Optimise project outcomes with earned value project management 

Discover various Earned Value Management (EVM) techniques construction companies can leverage for beneficial results.

WHY IS EARNED VALUE PROJECT MANAGEMENT IMPORTANT?

Before undertaking a construction project, project teams assess the risks and estimate the time as well as the costs that they may incur to complete the project. This is where EVM can support their efforts.

By incorporating EVM, construction project managers can see the differences between the planned value of a project versus its actual value. This allows them to make adjustments to their project schedule, cost, and resources by using their original project management goals as a benchmark.

Read on to discover the different earned value project management techniques construction project managers can use to achieve this objective.

KEY EARNED VALUE PROJECT MANAGEMENT TECHNIQUES

allocated budget

Planned value (PV)

PV refers to the authorised and allocated budget that has been set to cover the expenses of a construction project within a specific time. This is the baseline set for project managers to measure against when keeping track of costs incurred in a project. PV is expressed as the budgeted cost for scheduled activities, considering the project’s work breakdown structure.

Actual cost (AC)

AC is the total cost incurred for the work performed throughout a project’s timeline. It includes all costs associated with the completed activities. AC is typically different from PV as there are variances in figures after accounting for all actual costs, including materials, labour, equipment and other expenses associated with completing construction tasks.

Planned value
Cost control

Earned value (EV)

EV is the value of the work actually performed in a construction project. It represents the budgeted cost of work performed. In construction projects, EV is determined based on the completion of specific construction tasks or milestones. It measures the progress in monetary terms by multiplying the percentage of completed work with the budget at completion.

Cost performance index (CPI) and schedule performance index (SPI)

CPI is a ratio of EV to AC, indicating the cost efficiency of a construction project. SPI is also a ratio of EV, indicating schedule efficiency. When used together, CPI and SPI provide insights into cost performance trends and the effectiveness of time management, respectively. This helps ensure on-time project completion without running the risk of cost overruns.

Cost performance

ACHIEVE BETTER PROJECT OUTCOMES BY LEVERAGING EVM

According to McKinsey, 98% of large-scale construction projects suffer cost overruns of up to 80% from their PV and experience schedule slippages of 20 months or longer. 


At Compass Consult, we are committed to helping project managers and their team members navigate these challenges. With our support for project management software implementation, expert consultants, and training, we can help you achieve better project outcomes regardless of how complex your construction project is. 


Contact Compass Consult today to leverage our Earned Value Management systems expertise and enhance your project management capabilities.

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FAQs

What are some common challenges in implementing EVM for construction projects?

Some of the most common challenges include the complexity of EVM techniques, the need for accurate data, potential conflicts between project team members or stakeholders, as well as the steep learning curve for project stakeholders unfamiliar with EVM concepts.

What does CPI or SPI value of 1 mean?

This means that the construction project is exactly on track. Values above 1 signify better performance, while values under 1 suggest performance issues. You can learn more about these concepts when you work with the EVM consultant.

How can EVM be used for project forecasting?

EVM can be used to extrapolate current performance trends. This means utilising both CPI and SPI to predict schedule performance and future costs.

Want to optimise your construction project with EVM? Contact Compass Consult today.

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