By José Luis Ponz-Tienda, PhD
This article exposes the principles of the budgeting and Earned Value Methodology (EVM), the process to apply it properly with Plexos project® and some warning to take into account for the correct interpretation of the results.
We wish that this example will be useful for all the Plexos´ fanatics.
The total scheduled production quantity is the estimated quantity of production prior to starting the execution of the project and is used to compute the Planned Value of the project.
Plexos project initializes this value when the user creates a new baseline and is assigned from the current values in the properties panel.
The Updated production quantity is the current and updated new quantity of production estimated at the control (t), and is the value that appears in the Remaining Budget (RB).
Plexos uses this value to compute how project performance deviates from the plan when is created a new control.
The Updated unit cost is the cost estimated at the control (t), and is the value that appears in the Remaining Budget (RB).
Plexos uses this value to compute how project performance deviates from the plan.
The Remaining Budget is the cost of the project pending to be executed, and is computed considering the updated production quantity, the Percent executed, and the updated unit cost for all the activities.
The columns bordered in red in the Remaining Budget panel corresponds to the Updated Production Quantity, the Percent executed and the Updated Unit Cost.
When a new baseline is added to the project, Plexos uses the Remaining Budget to build the Planned Value of the project, based on the current schedule, quantities, and costs of the activities.
The Percent executed is the actual production expressed in percent over the Updated Production Quantity.
Plexos uses this value to recompute the Remaining Budget (RB).
The three fundamental supports on which the EVM rests are the Planned Value (PV), the Actual Cost (AC) and the Earned Value (EV). The first two are equivalent to the forecast and what has been achieved, both in terms of cost and in terms of production, while the third is the real kernel of the EVM, on which the other elements are built: the Schedule Variation (SV) and Cost Variation (CV).
The PV, also known as Baseline or BCWS is a measure of the cost of work performed up to the control date (t). It indicates how much of the budget cost should have been achieved, according to the project baseline dates.
The AC is the total cost that is actually incurred for the work actually performed for each of the tasks of the project until the period of control.
The EV represents the value that the project should have at the control period (t) in terms of budgeted cost. It is calculated by multiplying the budgeted cost by the work actually performed.
Actual Cost plus Remaining Budget is the estimate of the final project cost given the past performance of the project (Actual Cost) plus the Remaining Budget computed with the Updated Unit Costs and the Updated Production Quantities of all the activities of the project.
The Schedule Variation is a measure of conformance of the actual progress against the budgeted schedule in terms of production at control t. It indicates the progress of production in units of Budgeted Unit Cost.
SV is calculated by the difference between the Earned Value in t and the Planned Value in t, and can produce to different scenarios: SV a positive value or SV a negative value.
When the SV is a negative value, the production of the project (activity or chapter) is under the expected production, or in other words, the analyzed entity is delayed (project, activity or chapter).
The Cost Variation is a measure of the budgetary conformance of the Actual Cost at control t.
CV is calculated by the difference between the Earned Value in t and the Actual Cost in t, and, as with the SV, can produce to different scenarios: CV a positive value or CV a negative value.
When the CV is a negative value, the costs of the project (activity or chapter) is over the expected costs, or in other words, the analyzed entity is in a cost overrun (project, activity or chapter).
The Schedule Performance Index (SPI) and the Cost Performance Index (CPI) are similar to the Schedule variance (SV) and Cost variance (CV), but expressed in a normalized way as the relation between the Earned Value (EV) and the Planned Value (PV) or the Actual Cost (AC).
For a proper comprehension of the previously exposed concepts, an example of application has been developed, not only to expose the principles of the budgeting and Earned Value Methodology (EVM), but the process to apply it properly with Plexos project® and some warning that must be taken into account for the correct interpretation of the results
The project consists of 10 activities organized in one critical path (Act-1, Act-2, Act-3, Act-4, and Act-10), and two non-critical paths, with two initial activities (Act-1 and Act-7) and one ending activity (Act-10).
The duration, Scheduled Production Quantity, and the Scheduled Production Quantity for the activities are exposed below:
Once the project is scheduled and the cost and quantities are assigned to the activities, the project baseline must be created making click over the Baseline button of the ribbon.
Then a dialog box appears for giving a name to the baseline. An unlimited number of baselines can be created for comparing the project performance with different scenarios.
At this moment, can be compared the current schedule with the desired baseline (the grey bar under the colored bars) in the Gantt chart.
To allow these features in the Gantt chart must be checked the Baseline, the Activity Progress, and the Earned Value options.
The values stored in the baseline/s can be changed if necessary, for example, due to new activities or incorrect values, by opening the context menu and selecting which values to change with the current ones.
Once the project baseline is created, the process of controlling the project can start, first by updating the activity values and finishing by creating the project control.
The activity values to be updated for each activity are:
When a control is added to the project, the current values in the properties panel are assigned to the control, as a picture of the state of the project at that moment. Later of adding the control, the values updated in the properties panel are only reflected in the remaining budget, not in the controls.
To illustrate the process, six controls have been considered in the project example.
In the first control, the activity Act-1 started on 12th December (two days after the scheduled starting date) and activity Act-7 on 10th December. The duration of Act-7 was updated to 14 days instead the 15 days scheduled previously.
The new Gantt chart with the current scenario compared to the baseline and the EVM values are shown below
The analysis of the EVM values must be made at least at three levels, at the project level, at the chapter level, and at critical activities level.
At the project level, we can analyze the complete project development, but it is necessary to analyze the evolution at the critical activity level, especially for the SV, to understand the real delay of the project.
In this case, at project level can be seen an SV of -4.000 economic units (EU), but an SV of -10.000 EU in Act-1 that is a critical activity, and reflecting the real project delay.
Additionally, the project presents a cost overrun, considering the production actually executed, of 8.000 EU.
In this control, the problem of analyzing the SV only at the project level is more evident, presenting a positive SV value of 3.500 EU, but an SV of -17.500 EU for Act-1. In other words, the real project delay produced by Act-1 (17.500 EU) is being biased by the Act-7 (21.000 EU). We are working hard, but not in the correct place.
In other hand, the CV offers a positive value of 11.500 EU that reflects a cost reduction for the actual production.
In control 3, The CV continues the positive sign (costs reduction) with a value of 9.000 EU, but a negative SV of 24.600 EU in all levels, which correspond with the delay observed in the Gantt chart.
Analyzing the EVM chart can be seen that the Actual Cost line (yellow) is below the EV in green (positive CV) and that PV (blue line) is over the EV (negative SV).
In control 4, two activities present a negative CV (Act-5 and 8), but the hole of the project offers a positive CV, due to the positive behavior of activities 1, 2 and 7.
Regarding SV, a delay of 16.500 EU is observed, continuing the delay presented in previous control.
In control 5, the comments are the same that in previous control, with positive values in the CV (costs reduction) and negative ones in the SV (time delay).
In this sixth control, only two activities are pending to be finished and the overall behavior of the project continues with a positive value for the CV and a negative one for the SV with around two weeks of time delay.
In this article an example of application of the EVM using Plexos project® has been exposed, showing the great advantages of this methodology, but also the limitations and warnings that must be taken into account for a proper understanding of the EVM indexes.
It is important to notice that controls are a picture of the project in a given moment, which values are obtained from the properties panel. Once created the control, the changes introduced in the properties panel are no reflected in the control, only in the Remaining Budget.
However, the values of each control can be modified by selecting the desired control and changing the corresponding values, that will not affect the values in the properties panel nor in the Remaining Budget.
Ponz-Tienda, J. L., Pellicer, E., & Yepes, V. (2012). Complete fuzzy scheduling and fuzzy earned value management in construction projects. Journal of Zhejiang University SCIENCE A, 13(1), 56-68.
Ponz-Tienda, J. L., Pellicer, E., Alarcón, L. F., & Rojas-Quintero, J. S. (2015). Integrating task fragmentation and Earned Value Method into the last planner system using spreadsheets. In Proceedings of the 23rd Annual Conference of the International Group for Lean Construction, Perth, Australia.