Earned Value Concept – My Understanding

Earned Value Concept – My Understanding
  • Lets understand the earned value concept by taking an simple example with lower values for efficient understanding and easy elaboration.
  • P.V.  =  Planned Value
  • A.C.  =  Actual Cost
  • B.A.C.  =  Budget At Completion
  • E.V.  =  Earned Value
  • C.V.  =  Cost Variance
  • S.V.  =  Schedule Variance
  • C.P.I.  =   Cost Performance Index
  • S.P.I  =   Schedule Performance Index

 

  • Suppose I want to complete with 3 jobs and I plan Rs.10 for each job. So this goes as —

 

                                                            Job                      P.V.

                                                        A                     Rs.10

                                                        B                     Rs.10

                                                        C                     Rs.10

 

  • Now I have planned to spend Rs.30 i.e. (Budget At Completion, BAC). But in actual, I have spend @Rs.25 i.e. Actual Cost, AC.

 

                                 Job                   P.V.                         A.C.

                                   A                    Rs.10                      Rs.15

                                   B                    Rs.10                      Rs.10

                                   C                    Rs.10                      Rs.00

 

  • If we look at the surface level, we would think that the cost-wise we are not performing good, but to know exactly how are we performing cost-wise and schedule-wise, we need to get the Earned Value.

 

  • To get the earned value, we would require the actual % progress as follows —
  • We know that we have spend Rs.25 for the Jobs A & B, but we do not know how much work we have performed. Therefore, we cannot compare the planned value & the actual cost in deciding the performance.     

 

        Job                    P.V.                          A.C.                % Progress             

          A                     Rs.10                      Rs.15                     100%

          B                     Rs.10                      Rs.10                     50%

          C                     Rs.10                      Rs.00                     0%

 

  • Now consider Job A, you have planned  Rs.10 but the actual cost incurred to complete the work, costs you  Rs.15 as whole.

 

  • So though you have spend  Rs.15 actually, but you are budgeted to spend only  Rs.10. Thus the earned value is the value that you have budgeted to spend and not the actual cost.

 

  • Thus, EV =   % Progress   x    P.V.

 

         Job                    P.V.                          A.C.              % Progress            E.V.

          A                     Rs.10                      Rs.15                     100%                 Rs.10

          B                     Rs.10                      Rs.10                     50%                   Rs.5

          C                     Rs.10                      Rs.00                     0%                    Rs.0

     TOTAL                Rs.30                     Rs.25                                                Rs.15

 

  • In Summary, we get    

          BAC =  Rs.30

          (P.V) =  Rs.20 ……….This is the planned value as of today for 2 jobs because we haven’t yet begin with 3rd Job. 

          A.C. =  Rs.25

          E.V. =  Rs.15

 

  • So now, we can conclude that; we planned to spend  Rs.20 for which we are supposed to complete the two jobs, but we have actually spend  Rs.25.

 

  • But what is the actual work we completed and how much its worth?  So the worth of work we completed is  Rs.15.

 

 

Now we will consider what is the Cost Variance, CV & Schedule Variance, SV —

 

  • Cost Variance, CV  =  Earned Value – AC   =     15 – 25     =   – Rs.10

i.e. (we have spend  Rs.10 extra for the job)

 

  • Cost Performance Index, CPI  =  EV / AC   =   15 / 25    =    0.6

CPI shows the efficiency of the utilization of the resources on the project.

 

  • Schedule Variance, SV   =    Earned Value  – PV  =   15 – 20   =   – Rs.5

 

  • Schedule Performance Index, SPI  =  EV / PV  =   15 / 20  =  0.75

 

Thus we have,

CPI = 0.6

SPI = 0.75

 

Anything less than 1 means BAD. It indicates that you are Over-budget as well as Behind the Schedule.

Hope the concept was pretty understood by the mere example. Have a nice day!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Productivity in Construction

Productivity in Construction

Increase in the productivity does not depend upon increasing the man-power.

 

Productivity is an efficiency or the performance to carry out the alloted task.

Greater is the productivity, lesser are the allocations of more man power, thus results in saving of the resources.

 

Productivity can be calculated as per the convenience in terms of quantity of work or in terms of man-hours.

 

Here, we have calculated productivity in terms of…..( No.of Labors / Quantity of work )

 

Consider an example, For Backfilling

The actual no. of labors = 4 Nos.

Quantity of work required to be done = 20 cum.

Thus to perform the work of 20 cum, the average productivity of 4 labors is,

                                     4 labors / 20 cum  =    0.20 labors/cum

i.e. For the performance of 1 cum of work, 0.20 labors are required.

 

The construction industry is booming all round and therefore productivity has recently been an important factor in terms of time, costs and quality triangle.

If we need to increase the productivity, we need to perform the following crucial steps:

                                    A. Grouping

                                    B. Sorting

                                    C. Training

                                    D. Uplift

                                    E. Remuneration

We need to group or categorize the labors and check their productivity based on their previous works.

If 5 groups of labors are performing at different sites, sorting of each labor shall be done individually. Find the productivity of each labor based on his work performance and sort the best from each group.

To others who have entertained lower productivity , uplift them through trainings and various inductions.

Remuneration also plays an important role indirectly, for the attitude towards the work, thus affecting the productivity.

Calculations for Productivity :

  1. Total M/P required   =    Quantity of work    /    Productivity
  2. Daily M/P required   =     Total M/P    /     Duration
  3. Total Duration required    =   Quantity of work   /    (Daily M/P required  x                        Productivity)

M/P : Manpower