For many capital construction projects’ stakeholders and in particular executive stakeholders they always need to know whether a project will be facing cost overruns and/or delayed completion date. The earned value method (EVM) provides a proven solution to answer for those two critical questions. Nevertheless, for most stakeholders, the terminologies used in EVM reporting might not be meaningful or relevant to them. Therefore, to increase the value of EVM reporting it is highly recommended to replace the EVM terminologies with the terminologies that are understood by those stakeholders. Sometimes, those revised terminalizes need to be also communicated in languages other than the English language including non-Latin languages like the Arabic language.
For example, the Budget at Completion (BAC) could be renamed as the Approved Budget whereas the Planned Value (PV) will be renamed as Approved Spending Plan. The Earned Value (EV) could be renamed as Work In Place and Actual Cost (AC) as Invoiced To Date. The Estimate to Complete (ETC), Estimate at Completion (EAC) and Variance at Completion (VAC) can be kept as this unless other terminologies need to be used. Similarly, the Schedule Variance (SV), Cost Variance (CV), Schedule Performance Index (SPI) and Cost Performance Index (CPI) will be kept as this unless they need to be modified. Finally, the Total Float (TF) will be renamed as Completion Delay.
Accordingly, a report can be designed to communicate each project cost and schedule performance status in a language that is best understood by project stakeholders. The report could include a map to show the boundaries of the project as well as picture to show the current project’s construction status. The report will also include score cards for each one of the EVM measures as well as the project’s total float value. The measures for Variance at Completion (VAC), Schedule Variance (SV), Cost Variance (CV), Schedule Performance Index (SPI), Cost Performance Index (CPI) and Total Float (TF) will be colored either “Green” performance is ahead of what is planned, “Yellow” borderline performance and “Red” behind planned performance.
The report will also include a line chart that will display the curves for Planned Value (PV), Earned Value (EV), Actual Cost (AC) and Estimate to Complete (ETC). The reports will include threshold lines for Data Date, Budget at Completion (BAC), Estimate at Completion (EAC), Planned Finish Date and Current Finish Date. In addition, it is recommended to add a rectangular box to highlight the project’s current risk for cost overrun and delayed completion. The report will have a filter to enable selecting the project to be reviewed. Of course, the report layout can be modified to display other performance information that could be required by the stakeholders.
Although having a report that worth thousands of words is of great value, nevertheless, this value can easily diminish and even cause end causing harm to the readers if the reported project’s performance data was not accurate, valid or traceable. In other words, without trust-worthy data source, those reports could be virtually of no value.
This issue can be overcome when a Project Management Information System (PMIS) like PMWeb is used as the single data source for capturing the performance data for the complete projects’ portfolio that an organization has. For example, PMWeb comes ready with the Budget module which will be the basis for capturing the approved baseline budget as well as the approved budget spending plan. PMWeb also comes ready with the Budget Request module to capture all budget omissions, additions and transfers.
For each transaction for budget or budget request business processes, PMWeb allows attaching all supportive documents and add links to other relevant business processes. In addition, a workflow can be assigned to each one of those two business processes to formalize the submit, review and approve tasks. The workflow could include conditions to formalize the approval authority levels as set in the Delegation of Authority (DoA) matrix.
On the other hand, the data for Actual Cost (AC) or progress invoices against approved contracts will be captured using PMWeb Progress Invoices module. Unlike the issues that are usually faced by all ERP and Accounting system where only approved progress invoices are recognized as actual cost, PMWeb allows calculating the Actual Cost (AC) for all submitted progress invoices whether those were approved or pending approval.
This will eliminate the need to have the Accrual business process where it is used by ERP and accounting systems to capture the details of progress invoices that are although been received but still not yet approved. Those Accrual transactions will be then deleted after closing the monthly cost status report. Not only this eliminates the wasted effort in implementing a workaround transaction but also carries the risks of wrong data entries as well as the delays in providing this data. PMWeb forecast report will display the reported Actual Cost (AC) and the calculated Estimate to Complete (ETC) values as well as the Earned Value (EV).
In addition, PMWeb Schedule module will be also used to serve two purposes. The first is to capture the percent complete values assigned to activities that are associated with the project budget. This will enable calculating the Earned Value (EV) for each cost center. The second is that it will capture the schedule activities start and finish dates as well as the Total Float (TF) values.
About the Author
Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with 40-year service record providing project management, project controls services and project management information system to over than 200 projects with a total value in excess of US $100 Billion. Those projects included Commercial, Residential, Education and Healthcare Buildings and Infrastructure, Entertainment, Hospitality and shopping malls, Oil and Gas Plants and Refineries, Telecommunication and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training and business development.
Bassam is a frequent speaker in topics relating to Project Management, Strategic Project Management and Project Management Personal Skills. Over the past 40 years he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe and South America. He has written more than 550 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP) and Earned Value Professional (EVP) from the Association for the Advancement of Cost Engineering (AACE) and Green Project Management (GPM).
Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA and London Business School, London, UK.