97,200

        = 1,51,11,640

        In Table 5, cumulative planned value, cumulative earned value and cumulative actual cost of the project for a period of 6-month duration and budget at completion for the project of 14-month duration are tabulated from the collected data and the values are given as:

        1. Planned Value (BCWS) = Rs 2,12,84,000

        2. Earned Value (BCWP) = Rs 1,51,11,640

        3. Actual Cost (ACWP) = Rs 1,76,97,200

        4. Budget at completion (BAC) = Rs 2,12,84,000

          TABLE 6. SCHEDULE ANALYSIS AND FORECASTING

          To calculate

          Formula

          Value

          Project management questions

          Interpretati on

          Schedule variance (SV)

          SV = EV- PV

          – 61.72

          Lakhs

          Are we ahead or behind of schedule?

          Behind schedule

          Schedule performanc e index (SPI)

          SPI = EV

          PV

          0.71

          How efficiently are we using time?

          Behind schedule

          Time estimate at completion (TEAC)

          (BAC/SPI)

          (BAC/Mont h)

          20

          Mont hs

          When are we likely to finish work?

          Not on schedule

          TABLE 7. COST ANALYSIS AND FORECASTING

          To calculate

          Formula

          Value

          Project management questions

          Interpretati on

          Cost variance (CV)

          CV = EV- AC

          – 25.85

          Lakhs

          Are we under or over our budget?

          Over budget

          Cost performanc e index (CPI)

          CPI = EV

          AC

          0.85

          How efficiently are we using resources?

          Over budget

          Estimate at completion (EAC)

          EAC = BAC

          CPI

          250.4

          0

          Lakhs

          What is the project likely to cost?

          Assumptio n: Current performan ce trend continue

          Variance at completion (VAC)

          VAC = BAC-EAC

          – 37.56

          Lakhs

          Are we under or over budget?

          Over budget

          Estimate to complete (ETC)

          (BAC-EV) CPI

          72.61

          Lakhs

          What will be the remaining work cost?

          Assumptio n: Current performan ce trend continue

      2. Performance Graphs

      The performance graph for the project is shown

      25

      20

      Cost in Millions

      Cost in Millions

      15

      Cost (in Rupees)

      indicates the rate at which the project is progressing. The originally estimated completion time for the project was 14 months for skeleton work. Here we found that if work continuous at the current rate, the project will take 6 months longer than what was originally planned as time estimate for completion is now 20 months for skeleton work. So it takes 26 months for the entire project which includes 6 months for the finishing works.

      The project has an unfavourable cost variance of -25.85 which means the project is over budget. A CPI of 0.85 would tell that the project is currently running over budget by 15% that is for each rupee we spend, we are getting a value of rupee 0.85.

      Estimate at completion shows that the expected total cost of the project at completion is based on the performance of the data date 21284000 Rs divided by 0.85 is 250.40 lakhs. Therefore, EAC is 250.40 lakhs for skeleton work. In other words, since the project is getting only 0.85 rupee out of every rupee, the project will cost Rs. 250.40 lakhs instead of Rs. 212.84 lakhs that were planned. So a total cost of Rs.

      501.1 lakhs are expected instead of Rs.463.5 lakhs for the entire project which includes Rs.250.7 lakhs for finishing works.

      Variance at completion shows the variance of the total cost of the work and expected cost. Here it is -37.56. That means at this status date, the project is over budget by Rs. 37.56 lakhs. Estimate to complete shows the expected cost required for finishing all the remaining work, here it is Rs.72.61 lakhs. This amount is needed to complete the work.

      10

      5

      Upto

      Upto

      September

      September

      October

      October

      November

      November

      December

      December

      January

      January

      February

      February

      0

      Duration in months

      PV

      Cost (in Rupees) EV

      Cost (in Rupees) AC

      VII. CONCLUSION

      Through this project work, the effectiveness of EVM technique in assessing the project performance during the construction phase is studied. As the project had already completed about 71%. From the CPI and SPI values found out the project cost and time at completion is forecasted and also the performance needed to bring the project back to the planned / scheduled cost and time is also calculated. Due to the variation in the cost of the material, labour, equipment

      Fig. 1. Cumulative Planned Value, Earned Value, and Actual Cost for the Project.

      Figure 1 shows the S-Curve for cumulative planned value, earned value and actual cost of the project for a period of 6 months. The chart shows the 6-month interval from Sep 2014 to Feb 2015 and it is found that the EV line is below the PV or AC line, which means there are problems in those areas. From Figure, it is clear that the earned value line is below the planned value line, which indicates that the work has not been accomplished as per the planned value. From Figure, it is also clear that the earned value line is below the actual cost line, which indicates that the work has been going as a cost over run.

    4. RESULTS AND DISCUSSIONS

It is clear that: The project has an unfavourable schedule variance of -61.72 that means the project is behind schedule. An SPI of 0.71 would tell that the project is progressing at 71% of the rate originally planned. SPI

hiring, other overhead cost, and since the site is water logged the actual cost of work done is higher than what is expected. This cause the CPI value to be less than 1. Thus a cost over- run had occurred in the project, till monitored. Also as the project was a commercial building, maintaining the scheduled duration is given more importance than cost over-run. To keep the project on schedule the working time was adjusted to 10 hrs per day and Sundays also kept as a working day. Hence, from the study it is clear that EVM is an effective tool in the hands of a project manager to keep the project within the budgeted amount and time, if properly utilized.

REFERENCES

  1. Bhosekar Sager K, Vyas Gayatri. Cost controlling using earned value analysis in construction industries. IJEIT. April 2012; 1(4).

  2. Anbari Frank T. Earned value project management method and extensions. PMJ. Dec 2013.

  3. Brandon Daniel M. Implementing earned value easily and effectively PMJ. June 1998.

  4. Vanhoucke Stephan. Earned value forecast accuracy and activity criticality. The Measurable News. 2008;3.

  5. Jacob, D. (2003). Forecasting project schedule completion with earned value metrics. The Measurable News, March:1, 79.

  6. Lipke, Walt. Schedule is Different, The Measurable News, March 2003: 10-15.

  7. Christensen, D. S, Antolini, R. C., McKinney, . W. (1995 Spring) A Review of Estimate at Completion Research, Journal of Cost Analysis and Management, 41-62.

  8. Christensen, David, Ph.d, (1998, Fall) The Costs And Benefits Of The Earned Value Management Process, Acquisition Review Quarterly.

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