Defining EVM

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Construction Cost Estimating and Cost Control

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Columbia University

Construction Cost Estimating and Cost Control

581 classificações

Curso 3 de 4 em Specialization Construction Management

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.

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Earned Value Method (EVM)

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

Defining EVM9:05

EVM Parameters11:19

Performance Examples11:50

EVM Favorable Performance12:04

Calculating EVM12:22

Conheça os instrutores

Ibrahim Odeh, Ph.D., MBA
Instructor, Department of Civil Engineering and Engineering Mechanics, Columbia University
Director of Research and Founder, Global Leaders in Construction Management

Hello everyone, in this module, we will build on what we

discussed before, related to the earned value method.

And to take it further up,

as I mentioned since the EVM is the most common used

cost control method in our construction projects,

and I want to emphasize more on an example and

what's exactly what we mean from a definition and objectives.

That been said, let's go to defining earned value method.

As a definition, earned value method is a way to

calculate the work of progress on a project

using a work account based breakdown system.

In matter of fact, this method started to

be implemented by government agencies

first here in the US in the early 70s.

And it used and implemented to help

control both the costs as well as

the schedule of complex projects.

It was called in the beginning,

the Cost/Schedule Control Systemic Criteria or C/SCSC.

Then some private owners, I think it was in the power sector,

started using very similar systems as a means to

report back to the government as their clients.

That helped or actually encouraged to place

requirements use of the C/SCSC or what we refer to,

the earned valued concept in our industry.

The main idea behind the earned value is based on

the development of the percent complete of the budgeted

costs associated with an individual work package.

So at the earned value method or EVM,

there is a direct relationship is established

between percent complete of an account and

the budget for that account.

This relationship is expressed with the equation

earned value equal percent complete times budget for that account.

This is for the definition.

Now, objective, the main objective of the earned value method is determining

project progress addresses both cost status and the schedule status.

From a cost status point of view, that means to identify if the project

is on budget, is over budget, or is under budget.

For the schedule status also to identify if the schedule you have is

on schedule or behind or ahead of schedule.

So let's take a very simple example here.

If we have a budget for a specific activity or account of $10,000,

and also a 60 working hours have been budgeted for

that specific or given account.

And we says that the account is 25% complete.

Then if we want to identify how many working hours have been used and

how many value has been earned, we would just multiply.

As I mentioned, the earned value is the percentage

times the budget cost or the budgeted time or

the schedule which is 25% times that 10,000 or

the 25% times the 60 worked hours.

And that will give you $2,500 and 15 work hours have been earned to date.

So this is the concept, I'm simplifying it here before

we move forward in more advance of the concept of the EVM.

Of what's the earned value from the initial

budgeted when we finish 25%, as we can see here.

Since progress in all accounts can be calculated as an earned dollars or

an earned work hours, this provides a method for

summarizing multiple accounts and

calculating overall progress.

So we can say that the percent complete equal

to the earned dollars of all accounts divided

by the budgeted dollars of all accounts.

So it is as if, as I mentioned the earned value equals the percentage times

the budgeted, we just took the budgeted over the earned and equal the percentage.

So the percentage complete is equal to the earned dollars or

work hours of an account, or all accounts divided by the budgeted

work hours or dollars of all accounts or one account.

The next challenge is to analyze the results for

the purpose of determining how well work is

it proceeding as compared to what was planned for.

So far, only budgeted and earned dollars or

work hours have been identified with the formula that I just highlighted.

Next, actual work hours or

actual dollars have to be identified.

This will take us to the introduction to the mean parameters or

actually four parameters we want to highlight,

that we need to understand in order to catch the fundamental concept or

the foundation of the earned value method or the EVM.

So let's say here, on each work package,

there is an estimated initial budget that we refer

to as the budgeted cost at completion, BCAC.

When we progress with the work on that work package or a matter of fact,

any work package, we start to do an assessment of what is

the percent completed in any day during the project.

We call that day or any day that we want to identify

as the study date of that work package progress.

Now, from the beginning of the project, we have the initial schedule.

The schedule establishes an expected level of work completion on any

of the study dates during the duration of that work package.

Delivery of expected production

usually identified as an s curve.

That shows the relation between the costs,

or units of production, and time.

We refer to that production curve or the s curve as

sometimes the baseline or the budgeted curve.

Let's draw it here.

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