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Earned Value As A Tool For Control

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18 views

Earned Value As A Tool For Control

Uploaded by

فيصل الحربي
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Objectives of This Lecture :

When you have studied this module, you should


be able to:

• Control projects to the plan


• Introduce value and describe how it can be
measured
• Examine earned value analysis concepts
Highlights of Last Lecture!!

• What is meant by project crashing?


• What are the reasons behind project
crashing ?
Purpose Of Project Control

• The purpose of project control is to adjust the project


to meet its goals by assessing the performance of the
project, analyzing the causes of performance
problems, designing changes to address problems
that are determined to need attentions and
implementing those changes through control actions.
• The estimated cost during bidding process is a
baseline to managed and control the cost.
• Within the context of engineering project cost control
can only be attributed to cost of labor, equipment ,
materials and site overheads.
Different between Project Planning and Project Control

• Project control is distinguished from project


planning in two ways:
1. Project control yields a set of designs, decisions
and actions whereas project planning yields a
design.
2. Project control is a real time process during the
implementation not before the implementation
Earned Value

• Earned value is a well-known project management


tool that uses information on cost, schedule and work
performance to establish the current status of the
project.
• The earned value method has been developed as a
tool facilitating project progress control.
• Earned value compares the planned amount of work
with what has actually been completed, to determine
if cost, schedule, and work accomplished are
progressing as planned
Earned Value Management Terms
• Planned value (PV) is the portion of the approved cost
estimate planned to be spent on an activity during a given
period
• Also called the budget cost of work scheduled (BCWS)
• Actual cost (AC) is the total costs ( Direct and indirect)
incurred in completing work on an activity during a given
period
• Also called actual cost of work performance (ACWP)
• Earned Value (EV) is an estimate of the value of the work
actually completed
• Also called the budgeted cost of work performed (BCWP)
• EV based on original planned project costs and the rate at
which the team is completing work on the project to date.
Earned Value-Basic Performance Metrics
Schedule
Cost Variance CV=EV-AC • SV=EV-PV •
Variance
Difference Difference
between between
projected cost projected
and actual cost
CV SV schedule and
actual schedule

Cost
SPI CPI Performance
Schedule Index
Performance SPI=EV/PV • CPI=EV/AC • A measure of
Index how close the
A measure of project is to
how close the spending on the
project is to work performed
Index Values
performing work to what was
< 1: over budget or behind schedule
as it was actually planned to have
>1: under budget or ahead of schedule
scheduled been spent
How to Measure Earned Value
Earned Value Management Terms
• EV: Earned Value
• AC: Actual Cost
• PV: Planned Value
• BAC: Budget At Completion
• EAC: Estimation At Completion
• VAC: Variance At Completion
• SV: Schedule Variance
• CV: Cost Variance
• SPI: Schedule Performance Index
• CPI: Cost Performance Index
• To determine Budget of remaining work =BAC-EV
• To determine remaining Funds= BAC-AC

• Note that we Use SPI and SV to see if the project within the schedule or not
whereas we use CPI and CV to see if project within budget or not
Cost Performance
1. Cost Variance (CV) = BCWP  ACWP
+ve  Under Budget (cost)
Cost Variance 0  Within Budget (on cost)
- ve  Over Budget (cost)

2. Cost Performance Index (CPI) or Cost Performance Ratio (CPR) =


BCWP/ACWP
> 1  Under Budget (under cost) = costs below budget
CPI = 1  Within Budget (on cost)
< 1  Over Budget (over cost)

3. % Cost Overrun/ Underrun = (ACWP – BCWP)/ BCWP


where –ve value indicates an underrun has occurred.
Schedule (Time) Performance
4. Schedule/ Performance Variance (SV) = BCWP  BCWS

+ve  Ahead of Schedule


Sch./ Per. Variance 0  On Schedule
-ve  Behind Schedule

5. Schedule Performance Index (SPI) = Schedule Performance ratio


(SPR) = BCWP/ BCWS

> 1  Ahead of Schedule (completions ahead of schedule)


SPI = 1  On Schedule
< 1 Behind Schedule
Cost Forecasting
6. Budgeted Cost At Completion (BAC) = Budget cost of the project =
Budgeted Cost of Work Scheduled at the end of the project (BCWSend)

7. Estimated Cost At Completion (EAC) = Estimated total final cost =


(ACWP to date / BCWP to date) * BAC

More accurate forecast can be reached by using the following formula:


8. Estimated Cost At Completion (EAC)
= ACWP to date + [(BAC – BCWP to date ) / CPI this period]

9. Estimate to complete (ETC) = EAC – ACWP

10. Variance from original budget = EAC - BAC


Earned Value Analysis
Activity Predecessor Duration Cost/Day Total Cost
A - 2 300 600
B A 3 400 1200
C B 3 400 1200
D B 2 200 400
E D 3 100 300

Field Report At End Of Day 7


Activity Actual % Completion Incurred Cost
A 100 600
B 100 1400
C 33 500
D 50 200
E 0 0
Solution

5 C 8

7 3 10

0 A 2 2 B 5 10 10

FINISH
0 2 2 0 3 7 10 10
5 D 7 7 E 10

0 2 7 7 3 10

Critical Path = A-B-D-E


Solution
A
B
C
D
E
Days 1 2 3 4 5 6 7 8 9 10 11 12 13
Solution
SPI
Activity ACWP BCWP BCWS CPI CV SV

A 600 600 600 - - - -

B 1400 1200 1200 - - - -

C 500 400 800 - - - -

D 200 200 400 - - - -

E 0 0 0 - - - -

Total to 2700 2400 3000 0.889 -300 0.8 -600


date

Based on the calculation we can summarise the following points


CV= project over budget
CPI= less than 1 project over budget
SPI= Less than one Project below schedule
SV= project is behind the schedule

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