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EVM Parameters

Course video 39 of 72

In this module, Professor Odeh goes deeper into the Earned Value Method of Cost Control.

Construction Cost Estimating and Cost Control

Columbia University

Course 3 of 4 in the Construction Management Specialization

This course introduces the types of cost estimation from the conceptual design phase through the more detailed design phase of a construction project. In addition, the course highlights the importance of controlling costs and how to monitor project cash flow. Students will work on a break-even analysis of construction tasks in a project.

Skills You'll Learn

Cash Flow, Cost, Cost Control, Cost Estimate

Taught By

Ibrahim Odeh, Ph.D., MBA
Instructor, Department of Civil Engineering and Engineering Mechanics, Columbia University

Transcript

So if we have.

The x and y-axis, here we have the time.

And here we have the cost or the units produced,

and as I mentioned, we do have kind of an S-curve.

Let's do the following, approximately.

So this is around a curve of an S-curve

of a specific work package.

We mentioned that the end of

the cost of the work package,

we referred to that as the budgeted costs at completion.

And we mentioned that there is a study

date at any given time during the cost

you have allocated for a work package.

Let's say we want to study here T, or

that we can refer to as the study date.

We can at any given time on the duration of the work package.

The units that are indicated by the S-curve itself or

the base line or the budgeted curve are called budgeted cost of work scheduled.

So let's say we have here the study date,

the intersection here is the budgeted costs of work scheduled.

At the field, there is a tracking system to report or

provide information on the actual costs of

work performed, or what we refer to as ACWP.

And also, we have the end value which is the budgeted costs of work performed,

the percentage times the budget cost at completion.

So, we have the ACWP and that BCWP also

can vary in the line here when studying.

So the ACWB could be here, could be here, could be here, here, here.

And the BCWP, the end value, also it could be anywhere also on the line.

The relationship between the ACWP and

the BC CWP.

And the BCWS and all these four parameters will get us

more understanding, about the schedule and

the cost status of our work package or our project in general.

And we will talk about this in more details in a few minutes.

In summary, the mean four parameters we need

to know to understand the foundation of the EVM are the following four.

The BCAC, each work package has an initial budget,

this is identified or defined as

the budgeted cost at completion, BCAC.

As for that BCWS, the budgeted dollars or

work hours to date at the study date as I just draw at the T,

the study date, represent what you planned to do.

This is called budgeted cost of work scheduled, BCWS.

Now the ACWP is the actual dollars or

working hours to the study date,

represent what you have paid for.

This is measured in the field, and

called the actual cost of worked performed ACWP.

Finally, BCWP which is the earned value.

And it is the measured dollars or

work hours to date represent what you did.

And, it is equal to the percent complete

times the BCAC, the first parameter here.

Which is called budgeted cost of work performed or BCWP.

Now the level of expected production as I just mentioned

is shown as an S-curve that we refer to, as I mention,

the baseline or the budgeted curve.

And we can see it here,

and T is the study date.

And BCAC, the first parameter here,

when you complete the S-curve towards the end it will

give you the accumulated one, the last number.

Any point on the curve here when you have any point that you want to do the study

date is parameter number two, the BCWS, budget cost of work scheduled.

And that ACWP, the actual one, and the earned value one it could be

anywhere on the study date either below, above the curve.

And it has a lot of combinations.

So speaking of that it is important to know that schedule and

cost objectives are being achieved.

How we track cost and schedule, and

how we characterize them in our project, will be as following.

There is two factors or

points that I want to refer to here.

From a cost status point of view, there is something what we call a cost variance.

And it links both the earned value,

BCWP, to the actual cost of work performed.

The differences between both of them is the variance for the cost.

When you divide them, BCWP or the earned value, divided by the ACWP,

you get you an performance index for the cost.

So a cost performance index, CPI, sometimes some books refers to as CI.

Now if the cost variance or the cost index

they are positive, or greater than one,

this means that earned value is more than the actual cost before performed.

That will give you a conclusion that the accounts of the project or

that account you are studying is within budget.

But if, and that's, I highlighted here one sentence, that means,

less is being paid in the field than was originally budgeted for.

The other way around if the earned value minus the actual cost for

perform is negative or less than one, in the reference to the cost index.

That's mean the accounts is overrunning the budget.

The actual cost is greater than the cost budgeted.

The schedule has similar approach to the cost status and

the earned value method, and it has also variance and then index.

That schedule variance connects also the earned value,

the BCWP to the budgeted cost of workers scheduled.

Which is identified on the S-curve before you reach to the top of the budget cost at

completion.

So any point there is the budgeted cost of work scheduled.

So the relation between this and

the earned value on that study date, it give you the schedule variance.

And when you divide them both,

similar concept to what we did here in the cost index and the cost variance,

the schedule performance index or schedule index is equal to the earned value,

the BCWP, divided by the budgeted cost of works schedule.

Again, if the variance and the index for the schedule is positive and

above one, then accounts are ahead of schedule.

And if the schedule variance and schedule performance index is less than one and

variance is negative, then accounts are behind the schedule.

So if you want to look at the cost and the schedule variance you can use

either the variance or the index, or you can use both.

Here to learn it in our module, in our course I'm using both so

as you have an idea if you heard both terms to know exactly what's going on.

And a positive variance, this is kind of a quick summary of this slide.

A positive variance and an index of one or

greater is a favorable performance.

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