Course Code: CEE406A Course Title: Construction Management and Engineering Economics

Course Code: CEE406A
Course Title: Construction Management and

Engineering Economics
Course Leader:
Mr. Akshayakumar V. H.
akshayakumar.ce.et@msruas.ac.in
Lecture 04: Project Planning in Construction cont..

Delivered by: Mr. Akshayakumar V. H.
1
Faculty of Engineering & Technology © Ramaiah University of Applied Sciences
Lecture Objectives
At the end of this lecture, student will be able to:
– Explain Project Control with respect to construction projects

– Discuss the concept of S-curve and Earned Value
Management(EVM)
2
Project Monitoring and Control
Monitoring
• Establishing progress of the project
• Periodic review of current status
Control
• Comparing the planned v/s actual
progress
• Identifying deviations and reasons for
such deviations
• Analyzing the effect on time, cost and
performance parameters of the
project
• Corrective actions
• Updating plans
3
Project Control
Base Plan Actual status Deviations
-schedule -schedule -schedule
-budget -budget -budget
-scope -scope -scope
Replace
Base plan Impact on Schedule, Budget & Scope
Revised Plan
-schedule
Corrective Actions
-budget
-scope
4
Faculty
©M. S. of
Ramaiah
Engineering
University
& Technology
of Applied Sciences © Ramaiah University of Applied Sciences
Project control
Project Control process

5
Controllable elements in project
• Schedule/time/progress control
• Cost control
• Quality control
6
Schedule/time/progress control
• Establish ‘targets’ or ‘milestones’ – times by which identifiable

complete sections of work must be completed
• As each target event occurs, compare actual against targeted

performance
• Assess the effect of performance to date on future progress
• If necessary, re-plan so as to achieve original targets or to reach

as close as possible in achieving them
• Request appropriate action from those directly responsible for

the various activities 7
Monthly Progress Report
• Reviewing of monthly progress

• Sets targets for the following month (on the basis of actual
performance till then)
• Job status for the project (or for critical structures in the
project) for reporting to higher management
• Updated continuously for regular review.
8
Measuring Progress at Site
• Quantities installed
• Percent complete
• Effort by support services
• Milestones reached
• Tied to contract terms of payment
• Two-point measurements
• Single-point measurement
9
Typical Reports to Aid Progress Review
• Actual versus planned bar-chart schedules and time analysed

network reports
• Activity status reports with early and scheduled starting and

completion dates, for current and balance activities, and floats
• Activity reports generated by departments, resources, costs

and sales
• About two to three months’ look-ahead plan
10
Typical Reports to Aid Progress Review
• Report on critical activities
• Report on slipping tasks
• Report on achievement of milestone activities
• A format of three bars showing original plan, revised

plan and actual achievement till date
11
Cost control
•Different ways employed in a construction project

•Important aspects are:
•simplicity of the system
•low response time
12
Cost control
•Project cost control, a 3 step process:
•Observe cost expended for an item

•Compare with standards (ACE)
•Compute variance of observed and standard
(Warnings followed by corrective action)
13
Cost control
•Importance of simple system:
–Less people, less response time

–Variance found before completion of activity
14
Cost control
•Collection of cost for a project involves:

–Planning and Billing Engineer
–Plant and Equipment Engineer
–Time keeper and store keeper
–Accountant and office staff
•Looks simple but difficult to coordinate
•It is very difficult to detect variance in cost among different
activities.
15
Cost control
•Process of cost code generation, allocation and

comparison are difficult in real life
•Different control systems employed based on

requirements
16
Cost control systems
Profit/ loss at completion of contract:
•Very simple – hardly a cost control system
•Information used for future (data bank)
•Used for very small projects
Stage-wise completion of cost:

•Cost calculation – different stages (milestones)
•On completion – each stage compared with standard cost

of each package
17
Cost control systems (Contd…)
Standard costing:
•Common in manufacturing industries
S Curve:
•Monitor cost of construction project
•Depicts progress profile of construction project

• Slow at beginning
• Rapid progress in middle
• Slow again at end
18
Cost control systems (Contd…)
– Invoiced and actual bill also monitored in S curve
– On awarding contracts:
•Based on activity – estimation of distribution of value
done (on a monthly basis) – Planned curve
•2nd curve – based on actual work done
19
Planned Vs actual bill value
Cumulative
Contract Sum
Under spend
Overall delay
Time
20
S-curve
– Amount billed till day of monitoring < planned
•Hence, the 2nd curve runs below

•Under spend condition
– Overall delay – indicates project running behind schedule
– Continuous curve possible

•If estimation of value of work is done in detail
21
S-curve
– Bar chart derived from project network
•Estimated cost for activities (weekly/ monthly basis)

– S CURVE – budgeted, revised & actual cost
•Based on early start or late start of activities
•Accordingly two sets of cost are available

•Consider cost details of example project
22
S curve – Budgeted, revised & actual cost (Contd.)
350
300
250
200
150
Actual cost
100 Revised cost
Budgeted cost
50
23
Unit Costing
Unit costing:
– Project cost report prepared based on monthly basis
– Assists in reviewing cost every month
– Regularly assesses project cost and site contribution
– Comparison with ACE
•Matches bid rate or sales price – no profit or loss
•Lower than bid rate – estimated profit
•Higher than bid rate – estimated loss
24
Unit Costing
– Basic input – Cost statement

– Planning Er. – Project cost report
– Site Accountant – Input cost statement
– Close coordination required for this purpose
25
Steps involved – system of cost control
•Step 1 – Setting up cost code
•Step 2 – Preparation of cost statement
26
Steps involved – system of cost control
•Step 3 – Preparation of project cost report

– Prepared by Planning Er.
– Steps are as follows:

•Estimate to date: Ed=Cd / Qd
•Estimate for balance quantity: Eb=Cb/Qb
•Revised estimates: Er=Cr/Qr=(Cd+Cb)/(Qd+Qb)

•Original estimate: Eo= Co/Qo
•Variance: V= Eo- Er
27
Sample project cost report
Source: Construction Project Management by Neeraj Kumar Jha
28
Control of schedule, cost & technical performance
•EVM integrates schedule and cost control aspects
•Determines schedule, cost and technical performance

– Compares with planned or budgeted performance
•Comparison done in monetary terms:
– Man hour
– Equipment hour
– Quantity of material etc.
29
Control of schedule, cost & technical performance
•Idea of EVM:
– Value of product increases as tasks are completed

– Measure of the real progress of project
30
Control of schedule, cost & quality performance
(Contd.)
Involves concept of work package and earned value to analyze
performance
•Informs us regarding:
•Progress to be achieved on schedule
•Whether resources spent are commensurate with the budget
Used to forecast likely course of project – extrapolation

•Possible to forecast project completion date
•Probable cost at completion
PM can take action to avoid unwanted variances 31

Implementation of Earned Value Management
(EVM)
Defining scope of works

– Frozen at an early stage in project life cycle
WBS – Work Breakdown Structure
– Project broken down to logical groupings and levels
Project Master Schedule
– Details of scheduled start
– Completion of entire work
32
Implementation of EVM
•Allocation of cost to work packages

• Principal cost elements – labour, material and P&E
•Establish – Practical way of measuring completed work
•Select performance measurement baseline
• Indicates plan to spend in different time periods for all work
packages over planned duration
33
Basics of EVM
The three ‘S’ curves
34
Terminologies of EVM
Budgeted cost for work scheduled (BCWS)

•Defined as budget or plan for all planned work
packages
•Derived from WBS, project budget & project master
schedule
•Cost of each package calculated
•Cumulative cost also calculated
Indicated in Master Schedule
35
Terminologies of EVM (Contd…)
Budgeted cost of work performed (BCWP)

•Planned cost of the work allocated to completed activities
•Known as EARNED VALUE
•Earned Value = Percentage project complete x Project Budget
36
Actual cost of work performed (ACWP)

•Real cost of works charged against completed activities
•Found by actual measurement of work completed
•Actual costs recorded from
– Invoices & workmen’s time sheets

•Appears daunting – but simple with proper planning
37
Variances
•Schedule and cost variances (calculated in monetary terms)
•Schedule Variance
–SV = BCWP – BCWS
•Cost Variance
– CV = BCWP – ACWP
38
Performance Indices
•SPI
• SPI = BCWP / BCWS
• If SPI < 1 – behind schedule
•CPI
• CPI = BCWP / ACWP
• If CPI < 1 – cost overrun
39
Estimate at completion (EAC)
S. Expression for Remarks
No computing EAC
01 EAC = Actual Cost It assumes that all remaining work is
(ACWP) + Estimate to independent of the burn-rate incurred to
Complete (ETC) date.
02 EAC = ACWP/BCWP x BAC It assumes that the “burn-rate” will be
the same for the remainder of the
project.
03 EAC = BAC/CPI The formula is an extension of the
previous formula. It assumes that the
“burn-rate” remains constant for the
remainder of the project.
04 EAC = ACWP/BCWP x It assumes that the work not yet begun
[Work Completed and in will be completed as planned.
Progress] + [Cost of work
not yet begun]
05 EAC = ACWP + [ (BAC- This formula is a very subjective way of
BCWP)/CPI] calculating EAC. 40
Summary
• Controllable elements in project
– Schedule/time/progress control
– Cost control
– Quality control
Unit costing:
– Project cost report prepared based on monthly basis
– Assists in reviewing cost every month
– Regularly assesses project cost and site contribution
– Comparison with ACE
•Matches bid rate or sales price – no profit or loss
•Lower than bid rate – estimated profit
•Higher than bid rate – estimated loss 41

Course Code: CEE406A Course Title: Construction Management and Engineering Economics

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Course Code: CEE406A Course Title: Construction Management and Engineering Economics

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Course Code: CEE406A

Course Title: Construction Management and

Lecture 04: Project Planning in Construction cont..

At the end of this lecture, student will be able to:

– Explain Project Control with respect to construction projects

Project Control process

• Establish ‘targets’ or ‘milestones’ – times by which identifiable

• As each target event occurs, compare actual against targeted

• Assess the effect of performance to date on future progress

• If necessary, re-plan so as to achieve original targets or to reach

• Request appropriate action from those directly responsible for

• Reviewing of monthly progress

• Actual versus planned bar-chart schedules and time analysed

• Activity status reports with early and scheduled starting and

• Activity reports generated by departments, resources, costs

• About two to three months’ look-ahead plan

• Report on critical activities

• Report on slipping tasks

• Report on achievement of milestone activities

• A format of three bars showing original plan, revised

•Different ways employed in a construction project

•low response time

•Project cost control, a 3 step process:

•Observe cost expended for an item

(Warnings followed by corrective action)

•Importance of simple system:

–Less people, less response time

•Collection of cost for a project involves:

•Process of cost code generation, allocation and

•Different control systems employed based on

•Used for very small projects

Stage-wise completion of cost:

•On completion – each stage compared with standard cost

•Depicts progress profile of construction project

• Slow again at end

– Invoiced and actual bill also monitored in S curve

– Amount billed till day of monitoring < planned

•Hence, the 2nd curve runs below

– Continuous curve possible

– Bar chart derived from project network

•Estimated cost for activities (weekly/ monthly basis)

•Accordingly two sets of cost are available

– Basic input – Cost statement

•Step 1 – Setting up cost code

•Step 2 – Preparation of cost statement

•Step 3 – Preparation of project cost report

– Steps are as follows:

•Revised estimates: Er=Cr/Qr=(Cd+Cb)/(Qd+Qb)

Source: Construction Project Management by Neeraj Kumar Jha

•EVM integrates schedule and cost control aspects

•Determines schedule, cost and technical performance

– Value of product increases as tasks are completed

Used to forecast likely course of project – extrapolation

PM can take action to avoid unwanted variances 31

Defining scope of works

•Allocation of cost to work packages

The three ‘S’ curves

Budgeted cost for work scheduled (BCWS)

Indicated in Master Schedule

Budgeted cost of work performed (BCWP)

Actual cost of work performed (ACWP)

– Invoices & workmen’s time sheets

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