Project Management Central

Please login or join to subscribe to this thread

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
Sort By:
Network:91



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:0



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).
Network:4543



Agree with Manda

Please login or join to reply

Content ID:
ADVERTISEMENTS

"New York is my Lourdes, where I go for spiritual refreshment; a place where you're least likely to be bitten by a wild goat."

- Brendan Behan

ADVERTISEMENT

Sponsors