Using Earned Value Management for evaluating the overall productivity of a project
I
t is generally acknowledged that the productivity of labour and equipment is one of the major risk factors in the success or failure of a project, but is it possible to evaluate, on an overall basis, how this productivity is affecting the project trend? In this article, the author reviews a methodology for measuring and interpreting the overall productivity of the Project, known as Earned Value Management (EVM) or Earned Value Analysis (EVA). This methodology is available in most ‘high end’ planning packages. The Baseline Schedule In implementing EVM, the first challenge is the creation of the Baseline Schedule on which the ‘planned labour units’ (normally expressed in hours) and ‘quantities to be executed per activity’ are included for every activity of the Work Breakdown Structure (WBS). For example – Activity 001: ‘installation of secondary cable trays’ has a planned labour unit of 0.80 hour/m. This means that the plan is to spend 48 minutes (60 minutes x 0.80) for the installation of every metre of secondary cable tray. The same planned labour unit and quantity evaluation is made for all the activities of the WBS so that the ‘total planned hours’ to be spent on the project can be identified. Obviously, it is mandatory to align these hours at the moment that the contractor was chosen. The Planned S Curve Once the baseline schedule is defined, and the planned quantities and labour units inserted for each activity, it is possible to create a Planned S Curve, using the formula below: • Planned Hours (PH) = Planned Quantities x Planned Labour Units Going back to the example, let´s consider that the planned quantity was 5,000m of secondary cable trays, so we would have:
• Planned Hours (PH) = 5,000m x 0.80 hours/m = 4,000 planned hours Doing the same exercise for all the activities of the project, and cumulating the working hours on a monthly basis using the planning software, it is possible to create an S-Curve for the Planned Hours (PH). The graphic below is an example of an S Curve forecasting almost 250,000 working hours for an entire project. The Baseline Schedule – Planned Hours ‘S’ Curve Usually on a monthly basis, the actual progress (or quantities executed per activity) is recorded/monitored. In EVM, the actual progress is measured by the ‘Earned Hours,’ and it is a measure of the quantities installed multiplied by the Planned Labour Units. Using EVM, the simple formula for calculating the progress (EH) using this recorded data is therefore as follows: • Earned Hours (EH) = Actual Quantities Executed x Planned Labour Units Continuing with our example, let´s say that the production of ‘secondary cable trays’ during the first month of the project was 400m. Our progress (Earned Hours) would be: • Earned Hours (EH) = 400m x 0.80 hour/m = 320 hours Making the same calculations across all activities in the Schedule for the month, we would have an overall result of the ‘Earned Hours’. But why is this information needed? Let´s compare both formulas:
36 | CONSTRUCTION ECONOMIST | www.ciqs.org | Summer 2017
• Planned Hours (PH) = Planned Quantities x Planned Labour Units • Earned Hours (EH) = Actual Quantities x Planned Labour Units Comparing one formula to the other it is clear that the only variable is the difference between the ‘planned’ and ‘actual’ quantities. Therefore if the ‘actual’ quantities installed are more than the ‘planned’ quantities in the reporting period, the Earned Hours will be more than the Planned Hours. Common sense tells us that we would be ahead of our planned progress because we had installed more work than planned. More importantly, if Earned Hours were less than Planned Hours we should be aware that we are behind programme. The Efficiency Analysis or the Actual Hours (AH) Curve EVM goes a little further than that. The next step is to identify the efficiency of the direct labour or, in other words, verify if the hours spent in relation to the quantities executed are as per planned. The formula for this part of the EVM process is simply: • Actual Hours (AH) = Actual Quantities x Actual Hours (Actual Labour Units) The Actual Labour Units can be measured on a daily or weekly basis per activity depending on the level of accuracy required. It should be noted that this analysis requires a significant commitment from the foreman of the project and that an administrator will
To return to Table of Contents CLICK HERE
