CHAPTER THREE

Time and Cost related Performance measurement

Focus areas
 Project time management
 Project cost management
 Tools & Techniques for performance measurement
(Earned value analysis )

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 Time related Performance management

Project planning
Planning aims at formulation of a time-based plan of action for
coordinating various activities and resources to achieve specified
objectives.
Planning is the process of developing the project plan. The plan
outlines how the project is to be directed to achieve the assigned
goals.

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• Planning follows a systematic approach. Various planning techniques are
employed to systematize and transform the mental thought process into a
concrete project plan.
Project Planning Process
Planning data collection Where to look for data? Studying the relevant documents
Planning time What is to be done? Define scope of the work
What are the activities involved? Breakdown project into activities
How it can be done? Developing network plans
When it is to be done? Scheduling work
Where it is to be done? Charting site layout

Planning resource What is needed to do it? Forecasting resource requirement

Planning the 4M’S
Who is to do it? Designing organizational structure
Allocate tasks and resource
Establishing responsibility centers

Planning implementation How to account performance? Designing control systems

How to monitor performance? Formulating monitoring methodology

How to communicate information? Developing project management

information system(PMIS)

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Types of project plans
Planning the entire project from its inception to completion
requires a vast coverage, varied skills, and different types of
plans. The nature of plan encountered in a typical construction
projects are;

Project plan

Inception stage Engineering stage Implementation stage

Project feasibility Project preliminary Project
plan plan construction Plan

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 3.1 Project Time Management

A. Defining Work Tasks

• The choice of technology ,defining the general method and
defining the various work tasks are the major processes in
planning.
WBS enables splitting of the project work in to hierarchical
work break down levels of
sub projects
Tasks
Work packages
Activities
Operational level
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 Contd…
• These work tasks represent the necessary framework to permit
scheduling of construction activities, along with estimating the
resources required by the individual work tasks, and any necessary
precedence's or required sequence among the tasks.
• Execution of an activity requires time and resources, including
manpower and equipment.
• The time required to perform an activity is called the duration of
the activity.
• The beginning and the end of activities are signposts or milestones,
indicating the progress of the project.

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 B. Defining Precedence Relationships among Activities
• Once work activities have been defined, the
relationships among the activities can be specified.
• Numerous natural sequences exist for construction
activities due to requirements for structural integrity,
regulations, and other technical requirements.
• Diagrammatically, precedence relationships can be
illustrated by a network or graph in which the
activities are represented by arrows.

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 Example : Precedence Definition for Site Preparation and Foundation Work

Suppose that a site preparation and concrete slab foundation

construction project consists of nine different activities:
A. Site clearing (of bush and minor debris),
B. Removal of trees,
C. General excavation,
D. Grading general area,
E. Excavation for utility trenches,
F. Placing formwork and reinforcement for concrete,
G. Installing sewer lines,
H. Installing other utilities,
I. Pouring concrete.

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TABLE: Precedence Relations for a Nine-Activity Project Example

Activity Description Predecessors

A Site clearing ---

B Removal of trees ---
C General excavation A
D Grading general area A
E Excavation for utility trenches B,C
F Placing formwork and reinforcement for concrete B,C
G Installing sewer lines D,E
H Installing other utilities D,E
I Pouring concrete F,G

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Contd…
• With the previous information, the next problem is to represent
the activities in a network diagram and to determine all the
precedence relationships among the activities.
• The following diagrams show the representation of the
activities on arrow.

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Activity-on-Branch Representation of a Nine Activity Project
 C. Estimating Activity Duration

• All formal scheduling procedures rely upon estimates

of the durations of the various project activities as
well as the definitions of the predecessor
relationships among tasks.
• A straightforward approach to the estimation of
activity durations is to keep historical records of
particular activities and rely on the average durations
from this experience in making new duration
estimates.

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 Contd…

• The time required to complete an activity should

depend not only on the quantity of work to be
executed (Q) but also the resources allocated (R) and
the (unit) productivity of the resources (P).
• The experience of the planner comes to the force not
only in cases when such data is not available, but also
when the data is to be interpreted to account for
geographical differences, age of equipment,
operating conditions, etc.

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Contd…
• Simply put, the time required (T) to complete an
activity can be calculated using the following
relationship, provided care is taken to ensure
proper units for all the quantities.
• T = Q / (RxP)
• For example, the time taken to paint 100 m2 (Q)
using 2 painters (R) and assuming each painter
can do 5 m2 in an hour (P), is simply 10 hours (T).

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 D. Fundamental Scheduling Procedures
Scheduling means putting the plan on a calendar time scale.
• In addition to assigning dates to project activities, project
scheduling is intended to match the resources of equipment,
materials and labor with project work tasks over time.
• Good scheduling:
– facilitate the timely procurement of necessary resources.
– Insure the completion of a project as soon as possible.
– can eliminate problems due to production bottlenecks

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• Poor scheduling can result in considerable waste as
laborers and equipment wait for the availability of
needed resources or the completion of preceding
tasks.

The fundamental scheduling techniques

Bar charts
Critical path method
Program evaluation and review technique,
Precedence network analysis
These scheduling techniques have been covered in
other course.(construction planning & scheduling)
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 E. Review and monitoring (Schedule Control)

• Schedule control is concerned with:

a) Influencing the factors that create schedule changes
to ensure that changes are agreed upon,
b) Determining that the schedule has changed, and
c) Managing the actual changes when and as they
occur.

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 Schedule control process

Inputs Tools & Techniques Outputs

 Schedule change  Schedule updates

 Project schedule
control system  Corrective action
 Performance  Performance  Lessons learned
reports measurement
 Change requests  Additional
 Schedule planning
management  Project
plan management

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Inputs to Schedule Control
• Project schedule:
– The approved project schedule, called the schedule baseline
(which must be feasible technically and in terms of resources),
– provides the basis for measuring and reporting schedule
performance
• Performance reports:
– It provides information on schedule performance, such as
which planned dates have been met and which have not.
• Change requests:
– Changes may require extending the schedule or may allow
accelerating it.

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 Tools and Techniques for Schedule Control

• Schedule change control system:

– A schedule change control system defines the procedures by
which the project schedule may be changed.
• Performance measurement
– Performance measurement techniques help to assess the
magnitude of any variations that do occur.
– An important part of schedule control is to decide if the
schedule variation requires corrective action.
• Additional planning
– Few projects run exactly according to plan. Prospective
changes may require new or revised activity duration
estimates, modified activity sequences, or analysis of
alternative schedules.

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Outputs from Schedule Control

• Schedule updates:
– A schedule update is any modification to the schedule
information that is used to manage the project.
– Schedule updates may or may not require adjustments to
other aspects of the project plan.
– Revisions are a special category of schedule updates.
– Revisions are changes to the schedule start and finish
dates in the approved project schedule.

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• Corrective action:
– Corrective action is anything done to bring expected
future schedule performance in line with the project
plan.
– Corrective action in the area of time management
often involves expediting: special actions taken to
ensure completion of an activity on time or with the
least possible delay.
• Lessons learned:
– The causes of variances, the reasoning behind the
corrective action chosen, and other types of lessons
learned from schedule control should be documented.

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Generally the project time control aims at timely execution of work as per
the work program and applications of corrective measures in case of
deviations.
The time control process involves the monitoring of time status by
 updating the project network and time schedules,
 reviewing durations of balance activities,
 computing deviations and evaluating the implication of deviations on
project time objective by time-analyzing the project network.
It includes formulating remedial measures including what-if analysis,
time crashing, re-planning, re-forecasting and re-mobilizing resources
under changed situations with a view to accomplish the time objective

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 3.2 Project cost management

Cost Estimating
– Cost estimating involves developing an approximation
(estimate) of the costs of the resources needed to
complete project activities.
– Or Cost estimating involves developing an assessment of
the likely quantitative result how much will it cost the
performing organization to provide the product or service
involved.

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 Inputs to Cost Estimating

• Work breakdown structure.

– It is used to organize the cost estimates and to
ensure that all identified work has been
estimated.
• Resource requirements.
– The output of the resource planning process is a
description of what types of resources are
required and in what quantities for each element
at the lowest level of the WBS.

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 Contd…
• Resource rates
– The individual or group preparing the estimates must
know the unit rates (e.g., staff cost per hour, bulk
material cost per cubic yard) for each resource to
calculate project costs.
• Activity duration estimates.
– Activity duration estimates will affect cost estimates
on any project where the project budget includes an
allowance for the cost of financing (i.e., interest
charges).
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 Contd…
• Estimating publications
– Commercially available data on cost estimating.
•  Historical information
– Information on the cost of many categories of
resources is often available from one or more of the
following sources:
• Project files
– one or more of the organizations involved in the project
may maintain records of previous project results that are
detailed enough to aid in developing cost estimates.

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 Contd…
• Commercial cost-estimating databases:
– historical information is often available commercially.
• Project team knowledge:
– the individual members of the project team may
remember previous actual or estimates.

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 Outputs from Cost Estimating

• Cost estimates
– Cost estimates are quantitative assessments of the likely
costs of the resources required to complete project
activities.
– Costs must be estimated for all resources that will be
charged to the project.
• Supporting detail
Supporting detail for the cost estimates should include:
• A description of the scope of work estimated.
• Documentation of the basis for the estimate;
• Documentation of any assumptions made.

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 Contd..

• Cost management plan:

– The cost management plan describes how cost variances
will be managed (e.g., different responses to major
problems than to minor ones).

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 Cost Budgeting

• Cost budgeting involves allocating the overall cost

estimates to individual activities or work packages to
establish a cost baseline for measuring project
performance.
• For control and monitoring purposes, the original
detailed cost estimate is typically converted to a
project budget, and the project budget is used
subsequently as a guide for management.

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 Cost Control

• Cost control is concerned with ;

– a) Influencing the factors that create changes to
the cost baseline to ensure that changes are
agreed upon,
– b) Determining that the cost baseline has
changed,
– c) Managing the actual changes when and as they
occur.

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Contd…

• Cost control includes:

– Monitoring cost performance to detect and
understand variances from plan.
– Ensuring that all appropriate changes are recorded
accurately in the cost baseline.
– Preventing incorrect, inappropriate, or
unauthorized changes from being included in the
cost baseline.
– Informing appropriate stakeholders of authorized
changes.
– Acting to bring expected costs within acceptable
limits. 33
 Tools & Techniques

• Earned value analysis

– Earned value analysis in its various forms is the
most commonly used method of performance
measurement.
– integrates scope, cost (or resource), and schedule
measures to help the project management team
assess project performance.

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 Contd…
• Earned value (EV) involves calculating three key values for
each activity:
– The Planned Value (PV), which is also called the budgeted
cost of work scheduled (BCWS), is that portion of the
approved cost estimate planned to be spent on the activity
during a given period.
– The Actual Cost (AC), previously called the actual cost of
work performed (ACWP), is the total of costs incurred
in accomplishing work on the activity during a given
period.

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 Contd…
The EV, previously called the budgeted cost of work
performed (BCWP), is the value of the work actually
completed
From these three quantities we can determine our
total program budget as well as make a
determination of schedule and cost performance and
provide an estimated cost of the project at its
completion.

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 Contd…
• Budget At Completion (BAC) – The sum of all the
budgets allocated to a program.
• Schedule Variance (SV) – The difference between the
work actually performed (BCWP) and the work
scheduled (BCWS).
• Cost Variance (CV) – The difference between the
planned cost of work performed (BCWP) and actual cost
incurred for the work (ACWP).

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 Contd…
• Cost Performance Index (CPI) – The ratio of cost of work
performed (BCWP) to actual cost (ACWP). CPI of 1.0
implies that the actual cost matches to the estimated
cost. CPI greater than 1.0 indicates work is
accomplished for less cost than what was planned or
budgeted. CPI less than 1.0 indicates the project is
facing cost overrun.
• Schedule Performance Index (SPI) – The ratio of work
accomplished (BCWP) versus work planned (BCWS), for
a specific time period. SPI indicates the rate at which the
project is progressing.

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 Contd…
• Estimate At Completion (EAC) – It is a forecast of most
likely total project costs based on project performance
and risk quantification. At the start of the project BAC
and EAC will be equal. EAC will vary from BAC only
when actual costs (ACWP) vary from the planned costs
(BCWP).

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 Contd…
• Estimate At Completion (EAC)-
• Most common forecasting techniques:
• 1.EAC = Actual to date plus a new estimate for all
remaining work. This approach is most often used when
past performance shows that the original estimating
assumptions were fundamentally flawed, or they are
longer relevant to a change in conditions.
• 2.EAC = Actual to date plus remaining budget. This
approach is most often used when current variances are
seen as a typical and the project management team
expectations are that similar variances will not occur in the
future.
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 Contd…
• 3.EAC = Actual to date plus the remaining budget
modified by a performance factor, often the cumulative
cost performance index (CPI). This approach is most
often used when current variances are seen as typical of
future variances.

• 4.EAC = Budget At Completion (BAC) modified by a

performance factor, cumulative cost performance index
(CPI).

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 Contd…
• Estimate To Complete (ETC) – The difference between
Estimate At Completion (EAC) and the Actual Cost (AC).
This is the estimated additional cost to complete the
project from any given time.

• Variance At Completion (VAC) – The difference between

Budget At Completion and Estimate At Completion
(EAC). This is the dollar value by which the project will
be over or under budget.

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 Earned Value Formulas
NAME FORMULA NOTES
Cost Variance (CV) EV-AC Negative = Over budget
Positive = Under budget
Schedule Variance EV-PV Negative = Behind Schedule
(SV) Positive = Ahead of Schedule
Cost Performance EV/AC How much are we getting for every
Index (CPI) dollar we spend?
Schedule Perform EV/PV Progress as % against plan
Index (SPI)
Estimate to EAC-AC How much more do we have to
Complete (ETC) spend?
Variance at BAC-EAC At the end of the day, how close will
Completion (VAC) we be to plan?
Estimate at See following
Completion (EAC) slide

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 Earned Value Formulas (Cont’d)
NAME FORMULA NOTES
Estimate at
Completion
AC+(BAC-EV)/CPI Use when current
variances are expected to
(EAC) BAC/CPI continue
AC+ATC Use when original
estimate was bad. Actual
+ New estimate
AC+BAC-EV Use when current
variances are not
expected to be there in
the future
AC+(BAC-EV)/CPI*SPI Use when the project
is over budget and
behind schedule

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The Comparison between planned and earned values provides work
accomplishment or project performance in terms of cost and time
variances

Schedule Performance Cost Performance Index R

Index A
T
I
O
BCWS BCWP ACWP
V
A
R
I
Schedule Cost Variance
Variance A
N
C
E

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The expression used for computations based on EV Analysis can
also be shown clearly using three S-Curves

Status date Planned comp. Actual

date comp.date
EAC

Over budget VAC

cash flow
BAC ACWP=AC ETC
Cost

BCWS=PV

CV SV=EV-PV
CV=EV-AV
Forecast time CPI=EV/AV
overrun
BCWP=EV SPI=EV/PV

SV Time 46
 Examples on EVA technique

Example 1
The excavation of one building scheduled for 10 days on
100birr. Currently the excavation work on 3rd day the work
completed 20% in 30 birr. Then find
a) CV
b) SV
c) SPI
d) CPI
Of excavation work and write status of work?

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 Example 2
Given a project with the following characteristics, answer the
following questions:
• You are the project manager of a project to build fancy birdhouses.
• You are to build two birdhouses a month for 12 months.
• Each birdhouse is planned to cost $100.
• Your project is scheduled to last for 12 months.
• It is the beginning of month 10.
• You have built 20 birdhouses and your CPI is 0.8.
Then find
a. EV, PV,AC,CV, SV and SPI
b. States of project

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 Example 3

Given project
 5km road project
 5month contract time of completion
 Budgeted cost of Br. 500M
Scheduled(time and cost)
 1km1month100M.Br
Physical progress
 At the end of 2nd month 1.5 km
 Actual cost 180M.Br
Question
 Under spending?/ over spending?
 Behind schedule?/ ahead schedule?

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Solution
Cost over run=180-150= 30M
 BCWS=200M here the schedule is measured by Br.
 BCWP=150M
 ACWP=180M(Earned Value) from cost statement of the project(Report)
Variance
 SV=BCWP-BCWS=-50M
(schedule variance in terms of money, it could be in MH or equipment, labor..)
CV=BCWP-ACWP=-30M(negative variance as of monitoring day )
Conclusion
As the SV & CV indicates the project is Overspending and as well lagging
behind the schedule.
SPI=BCWP/BCWS=150/200=0.75 behind schedule
CPI=BCWP/ACWP=150/180=0.83 cost overrun

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Budget at completion BAC=500M
Estimate at completion
 EAC= ACWP+ETC=180+350=530M
 EAC=(ACWP/BCWP)x BAC=(180/150)x500=600
Estimate to completion
(EAC=BAC/CPI=500/0.83=600) 3.5km each with 100
 EAC=AC+BAC-EV=180+500-150=530
 EAC=AC+ (BAC-EV)/CPI=180+(500-150)/0.83=601.69
 Which one is the exact estimate????
Variance at competition
VAC=BAC-EAC=500-???=???

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 Example 4
consider a simple project in which five activates described as a bar chart each activity requires
time. To complete associated cost also indicated below estimated project duration five month.

activity cost M1 M2 M3 M4 M5
A 20000
B 10000
C 100000
D 40000
E 60000

at third month and 15 day the following has been accomplished

-B,C,D are 100%
-A 30% completed
incurred to date cost :150000

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compute
A estimated value of work actually accomplished
B estimated value of work planned to be done
C determine the project status(over budget, under budget ,on budget)
D determine the project ahead , behind or on schedule
E determine the revised estimation cost of the project

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 Q1
You are working as an intern and have 10 m3 mixing of
concrete. It is estimated that it will take you 5 hours per
m3 and you are scheduled to work 5 hours a day. You are
paid birr10 per hour. After 6 work days you have spent
15 hours and completed 5 m3 concrete.
compute
A estimated value of work actually accomplished
B estimated value of work planned to be done
C determine the project status(over budget, under budget
,on budget)
D determine the project ahead , behind or on schedule
E determine the revised estimation cost of the project 54