6th international Project and Construction Management Conference (IPCMC2020)

Istanbul Technical University, 12-14 November 2020, Istanbul, Turkey

Performance Evaluation of Construction Projects by EVM

Method, Using Primavera P6 – A Case Study in Istanbul, Turkey

M.L. Zalmai, O.H. Turkakin and O. Giran

Istanbul University - Cerrahpasa, Civil Engineering Department, Istanbul, Turkey
lemar_zalmai07@hotmail.com, turkakin@istanbul.edu.tr, ogiran@istanbul.edu.tr

C. Akcay
Istanbul University, Department of Architecture, Istanbul, Turkey
cakcay@istanbul.edu.tr

Abstract

Most of the construction projects are exposed to time and cost overruns due to various factors
and this is a major problem. As a solution to this, the Earned Value Management (EVM)
method is considered. EVM is a powerful and well-known method used in monitoring and
controlling the project. EVM gives an early indication that either project is delayed or not
and the project is either over budget or under budget at any particular day by tracking it.
Thus, it helps to improve the management control system of a construction project, to detect
and control the problems in potential risk areas and to suggest the importance and purpose of
monitoring the construction work.

This paper explains the main parameters of the EVM system involved in the calculation of
time and cost for construction projects. In this study, the Primavera P6 software is used to
deals with the project monitoring process of a seven-storeyed (G+6) faculty building whose
construction is in progress at Istanbul, Turkey. A comparison between the planned progress
of construction activities and actual progress is performed and the analysis results are
interpreted. This case study justifies the benefits of using EVM for project cash flow analysis
and forecasting.

Keywords: Earned Value Management (EVM), Construction cost management, Construction

planning, Primavera P6, Project management, Project scheduling.
 Introduction

The construction industry is one of the most rapidly growing industries in the world. The
construction sector is an important industry branch at both the global and national levels.
Construction projects provide many investment opportunities across various related sectors.
Therefore, the construction sector is an important economic indicator for developing countries
like Turkey. The construction industry in Turkey plays a vital role in creating both economic
growth and employment opportunities for the country.

In developing countries like turkey, most construction projects face time and cost overruns
due to a large number of uncertainties in the construction industry (Vyas & Birajdar, 2016). It
is the prime responsibility of the project manager to control the costs associated with the work
packages. Project managers can avoid time and cost overruns by using an effective project
monitoring and control technique.

Traditionally, the evaluation of the budgeted cost of construction projects is based only on
two parameters: 1) Planned expenditure, 2) Actual expenditure. Although these parameters
help the manager to compare the planned and actual spending, they do not contain
information about the progress of the project. As it does not give any idea about the
completed work, this information is not sufficient. Moreover, it is also not possible to relate
the completed work with the amount of money spent on it (Waris, Khamidi, & Idrus, 2012).

The development of Earned Value Analysis Management helped overcome the shortcomings
of traditional project management techniques and provided information to managers about the
project progress (Karaman & Son, 2018). Except planned and actual expenditures, earned
value management (EVM) introduces a third variable named earned value (EV). This
parameter provides clear and concise information about the budgeted cost and schedule.

According to PMI, (2008) the earned value management (EVM) is recommended as the
global standard for project performance measurement. The concept of implementation of the
EVM into the cost control and even to overall performance measurement of construction
projects have been presented by many authors (Burtonshaw-Gunn, 2009; CIOB, 2011;
Fewings, 2013; Levy, 2012)

In this study, first earned value analysis is reviewed and the parameters constituting the
analysis are explained. Within the scope of this study, the EVM analysis was applied to a real
project data, and the results were interpreted with a case study. A G+6 building is selected for
analysis as a case study. Later, the Primavera P6 is used to apply “earned value analysis” over
some clusters of activities related to the construction project. The steps used to perform EVM
analysis using Primavera P6 software are described and finally, results are evaluated
regarding the performance of the activities.

Earned Value Management (EVM)

Earned value project management is a well-known management system that integrates cost,
schedule and technical performance. It allows the calculation of cost and schedule variances
and performance indices and forecasts of project cost and schedule duration. The earned value
method provides early indications of project performance to highlight the need for eventual
corrective action (Vandevoorde & Vanhoucke, 2006).

Earned value management as a good method for better project management. It is stated that
this method can be used to estimate progress performance and project completion. It
integrates scope, cost and schedule measures, and could give a good picture of current project
status at the date of control Nagrecha, (2002).

Earned value is a program management technique that uses “work in progress” to show what
will happen to work in the future. EVA 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 related to
project work. (Subramani, Jabasingh, & Jayalakshmi, 2014).

Important Earned Value Management Terms:

EVM monitors the project’s progress against a baseline. It includes the following basic
elements to evaluate projects technical performance. The basic terms related to earned value
management are; (PMI, 2011; Vyas & Birajdar, 2016)

Planned Value (PV): It is the amount of money budgeted to be spent at a particular point in
time. or in a simple way, the cost of the project according to the schedule of the project. PV
is also known as budgeted cost of work scheduled (BCWS). Planned value is calculated
before actually doing the work, which also serves as a baseline. Total planned value for the
project is known as budget at completion (BAC).
Actual Cost (AC): It is the actual amount of money spent for the corresponding planned and
earned value or the amount spent on the project to date. This actual cost must correspond to
whatever was budgeted for the planned value and earned value (e.g. all labor, material,
equipment and indirect costs). It is also known as the actual cost of work performed
(ACWP).
Earned Value (EV): It is the amount of work in terms of cost that is actually accomplished
at a particular point of time with respect to the planned value or the planned value of actually
completed work. It is also known as budgeted cost of work performed (BCWP).
Cost Variance (CV): It is the difference between earned value and actual cost. (EV-AC)
Schedule Variance (SV): It is the difference between earned value and planned value. (EV-
PV)
Cost Performance Index (CPI): It is the ratio between earned value and actual cost. If CPI
greater than 1 then the project is under budget and CPI less than 1, then the project is under
budget.
Schedule Performance Index (SPI): It is the ratio between earned value and planned value.
It indicated how much ahead or behind schedule, the project is at a particular time.
Critical Ratio (CR): It is the product of the cost performance index and schedule
performance index. It indicates the overall performance of the Project with respect to both
cost and time.
Estimate at Completion (EAC): It’s a prediction of the total project cost based upon the
current trends in project performance.
Variance at Completion (VAC): It is the difference between the planned budgets at the
beginning of the project to the estimate at completion. This value denotes how much more
profit or loss the contractor will make on that Project.
Time Estimate at Completion (EACt): It predicts the completion time of a project based
on its current performance. EACt = (BAC / SPI) / (BAC / months)

Table 1. Earned value management formula and interpretation. (Bhosekar & Vyas, 2012)

Name Formula Interpretation

Cost variance Negative is over budget, positive is under
(CV) EV – AC
budget.
Schedule variance Negative is behind schedule, positive is
(SV) EV – PV
ahead of schedule.
Cost performance Less than 1 poor performance is greater than 1
index (CPI) EV / AC
good performance.
Schedule
Less than 1 poor performance is greater than 1
performance EV / PV
good performance.
index (SPI)
If SPI = 1, SV = 0 On proper schedule If CPI = 1, CV = 0 Project is on budget
SPI < 1, SV < 0 Behind the schedule CPI < 1, CV < 0 Project is over budgeted
SPI > 1, SV > 0 Ahead of schedule CPI > 1, CV > 0 Project is under budgeted
Estimate at As of now how much do we expect the total
project to cost ₺ .
completion
• Actual plus a new estimate for
(EAC) AC + ETC remaining work.
Estimate to EAC – AC How much more will the project cost?
complete (ETC)
Variance at How much over budget will we be at the end of
completion BAC – EAC
(VAC) the project?
EVM implementations for large or complex construction projects helps in indicating and
forecasting the cost performance (over budget or under budget) and schedule performance
(behind schedule or ahead of schedule).

Application of the EVM in the construction site management practice does require a regular
register of time and cost data (usually once a week) in order to get the two following values:
AC which is the actual cost of work performed and PV which is budgeted cost of work
performed. The third required value, namely EV is budgeted cost of work scheduled. it can be
defined before the start of works, based on the time schedule of all works and the associated
cost plan (Figure 1).

Figure 1: Three basic curves used in the EVM. A standard EVM graph.

Case Study

In this study, a seven-storeyed (G+6) a university faculty of dentistry construction project

which is in progress in Istanbul selected as a case study. One of the authors worked as a
planning engineer in the related project and the data were collected by him. The project
duration is 28 months and the budget at completion (BAC) is ₺ 104,947,000,00.
Construction, electrical and mechanical disciplines are included in the project planning. The
number of activities of the project considered in the EVM analysis is 543 activities. Earned
value analysis was done at 5 different points of time. Here the last EVA analysis of the project
which was done at the end of the twentieth month is given. This analysis will indicate the
efficiency at which the work was done and the rate at which it was completed. It also shows
the additional profit or loss the contractor will make with respect to what was originally
planned.

There are so many construction management software is available in the market. But
nowadays, MSP and Primavera are the most popular software which is used for monitoring
and control of construction projects. Primavera is an amazing software which can be used for
small as well as a large project. In this software, we can control and monitor as many projects
at the same time. In this study, the earned value analysis of a real construction project is done
by using primavera p6 software. The following sections explain the software in brief. Also,
give information about the steps involved in monitoring and control of our project.

Primavera is used for making project management smooth. It is helpful in civil engineering
for creating strategies, controlling the delay of the project and determines the optimum use of
resources. Primavera is used to completing the project within a specified time and cost. It is
the application of skills, tools and techniques to project activities in order to carry out the
demand of the owner. Primavera program is used to scheduling, controlling and estimating all
types of projects (Saini, Singh, & Malik, 2019).

Primavera P6 manages and controls activities associated to project management as well as

resource management. Resources representing labor, materials, and equipment are used to
track time and costs for the project. Projects’ activities are updated resulting in the adjustment
of time-related bars. It needs the database of Oracle My SQL.

Steps involved in monitoring and control of our construction project are;

1) Create a new project: A project is a collection of activities and related information that
forms a plan for creating a product or service. The project is made under the related
department in Enterprise Project Structure with project ID and project name. Planned start and
must finish dates can be given to the project. A calendar is assigned to the project which can
be global, resource, or project calendar.

2) Work breakdown structure (WBS): WBS is a hierarchical structure of work that must be
able to complete a project. Each project has its own WBS hierarchical structure. Each WBS
element may include more detailed WBS levels, activities, or both in it as shown in figure 2.

3) Determining activities: Activities are the basic work elements of a project. They are the
smallest part of a project. An activity has mainly the following characteristics such as activity
ID, name, start and finish dates, activity calendar, activity type, activity codes, constraints,
expenses, predecessor and successor relationships, resources, roles, etc, shown in figure 3.

4) Relations between activities: To constitute a network, the activities should be linked to

each other, which is done by allocating relationship to the activities.
• Finish to start a relationship (FS). • Finish to finish the relationship (FF).
• Start to start relationship (SS). • Start to finish relationship (SF). As shown in Figure 4.

5) Finding activity duration: when planning the activity duration is entered in the original
duration field.
 Figure 2: Work breakdown structure. Figure 3: Determination of activity.

6) Activity dates: The following are the types of activity dates primavera; actual start, actual
finish, planned start, planned finish.

7) Activity cost: The activity cost is the addition of all the costs incurred to finish the
activity.

8) Resource assignment: resources are the general name of the factors required for the
completion of the activity. Labor, equipment and material are resource types. In Primavera
software first, the resources are defined, then the required resources are assigned to each
activity. As shown in Figure 5.

Figure 4: Relations between activities. Figure 5: Resource assignment.

9) Creating baselines: Baseline is a standard benchmark based on the standard performance

of the project is the measure. To create a baseline select project option in the activity toolbar
and then select baseline after creating baseline assign baseline to the project.
9) Update schedule: After assigning a baseline again, the project is scheduled to update the
project baseline for analysis.
10) Tracking: The tracking window is utilized for monitoring a project’s progress by
updating and periodic data entry of activities.

Results and Discussion

Earned value analysis is done on a university faculty of dentistry construction projects in

Istanbul. The case study project was analyzed using Primavera P6, based on the Earned Value
Analysis Method. CPI - Cost Performance Index, PD - Planned Duration, AD - Actual
Duration, CV - Cost Variance, PV -Planned Value, AC - Actual Value, and EV - Earned
Value variables were selected.

Figure 6: Earned value analysis (EVA) for foundation works.

In this study, the main works of the case study project are examined and the EVM analysis
was done. The cost variance of the foundation works was higher than any other main works.
Thus the EVM analysis parameters for foundation work are given in table 2 and the results are
interpreted.

Table 2. Results of EVA parameters for foundation works.

Original duration 28
Budgeted total cost ₺ 7195955,40
Earn value ₺ 7195955,40
Actual cost ₺ 7558664,40
Cost Variance ₺ -362709.00
Schedule performance index 1
Cost performance index 0,95

The project is on the schedule but it is over budgeted.

 Conclusions

With the introduction of Earned Value Analysis to the monitoring of this project, the actual
return of investment for the work done is found out. It also brings to light if the project is
going as per what was originally planned. It shows how much ahead of schedule or behind
schedule, the project is at a particular point of time. Consequently earned value analysis
enables the contractor to monitor the progress of work in terms of cost and time in a much
more effective.

This research on the earned value management in Primavera P6 software helps the
management to find the problems in potential risk areas in early stages which can be
controlled and gives detailed progress of variances in every single activity. After the analysis,
the managers can make a decision about future works of the project which are to be achieved
and control the budget of the project. Earned value in Primavera P6 software results in faster
and true results when compared to manual calculations.

This study also demonstrated that EVM has considerable value and presents extraordinary
properties that can benefit clients, consultants and industries.

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