EARN VALUE TECHNIQUE.docx

**UNIVERSITY OF MINDANAO, DAVAO CITY** **College of Engineering Education-Civil Engineering Program** **EARNED VALUE TECHNIQUES** Submitted by: Jonathan Torralba Submitted to: Engr. Geffren Bernardo **EARNED VALUE TECHNIQUE** Earned Value is a project control technique which provides a quant...

**UNIVERSITY OF MINDANAO, DAVAO CITY** **College of Engineering Education-Civil Engineering Program** **EARNED VALUE TECHNIQUES** Submitted by: Jonathan Torralba Submitted to: Engr. Geffren Bernardo **EARNED VALUE TECHNIQUE** Earned Value is a project control technique which provides a quantitative measure of work performance. The earned value technique is a proven method to evaluate work progress in order to identify potential schedule slippage and areas of budget overruns. Value earned for a given task is computed as budgeted cost of work performed and is a function of time, work completed, and budget. Budgeted cost of work performed is compared against actual cost of work performed and budgeted cost of work scheduled to assess cost and schedule variances, respectively. Cost and schedule variances may be identified at the individual cost account level or at any other level up to the overall project for upper management review. Variances may be identified by work element and organizational disciplines. Variances may be reported as a percent of the baseline and presented graphically. The work breakdown structure, detailed schedules and cost account budgets form the foundation for earned value assessment. Project management control points are established by creating a matrix of the work breakdown structure and the project organizational breakdown. This identifies functional managers and subcontractors responsible for work performance. Each control point is represented by a cost account and establishes the lowest level for evaluating cost and schedule performance. **PERFORMANCE MEASUREMENT BASELINE (PMB)** The performance measurement baseline (PMB) is a component of the project plan. It sets out the scope, budget and schedule of a project or portions of a project. The progress of the work is measured against this baseline which helps the project manager and the stakeholders determine where the project stands with respect to schedule, budget, and scope. A performance measurement baseline is typically established for an entire project. In addition, it is often broken up to a more granular level. In a work breakdown structure (WBS), it can refer to a control account that contains one or several work packages or planning packages.  The performance baseline consists of the 3 baselines that are also components of a project plan: - [project scope baseline](https://project-management.info/project-scope-baseline/), - [project schedule baseline](https://project-management.info/project-schedule-baseline/), and - project cost baseline **Project Scope Baseline** Scope' is probably one of the most common terms in project management. Often, the scope of a project is subject to different views and intensive discussions among stakeholders, project managers, and team members. A scope baseline is therefore a 'must' in every project: it defines and documents the scope of a project clearly and in sufficient detail from the beginning. The scope baseline defines the scope of a project in terms of combining the scope statement and the defined work breakdown structure of the project  The scope baseline is a bundle of scope-related documents that sets out the approved scope of a project. A project's scope baseline consists of the scope statement and the defined work breakdown structure of that project, subject the approval of the relevant stakeholders. A project's results and progress are measured against that baseline. This example demonstrates how important it is to agree on a single clear terminology in a project. Scope baseline consists of the project scope statement, the work breakdown structure and the WBS dictionary The scope baseline of a project consists of: - the approved project statement, - the work breakdown structure (WBS), incl. control accounts, planning packages, and work packages, and - The associated WBS dictionary. - The 'project scope statement' is a written definition of the project scope. It describes the goals, main deliverables, and other characteristics of a project. - 'Work breakdown structure' (WBS) refers to the breakdown of project deliverables into smaller, manageable pieces of work. The lowest level of a WBS represents 'work packages'. A work package itself consists of various activities (which are technically not part of a work breakdown structure). A planning package is hierarchically higher than work packages, and a controlling account can contain several planning packages.  The hierarchy of a work breakdown structure (WBS) - The WBS dictionary accompanies the work breakdown structure with details on all its constituents, including an identifier, an outline of the work of a WBS element, responsibilities, assumptions, and estimations. The scope and extent of WBS dictionaries vary significantly among the different organizations. **Project Schedule Baseline** The schedule baseline is the planned schedule of the project after its approval by the relevant [stakeholders](https://project-management.info/stakeholder-engagement-matrix/). In project management, it is typically the output of the schedule development process and becomes a component of the project management plan (source: PMBOK®, 6^th^ ed., ch. 6.5.3). Within this plan, it is one of the 3 project baselines, besides the [scope baseline](https://project-management.info/project-scope-baseline/) and the cost baseline. Together with the 2 other baselines, it is a constituent of the [performance measurement baseline](https://project-management.info/performance-measurement-baseline/). The schedule baseline is used to measure and monitor the performance of a project: the delivered work at a point in time or over a period of time is compared against the baselined planned work at that time. ### What Are the Components of the Schedule Baseline? A schedule baseline comprises of (at least) - the documented planned project schedule (sometimes referred to as a schedule model), and - The approval by the relevant stakeholders. The detailed components of the schedule baseline may vary among projects. However, the essential information reflected in the baseline is usually: - [sequence](https://project-management.info/pdm-precedence-diagramming-method/) of project activities, - dependencies between activities, including [leads and lags](https://project-management.info/leads-and-lags/), - [activity durations](https://project-management.info/estimating-activity-durations/), - planned/baselined start and finish dates of activities, - underlying assumptions and constraints, - resource requirements, and - Other elements necessary for the schedule planning of the project. Project managers typically use a scheduling or project management software to develop this so-called schedule model. This schedule model is often presented as a diagram (e.g. a Gantt chart) accompanied by a documentation of additional details, such as resource requirements and assumptions. Once the schedule model is approved by the relevant stakeholders, it becomes the schedule baseline of the project. Project schedule as Gantt chartA Gantt chart is a common way to visualize the project schedule baseline. **Project Cost Baseline** The cost baseline is the budget allocated to project activities (based on [cost estimates](https://project-management.info/estimating-project-cost/)). Both the schedule as well as the cost baseline include contingency reserves but do not contain the management reserves. A cost baseline is the budget that has been approved for a project, broken down into a list of salaries, materials, equipment and more. It's the sum of the cost estimates for all the tasks on your project schedule. Once you have a cost baseline, you need to add a management reserve, which is a portion of the [project budget](https://www.projectmanager.com/training/create-and-manage-project-budget) that's used as a contingency reserve for management control and unexpected costs. Those two elements make up your project budget. **DATA COLLECTION AND REPORTING** Effective data collection and reporting are crucial for the successful implementation of Earned Value Technique (EVT). These processes ensure that accurate and timely information is available for measuring project performance and making informed decisions. **IMPLEMENTING EVT IN CONSTRUCTIONS PROJECTS** The essential steps to effectively implement EVA in construction: **1. Establish a project plan** Initially, it\'s crucial to establish a detailed baseline plan that encompasses the project\'s scope, schedule and budget, as this plan acts as a foundational reference for all EVA-related calculations. It ensures that every aspect of the project is accounted for from the start. **2. Define the Work Breakdown Structure (WBS)** Develop a comprehensive [work breakdown structure](https://www.procore.com/library/work-breakdown-structure) to segment the project into manageable components. This breakdown is crucial for precise tracking and measuring of project progress. **3. Assign monetary value to WBS** Each task or section in the WBS is assigned a specific monetary value. This step establishes a cost baseline that is directly linked to the project schedule, allowing for accurate tracking of financial progress alongside physical project milestones. **4. Calculate and chart the planned value** Utilize the WBS and its assigned monetary values to calculate the PV, which represents the budgeted cost of the work scheduled. Charting the PV over time offers a visual representation of how the budget is allocated across the project timeline. **5. Monitor earned value and actual cost** Continuously track the actual progress of the project to determine the EV, which reflects the actual value of work completed. Similarly, monitor and record the AC to understand real-time financial expenditures as the project progresses. **6. Evaluate the project's performance** Compare the earned value against the actual cost and planned value. This comparison provides insights into the project\'s performance in terms of schedule adherence and budget management. It allows for early detection of deviations from the plan and facilitates timely decision-making and adjustments. **7. Perform EVA regularly** Lastly, institute a system for regular monitoring of these metrics at set intervals. This ongoing evaluation ensures that any deviations from the plan are quickly identified and addressed. This step is crucial for maintaining control over the project, allowing for timely adjustments and decision-making based on the latest data. **SOFTWARE TOOLS FOR EVT** Several software tools are available to assist project managers in implementing EVT. These tools offer features such as data integration, real-time tracking, and detailed reporting, which help in accurately measuring and managing project performance. Here are some commonly used tools: 1. **Microsoft Project** - **Features:** Comprehensive project scheduling, resource management, and earned value analysis capabilities. - **Benefits:** Integrates easily with other Microsoft Office tools, widely used in various industries, and provides robust reporting features. 2. **Primavera P6** - **Features:** Advanced project scheduling, resource leveling, and earned value management functions. - **Benefits:** Suitable for large and complex projects, supports multi-project environments, and offers detailed analytics and reporting. 3. **Deltek Cobra** - **Features:** Specialized in earned value management, cost performance analysis, and reporting. - **Benefits:** Provides in-depth EVM analysis, integrates with other project management systems, and is compliant with EVM standards. 4. **Oracle Primavera** - **Features:** Comprehensive project portfolio management, scheduling, and earned value management. - **Benefits:** Robust for large-scale and complex projects, provides detailed performance metrics, and integrates with other Oracle tools. 5. **ProjectManager.com** - **Features:** Cloud-based project management with real-time dashboards, task management, and earned value tracking. - **Benefits:** User-friendly interface, accessible from anywhere, and offers collaborative features for team management. 6. **SAP Project System (PS)** - **Features:** Integrates with other SAP modules, provides detailed project planning, scheduling, and earned value analysis. - **Benefits:** Ideal for organizations using SAP ERP, offers comprehensive project financial management, and detailed analytics. 7. **Asta Powerproject** - **Features:** Project scheduling, resource management, and earned value tracking. - **Benefits:** Flexible licensing options, easy-to-use interface, and strong focus on construction and engineering projects. 8. **Wrike** - **Features:** Task management, real-time collaboration, and earned value tracking. - **Benefits:** User-friendly, integrates with other tools (e.g., Salesforce, Slack), and suitable for agile and traditional project management. 9. **Smartsheet** - **Features:** Project management, collaboration, and real-time data tracking, including earned value metrics. - **Benefits:** Highly customizable, easy to use, and integrates with various business tools. 10. **Clarizen** - **Features:** Project portfolio management, real-time tracking, and earned value management. - **Benefits:** Suitable for large enterprises, offers detailed analytics and reporting, and integrates with various business applications.     References McConnell, D. R. (1985). Earned value technique for performance measurement. *Journal of Management in Engineering*, *1*(2), 79-94. CHATGPT