A significant role of Project Management (PM) is managing the resources and tracking the progress of a project. With the thousands of tasks required to design, engineer and build a facility, it can be difficult to track progress and allocate resources effectively. Consequently, it is tough to quantify progress accurately, making it a challenge to paint a picture of exactly what percent completion has been reached, what there is still to complete, and what the final cost and start-up date will look like as the project nears completion.
AMG’s solution to the problem of accurate tracking & forecasting is utilizing Earned Value Management (EVM). EVM is a mechanism to help project managers effectively manage the project and to communicate to project stake-holders objective, period-driven cost and schedule performance data throughout the life of the project. The main purposes of EVM are to help control the project, to inform the project decision makers, and highlight cost and schedule issues early, allowing time to develop a recovery plan if necessary.
Measuring Progress and Assigning Value
With the use of Building Information Modeling (BIM) data growing in our industry, the art of business is becoming more and more of an exact science. The ever-expanding volume of BIM data allows increasingly accurate projections of resource requirements, timelines and project tasks, and allows managers and stakeholders to breakdown every aspect of a project to its basic blocks, resulting in increased detail and clarity.
Earned value metrics should be instituted as soon as possible after the project kickoff. AMG utilizes our proposal hours/cost estimating system as a baseline for generating the EVM tracking system. Project hours, costs and schedule are assigned to discipline specific engineering/design packages and entered into an EV metrics table to be used as the baseline for the project. This baseline will be used for comparison on cost/schedule trending & forecasting throughout the project. AMG has developed an assessment methodology that defines project milestones to be applied to each engineering/design package in determining EV progress for each specific package.
The Benefits of Earned Value
There is a lot that can be gained from itemizing your project and assigning value to each design package. Some believe, as AMG did many years ago, that if you spent 50% of the hours/dollars you are 50% complete. EVM considers what work was budgeted to be completed by a certain date, what the budgeted cost was for the work that actually has been completed at that date, and what the actual cost to date is. It looks at completion of work and the budget for that completed work and provides, through multiple calculations, cost and schedule performance indexes and variances, and an estimate to complete.
Here are some benefits of using Earned Value Analysis:
- Performance Indexes – Our EVM calculations summary provide two indexes that help project stakeholders quickly see the “health” of the project. The first is the Schedule Performance Index (SPI) and the second is the Cost Performance Index (CPI). An index value of 1.0 indicates performance as planned – less than 1.0 is performance less than planned. Both correlate actual to planned values.
- Tangible Flexibility and Better Budgeting – EVM forces the PM to schedule resources to every design package on a weekly basis from the beginning of the project. This helps management forecast against all active projects in house and also gives the customer an idea of the cost of the engineering for the reporting period (cash flow).
- Managing Expectations and Providing Transparency - EVM is about transparency, reporting and evidence. With the evidence and detail provided by an accurate analysis of all discipline-specific design packages, you can monitor trending and analyze variances fairly quickly.
- Spot Variances Early - Hand-in-hand with the previous benefits, EVM allows a project manager and the project stakeholders to identify and address variances quickly. EVM requires a routine review of all design packages for percent completion ensuring that each package’s design group gets a chance to provide feedback in regards to progress and information flow each reporting period.
- Forecasting/Trending – EVM includes a forecasting mechanism to help project managers evaluate future resourcing/costs for a given period and compare against previous reporting periods. Projects don’t always go as planned and forecasting against the project trend helps PM’s predict the future needs of the team and develop a recovery plan if necessary.
It is our goal at AMG to work along-side our customers as an extension of their engineering group or act as their Design/Build partner to help them be successful by completing the project scope safely, on time, and on budget. There is no task more paramount for our project managers than to effectively communicate with our customers and give them objective measures of status against the cost and schedule goals of the project. Giving your project a tool like Earned Value Management allows for more transparency of the details and flexibility about costs and schedule for finer, more granular reporting than ever before. Contact us at AMG today to find out how to integrate Earned Value Management into your projects today.