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How is EVM performed in live construction projects ?
Earned value management is a project management technique for measuring project performance and progress in objective manner. It has the ability to combine measurements of the project management triangle:
In a single integrated system, Earned Value Management is able to provide accurate forecasts of project performance problems, which is an important contribution for project management.
EVM is performed by different variances & indexes as mention below.
1) SV (Schedule Variance) = EV-PV
SV greater than0 is good (ahead of schedule). The SV will be0 at project completion because then all of the planned values will have been earned. Schedule Variance (SV) measured through EVM method is indicative only. To know whether a project is really behind or ahead of schedule (on time completion), Project Manager has to perform critical path analysis based on precedence and inter-dependencies of the project activities.
2) SPI (Schedule Performance Index) = EV/PV
SPI greater than1 is good/favourable (ahead of schedule)
3) CV (Cost Variance) = EV-AC
CV greater than0 is good (under budget)
4) CPI (Cost Performance Index) = EV/AC
EV=Earned Value at data date
PV= Planned Cost at data date
AC=Actual Cost at data date
CPI greater than1 is good/favourable (under budget):CPI<1 means that the cost of completing the work is higher than planned (bad);CPI=1 means that the cost of completing the work is right on plan (good);CPI>1 means that the cost of completing the work is less than planned (good or sometimes bad).Having a CPI that is very high (in some cases, very high is only1.2) may mean that the plan was too conservative, and thus a very high number may in fact not be good, as the CPI is being measured against a poor baseline. Management or the customer may be upset with the planners as an overly conservative baseline ties up available funds for other purposes and the baseline is also used for manpower planning.
5) Estimate at completion (EAC)
EAC is the manager's projection of total cost of the project at completion.
Earned Value Management EVM helps project managers to measure project performance. It is a systematic project management process used to find variances in projects based on the comparison of worked performed and work planned. EVM is used on the cost and schedule control and can be very useful in project forecasting.
Some benefits of calculating Earned Value in P6 are the ability to caluclate activity percent complete and view in graphical form to predict obstacles early in a project schedule; forecasting project progress more effectively; and developing an early understanding of progress according to budget and schedule to identify problems as they arise.
Actual Cost (ACWP) is the actual total cost incurred on the activity as of the project data date. ACWP is the same as the Actual Total Cost.
This is always the Total cost from the Baseline, calculated using the Baseline Budgeted Values or Baseline At Completion values depending upon the ‘Earned Value Calculation’ setting (Admin, Admin Preferences, Earned Value).
If the ‘Earned Value Calculation’ is set to ‘Budgeted Values with Planned dates’ or ‘Budgeted Values with Current Dates’:
If the ‘Earned Value Calculation’ is set to ‘At Completion Values with Current Dates’:
A CPI greater than 1 means that Earned Value is greater than the actual amount spent. A CPI of less than 1 means that the Earned Value is less than the actual amount spent.
Cost Variance is the difference between the Earned Value and the actual cost of that activity.
Earned Value Cost (EV) is the portion of the budgeted total cost of the activity that is actually completed as of the project data date. Also known as the Budgeted Cost of Work Performed for the activity. The method for computing the performance percent complete depends on the Earned Value technique selected for the activity’s WBS.
EAC is the estimated cost at completion for the activity.
Estimate to Complete is the estimated cost left to complete on the activity. The calculation can be customized at the WBS level (On the ‘Earned Value’ tab in the WBS view).
It can be computed as either:
Where ‘PF’ is a multiplier to weight the ETC calculation.This can be either ‘1’, ‘1/CPI’ or ‘1/(SPI * CPI)’ or user defined amount.
Planned Value Cost (PV) is the portion of the budgeted total cost of the activity that is scheduled to be completed as of the project data date according to the baseline dates. Also known as the Budgeted Cost of Work Scheduled for the activity. The Schedule % Complete specifies how much of the activity’s original duration has been completed so far based on the baseline dates.
A SPI greater than 1 means that Earned Value is greater than the Planned Value. A SPI of less than 1 means that the Earned Value is less than the Planned Value.
