Earned value method in construction
The earned value method in construction project management
The earned value method is the system of the techniques used for measurement and control of efficiency of project performance. The method is based on the analysis of a number of numerical indicators calculated in the process of project implementation.
Constant monitoring of the earned value and other indicators allows the project manager to predict the success of its completion on schedule, the risks of exceeding these deadlines, budget overruns and so on.
The method operates with the following indicators:
|
Indicator |
Description |
Formula |
Name of the Indicator in Project map |
|---|---|---|---|
|
PV |
Work volume scheduled to complete for reporting date |
PC * scheduled completion % |
BCWS Budgeted cost of work scheduled |
|
AC |
Actual / earned cost of work for reporting date |
AC * actual completion % |
ACWP Actual cost of work performed |
|
EV |
Earned value The actually completed value of work indicated in the budget. In other words, the real (actual) cost of work performed in accordance with the plan at the reporting date |
BAC * actual completion % |
BCWP Budgeted cost of work already completed at the reporting date |
|
BAC |
Budget at completion (BAC) The whole budget for the entire project - the budgeted cost of the project |
Sum of all budgets of all works |
BC Budgeted cost |
|
CV |
Cost variance |
BCWP - ACWP (CV = EV - AC) |
CV Cost variance |
|
BV |
Budget variance |
BCV = BC - AC |
BCV Variance between Budgeted and Actual cost |
|
CPI |
Cost performance index |
BCWP / ACWP (CPI = EV / AC) |
CPI Cost performance index |
|
SV |
Schedule variance |
SV = BCWP - BCWS |
SV Schedule variance |
|
SPI |
Schedule performance index How far have we deviated from the plan |
BCWP / BCWS (SPI = EV / PV) |
SPI Schedule performance index |
|
EAC |
Estimation at completion What will be the budget upon completion of the project |
EAC = BAC / CPI |
EAC Estimation at completion |
|
VAC |
Variance at completion |
VAC = BAC - EAC |
VAC Variance at completion |
|
ETC |
Estimation to completion How much is left to complete the work |
ETC = EAC - AC |
ETC Estimation to completion |
Let's take a look at the example of applying earned value method to our project:
The table contains a list of project tasks, their costs and duration:
|
# |
Work |
Predecessors |
Planned duration, days |
Budgeted cost, per day |
Budgeted cost, total |
|---|---|---|---|---|---|
| 1 | A | 2 | 100 | 200 | |
| 2 | B | A | 2 | 150 | 300 |
| 3 | C | B | 2 | 120 | 240 |
| 4 | D | B | 3 | 200 | 600 |
| 5 | E | D | 2 | 200 | 400 |
| 6 | F | 3 | 100 | 300 | |
| 7 | G | 4 | 25 | 100 |
This is how it looks on the network diagram (Gantt chart)
Yellow lines - baseline plan
Blue lines - actual plan
Suppose we received data from the project manager from field about the completion of tasks for the reporting date:
|
# |
Work |
Actual completion, % |
Budget variance |
|---|---|---|---|
| 1 | A | 100 | -160 |
| 2 | B | 100 | -60 |
| 3 | C | 50 | 0 |
| 4 | D | 10 | -80 |
| 5 | E | 0 | -100 |
| 6 | F | 20 | 60 |
| 7 | G | 80 | 0 |
Let's supplement the data with actual indicators:
For date: May, 17
|
# |
Work |
Predecessors |
Planned duration, days |
Budgeted cost, per day |
Budgeted cost, total |
Actual duration, days |
Actual cost, per day |
Actual cost, total |
|---|---|---|---|---|---|---|---|---|
| PROJECT | 9 | 2140 | 10 | 2480 | ||||
| 1 | A | 2 | 100 | 200 | 3 | 120 | 360 | |
| 2 | B | A | 2 | 150 | 300 | 2 | 180 | 360 |
| 3 | C | B | 2 | 120 | 240 | 2 | 120 | 240 |
| 4 | D | B | 3 | 200 | 600 | 3 | 220 | 680 |
| 5 | E | D | 2 | 200 | 400 | 2 | 250 | 500 |
| 6 | F | 3 | 100 | 300 | 3 | 80 | 240 | |
| 7 | G | 4 | 25 | 100 | 4 | 25 | 100 |
As you can see from the report, the real situation is slightly different from the plan.
Using the formulas above, let's calculate the development rates.
Indicators of project development:
|
# |
Work |
BCWS |
BCWP |
ACWP |
CV |
CPI |
SV |
SPI |
EAC |
VAC |
ETC |
|---|---|---|---|---|---|---|---|---|---|---|---|
| PROJECT | 1643 | 1330 | 1584 | -254 | 84% | -313 | 81% | 2549 | -409 | 965 | |
| 1 | A | 200 | 200 | 360 | -160 | 55.6% | 0 | 100% | 360 | -160 | 0 |
| 2 | B | 300 | 300 | 360 | -60 | 83% | 0 | 100% | 360 | -60 | 0 |
| 3 | C | 240 | 120 | 120 | 0 | 100% | -120 | 50% | 240 | 0 | 120 |
| 4 | D | 556 | 480 | 544 | -64 | 88% | -76 | 85% | 680 | -80 | 136 |
| 5 | E | 0 | 0 | 0 | 0 | 0% | 0 | 0% | 0 | 0 | 0 |
| 6 | F | 278 | 150 | 120 | 30 | 125% | -128 | 53% | 240 | 60 | 120 |
| 7 | G | 69,5 | 80 | 80 | 0 | 100% | -10.5 | 114% | 100 | 0 | 20 |
For the whole project :
CV = BCWP - ACWP
1330 - 1584 = -254
CPI = BCWP / ACWP
1330 / 1584 = 0.84
SV = BCWP - BCWS
1330 - 1643 = -313
SPI = BCWP / BCWS
1330 / 1643 = 0.81
EAC = BAC / CPI
2140 / 0.84 = 2548
VAC = BAC - EAC
2140 - 2548 = -408
ETC = EAC - ACWP
2548 - 1584 = 964
Estimated duration of the project:
EDP = Planned duration / SPI
9 / 0,81 = 12 days (round up).
We can assume that with such a speed of development, the project will be completed in 12 days.
Based on the above received development rates, we can estimate the condition of our project
|
SV < 0 SPI < 1 |
SV > 0 SPI > 1 |
|
|---|---|---|
|
CV > 0 CPI > 1 |
Saving the budgetLagging behind the schedule |
Saving the budgetAhead of schedule |
|
CV < 0 CPI < 1 |
Overspending the budgetLagging behind the schedule |
Overspending the budgetAhead of schedule |
Let us explain this scheme.
The positive value of the indicator CV (Cost variance) tells us that we are saving money.
And negative - that we are overspending.
The negative value of the indicator SPI (Schedule performance index) tells us that we are working slowly and behind the scheduled terms. We should speed up.
A positive indicator value - we are keeping up with the schedule.
The time and cost indices tell us how far behind schedule and budget we are.
If the values are less than one (less than 100%), then the situation is unfavorable. Otherwise, we keep up with the schedule and budget.
The earned value method described above is implemented in the Project map construction project management system.
In the Project map, you can easily analyze your project, track the actual development rates, as there are all the necessary tools for this.
The resulting analytical reports of development can be saved for later analysis. You can always refer to the archive of reports to analyze the progress of changes in the project.
With our project management system, you can competently manage and analyze projects. Project map will help the project manager to identify problem areas in time and make the right decision in advance, where to accelerate work in order to keep up with the schedule, and where to increase funding or reallocate resources to minimize risks.
Report example:
