Paper Topic: “Building and Managing low-cost Housing units of identical flats, using Line of Balance (LoB) and Earned Value Management (EVM) Techniques.”

(Typical of State Housing Project in Nigeria).

W3_Austin Iserhienrhien_Earned Value Analysis Management Best Practices.

According to PMI in Projects, EVM is a management methodology for integrating scope, schedule and resources for objectively measuring, monitoring, controlling and reporting project performance and progress against the baseline. These criteria were first released by the U.S. DoD in Dec 1967. EVM is calculated by using formulas to determine variances related to time and cost for progress analysis purposes and forecasting. Some major EVM acronyms applicable in this analysis include;

PV (BCWS):     Planned Value or Budgeted Cost of Work Scheduled represents originally planned cost of the work that should have been done by a definite point in time.

AC (ACWP): Actual Cost or Actual Cost of Work Performed represents actual cost expended on the project or task, up until this point in time.

EV (BCWP): Earned Value or Budgeted Cost of Work Performed represents Project Manager’s estimate of the amount of originally budgeted work completed.

BAC: Budget at Completion represents total budget for the project or task.

EAC: Estimate at Completion represents Project Manager’s estimate of what the final cost of the project or task will be.

ETC: Estimate to Completion, represents Project Manager’s estimate of the cost of the remaining work on the project or task.

SV: Schedule Variance represents the budgeted value of the work that is ahead or behind schedule. An (positive) SV > 0 is favorable (ahead of schedule).

CV: Cost Variance represents the difference between the actual cost and budgeted cost of work that is finished. A (positive) CV > 0 is favorable (underrun).

SPI: Schedule Performance Index compares how much work has been accomplished against how much work had been planned to be accomplished. An (positive) SPI > 1 is favorable.

CPI: Cost Performance Index indicates the efficiency with which work has been accomplished. A CPI greater than 1 is favorable.  

VAC: Variance at Completion represents the difference between budget at completion (BAC) and estimate at completion (EAC). A positive value (>0) indicates a projected underrun and a negative value (<0) indicates projected overrun.

1.  Problem recognition, definition and evaluation

Projects like Building and Managing Housing Estates of Identical Flats, requires a more flexible approach to development and management without compromise on design or amenity, guarantee of adequate supply of housing that is affordable for very low, low and moderate-income earners, provides  financial viability for developers and managers. It's said that every project is unique; however the underlying causes of project failure are usually the same. When we know what these causes are, we can minimize the chances of problems and increase our likelihood of success. Earned Value analysis is an effective way to do so.

There are two major objectives of an earned value management system:

1.   To encourage contractors to use effective internal cost and schedule management control systems

2.   To permit the customer to be able to rely on timely data produced by those systems for determining product oriented contract status.

While the specific objectives of applying EVM analysis Best-Practices to this project are:

·        To encourage contractors to use effective internal technical, cost and schedule management control systems.

·        To permit the customer to rely on timely data produced by those systems for better management insight.

·        This data is in turn used for determining product-oriented contract status.

·        And projecting future performance based on trends to date.

·        In addition, EVM analysis allows better and more effective management decision making to minimize adverse impacts to the project.

2.  Development of the feasible alternatives

a.   Earned Value Management Analysis

Earned Value (EV) is a management tool for tracking and communicating a project's status. It provides an objective measurement of how much work has been accomplished on a project. Using the EVM process, the management team can readily compare how much work has actually been completed against the amount of work planned to be accomplished. All work is planned, budgeted, and scheduled in time-phased “planned value” increments constituting a performance measurement baseline, real time project monitoring and controlling to achieve project completion target.

b.  Practical Project Management & Tracking Using MS Project: MS Project starts with what to do as soon as you have created the new project and ends with tracking progress against that plan. Microsoft PROJECT (MSP) depending on human judgment and estimating knows about three aspects of any Task: a. Duration (measured in Working Days), b. Cost (measured in Dollars), c. Work (measured in Hours). Most of the fields needed for Tracking, the important ones, are usually in the Tracking Table. There are four important numbers associated with these three aspects of any Task: DURATION: a. Total Duration, b. Actual Duration, c. Remaining Duration, d. % Complete = Actual/Total. COST: a. Total Cost, b. Actual Cost, c. Remaining Cost, d. % Cost complete = Actual/Total. WORK: a. Total Work, b. Actual Work, c. Remaining Work, d. % Work Complete = Actual/Total. Some Tasks, such as laying bricks, are easy to measure by counting the bricks. These Tasks, the ones that are easy to measure, can have longer Durations. Other Tasks, which are harder to measure, must have shorter Durations, or shorter stages, or they will not be track-able or controllable.

c.   Track Project Progress with Physical % Complete: 

Far too often people arbitrarily track project performance through the “Percent (%) Complete” method with subjective estimates for “how finished” the project is. However, repetitive activities project doesn’t work well with this technique due to manual entering of values into the % complete field. The % complete or % work complete fields in Project work best when actual hours of labor or actual hours of time performed get entered. If you wish to use the subjective assessments, the better alternative may be the Physical % complete field. The Physical % complete field is included by default in the Tracking Table or it can be inserted into any Task-oriented view “Physical % complete” in the Field name: field. Any values in the Physical % complete field must be manually entered, and so it's designed for human operators to insert their own subjective opinion of the relative degree of completion. Unfortunately, this field causes problems when project status needs to be summarized.

3.  Development of the outcomes and cash flows for each Alternative

Earned Value Calculation Table:

Earned Value method based report presents project’s schedule, cost and scope performances in certain period from inception with the ability to be expanded to forecast the project performance at the completion.

Hence, the EVM indicators are;

SPI = BCWP/BCWS

CPI = BCWP/ACWP

BCWP = Physical % Complete x BAC

Where;

SPI = Schedule Performance Index

CPI = Cost Performance Index

BCWP = Budgeted Cost of Work Performed

BCWS = Budgeted Cost of Work Scheduled

ACWP = Actual Cost of Work Performed

From the table above we know that the budget for 1 Flat is $28,829 with total target 12 Flats Eqv to be completed in a month, the simple calculation using the EVM Technique is as follows:

BAC per month          = 12 Flats Eqv x $28,829 = $345,948
BCWP per month         = Actual Flats Eqv Completed x $28,829
BCWS per month       = Planned Flats Eqv x $28,829
ACWP per month         = Monthly actual cost is retrieved from ERP every month
SPI per month                = BCWP /BCWS
CPI per month                = BCWP / ACWP
Example :

Assumption :
1 month               = 30 days
1 day                    = 3 shifts (day, swing, night)
1 month              = 90 shifts

Target Plan:
1 month               = 12 Flats Eqv
1 shift                   = 12 Flats Eqv  / 90 shifts = 0.133 Flats Eqv

Performance:
Report Period             = Shift 50^th

Actual achievement      = 5.81 Flats Eqv
BCWP                        = 5.81 Flats Eqv x $28,829                =  $167,496
BCWS                        = (50^th x 0.133) x $28,829                 = $191,713
ACWP                         = Caclulated at end of the month       =  N/A
SPI                             = $167,496 / $191,713                      =  0.87CPI                            = Calculated after finance month closing =   N/A

4.  Selection of the acceptable criteria

Earned Value (EV) is a management tool for tracking and communicating a project's status with an SPI of 0.87 as shown above. The earned value management criteria selection is driven by the requirement of accurate and real-time performance measurement, monitoring and controlling tools that would be easily updated by the field project team with minimum wording but presenting the valuable project information accurately and timely. Earned Value Management (EVM) will let you know the actual state of the project by comparing your current project performance against your plan. Knowing the project's performance will let you take actions needed to ensure that the project is completed on time and within budget. Like any tool, in order for EVM to be successful, it’s very important that it is used correctly.

5.  Analysis and Comparison of the alternatives

The foregoing analysis demonstrates the use of Earned Value method as a the most effective project tracking tool to generate a real-time progress measurement, monitoring, controlling and reporting for efficient management and mitigation against anticipated constraints to achieving project completion target.

6.  Selection of the preferred alternative

Timelines, accuracy and consistency are the yardstick for measuring this project performance. Hence, the user friendly EVM measurement, monitoring controlling and reporting system is implemented, with an SPI of 0.87 as shown above. The EVM tracking system enables the project management team develops a standard shift progress measurement check list required to record the daily progress. Earned value (EV) is one of the most sophisticated and accurate methods for measuring and controlling project schedules and budgets. Earned value has been used extensively in large projects, especially in government projects, such as Estate Development Project, Hotel Bedrooms. PMI is a strong supporter of the earned value approach because of its ability to accurately monitor the schedule and cost variances for complex projects.

7.  Performance Monitoring and Post Evaluation of Results

The shift crews’ performance is measured by using the shift crews SPI, because of the shift crews’ most likely works in the same location, and to avoid any shift performance bias between shift crews, the progress measurement check list has to be signed and accepted by next shift crew’s foreman. The field project team assigned to each shift crew has to complete the shift progress performance measurement at the end of the shift to enable the project management team to monitor and control the progress every single shift and would become the project dashboard.

8.  References/Bibliography

1.   Humphreys, G.C. (23 Oct 2012 – Irvine, CA (PRWEB) The Humphreys & Associates team ... field of earned value project management consulting and training. U heeft dit openbaar een +1 gegeven. Ongedaan maken

    http://cad.digitalmedianet.com/articles/viewarticle.jsp?id=2258411

2.   Ray, W. Stratton, PMP, EVP 714-318-2231 Management Technologies. http://www.mgmt-technologies.com/

3.   Humphreys, G. C. (2011). Project Management Using Earned Value (2nd ed. P-16). Humphreys & Associates, Inc.

http://www.humphreys-assoc.com/evms/project-management-using-earned-value-second-edition-p-16.html

4.   Humphreys, K. K. (2005). Project And Cost Engineers' Handbook Fourth Edition. North Carolina: Marcel Dekker.

http://ebookee.org/Project-and-Cost-Engineers-Handbook-Fourth-Edition-Cost-Engineering-_195466.html

5.   Marvis, M. Mills (2 Nov 2011) Practical Project Management & Tracking Using Microsoft Project.

http://www.projectsmart.co.uk/practical-project-management-and-tracking-using-microsoft-project.html

http://www.projectsmart.co.uk/best-practice.html