Chapter 14

Progress Measurement and

Earned Value
 Earned Value Management

Essential features of any EVM implementation

include
1. a project plan that identifies work to be
accomplished,
2. a valuation of planned work, called planned value
(PV), and
3 pre‐defined
3. d fi d ““earning
i rules”
l ” ((also
l called
ll d metrics)
t i ) to
t
quantify the accomplishment of work, called Earned
Value (EV).
( )
 Measuringg Work Progress
g to report
p Earned Value

• During project execution, individuals performing activities

should report their progress periodically.
• O.K., That seems pretty simple, Let see how do they
report?
• Let say if Jack has to install 1000 Air Conditioner and until
now he installed 500 Air Conditioner. Now its pretty easy
to report. Boss I completed 50% of my work.
• Now what if the work involves a mixed of complicated set
of tasks and subtask to complete a work package, which is
not easily measurable by units.
units
 Measuringg Work Progress
g

• There are Six method by which a work progress

can be measured.
1. Units Completed
2. Incremental Milestone
3. Start/Finish
4. Supervisor Opinion
5. Cost Ratio
6. Weighted Or Equivalent Units
 Units Completed
p

• When each task requires approximately the same level of

effort units completed technique can be used.
• Same budget value for identical units with in a control
account.
• Example
– Light Fixtures is a task where accomplishment is easily
measured in terms of number of lights fixed in each flats. Let
say you have fix 450 similar light fixture and so far you have
d
done 230.
230 The
Th earned d value
l percentage iis (230 / 450 x 100)
51% and you should have spent 51% of the budgeted amount
for the 450 light fixture.
 Incremental Milestone

• Particular activities can be sub‐divided or "decomposed" into a series of

milestones, and the milestones can be used to indicate the percentage of work
complete based on historical averages.
• For example, the work effort involved with installation of standard piping
might be divided into four milestones:
– Spool in place: 20% of work and 20% of cumulative work
work.
– Ends welded: 40% of work and 60% of cumulative work.
– Hangars and Trim Complete: 30% of work and 90% of cumulative work.
– Hydrotested
y and Complete:
p 10% of work and 100% of cumulative work.
• Thus, a pipe section for which the ends have been welded would be reported
as 60% complete.
 Start/Finish
/ percentage
p g

• In this technique, a percentage complete is

arbitrarily assigned to start of the task, and 100% is
record once the task is completed.
completed
• No credit given in between the task.
• For example,
example if a work is very short term
term, we can set
0%/100% credit, which means, only if the work is
completed it will get the credit not in the start or in
the
h middle.
iddl
• Depends on the nature of the work, we can
20%/100% 50%/50% etc.,
20%/100%, etc
 Opinion
p

• Subjective judgments of the percentage complete

can be pprepared
p byy inspectors,
p , supervisors
p or
project managers themselves.
• Clearly, this estimated technique can be biased by
optimism, pessimism or inaccurate observations.
• Knowledgeable estimators and adequate field
observations are required to obtain sufficient
accuracyy with this method.
 Cost Ratio

The cost incurred to date can also be used to estimate the work progress.
For example, if an activity was budgeted to cost $20,000 and the cost incurred at a
particular date was $
p $10,000,
, , then the estimated p
percentage
g complete
p under the cost ratio
method would be 10,000/20,000 = 0.5 or fifty percent.
This method provides no independent information on the actual percentage
complete or any possible errors in the activity budget: the cost forecast will
always be the budgeted amount.
Consequently, managers must use the estimated costs to complete an activity
derived from the cost ratio method with extreme caution.
 Cost Loaded Schedule

While the cost loaded schedule reflects the cost of each work component, it is also
essential that it has to be time phased. So it must show you not only how much
project activities will cost, but when these costs will be incurred.
Cost Baseline is a time‐phased budget which can be used to monitor and measure
cost performance throughout project life cycle. It is the product of the approved
schedule and the project budget (BAC). Using the schedule, you need to identify
when,
h andd for
f how
h long,
l eachh activity is planned.
l d You then
h align
l the
h aggregated
d costs
you've calculated with the time durations in which they fall.
The BAC includes the allocated project budget and the budget contingency to
accommodate
d t the
th risk
i k off incurring
i i unidentifiable
id tifi bl but
b t normally
ll occurring
i costs.
t The
Th
key elements that should be present in any cost baseline are work package costs,
subproject costs, a total project cost, as well as their due dates and contingency
reserves.
Cost Baseline
 Cost Loaded Schedule – Advantages.
g

Some advantages to the cost loading of schedules include:

 Make sure the owner pays on time for work accomplished.

 Make sure contractor is not charging too much for the work accomplished.
 Insure that all parties expect the same level of effort on similar work.
 Allows the evaluation of possible changes to the project scope.
scope
 Updating earned value is little additional effort if time‐based progress is
tracked monthly.
 Allows analysis of Time‐Cost Tradeoff.
 Allows analysis of Cash Flow and Financing Requirements.
 Budget
g At Completion
p

BACC iss p
prepared
epa ed at p planning
a g stage be
before
o e tthee
execution takes place.
BAC is calculated byy aggregation
gg g method. Bottom‐
up estimating is the most accurate.
Estimating should be based on WBS to improve
accuracy.
Contingency reserve is included and Management
reserve is
i excluded
l d d in
i BAC.
BAC
Your BAC becomes your cost baseline.
Project
j Cost Budgeting
g g

COSTING
Cost Baseline – Time Phased Budget
g
 Project
j Performance

The traditional approach to progress monitoring was merely the comparison

of budget versus actual cost which would indicate what was planned to be
spent versus what was actually is spent at any given time. This method fails to
compare or detect the physical amount of work performed.
 Earned value Management
g

The basis:
The Earned Value Analysis provides a third reference which is the earned
value of the physical work completed which gives an objective view of the
status of the project, i.e. the value of the work completed to date.
This can be compared with both planned and actual cost to determine the
performance to date which will give an early indication of problems.
problems
Earned Value Analysis (EVA) is an industry standard method of measuring a
project’s progress at any given point in time, forecasting the project
completion
l d
date andd final
f l cost and d also
l analyzing
l variances in the
h schedule
h d l
and budget as the project proceeds.
Earned value Management
g
 Earned value Management
g

EVM – BENEFIT.

The outcome of the EVM analysisy will answer the

following two important questions:

At the
h end d off the
h project, is it likely
l k l that
h the
h cost willll
be less than or equal to or greater than the original
estimate or the budget?

Whether the project is likely to be completed on

time?
 Project
j Progress
g Parameters.

Budgeted Cost of Work Scheduled (BCWS):‐ It represents the budgets of the

activities that were planned or scheduled to have been completed, otherwise
known as Planed Value (PV). BCWS is derived from the Work Breakdown Structure
(WBS), the project budget and the project master schedule.
Actual Cost of Work Performed (ACWP):‐ It represents the actual cost charged
against the activities that were completed, other wise known as Actual Cost (AC).
This
h can be b established
bl h d from
f the
h actuall measurements off the
h workk completed.
l d
Actual costs recorded from invoices and workmen’s time sheets.
Budgeted Cost of Work Performed (BCWP):‐ It represents the planned or scheduled
costt off the
th activities
ti iti that
th t are completed
l t d att any given
i ti
time, other
th wise
i known
k as
Earned Value (EV). This is calculated from the measured work completed and the
budgeted costs for that work (i.e Percentage project completed x Project Budget).
 Planned Value

• Planned Value is the amount of money and

work scheduled to be completed at the time
of EVM Calculation.
Calculation
• Planned Value can be taken from Cost
Baseline with the help of “S”
S Curve.
Curve
BAC,, AC,, PV,, EV
 Project
j Status Indicators.

Cost Performance Index (CPI):‐ It is the ratio between the work accomplished versus
the actual cost incurred for a specified time period. It can be stated as an efficiency
rating for the work accomplished for the resources expended.
Cost Variance (CV):‐ It is the difference between the Earned Value and the actual
cost incurred for a specified time period. It can be stated as a measure of the
spending variance.
Schedule Performance Index (SPI):‐ It is the ratio between the work accomplished
versus the value of the planned work for a specified time period. It can be stated as
an efficiency rating for the work accomplished against the original plan.
Schedule Variance (SV):‐ It is the difference between the Earned value of the work
accomplished and the planned versus the value of the planned work. It can be stated
as an efficiency of the project performance.
 Cost Performance Indicator (CPI)
( )

CPI is the ratio of earned value and the actual cost of completed works.

CPI = BCWP / ACWP or

CPI = EV / AC

CPI represents the amount of work produced by the project for every unit of cost
spent.
No. Description Remarks
1 C t Performance
Cost P f I d (CPI) = 1
Index O Budget
On B d t
2 Cost Performance Index (CPI) < 1 Over Budget

3 Cost Performance Index (CPI) > 1 Under Budget

 Cost Variance (CV).
( )

Cost Variance is the difference between the Earned Value and the Actual Cost
of the works.
works

CV = BCWP – ACWP
CV = EV ‐ AC

No. Description Remarks

1 Cost Variance (CV) = 0 On Budget
2 Cost Variance (CV) < 0 Over Budget
3 Cost
C t Variance
V i (CV) > 0 U d Budget
Under B d t
 Schedule Performance Indicator (SPI).
( )

SPI is the ratio of earned value and the planned value of completed works.

SPI = BCWP / BCWS

SPI = EV / PV

SPI represents the amount of time being utilized on a project for every unit hour
spent

N
No. D
Description
i ti R
Remarks
k
1 Schedule Performance Index (SPI) = 1 On Schedule
2 Schedule Performance Index (SPI) < 1 Behind Schedule
3 Schedule Performance Index (SPI) > 1 Ahead of Schedule
 Schedule Variance (SV).
( )

It is the difference between the Earned Value and the planed value.

SV = BCWP – BCWS

SV = EV ‐ PV

No. Description Remarks

1 Schedule Variance (SV) = 0 On Schedule
2 Schedule Variance ((SV)) < 0 Behind Schedule
3 Schedule Variance (SV) > 0 Ahead of Schedule
 Project
j Forecasting.
g

Estimate At Completion (EAC): It is the estimate or the amount of money will be spend on
the project and it depend on judgment.
Independent Estimate At Completion (IEAC): is the projected final cost of the project,
based on the performance so far. It takes into account the original budget (BAC).
IEAC = BAC / CPI
BAC is the Budget at completion
Independent Schedule At Completion (ISAC): is the projected duration of the project based
on the performance so far.
far
ISAC = SAC / SPI
SAC is the schedule at completion
Variance AT Completion(VAC): is the forecast of final cost variance.
variance
VAC = BAC – IEAC or BAC ‐ EAC
The above analysis and the forecasted values will give an indication, whether the project is
in crises or not and also the type
yp of crises if there is.
Project
j Status
 Project
j Forecasting.
g

To Complete Performance Index (TCPI):

TCPI is the required productivity to complete the scope within the available budget.
TCPI = (Budget – BCWP) / (Budget – ACWP)

TCPI is an indication of how one has to perform for the project duration in order to meet
the desired cost goal.

Inference of the results:

If TCPI is greater than 1, one must perform better than planed to meet the goal.

If TCPI is less than 1, one can get by with performing under the plan.
 Project
j Forecasting.
g

To Complete Schedule Performance Index (TCSPI):

TCSPI is the required work rate to complete the scope within the available schedule. It gives
the idea how to utilize the remaining time period of the project.

TCSPI = (Budget – BCWP) / (Budget – BCWS)

TCSPI is an indication of how we have to perform for the project duration in order to meet
the desired schedule goal.

Inference of result:
If TCSPI is grater than 1, one must perform better than planned in order to meet the goal.
If TCSPI is less than 1, one can get by with performing under the plan.
EVM measures p
project
j p performance
 Project Cost Control – Tools & Techniques

Acronym Term Interpretation

PV Planned Value What is the estimated value of the work planned to be done ?

EV Earned Value What is the estimated value of the work actually

accomplished?
AC A t l Cost
Actual C t Wh t is
What i th
the actual
t l costt incurred
i d ffor th
the work
k accomplished?
li h d?

BAC Budget At Completion How much did we BUDGET for the TOTAL project effort?

EAC Estimate At Completion What do we currently expect the TOTAL project to cost?

ETC Estimate to Complete From this point on, how much MORE do we expect it to cost
to finish the project?
VAC Variation to Complete How much
Ho m ch over
o er or under
nder b
budget
dget do we
eeexpect
pect to be at the
end of the project?
 Calculations Example

The Case Project: A status is taken at the end of week

2 for a 12‐week project. The total planned budget for
the project is $120,000 for work that is evenly spread
over 12 weeks. The project staff has confirmed that
20% of the entire scope of work have been
completed at the end of week 2. Actual costs
incurred to date on this p
project
j total $ $22,000.
,
Establish the project status indicators and comment
on the project performance as on date.
 Example – Weighted or Equivalent Units
All
Allowed
d S bt k
Subtask Total
T t l T t l Qty
Total Qt T D t Qt
To-Date Qty
(U/M)
Credit
0.02 Run foundation bolts Each 200 200
0.02 Shim % 100 100
0.05 Shakeout % 100 100
0.06 Columns Each 87 74
0.11 Beams Each 859 45
0.10 Cross braces Each 837 0
0.20 g rods
Girts and sag Bay
y 38 0
0.09 Plumb and align % 100 5
0.30 Connection Each 2977 74
0 05
0.05 Punch list % 100 0
1.00 Steel Totals Ton 520
 Example – Weighted or Equivalent Units
Allowed Subtask Total Total Qty To-Date
To Date Qty Earned Tons
(U/M)
Credit
0.02 Run foundation bolts Each 200 200 10.4
0.02 Shim % 100 100 10.4
0.05 Shakeout % 100 100 26.0
0.06 Columns Each 87 74 26.5
0.11 Beams Each 859 45 3
0.10 Cross braces Each 837 0 0
0.20 Girts and sag rods Bay 38 0 0
0.09 Plumb and align % 100 5 2.3
0.30 Connection Each 2977 74 3.9
0.05 Punch list % 100 0 0
1.00 Steel Totals Ton 520 82.5
 Weighted
g or Equivalent
q Units

Earned quantity = (allowed credit) x (summary qty) x [(qty to date) / (total qty)]
Earned Ton Beams = (0.11) x (520 tons) x (45 each /859each) = 3.0 tons
E
Earned
d value
l =P Percentage
t Completed
C l t dxbbudget
d t ffor th
thatt accountt
Percentage Completed = (earned work hours or dollars all accounts) / (budgeted
work hours or dollars all accounts)
For our earlier example:
– Percentage Complete = 82.5/520 tons = 15.87%
 Productivityy

• Project managers are always interested to

know how well their team is doing.
• A comparison of earned WH with actual WH
may provide an evaluation of productivity but
only incase of budgeted WH = actual WH.
WH
 Productivityy

Credit WH
• Like earned WH are derived quantity that
provide a vehicle for handling quantity
variations between budgeted and actual WH’s
without distorting crew productivity figures
figures.
• CWH = budgeted productivity unit WH rate X
actuall WH
 Productivityy

Productivity Index
• PI= (Sum of credit WH) / (Sum of actual WH)