Earned value for construction teams, without the jargon
At the monthly meeting, the owner's representative asks whether the new fire hall is behind. You have spent 47% of the budget, and the schedule says half the work should be done by now. Neither number answers the question, because neither says how much work is actually in place.
Comparing spending with the schedule mixes two problems: working slower than planned and paying more than planned for the work done. Earned value separates them with three numbers taken at the same date. Planned value (PV) is the budgeted cost of the work scheduled to be done by then, earned value (EV) the budgeted cost of the work actually performed, and actual cost (AC) the actual cost of that work. Earned value comes from physical progress, not from money or hours spent.
Three numbers, two comparisons
- List the items you already budget: the schedule of values or the estimate's main items.
- Find PV: from the schedule, the budget of the work planned to be complete by the cut-off date.
- Find EV: each item's physical progress at the same date, times its budget, added up.
- Find AC for the same items and date from the job cost report.
- Compare: EV − AC is the cost variance and EV − PV the schedule variance; below zero is unfavourable. The cost performance index (CPI = EV ÷ AC) and schedule performance index (SPI = EV ÷ PV) are unfavourable below 1.0.
- Check the schedule before calling the job late: SPI compares dollars of work, not days, is independent of the critical path and reaches 1.0 at completion, late or not.
- Test your forecast: budget ÷ CPI estimates the final cost if cost performance continues; compare it with your cost-to-complete forecast.
Common mistakes
- Taking earned value from money or hours spent, which makes EV simply follow AC and hides the overrun.
- Calling the job late from SPI alone.
- Using different cut-off dates for progress and cost.
- Giving the owner indices without a sentence that says what they mean.
Checklist
Your monthly earned value check
- One cut-off date for progress and cost
- PV from the schedule
- EV from counted progress and item budgets
- AC for the same items
- CV, SV, CPI and SPI, each explained in a line
- Critical path checked before calling a delay
- Budget ÷ CPI against your own forecast
Check your understanding
Your SPI is 0.90, but every activity on the critical path is on time. What does that tell you?
