W3_Joseph Adewale_Importnace of Earn Value to other management practices

1.      Problem recognition, definition, root cause analysis and evaluation

                                I.            Problem recognition

In one of the site report received, the percentage of physical work done by the contractor was misplaced with actual expenditure. The project was the construction of 3,600m of line drain at the rate of 600m per week. The project is expected to be completed within six weeks. Each drainage length is given at the rate of N25, 000.00 per linear meter.

The Project manager was newly employed, the site is his first assignment, the report sent did not give basis for recommending payment to the contractor he is supervising. Hence, the missing parameter is the earn value of physical work done by the contractor.

                              II.            Problem definition: Misplacement of the principle of “quantum merut” on the project site

                            III.            Root cause analysis and evaluation: Root-cause analysis conducted showed that percentage of physical work completed was missing in the report submitted.

2.      Development of feasible alternatives

Among alternatives available for consideration in are:

                                I.            Budgeted cost of work scheduled (BCWS)- this is the overall planned budget on the project

                              II.            Actual Cost of work Performed (ACWP)- this is the actual cost to do the work

                            III.            Budgeted Cost of work Performed (BCWP)- this is budgeted cost of what was completed (Earn value)

3.      Development of outcomes for each alternative

                                I.            BCWS: This is what is planned to be spent on the drainage works.

I.e. 3,600x25, 000.00=90,000,000.00

                              II.            ACWP: At week four, only 2,300m length of drainage works was achieved.

                            III.            BCWP: This is the earned value of physical work completed

Week	1	2	3	4	5	6
Length Done (M)	600	500	800	400
BCWS	15,000,000.00	15,000,000.00	15,000,000.00	15,000,000.00	15,000,000.00	15,000,000.00
BCWS cum	15,000,000.00	30,000,000.00	45,000,000.00	60,000,000.00	75,000,000.00	90,000,000.00
ACWP	15,000,000.00	12,000,000.00	15,000,000.00	9,000,000.00
ACWP cum	15,000,000.00	27,000,000.00	42,000,000.00	51,000,000.00
BCWP	15,000,000.00	12,500,000.00	20,000,000.00	10,000,000.00
BCWP cum	15,000,000.00	27,500,000.00	47,500,000.00	57,500,000.00
SV	0.00	-2,5000,000.00	5,000,000.00	-5,000,000.00
CV	0.00	500,000.00	5,000,000.00	1,000,000.00
% Complete	16.67	30.56	52.78	63.89

4.      Selection of criteria

The criteria for selecting the most appropriate value to recommend payment upon these:

                                I.            Conformance to specification requirement

                              II.            Terms and condition for contract agreement must be met

                            III.            Work must be physically completed as measured.

5.      Analysis and comparison of the alternatives

The problem statement analyzed two methods:

                                I.            Traditional management method: This approach uses two data sources. The Budget cost of work Scheduled (planned value) or Planned expenditure and Actual cost of work performed ( Actual Cost) or actual expenditure

                              II.            Earn value management: This method uses three data sources. The Budgeted cost of work Scheduled (BCWS), budgeted cost of work performed (BCWP) and actual cost of work performed (ACWP)

6.      Selection of preferred alternative

Alternative II is preferred since it satisfied the three criteria for recommending payments to the contractor. The fourth week report would have been:

a.       % Complete = (BCWP_cum/∑BCWS)x100

                        = (57,500,000/90,000,000) x100

                        = 63.89%

b.      And not:     = (ACWP_cum/∑BCWS)x100

                        = (51,000,000/90,000,000) x100

                        = 56.67%

The new project manager’s recommendation for payment to the contractor was 56.67% completion whereas the contractor has worked up to the level of 63.89% physically on site.

7.      Performance monitoring and post evaluation of results.

There is need to monitor progress of work done physically on site at the end of working week to keep tracking progress and check performance. This will enable the project manager to snap earn value of physical work done by each contractor and also enable check on errors can could accrued over a long period of time. Also accurate data will be ready to recommend for contractor payments at each milestone.

8.      References:

                                I.            Garry C. Humphrey, (2011) Project management using earn value (2^nd Edition) (Chapter 1 (pp. 32-42) CA USA Humphrey & Associates inc.

                              II.             Tate,T, & Stackpole,C. (2006) Controlling Project Progress. The advanced project management memory jogger(^1st ed) (chapter 7) (pp.91-94). Salem,NH: GOA

                            III.             Giammalvo, P. D. (2010). AACE Certification Prep Course [PowerPoint slides], Day 5. Lagos: Nigeria.

                           IV.            Sullivan, W. G., Wicks, E.M., & Koelling, C.P. (2009). Engineering economy and design process. In M.J. Horton (Ed.), Engineering economy (14^th ed.) (chapter 1.)  New Jersey, NJ: Pearson Education, Inc.