Standard Practices of Earn Value Management and It‟ s Impact on Construction Industry

Abstract

However during the last years, more and more project managers started to believe that EVM could also be a good technique for small and medium sized projects. This belief is only appropriate if some rules are taken into account. First it is interesting to increase the reporting cycle from months to weeks or even days for very small projects. Secondly it might be hard and expensive to calculate the actual cost on a daily basis. Then the compromise can be made to adjust the actual costs for example on a weekly basis while adjusting the schedule on a daily basis. Besides a study on projects with a cost of around $200.000 and length of only six months, revealed that EVM was very beneficial to these projects (Custers, 2008). Buyse, Vandenbussche (2010) satated, another finding concerning the duration of projects is that often projects get stuck at ninety percent completion. The last ten percent takes much longer than expected and costs much more than ten percent of the budget. This behaviour is called the '90 percent syndrome' and can be found across different types of projects and industries. This symptom can be explained by a common archetype from System Dynamics known as 'Shifting the Burden' (Winston and Maroulis, 1998). This relates to the time when activities are completed. Executing activities before they are scheduled can create rework later on in the project life and may be accumulated until the end of the project. This then causes the last ten percent to take ages. This can be seen as one of the main reasons why the p-factor, a recently proposed earn value measure is useful in following up a project.  Budget Projects are also characterized by a budget that is allocated to them. Although the influence of the budget is less crucial to the usefulness of EVM than that of the duration, it is also heavily discussed. The budget itself doesn't have an influence on the efficiency of EVM but EVM practitioners think it is not worthwhile to apply EVM on projects with a limited budget. However, this opinion is not realistic due to following reasons. Many project managers and people in general have the idea that EVM creates a lot of extra work which costs money. But actually most EVM key parameters already exist on most projects. The issue is just to find a common ground between the schedule and cost estimates of a project. For construction projects this connection is present in the public tender that is submitted by the company but afterwards this connection is neglected (Buyse, Vandenbussche 2010). Secondly there is the fear of having to change the organization of the company or project team when implementing EVM. This could require serious investments if it was really necessary. But this is not the case. EVM just requires that the functional organizational units within the company, which have a certain responsibility over the project, also show up on the project organization chart. A last thing that managers think will raise the costs of the project when implementing EVM is the need for a new software package. Most of the time these software packages are pretty expensive but such packages can be useful for large projects but are definitely not necessary. The straightforward calculations that are used by EVM can be easily done in Microsoft Excel.