Earned Value Analysis (EVA)

Dr Adewale Abimbola, FHEA, GMICE

www.edulibrary.co.uk

Aim and Objectives

• Aim: Earned Value Analysis (EVA)

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• Objectives: At the end of the lesson, the students should be able to:

• Assess the progress of a construction project based on the measured progress achieved.

• Forecast total cost and date of completion of a construction project.

• Explain the importance of monitoring costs in construction projects.

Learning Outcome and Assessment Criteria

P5. Describe the key principles of construction project management.

M3. Compare different techniques for planning and managing resources.

Earned Value Analysis - Definition

• • Earned Value Analysis (EVA) is a project management methodology used to quantify the actual work accomplished in a project.
• • EVA offers a means to assess a project's progress based on the measured progress achieved.
• • Through progress measurement, project managers can forecast a project's total cost and completion date using trend analysis, relying on a crucial metric called "earned value."
• • "Earned value" is defined as the "budgeted cost of work performed" (BCWP), facilitating the computation of cost and schedule performance indices.
• These indices provide insights into how well the project aligns with its original programme.

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Earned Value Management – Fundamental Notions

Earned value management (EVM) serves the purpose of addressing three critical questions in project management:

• 1. Historical progress on the project?
• 2. Current status on the project?
• 3. Future trajectory on the project?

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Three primary data sources in earned value management include:

1. The planned value (PV) or budget cost of work scheduled (BCWS).
2. The actual cost (AC) of work completed (ACWP).
3. The “earned value; EV” or budgeted cost of work performed (BCWP).

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VARIANCE ANALYSIS

• Schedule Variance (SV)
• Reflects the currency difference between work ahead or behind the plan.
• Computed as budget cost of work performed minus budget cost of work scheduled.

SV = BCWP – BCWS

• A variance of 0 signifies an on-schedule project, a negative variance indicates being behind schedule, and a positive variance implies being ahead of schedule.
• Cost Variance (CV)
• Defined as the difference between budget cost of work performed and actual costs of work performed

CV = BCWP – ACWP

• A variance of 0 indicates an on-budget project, a negative variance signals being over budget, and a positive variance suggests being under budget.

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• Variance refers to a measurable deviation from a known baseline or expected value.

• Two fundamental expressions of variance include schedule variance and cost variance.

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PERFORMANCE INDICES

• To analyse project performance.

• Two key performance indexes are the Schedule Performance Index (SPI) and Cost Performance Index (CPI).

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Case Study

• The planned construction duration for a commercial project is 19 weeks (Figure 1). The contracting firm on a lump sum contract with the client estimates that the total direct costs will be £555,000.00 (See Table 1 for breakdown).

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Table 1. Activity schedule.

Figure 1. Construction programme.

Case Study (Cont’d)

• There has been sudden project delays and changes to the some of the material costs during construction. The project manager has compiled the summary report in Table 2 to monitor the cost and schedule.

Table 2. Field report compiled on January 17, 2024

Questions

• Calculate the direct costs per week for each of the operations or activities.
• Calculate the total values of the actual cost of work performed (ACWP), budgeted cost of work schedule (BCWS), and budgeted cost of work performed (BCWP).
• Determine the cost performance index (CPI), cost variance (CV), schedule performance index (SPI), and schedule variance (SV).
• Estimate the project cost at completion and the project duration.

Solution

Question 1

Solution

Refer to the EVA Excel file for breakdown

Field report compiled on January 17, 2024.

Solution

Question 2

Field Reporting Date: January 17, 2024.

Solution

Question 3

Solution

Question 3

Solution

Question 4

CUMULATIVE COST – ACWP, BCWP, & BCWS

Group Exercise

• The planned construction duration for a foundation is 13 weeks. The contracting firm on a lump sum contract with the client estimates that the total direct costs will be £14,350.00 (See Table 1 for breakdown).

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Table 1. Activity schedule.

Group Exercise (Cont’d)

• There has been sudden project delays and changes to the some of the material costs during construction. The project manager has compiled the summary report in Table 2 to monitor the cost and schedule.

Table 2. Field report compiled on January 17, 2024

Questions

• Calculate the total values of the Budgeted cost of work performed (BCWP) and Budgeted cost of work schedule (BCWS).
• Determine the Cost performance index (CPI), Cost variance (CV), Schedule performance index (SPI), and Schedule variance (SV).
• Estimate the project cost at completion and the probable project duration.

References /

Bibliography

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• Engineer4Free (2017) Earned value analysis worked example. Available at: https://www.youtube.com/watch?v=z7b3SYQuqJM&list=LL&index=3 (Accessed: 30 January 2024)
• Project Management Institute (2004) A Guide to the Project Management Body of Knowledge (PMBOK® Guide). (3 ed.) Newtown Square, PA: Project Management Institute.
• Reichel, C. W. (2006). ‘Earned value management systems (EVMS): you too can do earned value management’ Paper presented at PMI® Global Congress 2006—North America, Seattle, WA. Newtown Square, PA: Project Management Institute.