PROJECT PERFORMANCE MEASUREMENT APPROACH IN
ROAD CONSTRUCTION INDUSTRY USING EVPM METHOD
Pedram DANESHMAND 1, 2 , Adel KHREICH 1
¹ Blue Visions Management Pty Ltd (BVM), Sydney, Australia
² Leighton Contractors, Sydney, Australia
Abstract: Among the available range of project performance assessment tools, Earned Value Performance Measurement
(EVPM) successfully encompasses scope, schedule and cost information within a single quantitative integrated analysis for
measuring and reporting project performance and forecasting future performance based on past performance. This review
outlines the development of the EVPM methodology on a AUD500M road construction project in Australia. The paper
examines the application of EV concepts (based on AS 4817-2006) in this case study, the advantages and challenges, and
provides practical guidance for monitoring and performance reporting for similar projects and programmes.
Key words: Earned Value, Performance, EVPM, Construction.
1
INTRODUCTION
1.1
Project Monitoring & Control
A construction project is highly unlikely to proceed in all
respects entirely according to plan. Small deviations
between plan and actual performance may locate within the
limits of uncertainty of the model, but significant variations
however may require a revision of the plan to meet the
project’s objectives. Two main phases of the project control
system involves the five steps of Plan, Implement, Monitor,
Report and Action. This study will focus on the monitoring
and reporting steps and highlight the benefits of the EVPM
method for this procedure.
An ideal control system sets the baseline, measures the
project performances and compares them with the expected
plan. Integrated project performance includes the four main
elements of a construction project: cost, schedule, quality,
and safety (Oberlander 1993). Typically, two parameters,
which are widely used for performance assessment, are Time
and Cost. A time-phase spend plan is usually prepared and
updated by the project planning manager monthly. On the
other hand, cost figures and the finance department easily
calculates Actual Costs. Some of the examples of monitoring
techniques are “Leading parameter”; “Activity based ratios”
and “Variances” methods. However, what is missing from
most of these models is any understanding of how much
work has been accomplished during the project. What is
needed, then, is a method of quantifying the technical
performance of the project and integrating with time and
cost, which is the objective of EVPM.
1.2
EVPM Background
The genesis of EVPM was in industrial manufacturing at the
turn of the 20th century, but the idea took root in the US
Department of Defense (DoD) in the 1960’s. In 1967, the
DoD established a criteria-based approach, using a set of 35
criterions called Cost/Schedule Control Systems Criteria
(C/SCSC). At best, C/SCSC was generally considered a
financial control tool that could be delegated to analytical
specialists. In the early 1990’s, EVPM emerged as a project
management methodology.
An overview of EVPM was included in first PMBOK Guide
in 1987 and expanded in subsequent editions. Recently,
efforts to simplify and generalize EVPM have gained
momentum. In Australia, standard AS 4817-2006 was
prepared by the Standards Australia Committee OB-014,
Earned Value Performance Measurement (EVPM) to
supersede AS 4817-2003. The current version of this
standard has been referred to for this case study.
2
EVPM PROCESS (AS 4817-2006)
2.1
Step 1: Decompose the WBS
The key for an effective EVPM system is the Work
Breakdown Structure (WBS). WBS breaks the project down
into manageable discrete elements of work and may be
expressed in an organization chart format. The WBS needs
to be defined down to at least the level at which EVPM
reporting will be applied. Making decisions about this level
is critical. Too low will create an overload of data and too
high could lead to the masking of some vital information.
According to the literature, most construction projects will
find 3-4 levels within a WBS will adequately meet their data
requirements for running a reliable EVPM system. However
for more complex projects and systems, breaking down to
level five or six has been recommended.
2.2
Step 2: Assign responsibility
Once the WBS has been developed into manageable
elements, responsibility is assigned for the performance of
the work elements. An Organization Breakdown Structure
(OBS) may be used to identify the project hierarchy
responsible for work accomplishment. A Responsibility
Assignment Matrix (RAM) may be used to map WBS
elements to the OBS elements.
2.3
Step 3: Planning/Scheduling
All elements of the work are scheduled into a logical
sequence, which identifies durations, activities, milestones
and interdependencies. For construction projects, activity
durations in the performance measurement programme will
usually be in the 2-4 weeks range, but there will exceptions.
Activities and milestones will be linked with dependencies
to produce a network schedule such that the critical paths
can be determined and the float can be determined for every
activity and milestone. Grouping the activities with start and
finish milestones helps creating the closed network.
2.4
Step 4: Develop time-phased budget
Costing may be done using a Bill of Quantities or pricing
schedule. If it is possible to influence the production of the
WBS, it is useful to define how the bill will be split to reflect
the programme. The total authorized budget for
accomplishment of an activity, WBS element or the project
scope of work is termed the BAC.
2.5
Step 5: Objective measures of performance
Objective measures of performance largely depended on
activity content, size and duration. There is no definitive set
of techniques, but a widely used method is the technique
termed ‘milestone’ where EV is only claimed when the
milestone is completed. Another technique termed ‘percent
complete’ is used to claim partial completion when the
objective measurement of the percentage completion of an
activity is possible. The performance measurement
indicators are scheduled with sufficient frequency to provide
a basis for accurate performance measurement.
2.6
Step 6: Set the performance baseline
The valid baseline should be logically constructed and also
should make sense when compared to available project
resources. The shape of the s-curve budget against time is a
quick way to judge. According to investigations by Singh
and Lakanathan (1992), the application of “S curves” for
cash flow projections can achieve an accuracy of
approximately 88-97%.
2.7
Step 7: Monitor, Report and Take Action
An accurate scoped, estimated schedule is essential for good
project performance measurement. As the project progresses,
we will make assessment of progress and will collect actual
information in regular bases from site senior engineers.
Labor Returns forms and cost reports can be used for actual
cost data and variations. Then EVPM uses this information
to calculate various KPI’s such as Percent Complete Planned
(PCP), Percent Complete Achieved (PCA), Schedule
Performance Indicator (SPI), Cost Performance Indicator
(CPI), Schedule Variance (SV) and Cost Variance (CV). One
sample of EVPM report has been shown at Figure 1.
According to the programme report, the appropriate action
then will be taken and a new baseline will be created when
the process is well documented and traceable.
Fig. 1 EVPM presentation
3
CASESTUDY OVERVIEW
3.1
North-West T-Way Project
The NWT-Way is a bus rapid transit line in the northwestern
suburbs of Sydney, Australia. The AUD500M project plan
was approved in Feb 04 and is due for completion in Dec 07.
As a design and construction project, it was designed and is
under construction by Leighton Contractors Pty Ltd. The
project planning management, control and performance
measurement reporting services are provided by blueVisions
Management Pty Ltd. The 24-kilometre-long road will
include 30 stations, seven new bridges, one new underpass, a
cycleway and pedestrian facilities.
3.2
WBS establishment and Work Packages
Traditionally applied EVPM considers the whole project and
no account is taken of the work break down structure in the
form of activities or work packages. For this project, the
usage of WP’s (Work Packages) for EVPM system has been
considered. The total project (Level 1) has been broken
down to four Zones (Level 2), and then each zone has been
divided to two Sections (Level 3). Down at this level, the
Work Packages (Level 4) are located. Also the project is
broken down to four Separation Portions (SP1-4).
For this proposed case study, the following types of Activity
Codes for planning purposes have been defined:
- Zone: Mile, Z1, Z2, Z3, Z4, and Cost.
- Task: Mile, Design, Procurement, and Construction.
- Section: SP1-4, S1, S2, S3, S4, S5, S6, S7, and S8.
- Discipline: Site Establishment, Temporary Works,
Communication Adjustments, Gas Adjustments,
Electrical Adjustments, Services Installation, Sewer
Adjustments, Water Adjustments, Asbestos
Removal, Local Roadworks, Property Works,
Utilities, Earthworks, Retaining Walls, Cross
Drainage, Drainage, Relocation Services, Pavement
Drainage, Traffic Signals, Pavements & Barriers,
Road Furniture, Street Lighting, Noise Walls,
Footpath, Concrete Paths, Station Intelligent
Transport Systems (ITS), Urban & Landscaping
Works, Linemarking & Signage, Testing &
Commissioning Works, Bridges & Structures,
Building Works, Bus Stations & Precincts, Station
-
Layout, and Civil Details.
Location: Project broken down to 50 locations.
Trade: 40 different trades have been identified.
The selection of Work Packages is made according to natural
groupings of project activities arranged in their logical work
sequence. Key dependencies between the activities within
different Work Packages are determined and these are used
to establish the lead and lag times between the packages.
Also choosing the work packages with regard to cost reports
has been recommended. For our purposes, these Work
Packages have been located at the 4th level of WBS and
based on Activity Codes of “Discipline” for the project’s
EVPM system. Hammocks or summary activities represent
the individual Work Packages and have been linked to
groups of tasks by start and finish milestones.
3.3
Budget Cost Allocation
As mentioned, for most construction projects 4 th Level of
WBS can provide an accurate database for EVPM system.
So to produce a time related budget, we have to allocate
estimated costs over each Work Package (Hammock
activities). All this information is taken from cost reports and
financial statements. The nature of the work will determine
whether costs should be set as labor costs only or if like this
project all project costs should be loaded into the schedule.
For cost allocation, we used traditional linear relationships,
but for long Work Packages, it may be more appropriate to
allocate a more accurate non-linear expenditure against time,
than to assume a direct relationship.
3.4
Schedule & Plan Value (PV)
As the initial plan is ready at this stage, this step generally
provides the spread of the project. It generates the traditional
S-curve of the project plan, often referred to as the sum of
the budgets for work scheduled to be accomplished within a
given time period or Planned Value (PV) or previously
BCWS (Budgeted Cost of Work Scheduled). The process
can include analysis of specific resources to ensure that
maximum available levels are not exceeded at any point in
the schedule. There is also a review of the financial viability
and the cashflow of the project to check that the financing
plan for the project supports the schedule.
3.5
Progress Monitoring/Updating
Ongoing updating of the schedule needs to be done whether
or not the EVPM system is used as a control mechanism. For
our programme updating, the scheduled activities are
reported as started, completed or part completed. For noncompleted activities, percentage completion and remaining
duration would be provided during the site updating with
junior engineers. The next step is the Work Packages
percentage completion updating with senior engineers and
section managers. Zone managers will check the updated
percent completion for all Work Packages.
The final step in the periodic updating is to enter the actual
costs into the Work Packages. This information comes from
financial documents, timesheets and invoices. Revised and
actual start and finish dates are recorded for all activities. On
the other hand, all Work Packages are updated with Actual
Costs and ETC information (cost figures) and because they
have been linked to the schedule network, they will be
updated automatically in terms of time (schedule figures).
3.6
EVPM Calculation
The final step is to calculate the Earned Value (EV) or
previously called BCWP (Budgeted Cost of Work
Performed). By using the defined Work Packages, the EV is
simply the percentage completion of a work package
multiplied by the budgeted cost. Other performance
calculations are described hereafter. Schedule Variance (SV)
is the difference between Earned Value and Planned Value
(EV – PV). A positive value indicates an ‘ahead of plan’
situation while a negative value indicates ‘behind plan’. Cost
Variance (CV) is the difference between EV and Actual Cost
(EV – AC). A positive value indicates a favorable position
and a negative value indicates an unfavorable condition.
Performance indices are often merely ratio expressions of
the SV and CV such as Schedule Performance Index (SPI)
and Cost Performance Index (CPI).
The Percentage Complete Planned (PCP) at any time is the
PV for that point divided by the total budget. Percentage
Complete Achieved (PCA) is the EV divided by the total
budget. The Estimate at Completion (EAC) is a useful figure
since it indicates where the project cost is heading. It equals
AC to a point in time plus the estimated costs to completion
(ETC). Most techniques for forecasting ETC include some
adjustment to the original estimate, based on project
performance to date. In this case study, all ETC figures are
provided by senior engineers and financial documents.
3.7
Data Analysis & Project Reports
Formal project reports are a critical part of the EVPM
system. We have to summarize and analyze the project data
received from senior engineers and the financial department
to prepare the reports provided to executive managers and
client. This is in effect, an interpretation of the various
results of last step and exact needs of the project. For our
case study, the following reports are provided:
3.7.1 Programme (Schedule) Report
As all activities and work packages have been updated
regularly by revised start and finish dates, actual start and
finish data, percentage completion and remaining durations
as at each status date, the current programme always shows
the remaining activities and forecast practical completion
date. A programme developed in using P3 software was used
for this case study.
3.7.2 Project Performance Report
At project level, the actual percentage completion can be
defined by using EVPM method. The project Percent
Complete Achieved (PCA) is the total EV of work packages
divided by the total budget (Eq. 1). For most construction
projects, it has been found that 3-4 levels within a WBS will
adequately meet the EVPM data requirements.
PCA  Total( EV ) / Total( Budget )
(Eq. 1)
3.7.3 Separation Portion Performance Report
One of the benefits of EVPM method is the performance
measurement ability for any combination of areas. For this
cast study, SP3 included the sections 1-6 and sections 7-9
make SP4. The PCA can be calculated for any combination
of areas using the Eq. 1 although we do not have the
individual programme information for that portion.
3.7.4 Cashflow Report
After updating all work packages with AC and ETC
information and regular programme updating, the system
can provide the distribution of forecast cashflow for the
project based on integrated time and cost data. The forecast
cashflow function at P3 software has been used for this
report. With actual cost figures, updated schedule, project
PV data and ETC information, the Cashflow is prepared. For
a fixed price project, we need two versions of the EVPM
system, as Work Packages have to be updated with two
different sets of data to meet the requirements of the Internal
and External systems For the Internal programme, WP’s are
updated with real AC and ETC information. On the other
hand, the External system requires that the WP’s would be
just updated with Claims reports to produce the cashflow
report for the client.
4
EVPM CHALLANGES
If the calculation of ETC is based on past performance, in
some instances the EVPM may not be correct because future
work may be entirely different and unrelated to that already
completed. To address this issue, we focused on senior
engineers estimation as well as past performance.
SV relates purely to cost performance only and no account is
taken of time as it relates to the completion of project
activities in their logical sequence (Howes et al. 1993). To
address this deficiency, the project schedule and WP’s are
updated concurrently with time and cost, respectively.
In its basic mode, EVPM does not account for variations to
the project in the form of additions and/or omissions. The
budget and forecast information are taken into consideration
to ensure a meaningful measurement approach is in place.
This powerful tool for project performance measurement has
no provision to measure project quality and client
satisfaction. Other management tools should be used in
conjunction.
5
CONCLUSIONS
EVPM is a tool for improving the analysis of progress and
performance on a construction project. The paper outlines
the development of EVPM methodology on a construction
case study and to provide practical guidance for EVPM
implementation in similar programmes.
According to this EVPM application for a road construction
case study, the following comments have been achieved:
- Although putting the work packages at Level 4 had
accurate results, engineers feel more confident at level 5. If
the implementation of EVPM is not scaled to match the size
and type of the project, it may be either too lightweight or
too costly and time wasting.
- General overheads and profits should be eliminated
from the analysis so that actual expenditure can be directly
compared with budgeted expenditure; hence, when these are
added back, a more accurate summary of the profitability
can be obtained.
- Within this closed network, activities are updated with
time data and Work Packages are updated with cost
information
creating
an
integrated
performance
measurement system built of time and cost.
- The test data needs to be expanded with data from a
wider range of road projects to provide more practical
usages and procedures of EVPM system.
- Getting the accurate cost figures from financial
departments and the real time and performance data from
site engineers, makes the EVPM system a reliable
performance measurement tool.
ACKNOWLEDGMENT
This consulting service was undertaken and fully supported
by Blue Visions Management Pty Ltd (”blueVisions”),
Sydney, Australia and the first author would like to express
his special thanks to the Managing Director, Mr. A. Khreich
for all his support and constructive reviews. We also
acknowledge the Leighton Contractors Pty Ltd team for
project database support.
REFERENCES
Al-Jibouri, S.H. (2003). “Monitoring systems and their
effectiveness for project cost control in construction”.
International Journal of Project Management, Vol. 21.
Australian Standard AS 4817-2006. “Project performance
measurement using Earned Value”.
Howes, R. (2000). “Improving the performance of Earned
Value Analysis as a construction project management
tool”. Engineering, Construction and Architectural
Management, 7|4, pp. 399-411.
Raby, M. (2000). “Project management via earned value”.
Work Study, Volume 49, Number 1, pp. 6-9, MCB
University Press, ISSN 0043-8022.
Park, H.K., Han, S.H. and Russell, J.S. (2005). “Cash Flow
Forecasting Model for General Contractors Using
Moving Weights of Cost Categories”. Journal of
Management in Engineering, ASCE.
Ruskin, A.M. (2004). “Two Issues Concerning the Use of
Earned Value Measurements”. Engineering Management
Journal, Vol. 16, No. 3.
Alvarado, C.M., Silverman, R.P. and Wilson, D.S. (2004).
“Assessing the performance of construction projects:
Implementing earned value management at the General
Services Administration”. Journal of Facilities
Management, Vol. 3, No. 1, pp 92-105.