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Topics: Earned Value Management, Government, IT Project Management
EVM question
Network:44



Thoughts please - we (government entity / client) want to measure performance on a fixed price contract project, The contractor has not added budget by task, resource rates or actual costs. I do have

gross contract price
budgeted hours by task (therefore budgeted hours for the project)
schedules start and stop
progress added weekly

Is an extrapolated cost per hour valid for calculating EV and PV (and everything that follows)? Is Earned schedule recommended?

TIA
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Network:96



Hello,

Yes you can, as soon as you don't mix currency and hours and not mixing hours scheduled for Equipments and Human Resources.

The Budgeted hour can be used to perform the index such us (CPI, SPI).

i.e
An activitiy name= Excavation of an hole - Duration 2 days (16h)
Planned Resources = 1 Excavator, 2 Helpers, 1 Operator)
Total (PV) = 3x8x2=48hous (HR) and 2x8=16Hours Equipment.
This baseline per Hours must be approved upfront assuming that for all completed works the EV will be equal to PV.

AC= 1 Excavator, 1 Helpers, 1 Operator)
As per timesheets 30hours HR and 15 Equipment

EV=PV=48 hours planned.

CPI= 48/30 = 1.6 , SPI=1,07 For Human Resources.
CPI= 16/15 = 1.07, SPI =1,07 For Equipments.
Network:44



As I thought - Thank You
Network:17



Earned value can provide a lot of useful information, even if you have a fixed price. You would start by setting up an earned value baseline in which the total earned value is equal to the fixed price of the contract (before you have signed the contract to do the work for the fixed price, if possible; though in bidding for the project your company would probably assess whether or not the fixed price is reasonable). Of course, the total cost is limited by the total earned value. Just setting up the earned value baseline is very helpful in organizing the project to ensure that you have your budget planned out, and that you can get the job done for the specified price. Of course, if in planning out the earned value baseline, you calculate that the costs would be greater than the fixed price, you would have to either find a way to complete the project more cost-effectively (somehow reduce labor costs, find a less costly way to complete some activity/activities, etc.), or let the customer know that the fixed price is not adequate to be able to do the work required. In setting up the baseline, also verify that the scope as provided has not expanded beyond what you had bid on.

Note that the EVM results still tell you how much you have completed vs. how much was planned to be complete, and whether you are keeping your costs within the planned budget. It can give you warning if any task within the contract is running over budget (which, in a fixed price contract is critical to know), and in general, how well you are managing your budget.

An extrapolated cost per hour can work if you don't have more details. Be sure that you are using the fully loaded cost per hour (i.e., include contractor benefits, general & administrative costs, any profit margin). If you are negotiating the price, this will ensure that the fixed price covers the labor costs to complete the project. As a contractor in the Washington, DC area, I can tell you that on many contracts, there are labor categories with a set price (e.g., senior mechanical engineer, $x/hour).
...
1 reply by Bruce A. Hayes
Jul 27, 2018 4:05 PM
Bruce A. Hayes
...
for me, the second paragraph states it all. It's another tool to compare the ideal with the actual. With this information you are able to see if trends are developing and if so, decide how to address the root cause of the situation.

Manda's comment gives us the correct math but Visswanathan's comment points out how an unscrupulous vendor might manipulate the EV. The EV can be "trued up" with the planned EV by just doing some future work now and hide a problem.
Network:5624



Agree with Manda
Network:404



In fixed price contracts, as the Employer is bothered about only the duration of the project and not the cost or the hours spent by Contractor employees, I suggest following to monitor the Schedule.

Earned Schedule and especially the SV and IEAC parameters for monitoring the works. You may implement ES as suggested above or you may give weightage based on activity duration. S-Curves..(cumulative wt. vs. time)

Monitoring the number of activities planned and completed in a given reporting period. This data is important to keep track of out of sequence activities. Some activities which were not scheduled in a reporting period may be started or achieved resulting in achievement of planned wt. This hides the planned activities which didnt start in that reporting period. So, it is important to monitor planned vs. started/closed activities in the reporting period.

Separate reporting of progress on CP activities.
Network:497



Jul 20, 2018 7:39 PM
Replying to Jay Goldberg
...
Earned value can provide a lot of useful information, even if you have a fixed price. You would start by setting up an earned value baseline in which the total earned value is equal to the fixed price of the contract (before you have signed the contract to do the work for the fixed price, if possible; though in bidding for the project your company would probably assess whether or not the fixed price is reasonable). Of course, the total cost is limited by the total earned value. Just setting up the earned value baseline is very helpful in organizing the project to ensure that you have your budget planned out, and that you can get the job done for the specified price. Of course, if in planning out the earned value baseline, you calculate that the costs would be greater than the fixed price, you would have to either find a way to complete the project more cost-effectively (somehow reduce labor costs, find a less costly way to complete some activity/activities, etc.), or let the customer know that the fixed price is not adequate to be able to do the work required. In setting up the baseline, also verify that the scope as provided has not expanded beyond what you had bid on.

Note that the EVM results still tell you how much you have completed vs. how much was planned to be complete, and whether you are keeping your costs within the planned budget. It can give you warning if any task within the contract is running over budget (which, in a fixed price contract is critical to know), and in general, how well you are managing your budget.

An extrapolated cost per hour can work if you don't have more details. Be sure that you are using the fully loaded cost per hour (i.e., include contractor benefits, general & administrative costs, any profit margin). If you are negotiating the price, this will ensure that the fixed price covers the labor costs to complete the project. As a contractor in the Washington, DC area, I can tell you that on many contracts, there are labor categories with a set price (e.g., senior mechanical engineer, $x/hour).
for me, the second paragraph states it all. It's another tool to compare the ideal with the actual. With this information you are able to see if trends are developing and if so, decide how to address the root cause of the situation.

Manda's comment gives us the correct math but Visswanathan's comment points out how an unscrupulous vendor might manipulate the EV. The EV can be "trued up" with the planned EV by just doing some future work now and hide a problem.
Network:32



Thomas, EVM can be implemented in a few different ways. People are always trying to use it to estimate final outcomes, but its best use is in providing an early warning of issues, and should be used that way, in my opinion. I've done this several ways -- all which give different absolute results, but more importantly, they all provide the same valuable early warning indications. We need to stay ahead of the Cost of Change Curve -- i.e., make necessary changes as soon as possible to keep the costs down, for as the project progresses the cost of change increases.

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