Do you make decisions guided by Earned Value?
Currently, cost control in construction projects frequently uses the ABC/M (Activity Based Cost Management) methodology. This approach tracks expenditures from specific activities, represented by verbs, through to the project's final deliverables. This method makes the cost structure of a construction project more transparent and enables a variety of interpretive analyses of the values. One such analysis is Earned Value Analysis (EVA), which compares the construction schedule and budgeted values against actual expenditures. In this insight, we will conduct a case study demonstrating the possible interpretations of an Earned Value Analysis, showing how it can be useful in decision-making and construction project management. Basic Concepts of Earned Value Analysis Before diving into the case study, it is necessary to understand some fundamental concepts of Earned Value Analysis: - BCWP (Budgeted Cost of Work Performed) or EV (Earned Value): The percentage of actual quantity completed multiplied by the budgeted cost of the work item. - ACWP (Actual Cost of Work Performed) or AC (Actual Cost): The real cost of executing the work item for the percentage completed. - BCWS (Budgeted Cost of Work Scheduled) or PV (Planned Value): The percentage of elapsed time multiplied by the budgeted cost of the work item. - CPI (Cost Performance Index): The cost performance index, calculated as EV / AC. - SPI (Schedule Performance Index): The schedule performance index, calculated as EV / PV. Note: Since both performance indicators use Earned Value as the numerator, values above 1 indicate favorable performance. Case Study: Scenario: A construction company is building three identical buildings and the time has come to contract masonry services. All site engineers received the same schedule and budget for execution. However, there is a difference in masonry quantities between the basic design and the executive design, as shown below: - Masonry Quantities - Contractual Budget - Construction Schedule