Earned Value Method

Earned Value
Elements of Project Control

Creation of a Baseline Schedule Measurement of Performance
Effective Corrective Actions
Schedule Updating
1. Schedule durations and sequences often vary from actual durations and sequences
Subcontractors might use different methods Force Majeure events delay the project Etc
2.
Participants would like to know how the project is progressing

Owners When can I move in? How much should I pay this month? What milestones have been met? Designers When do I release drawings Subcontractors when do I come on to the site?
Usefulness of frequent schedule updating

Current state of the project is always known Updates provide a valuable record of project status at a given time
Can document changes, responsibilities and delays throughout the project Useful during claims proceedings
Schedule is a document that can be followed
More on updates
Schedules should be updated periodically
Especially if a major event such as a logic change occurs
Updates should show

New start and completion dates Completed activities Percentage progress on activities
Percentage Complete
Planned Vs. Actual
Updating a Precedence Diagram

0 3 3 3 0 9 9 6 8
A 3
0 0 3
B (4)6
7
D 2
1 9 9 9 0 9
0 Start 0 0
0 0
3 E 3 4 1
6 7
Finish
9
6
C 2
F (3)4
7 1 9
Earned Value
We have spent 60% of the time for an activity but have completed 40% of the work. We are on schedule since we have completed the most time consuming parts of the activity
Evaluating Progress on an Activity

Units completed
Length of pipe laid, length of trench dug
Effort expended
Plastering = 50%, Painting = 50% effort 3 walls plastered, two painted out of 4 walls Percentage complete = (3x0.5+2x0.5)/4 = 62.5%
Expert opinion Amount spent Time taken (?)
Project Monitoring
Project Monitoring
Planning and scheduling play an important role in project management But without monitoring the project, chances of completing the project on schedule is difficult Two parameters are monitored
Cost Time
The following graph shows the Time-cost relationship for a project
Project Monitoring
This graph shows Project Progress
Cost over-run with schedule
Time over-run
Cost
Ideal Curve
Time
Project Monitoring
Cost is not proportional to the time/man-hours spent on each activity
Eg:- Installation of a projector in a classroom
Cost of the projector is very high Man-hours spent on installation are not significant
Neither expenditure nor man-hours spent can be used to measure the project progress Expenditure and man-hours are inputs Progress in terms of input does not indicate progress in terms of output
Project Monitoring
Quantities installed can give information regarding project progress, but is limited to very few activities and cannot be applied to the entire project as it involves various activities Thus with the help of above mentioned parameters, it is difficult to measure the project progress. Hence the use of EARNED VALUE of time or cost
Concepts of Earned Value
Concept of Earned Value

Consider the following example:
Wall construction Wall is divided into 4 sections For 4-sections - 100 man-hours are required Hence if 2-sections are completed, (2/4) 100 = 50 man-hours We say that 50 man-hours have been EARNED
The actual man-hours spent to construct these two sections can be more than or less than the Earned Value of man-hours

Wall construction If 4 sections cost Rs. 1000/then the cost of constructing 2 sections = Rs. 500/We say that Rs. 500/- is the EARNED value of money The actual cost incurred in constructing these two sections can be more than or less than the Earned Value of money It is important to note that Earned Value is based on the Actual quantities installed or Actual quantity of work done Hence output is considered in the Earned Value concept

Calculation of Earned Value
Earned Value of man-hours or money for an activity can be calculated as follows:
Example 1
Example 1
Determination of planned % complete: Consider the following example
300
Activity A 5000 5000 (money) 500 Activity B 10000 70000 (money) 800 (man-hours)
700 (man-hours)
Draw % complete with respect to man-hours and money.
Example 1
Determination of planned % complete based on man-hours.
300 Activity A 5000 5000 (money) 500 Activity B 10000 7000 (money) 800 (man-hours) 700 (man-hours)
Daily Cumulative Total Cumulative
300 300 300 2300 = 0.13
1200 1500 1200 2300 = 0.65
800 2300 300 2300 = 1.0
% Complete
Example 1
Determination of planned % complete based on money.
300 700 (man-hours)
Activity A
5000 5000 (money) 500 Activity B 10000 27000 (money) 800 (man-hours)
Daily Cumulative Total Cumulative
5000 5000 5000 27000 = 0.185
15000 20000 20000 27000 = 0.741
7000 27000 90000 27000 = 1.0
% Complete
Example 1
Percentage
Stages
Example 1
BCWS Man-hours
Stages
Total
Activity A
Activity B Stage Total Cumulative Total Project % Complete
300
0 300 300 0.13
700
500 1200 1500 0.65
0
800 800 2300 1.0
1000
1300 2300
Example 1
BCWS Money
Stages
Total
Activity A
Activity B Stage Total Cumulative Total Project % Complete
5000
0 5000 5000 0.185
5000
10000 15000 20000 0.741
0
7000 7000 27000 1.0
10000
17000 27000
Example 1
Determination of Earned Value of Man-hour.
Consider the previous problem (man-hours)
Activity A
300
700
Activity B
500
800
scheduled
% Complete Activity A Activity B 0.25 0.95 0.6 1.0 0.95
Example 1
Stage 1: EMh (A)
EMh (B)
% complete of project: Total Man-hours = 2300

% complete = 250 / 2300 % complete = 0.11
Example 1
Stage 2: EMh (A)
EMh (B)

Example 1
Stage 3: EMh (A)
EMh (B)

Example 1
Determination of Earned Value of Man-hour:
250
700
50
Man-hours
Activity A
300
700
Earned Value
780 455
Man-hours
(man-hours)
scheduled
Activity B
500
800
% Complete Activity A Activity B Project - % Complete 0.108 0.25 0.95 0.6 0.752 1.0 0.95 0.971
Example 1
BCWP
Stages % complete Activity A Activity B Earned Value (man-hours) Activity A Activity B Stage total Activity A (cum) Activity B (cum) Total cumulative Project % complete
0.25 0
0.95 0.6
1.0 0.95
250 0 250 250 0 250 0.109
700 780 1480 950 780 1730 0.752
50 455 505 1000 1235 2235 0.972
Example 1
Determination of Earned Value of Man-hour: ACTUAL MAN-HOURS
400 500 100
Man-hours
Activity A
300
700
Actual
450 1000
Man-hours
(man-hours)
scheduled
Activity B
500
800
Example 1
ACWP
Stages Activity A Activity B
1 400 0
2 500 450
3 100 1000
Stage Total
Cumulative Total
400 400
950 1350
1100 2450
Example 1
Stage 1 Stage 2 Stage 3
BCWS BCWP ACWP SV CV SPI CPI
SCHEDULED MAN-HOUR EARNED MAN-HOUR ACTUAL MAN-HOUR BCWP-BCWS BCWP-ACWP BCWP/BCWS BCWP/ACWP
(Cumulative) (Cumulative) (Cumulative)
300 250 400 -50 -150 0.83 0.63
1500 1730 1350 230 380 1.15 1.28
2300 2235 2450 -65 -215 0.97 0.9122
Example 1
Determination of Earned Value of Man-hour: Earned Value
Man-hour
Stages
Example 1
Determination of Earned Value of Money
Consider the previous problem (money)
Activity A
5000
5000
Activity B
10000
7000
scheduled
% Complete Activity A Activity B 0.25 0.95 0.6 1.0 0.95
Example 1
Determination of Earned Value of Money.
Stage 1: EMh (A)
EMh (B)

Example 1
Stage 2: EMh (A)
EMh (B)

Example 1
Stage 3: EMh (A)
EMh (B)

Example 1
2500
7000
500
Money
Activity A
5000
5000
Earned Value
10200 5950
Money
(money)
scheduled
Activity B
10000
7000
% Complete Activity A Activity B Project - % Complete 0.093 0.25 0.95 0.6 0.730 1.0 0.95 0.969
Example 1
BCWP
Stages % complete Activity A Activity B Earned Value (money) Activity A Activity B Stage total Activity A (cum) Activity B (cum) Total cumulative Project % complete
0.25 0
0.95 0.6
1.0 0.95
2500 0 2500 2500 0 2500 0.093
7000 10200 17200 9500 10200 19700 0.730
500 5950 6450 10000 16150 26150 0.969
Example 1
Determination of Earned Value of Money. ACTUAL MONEY
4500 6000 5000
Money
Activity A
5000
5000
Actual
8500 7500
Money
(money)
scheduled
Activity B
10000
7000
Example 1
ACWP
Stages Activity A Activity B
1 4500 0
2 6000 8500
3 5000 7500
Stage Total
Cumulative Total
4500 4500
14500 19000
12500 31500
Example 1
Stage 1 Stage 2 Stage 3
BCWS BCWP ACWP SV CV SPI CPI
SCHEDULED MONEY EARNED MONEY ACTUAL MONEY BCWP-BCWS BCWP-ACWP BCWP/BCWS BCWP/ACWP
(Cumulative) (Cumulative) (Cumulative)
5000 2500 4500 -2500 -2500 0.5 0.56
20000 19700 19000 -300 700 0.99 1.04
27000 26150 31500 -850 -5350 0.97 0.83
Example 1
Determination of Earned Value of Money. Earned Value
Money
Stages
Example 2
Example 2
Determination of planned % complete:
Sch. Qty. Sch. Mhrs MAN-HOURS 20 20 20 12.5 20 12.5 20 12.5 12.5 10 10
Flooring
Electrical AV systems
400
100 20
100
50 20
Sch. Money 40000 40000 150000 8000 8000 8000 10000
MONEY
8000 10000 8000 10000 10000 75000 75000
Draw % complete with respect to Man-hours and Money.
Example 2
Determination of planned % complete based on Man-hours:
Sch. Mhrs. Flooring Electrical AV systems 100 50 20 170 20 20 20 170 0.118 20 40 40 170 0.235 32.5 72.5 72.5 170 0.426 32.5 105 105 170 0.618 32.5 137.5 137.5 170 0.809 32.5 150 150 170 0.882 20 20 20 12.5 20 12.5 20 12.5 12.5
10
10 160 160 170 0.941
10
10 170 170 170 1.0
Total Mhrs. Cuml. Mhrs.
% complete
Stage 1
Stage 2
Stage 3
Stage 4
Example 2
Determination of planned % complete based on money:
Sch. Money Flooring Electrical AV systems 40000 40000 150000 230000 8000
8000 8000 230000
8000
8000
8000 10000
8000 10000
8000 10000 10000 75000 75000 75000

230000 230000 230000
8000
16000 16000 230000
18000
34000 34000 230000
18000
52000 52000 230000
18000
70000 70000 230000
10000
80000 80000 230000
75000
155000 155000 230000
Total Money Cuml. Money
0.034
0.069
0.147
0.226
0.304
0.347
0.673
1.0
% complete
Stage 1
Stage 2
Stage 3
Stage 4
Example 2
Scheduled-percentage complete
Percentage
Days
Example 2
Determination of Earned Value of Man-hour UPDATE 1
Sch. Mhrs Flooring Electrical AV Systems 100 50 20 170 12.5 Earned Mhrs. Cuml. Earned Mhrs. 12.5 17.5 0 0 0 0 0 0 Inst. Qty. 120 50 70 Quantity Installed
30
0.176
30
0.176
30
0.176
30
0.176
30
0.176
30
0.176
30
0.176
% complete
0.074
Actual Man-hours
20
20
20 20
20 40
0 40
0 40
0 40
0 40
0 40
0 40
Example 2
Update 1
Man-hours
Stages
Example 2
Sch. Qty. Flooring Electrical AV Systems 400 100 20 Sch. Mhrs 100 50 20 170 Inst. Qty. 280 55 50 70 80 25 Quantity Installed 80 30
Earned Mhrs.
Cuml. Earned Mhrs. % complete
12.5
12.5 0.074
17.5
30 0.176
32.5
62.5 0.368
35
97.5 0.574
0
97.5 0.574
0
97.5 0.574
0
97.5 0.574
0
97.5 0.574
Actual Man-hours 20 20 30 15 30 15
20 20
20 40
45 85
45 130
0 130
0 130
0 130
0 130
Example 2
Update 2
Man-hours
Days
Example 2
Sch. Qty. Flooring Electrical AV Systems 400 100 20 Sch. Mhrs 100 50 20 170 Inst. Qty. 400 100 0 50 70 80 25 Quantity Installed 80 30 90 35 30 10
Earned Mhrs.
Cuml. Earned Mhrs. % complete
12.5
12.5 0.074
17.5
30 0.176
32.5
62.5 0.368
35
97.5 0.574
0
137.5 0.809
0
150 0.882
0
150 0.882
0
150 0.882
Actual Man-hours 20 20 30 15 30 15 30 15 15 15
20 20
20 40
45 85
45 130
45 175
30 205
0 205
0 205
Example 2
Update 3
Man-hours
Days
Components of Earned Value
Components of Earned value Analysis

Budgeted Cost of Work Scheduled (BCWS)
It is the budgeted cost of work scheduled to be performed It is also called the Planned Value (PV) It tells how much work have been completed

Budgeted Cost of Work Performed (BCWP)
It is the budgeted cost of work actually performed The Earned Value for the work actually completed It tells how much work is actually completed

Actual Cost of Work Performed (ACWP)
It is the amount actually spent on the work completed This could be more or less than the Earned Value

Scheduled Variance (SC)
It compares work completed vs work planned It helps to identify whether the project is ahead or behind schedule Negative value indicated that the project is behind schedule

Scheduled Performance Index (SPI)
It helps to identify whether the project is ahead or behind schedule Less than 1 indicates that the project is behind schedule It can be used to forecast how long it will take for the project to complete

Cost Varience (CV)
It compares what was planned to be spent on the work completed vs. what was actually spent It helps to identify whether the project is ahead or behind schedule Negative value indicates that the project is over budget

Cost Performance Index (CPI)
It helps to identify weather the project is above or below budget Less than 1 means the project is over budget It can be utilised to forecast how much amount will be required to complete the project

Budget at Completion (BAC)
It is the amount that was originally budgeted to complete the project

Estimate at Completion (EAC)
It is the estimated amount required to complete the project
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Earned Value Method

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Earned Value Method

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Earned Value

Elements of Project Control

Participants would like to know how the project is progressing

Usefulness of frequent schedule updating

Schedule is a document that can be followed

Updates should show

Planned Vs. Actual

Updating a Precedence Diagram

Evaluating Progress on an Activity

Expert opinion Amount spent Time taken (?)

The following graph shows the Time-cost relationship for a project

Cost over-run with schedule

Concepts of Earned Value

Concept of Earned Value

Concept of Earned Value

Concept of Earned Value

Draw % complete with respect to man-hours and money.

Daily Cumulative Total Cumulative

300 300 300 2300 = 0.13

1200 1500 1200 2300 = 0.65

800 2300 300 2300 = 1.0

Daily Cumulative Total Cumulative

5000 5000 5000 27000 = 0.185

15000 20000 20000 27000 = 0.741

7000 27000 90000 27000 = 1.0

% Complete Activity A Activity B 0.25 0.95 0.6 1.0 0.95

% complete of project: Total Man-hours = 2300

% complete of project: Total Man-hours = 2300

% complete of project: Total Man-hours = 2300

250 0 250 250 0 250 0.109

700 780 1480 950 780 1730 0.752

50 455 505 1000 1235 2235 0.972

Stages Activity A Activity B

BCWS BCWP ACWP SV CV SPI CPI

(Cumulative) (Cumulative) (Cumulative)

300 250 400 -50 -150 0.83 0.63

1500 1730 1350 230 380 1.15 1.28

2300 2235 2450 -65 -215 0.97 0.9122

% Complete Activity A Activity B 0.25 0.95 0.6 1.0 0.95

% complete of project: Total Man-hours = 27000

% complete of project: Total Man-hours = 27000

% complete of project: Total Man-hours = 27000

2500 0 2500 2500 0 2500 0.093

7000 10200 17200 9500 10200 19700 0.730

500 5950 6450 10000 16150 26150 0.969

Stages Activity A Activity B

BCWS BCWP ACWP SV CV SPI CPI

(Cumulative) (Cumulative) (Cumulative)

5000 2500 4500 -2500 -2500 0.5 0.56

20000 19700 19000 -300 700 0.99 1.04

27000 26150 31500 -850 -5350 0.97 0.83

Sch. Money 40000 40000 150000 8000 8000 8000 10000

Draw % complete with respect to Man-hours and Money.

Total Mhrs. Cuml. Mhrs.

8000 10000 10000 75000 75000 75000

Total Money Cuml. Money

Total Mhrs. Cuml. Mhrs.

Total Mhrs. Cuml. Mhrs.

Total Mhrs. Cuml. Mhrs.

Components of Earned Value

Components of Earned value Analysis

Components of Earned value Analysis

Components of Earned value Analysis

Components of Earned value Analysis