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Earned Value in EPCprojects

10 replies [Last post]
Fri, 2004-07-16 04:42
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I would like to know how effectively EVM principle can be used in EPC and lumpsum/fixed price contracts?
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Wed, 2004-07-21 01:34
#1
Vladimir Liberzon
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Alex,
most software calculates remaining duration, cost, etc. basing on the percent complete. I wrote that it is not proper to estimate the same percent complete for all activity data. You can define any percent complete but it will not be obvious for others what did you mean.
I don’t know how to enter individual resource percents (though in Spider Project you can define different work volumes for individual teams assigned to the activity).

And finally I don’t know why do you need this artificial parameter - percent complete? It is much more natural to define what costs have been spent, what physical volume have been done, actual and remaining duration, etc. I am afraid that you (and others) try to adjust methodology to the software capabilities and it should be done in the opposite way - the software capabilities should be adjusted to the proper methodology.
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Tue, 2004-07-20 19:05
#2
Alex Wong
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Dear All,

I would like to join in the discussion in regards to EVMS.

Some of the software do allow using Physical % complete to determinate % complete. That will align with Joanne’s volumn of works.
i.e. if the software development activity require to produce 3 doc.
User requirement Spec
Functional design Spec
System Design Spec
then the planner can assign % against each individual within the one activity
Once each doc. produced then the % is earned.


In addtion, EV% can also use various other different rules.
50/100
0/100
Primary Resource driven

Regards

Alex
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Tue, 2004-07-20 15:26
#3
Vladimir Liberzon
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Joanne,
pm software that you use (Open Plan, P3e, MS Project) has not such field - work volume. So you will estimate percent complete by duration, cost, effort or something else?
In my example I wanted to show that the percent complete may be different if you use different measures (volume, cost, duration, material consumption). That is why I don’t like this approach.
Work package may consist of activities that have different volume units and costs. I suspect that performing expensive and short activity you will declare that a large percent of work package is complete. Is it proper?
I have too many questions to EVMS. You know some of them that were described in my presentation.
Best Regards,
Vladimir
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Mon, 2004-07-19 07:05
#4
Vladimir Liberzon
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Joanne,
you measure percent complete for work packages only after tasks are completed. If the task is not completed you cannot define percent complete. Usually tasks are not completed simulateously - so you shall estimate percent complete for uncompleted tasks.
Each task may have its own cost of an hour. Some of them may be short and expensive, others cheap and long. If such expensive task was completed does it mean that percent complete is defined as EV (example - 10% of duration but 90% of cost means 90% complete?) or vice versa (10% complete despite the fact that 90% of cost was spent?).

About tasks that are not completed. It was planned that the task will take 38 hours with the planned cost of the each hour. After 24 hours you know that 30% of work volume was done (it is not easy to measure work volume in IT tasks - it may be planned in standard manhours, number of departments where the system was implemented, number of pages that were reviewed, etc.), 70% of the planned money spent (consultant was needed), and task team estimates the remaining duration in another 24 hours (they learned something that will help to work faster). What is percent complete for this task?
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Mon, 2004-07-19 06:02
#5
Joanne Foster
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It’s quite simple really, Percent Complete is an objective measure of a Work Package and it should be decided before you commence work on how you plan to earn value. I can not give Oil & Gas or Construction examples as my projects are high techology...so here goes with a software example

eg

CSCI blah blah blah
- Requirement Analysis 38hrs
- Preliminary Design 76hrs
- Detailed Design 76hrs
- Code, Unit Test 76hrs
- Integration & Test 38hrs

Total Hours = 304hrs

Therefore - when Requirements Analyis is complete you are 12.5% complete on the task (regardless of how long it took in duration or the actual cost of the work). You planned for it to be 38hrs and therefore that is all you can claim as your Earned Value (or Percent Complete). Once Preliminary Design is complete, you claim an additional 25%, therefore once Requirement Analysis & Preliminary Design are both complete then the Total % Complete is 37.5%.

Work Packages should be broken down into tasks which can either be 0 or 100% complete in any given reporting period (generally 1 month).

It doesn’t matter what you use as your measure, provided you can measure it, you have budgeted along the same lines as you plan to claim earned value.

Joanne


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Sun, 2004-07-18 05:15
#6
Vladimir Liberzon
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Joanne,
what is percent complete?
Let’s assume that we have done 50% of activity work volume, have spent 60% of planned duration, 70% of the planned effort (work hours), 70% of materials and 80% of the planned cost. How do you define percent complete for this activity?

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Sun, 2004-07-18 04:25
#7
Joanne Foster
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Earned Value is calculated as follows:

Percent Complete * Budget At Completion

Therefore, actuals are not required for the calculation of Earned Value. So as long as you have a Budget and an objectively measured Percent Complete - then EV can be calculated...actuals don’t enter the equation (until you try to analyse the data ie CPI, Spend Rate etc)

We use Earned Value Management on all contracts Fixed, Firm and Time & Materials - it does not matter the type of contract.
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Fri, 2004-07-16 11:25
#8
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I would like to know how effectively EVM principle can be used in EPC and lumpsum/fixed price contracts?

-------------------------------------------------

EVM can be used effectivly in all types of project regardless of of the type of contract.

I believe that the term "Earned" is rather misleading, if you earn something than that is your profit and that will be derived from accounting practices rather than planning/project controls.

EVM is an indicator as to how well a project is doing in relation to Cost Performance Indicator (CPIs) and Schedule Performance Indicators (SPIs.

Try this link or just surf the pmforum, there is useful stuff there.


http://www.pmforum.org/library/papers/QuentinFlemingPUC02.ppt

Good luck
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Fri, 2004-07-16 09:29
#9
Bernard Ertl
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In my experience, contractors will not provide owners with actual hour data when working lump sum. Without that data, EV cannot be calculated. Why would an owner be concerned with EV on a lump sum job?

Bernard Ertl
InterPlan Systems - ATC Professional Shutdown / Turnaround Management System
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Tue, 2004-07-20 09:59
#10
Joanne Foster
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Vladimir...I don’t know I understand your question...however if they have completed 30% of the work volume - then they would be 30% complete...assuming that 30% was measured using an objective measure.

Actual Hours or Costs are irrelevant when determining percent complete, as is the type of resource used whether it be planned or not (eg getting a consultant in). It also depends on the Earned Value Technique (EVT) you apply to the task.

Estimates to Complete are a separate to earned value - and therefore do not even come into the equation of how complete you are on a task...ETCs give you an indication on on whether you plan to over or underrun on the work package.

How you claim earned value (% complete) also depends upon the EVT you applied to the work package. My example used the EVT of % Complete. However, in production it is more appropriate to use Units Complete and the Quality Control of those Units would be Apportioned Effort.

J
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