1) Problem Definition
A house is being built currently and the house is supposed to be completed the construction in six months with the budget of 120,000 Omani Rail. After more months the project manager of the construction company decided to measure the performance of the productivity, schedule and expenditure. The question now which is method he will apply even though he is aware that the method of comparing planned to actual results could provide indicator on time to the plan but does not show the overspend according to the plan.
2) Identify the Feasible Alternative.
A better method is earned value because it integrates cost, schedule and scope and can be used to forecast future performance and project completion dates. It is an “early warning “program/project management tool that enables managers to identify and control problems before they become insurmountable. It allows projects to be managed better – on time, on budget.
The Cost Management focuses on the cost performance of the project. It looks at the relationships between the Earned Value (EV or BCWP) and the Actual Cost (AC or ACWP).
The Schedule Management focuses on the schedule performance of the project. It looks at the relationships between the Earned Value (EV or BCWP) and the Planned Value (PV or BCWS).
The Cost Variance (CV) is the difference between the earned values of work performed and the actual cost. The Cost Variance (CV) = (EV or BCWS – AC or ACWP) If the result is POSITIVE, project is experiencing an “Underrun” If the result is NEGATIVE; project is experiencing an “Overrun”.
The Schedule Variance (SV) is the difference between the earned value of work performed and the work scheduled. The SV tells you the value of work performed less value of work scheduled.
The Schedule Variance (SV) = (EV or BCWS – PV or BCWS) If the result is POSITIVE, project is on schedule or exceeding the schedule If the result is NEGATIVE, project is behind schedule.
The Cost Variance (CV) % = (CV/ EV or BCWP) tells us what percentage cost varies from what has been earned to date.
The Schedule Variance (SV) % = (SV/PV or BCWS) tells us what percentage schedule varies from what has been planned to date.
TheCost Performance Index (CPI) = (EV or BCWP /AC or ACWP) If the result is less than 1.0, cost is GREATER than budgeted If the result is greater than 1.0, cost is LESS than budgeted.
The Schedule Performance Index (SPI) = (EV or BCWP / PV or BCWS) If result is less than 1.0, project is “BEHIND” schedule If the result greater than 1.0, project is “AHEAD of schedule”.
3) Development of the Outcome for Alternative
Figure1 below shows the inputs of this project:-
Figure -1 S Curve
As a consequence from the above figure, each of the above elements has a different definition and they defined below.
• Budgeted Cost of Work Scheduled (BCWS) or Planned Value (PV) – The sum of budgets for all work packages scheduled to be accomplished within a given time period.
• Budgeted Cost of Work Performed (BCWP) or Earned Value (EV) – The sum of budgets for completed work packages and completed portions of open work packages.
• Actual Cost of Work Performed (ACWP) or Actual Cost (AC) – The actual cost incurred in accomplishing the work performed within a given time period
4) Selection of Criteria.
Earn value method was adopted for the indication of the status of the project are shown in the following table -1.
Table –1 The Status of the Project by Using Earned Value method
5) Analysis and Comparison of the Alternative.
It is very obvious from table -2, that project is on the schedule and (18,000) OMR (18%) worth of work over budget.67% of the time of the project was elapsed. many recourses were dedicated to keep the project on schedule and that impacted on cost of the project and caused overrun. The work break down structure (WBS) was not reviewed well.
6) Selection of the Preferred Alternative.
It is too late to control on the budget because overspend of the project should be observed once the project was accomplished between 30% and 35% (2 months). And the action that should be done duly be identifying the route cause, corrective action and preventive action. At the present only preventive action can be taken on the consideration to stop the bleeding of money expanse by controlling the resources and monitoring their performances.
7) Performance Monitoring and the Post Evaluation of Result.
The project is composed of a lot of elements which should be considered at the beginning of the project and one of the most important elements is to figure out a guide line method to provide an indication of the performance of the project and assist in managing the schedule and the budget and Earned Value Analysis is a better method of program/project management because it integrates cost, schedule and scope and can be used to forecast future performance and project completion dates. It is an “early warning” program/project management tool that enables managers to identify and control problems before they become insurmountable. It allows projects to be managed better – on time, on budget.
- Duncan Haughty (2010). What is Earned Value? [ONLINE] Available at: http://cdn.projectsmart.co.uk/pdf/what-is-earned-value.pdf. [Last Accessed 10 June 2014].
- Booz Allen Hamilton (2010). Earned Value Management Tutorial. [ONLINE] Available at: http://energy.gov/sites/prod/files/maprod/documents/EVMModule6.pd. [Last Accessed 10 June 2014].
- Suketu Nagrecha (2002). An introduction to Earned Value Analysis. [ONLINE] Available at: http://www.pmiglc.org/COMM/Articles/0410_