COST AND SCHEDULE MANAGEMENT TECHNIQUES
1. CPM
2. PERT
3. EVM
Earned Value Management (EVM) in Construction
Projects
Earned Value Management (EVM) is a project performance
management technique that integrates scope, schedule, and
cost to assess the overall project performance. It helps project
managers track progress, forecast project outcomes, and
control costs effectively.
Key Components of EVM
1. Planned Value (PV)
• Definition: The budgeted cost of the work planned to be
completed by a specific date.
• Formula: PV = Total Project Budget × (Planned % of Work
Completed)
• Example: If a project has a budget of $1,000,000 and 30% of
the work should be completed by now, the PV is $300,000.
2. Earned Value (EV)
• Definition: The budgeted cost of the work actually completed
by a specific date.
• Formula: EV = Total Project Budget × (Actual % of Work
Completed)
• Example: If 25% of the project work has been completed, the
EV is $250,000.
3. Actual Cost (AC)
• Definition: The actual amount of money spent to complete
the work by a specific date.
• Example: If $280,000 has been spent to complete 25% of the
project, the AC is $280,000.
EVM Performance Indicators
1. Cost Variance (CV)
• Definition: The difference between the earned value (EV)
and actual cost (AC).
• Formula: CV = EV - AC
• Interpretation:
• CV > 0: Project is under budget.
• CV < 0: Project is over budget.
Example:
If EV = $250,000 and AC = $280,000, then CV = $250,000 -
$280,000 = -30,000 (over budget).
2. Schedule Variance (SV)
• Definition: The difference between the earned value (EV)
and planned value (PV).
• Formula: SV = EV - PV
• Interpretation:
• SV > 0: Project is ahead of schedule.
• SV < 0: Project is behind schedule.
Example:
If EV = $250,000 and PV = $300,000, then SV = $250,000 -
$300,000 = -50,000 (behind schedule).
3. Cost Performance Index (CPI)
• Definition: A ratio of earned value to actual cost, showing
cost efficiency.
• Formula: CPI = EV / AC
• Interpretation:
• CPI > 1: Project is under budget.
• CPI < 1: Project is over budget.
Example:
If EV = $250,000 and AC = $280,000, then CPI = $250,000 /
$280,000 = 0.89 (over budget).
4. Schedule Performance Index (SPI)
• Definition: A ratio of earned value to planned value,
showing schedule efficiency.
• Formula: SPI = EV / PV
• Interpretation:
• SPI > 1: Project is ahead of schedule.
• SPI < 1: Project is behind schedule.
Example:
If EV = $250,000 and PV = $300,000, then SPI = $250,000 /
$300,000 = 0.83 (behind schedule).
Forecasting Techniques in EVM
1. Estimate at Completion (EAC)
• Definition: The forecasted total cost of completing the
project based on current performance.
• Formula:
• EAC = AC + (BAC - EV)
• BAC (Budget at Completion) is the original project budget.
Example:
If the project’s BAC is $1,000,000, AC is $280,000, and EV is
$250,000:
EAC = $280,000 + ($1,000,000 - $250,000) = $1,030,000.
2. Estimate to Complete (ETC)
• Definition: The expected cost to complete the remaining
work.
• Formula: ETC = EAC - AC
3. To-Complete Performance Index (TCPI)
• Definition: The efficiency rate needed to complete the
project within the budget.
• Formula:
• TCPI = (BAC - EV) / (BAC - AC)
Advantages of EVM in Construction
• Tracks project progress by integrating cost and schedule.
• Identifies cost overruns and delays early.
• Forecasts project outcomes accurately.
• Improves decision-making by providing performance
metrics.
Disadvantages of EVM in Construction
• Requires accurate and regular data updates.
• Can be complex to implement for large projects.
• Does not account for quality or risk factors directly.
Summary of Key EVM Formulas
Metric Formula Interpretation
Planned Value (PV) PV = BAC × Planned % Budgeted cost of planned work
Earned Value (EV) EV = BAC × Actual % Budgeted cost of completed work
Actual Cost (AC) Actual expenditure Cost incurred to complete the work
Cost Variance (CV) CV = EV - AC Positive: Under budget, Negative: Over budget
Schedule Variance (SV) SV = EV - PV Positive: Ahead of schedule, Negative: Behind
Cost Performance Index (CPI) CPI = EV / AC >1: Under budget, <1: Over budget
Schedule Performance Index (SPI) SPI = EV / PV >1: Ahead of schedule, <1: Behind
schedule
Estimate at Completion (EAC) EAC = AC + (BAC - EV) Forecasted total project cost
Estimate to Complete (ETC) ETC = EAC - AC Cost to complete remaining work
By using Earned Value Management (EVM), project managers
can gain better control over project schedules and budgets,
ensuring the project stays on track and within the allocated
resources.
4. LOB
5. PDM
6. WBS
7. GANTT CHART
