Improving the Practical Application for Monitoring Project Progress ...

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of construction projects in terms of scope, time, and cost in an objective manner. .... meaning the delay (or advance) from the beginning of the project until the ...
CSCE 2010 General Conference - Congrès générale 2010 de la SCGC Winnipeg, Manitoba June 9-12, 2010 / 9 au 12 juin 2010

Improving the Practical Application for Monitoring Project Progress Using the Earned Value Method B. Lennon and A. Francis Department of Construction Engineering, École de technologie supérieure, University of Québec, Montréal, QC, Canada Abstract: The Earned Value technique (EV) is well-known for its effectiveness in measuring the progress of construction projects in terms of scope, time, and cost in an objective manner. The EV provides a set of uniform units in order to quantify the schedule and cost performance using curves, variances and indexes. However, the practical application of this method presents several challenges regarding the evaluation of a revised schedule and cash flow, the inability to take into account the criticality of the activities in the calculation of the Schedule Performance Index, and the calculation of this index when the planned end date has passed. This paper discusses and analyses the application of this method and presents practical solutions in order to overcome these limitations. These solutions have been applied to the design planning of two construction projects, and the obtained results have shown significant improvement compared to the alternative methods. 1. Background The Earned Value method is well-known for its effectiveness in measuring the progress of construction projects in an objective manner. The EV provides a set of uniform units in order to quantify the schedule and cost performance using curves, variances and indexes. The curves show the cumulative value associated with each element of the project and identify the Planed Value (PV), the Actual Cost (AC) and the Earned Value (EV). The comparison of the EV with the PV shows the schedule performance, while the EV indicates the cost performance when compared with the AC. It should be noted that the evaluation of performance in terms of cumulative value, variances and indexes is expressed in terms of value for both schedule and costs. In addition, a zero value of the Schedule Variance (SV) may mean that the activity is completed, or goes as planned (Vandevoorde and Vanhoucke 2006); in this situation there is no way to differentiate between completed and ongoing activities. Moreover, regardless of the actual status of the project at the end of the project schedule simulation, the schedule performance is equal to 1, whether it has been or will be completed early, late or indeed, which can incorrectly indicate that the project is fully consistent with the planned schedule. These shortcomings limit the usefulness of the method to evaluate, in an accurate manner, the activities and the project delay in terms of duration. Lipke (2003) has developed the Earned Schedule method to calculate the schedule performance index in terms of duration rather than in monetary value. This calculation compares the actual date according to the EV with the projected date, according to the planning schedule. This method also provides equations

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in order to estimate the new total duration of the project. However, this method does not take into consideration the sequence of the criticality of the project activities. In addition, the evaluation of the project end date and final budget are based on the performance index values. This method assumes that these indexes vary only very slightly after a certain percentage of project progress. However, the stability of performance indicators remains a subject of debate. Some studies indicate that these index values will vary only plus or minus 10% after 20% of the project’s progress (Christensen and Kirk 1992; Christensen 1994; Christensen and Templin 2002; Lipke and Henderson 2006; Stratton 2007). However, other studies claim that the schedule performance index does not stabilize until after 60% of the project’s progress; (Zwikael et al. 2000; and Henderson 2008), assert that the stability of this index settles only very late in some cases, at around 80 % of the project’s progress. Thus, according to De Marco et al. (2009), calculating the estimated time of delivery is a relevant advancement between 20% and to 70% of the planned work. Similarly, Fleming (1991) states that the schedule performance index is useful only during the early phases of the project. Generally, the Earned Value method is very useful to estimate the final cost of the project but failed in the estimated date of completion of the project (Stratton 2007). The EV method does not express the performance variance and index with enough precision in order to calculate a delay (or advance) in the project schedule with accuracy. In order to overcome these limitations, this paper discusses and analyses the application of the EV method and introduces new, more practical and accurate solutions. 2. The Periodic Delays Process for measuring the project schedule performance index. The most important limitation in the calculation of the schedule performance variance and index is related to the incapacity of the EV method to make a distinction between critical and noncritical activities. The non-critical activities are activities that have margins. A delay on a noncritical activity, less than its total margin, does not delay the total duration of the project and should not have an impact on the project schedule performance. The Periodic Delays Process (PDP) proposes the calculation of the schedule performance variance and index in terms of duration, based on the criticality of the activities. This method uses the Simplified CPM/PERT simulation model (AbouRizk & Lu 2000) to determine the criticality of the activities. The Simplified CPM/PERT simulation model identifies the activities according to their criticality potential i.e. according to their likelihood to be on the critical path. Thus, it is possible to establish the most likely critical path based on the probabilities obtained. The method evaluates the impact of the activity delays on the total duration of the project. The delay on a critical activity (or the delay on a non-critical activity which exceeds the Total Float value) is the result of a backlog on all earlier activities. It is therefore necessary to apportion the delay on the entire monitoring period in proportion to the activities duration. Finally, the schedule performance index is calculated based on accumulated delay that affects the whole project duration. The PDP is therefore conducted in 6 steps:  Step 1: Planed Critical Path The Simplified CPM/PERT simulation model is applied in order to determine the most likely probable duration for each activity, the critical path, and the margins. Activity durations and margins will be rounded in order to increase the applicability of the method.  Step 2: Revised Critical Path at each monitoring date At each follow-up date, and according to the information available at the time, a review is conducted for each ongoing activity, the pessimistic duration, the most likely duration, and the optimistic duration. Then we repeat Step 1.  Step 3: Running critical activities On the time-scaled schedule a vertical line is drawn corresponding to the actual monitoring date DateCi. All ongoing critical activities are identified (activities that have been cut by the actual control line) i.e., all critical activities that have started before the current control date and are still running. Each activity is checked for the following three conditions:

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Total Float = 0 Actual Start Date < DateCi Revised Finish Date ≥ DateCi  Step 4: Delay (or advance) attributable at the actual monitoring date For each critical activity, X that has been identified in Step 3 the portion of delay (advance) RXi attributable at this monitoring date is calculated in days as Figure 1. Firstly, the total activity delay (or advance) JX, is calculated in terms of days: JX = FRXi – FPX JXi = Total activity delay (or advance) in terms of estimated days at the actual monitoring date i. FRXi = Revised end date of activity X as of control i expressed in days FPX = Planed end date of activity X Then, the portion of delay (or advance) RXi attributable at this monitoring date is calculated in days, meaning the delay (or advance) from the beginning of the project until the actual monitoring date. This delay (or advance) is expressed as follows: RXi = JX * (1 – (FRXi - DateCi)) / (RDX)) RXi = The portion of delay (or advance) of activity X attributable at the actual monitoring date i. JXi = Total activity delay (or advance) in terms of days at the actual monitoring date i. FRXi = Revised end date of activity X as of control i expressed in days DateCi = Monitoring date i RDX = Revised duration of activity X  Step 5: Delay (or advance) attributable to the actual monitoring period The portion of delay (or advance) RPi attributable to the actual monitoring period is calculated i.e., the delay between the previous and the actual monitoring date. Knowing this, the delay of a critical activity is due to the accumulation of delays from the beginning of the project until the actual monitoring date. Thus, in order to simplify the distribution of the delay, we will base our calculation on the length of the control period. To calculate the value of the delay RPi attributable to the actual monitoring period i, the values of delays (or advances) RXi for this period are compared and the largest one is denoted Ri. From this value we deduce the total delay calculated at the date of the control i-1. Ri = Max (RXi) Ri = The maximum delay (or advance) attributable at the actual monitoring date i. RXi = The portion of delay (or advance) of activity X attributable at the actual monitoring date i. RPi = Ri – Ri-1 RPi = The portion of delay (or advance) attributable to monitoring period i. Ri = The maximum delay (or advance) attributable at the monitoring date i. Ri-1 = The maximum delay (or advance) attributable at the monitoring date i-1.

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Monitoring Period (i : i+1)

Légend: Critical activity (Actual Duration)

Activity A as revised at DateCi Activity A as Planed

Delay to be distributed betwen the two periods (i-1 : i) and (i : i+1)

Critical activity (Planed / revised Duration) Non Critical activity (Actual Duration)

Activity A as revised at DateCi+1 Activity A as Planed

Delay to be distributed betwen the two periods (i : i+1) and (i+1 : i+2)

Non Critical activity (Planed / revised Duration) Margin Delay

Activity B as revised at DateCi Activity B as Planed

Delay to be distributed betwen the two periods (i-1 : i) and (i : i+1)

Activity B as revised at DateCi+1 Activity B as Planed

Delay to be distributed betwen the two periods (i : i+1) and (i+1 : i+2) DateCi

DateCi+1

Figure 1: The Periodic Delays Process for measuring the project schedule performance index.

 Step 6: Schedule performance index A Schedule Performance Index (SPI) attributable to the actual monitoring period as well as the SPI related to the project at the actual monitoring date I are calculated. Calculate the Schedule Performance Index (SPI) attributable to the actual monitoring period: SPIPi =1 - RPi /DPCi SPIPi = Schedule Performance Index (SPI) attributable to the actual monitoring period RPi = The portion of delay (or advance) attributable to monitoring period i. DPCi = Duration of the actual monitoring period i Calculate the Schedule Performance Index (SPI) related to the project at the actual monitoring date i: SPIi = SPIi-1 - RPi /DPCi

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SPIi = Schedule Performance Index at the monitoring date i SPIi-1 = Schedule Performance Index at the monitoring date i-1 RPi = The portion of delay (or advance) attributable to the monitoring period i DPCi = Duration of the actual monitoring period i Knowing this, the Schedule Performance Index SPI0 at the beginning of the project is equal to 1. 3. Calculation of the Schedule Performance Index after the Project Planned Date Completion Current methods provide an incorrect calculation of the SPI after the project planned date completion. Indeed, once that date has passed, the SPI increases indicating that project performance is improving. In fact, the SPI value cannot be higher than its last value attained by the project planned end date. The suggested method supports the use of a penalty curve (Francis 2006). The final value of the SPI should serve as a reference. This curve will apply a penalty per day beyond the scheduled duration of the project. The establishment of the penalty curve requires evaluating the revised duration of the project. The evaluation of the revised schedule may be achieved through either simplified or detailed methods. The proposed detailed method is realized in two steps: Firstly, the planner evaluates the remaining work required to complete the project activities, and secondly, a simulation is applied in order to calculate the critical path of the remaining work based on the criticality of the activities. The planner then assesses the value of the SPI to the end date of the revised draft to determine the penalty curve against which performance will be evaluated. Once the penalty curve is established, the SPI can be evaluated. Three situations may occur:  If the earned value curve follows the revised curve exactly, then the value of the SPI will be equal to the value obtained from the penalty curve.  If the earned value curve is lower than the revised value, then the value of the SPI will be lower than the value obtained from the penalty curve, or  If the earned value curve is higher than the revised value, then the SPI will have a value higher than the value obtained from the penalty curve. 4. Conclusions The practical application of the Earned Value Method, used currently, presents several challenges regarding the evaluation of the revised schedule and cash flow, the inability to take into account the criticality of the activities in the calculation of the Schedule Performance Index and the calculation of this index when the planned end date has passed. The proposed Periodic Delays Process (PDP) takes into consideration the criticality of the activities and the associated probable float, and can distinguish between the impacts of delays caused by both critical and non-critical activities. Thus, project performance is not penalized if a manager decides to use the activities margins for resource levelling or other management purposes, and the SPI is evaluated according to the cumulative delay or gain during the evaluation period. The development of the concept of a penalty curve also permits a realistic evaluation of the SPI once the planned end date has expired. These methodologies were applied for the design phase for two projects: The Cavendish Boulevard Extension and the First line of the Tramway of the city of Montreal. The obtained results have shown significant improvement compared to the actual methods. In conclusion, the presented methodology overcomes the existing limitations and provides more reliable results.

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5. References Christensen, D.S. 1994. Using Performance Indices to Evaluate the Estimate at Completion. Journal of Cost Analysis, 17-24. Christensen, D.S. and Templin, C. 2002. EAC Evaluation Methods: Do They Still Work? Acquisition Review Quarterly, 105-116. Christensen, D.S. and Payne, K. 1992. Cost Performance Stability – Fact or Fiction? Journal of Parametrics, 10: 27-40. De Marco, A., Briccarello, D., and Rafele, C. 2009. Cost and Schedule Monitoring of Industrial Building Projects: Case Study. Journal of Construction Engineering and Management, 135: 853-862 Fleming, Q. W. 1991. Cost/Schedule Control Systems Criteria: the Management Guide to C/SCSC. Rev.Ed. Probus Publishing Company, Chicago, IL. Francis, A. 2006. Project Performance Evaluation after the Planned Date Completion, internal technical note, Cavendish Boulevard Extension project, Division of Major Projects, Directorate of Transportation, Town of Montreal, December 12th, 2006. Henderson, K. 2004. Further Developments in Earned Schedule. The Measurable News, 15-22. Lipke, W. 2003. Schedule is different. The Measurable News, 10-15 Lipke, W. and Henderson, K. 2006. Earned Schedule: An Emerging Enhancement to Earned Value Management, CrossTalk, 19(11): 26-30 Lu, M. and AbouRizk. S.M. 2000. Simplified CPM/PERT simulation model. Journal of Construction Engineering and Management, 126(3): 219-226. Stratton, R.W. 2007. Applying earned schedule analysis to EVM data for estimating completion date. AACE International Transactions, EVM, 4:1-3. Vandevoorde, S. and Vanhoucke, M. 2006. A comparison of different project duration forecasting methods using earned value metrics. International Journal of Project Management, 24: 289-302. Zwikael, O., Globerson, S., Raz, T. 2000. “Evaluation of Models for Forecasting the Final Cost of a Project”. Project Management Journal, 31(1): 53-57.

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