Regardless of whose perspective the project control system (PCS) is managed, both the Project Owner and his team as well as the Contractor will have the requirement to have a formal process for recording, monitoring, and evaluating the forecast cost to complete the remaining project’s scope of work (SoW). The Earned Value Management (EVM) method is the most widely used technique to analyze, monitor, evaluate and report the project’s forecast to complete analysis.
The value of each budget line item is known as the Budget at Completion (BAC) whereas the planned value for the budget spending is known as the Planned Value (PV) or Budget Cost of Work Scheduled (BCWS). The Earned Value (EV) or Budget Cost of Work Performed (BCWP) for each budget line item will be calculated using the achieved progress percent complete value (%) for that line item multiplied by the line item’s budget value or the Budget at Completion (BAC).
The difference between the Earned Value (EV) or Budget Cost of Work Performed (BCWP) and Planned Value (PV) or Budget Cost of Work Scheduled (BCWS) at the end of each project period is known as the Schedule Variance (SV) while dividing the Earned Value (EV) or Budget Cost of Work Performed (BCWP) by the Planned Value (PV) or Budget Cost of Work Scheduled (BCWS) will be the Schedule Performance Index (SPI). A positive Schedule Variance (SV) or a Schedule Performance Index (SPI) that is greater than one (1) indicates that the project is ahead of the schedule. On the other hand, a negative Schedule Variance (SV) a Schedule Performance Index (SPI) that is less than one (1) indicates that the project is behind schedule.
In addition, the Estimate to Complete (ETC) of each budget line item will be calculated by subtracting the Earned Value (EV) amount from the Budget at Completion (BAC) amount. The Estimate to Complete (ETC) could be adjusted depending on the anticipated performance status for the remaining scope of work (SoW).
As the project progresses, the Actual Cost (AC) will be calculated from the commitments’ interim payment certificates for work in place and other non-commitment costs that are captured from miscellaneous invoices and timesheets. The Actual Cost (AC) is also known as the Actual Cost of Work Performed (ACWP). The difference between Earned Value (EV) and Actual Cost (AC) is the Cost Variance (CV) whereas the Cost Performance Index (CPI) is calculated by dividing the Earned Value (EV) by the Actual Cost (AC). A positive Cost Variance (CV) or a Cost Performance Index (CPI) that is greater than one (1) indicates that the project is under budget. On the other hand, a negative Cost Variance (CV) and a Cost Performance Index (CPI) that is less than one (1) indicates that the project is over budget.
Adding the Estimate to Complete (ETC) amount to the Actual Cost (AC) amount will provide the value for the Estimate at Completion (EAC) value. The difference between the Budget at Completion (BAC) and Estimate at Completion (EAC) is the Variance at Completion (VAC).
For example, assume that a project’s budget (BAC) was US$1,000. At the end of month five (5), the achieved Earned Value (EV) was US$300, while the Planned Value (PV) was US$500 and the Actual Cost (AC) incurred was US$400. Accordingly, the Schedule Variance (SV) will be US$ -200 and the Cost Variance (CV) US$ -100. This will also mean that the Schedule Performance Index (SPI) will be 0.6, Cost Performance Index (CPI) 0.75, and To Complete Performance Index (TCPI) 1.33.
The Estimate to Complete (ETC) will be US$700, which is adjusted by the TCPI, assuming that the same performance trend will continue for the remaining period will become US$933. Accordingly, the estimate at completion (EAC) will become US$ 1,333, for which the variance at completion (VAC) will be US$ -333.
The EVM chart also indicates that the achieved EV of US$300 at the end of month five was planned to be achieved (PV) at the end of month four. This indicates that there will be a probable four (4) weeks of delay to the project’s completion date if the same performance trend continues for the remaining period. This delay is called the schedule variance for time (SVt).
The PMWeb forecast module will enable the project team to come up with a realistic adjusted estimate of completion cost for the project. For the first monthly forecast analysis, the list of the cost items that are part of the project budget will be selected and dropped into the forecast template. Those cost items are aligned with the project’s cost breakdown structure (CBS) levels or cost accounts. In addition, a project schedule activity can be associated with each cost item to enable loading the updated percent complete for each activity.
For each cost line item, PMWeb will automatically calculate the total Budget at Completion (BAC) value which equals the sum of the Original Budget and Budget Changes, Planned Budget Value (PV) for up to the period of the forecast report, and the Actual Cost (AC) captured from interim payment certificates for commitments (IPC) and non-commitment costs from miscellaneous invoices and timesheets. PMWeb provides the option to limit the forecast analysis to only approved cost records or also include pending Budget Changes and pending Actual Cost records.
The PMWeb forecast module will automatically calculate the values for Earned Value (EV) by multiplying the Budget at Completion (BAC) with the imported percent complete (%) of the linked project schedule activity. In addition, the PMWeb forecast module will also calculate the values for Estimate to Complete (ETC), Schedule Variance (SV), Cost Variance (CV), Schedule Performance Index (SPI), and Cost Performance Index (CPI), and Estimate at Completion (EAC).
Nevertheless, what is important in the PMWeb forecast module is the data field “Forecast to Complete” which has a default value of “0” but may be edited. The “Forecast To Complete” is defined as what the organization forecast to spend to complete the scope of work associated with the cost but this does not include what has been already committed to spending as per the calculated “Estimate to Complete”. This will be the basis for calculating the “Adjusted Estimate to Complete” and “Adjusted Estimate at Completion.
The EV report details the EV method’s key values for each period, including the approved BAC, PV for the current period, EV for completed works, total AC to date, estimated cost to complete the balance of the works (ETC), and project EAC. Moreover, the report will display the variances in each period: the SV, CV, and estimated cost variance at completion (VAC). Furthermore, the report will show the SPI and CPI for the same periods and display the variances and performance indices trend charts.
Another EVM report that is common to construction projects is the Bull’s Eye report. The report displays the performance status of a project or period by using the SPI and CPI values. The Bull’s Eye will be the intersection of SPI and CPI values of 1.00, which indicates that the project is performing as planned.
The chart is divided into four zones. The upper right is for projects that are ahead of schedule (SPI greater than 1.00) and under budget (CPI greater than 1.00), while the upper left will be for projects that are under budget (CPI greater than 1.00) but behind schedule (SPI is less than 1.00). On the other hand, the lower right corner is for projects ahead of schedule (SPI is greater than 1.00) but over budget (CPI is less than 1.00). The lower-left corner is for projects that are behind schedule (SPI is less than 1.00) and over budget (CPI is less than 1.00).
