2020-03-15 application of earned value management …

DSpace Institution

DSpace Repository http://dspace.org

Construction Technology and Management Thesis

2020-03-15

APPLICATION OF EARNED VALUE

MANAGEMENT (EVM) ON

PERFORMANCE EVALUATION OF

INFRASTRUCTURE PROJECTS: A

CASE STUDY OF AMHARA ROAD

WORKS ENTERPRISE (ARWE)

CONSTRUCTION PROJECTS

Yitayih, Wollelaw

http://hdl.handle.net/123456789/10331

Downloaded from DSpace Repository, DSpace Institution's institutional repository

BAHIR DAR UNIVERSITY

BAHIR DAR INSTITUTE OF TECHNOLOGY

SCHOOL OF RESEARCH AND POSTGRADUATE STUDIES

FACULTY OF CIVIL AND WATER RESOURCE ENGINEERING

APPLICATION OF EARNED VALUE MANAGEMENT (EVM) ON

PERFORMANCE EVALUATION OF INFRASTRUCTURE PROJECTS:

A CASE STUDY OF AMHARA ROAD WORKS ENTERPRISE (ARWE)

CONSTRUCTION PROJECTS

By

Wollelaw Yitayih Tegegne

Bahir Dar, Ethiopia

July 30, 2019

APPLICATION OF EARNED VALUE MANAGEMENT (EVM) ON PERFORMANCE

EVALUATION OF INFRASTRUCTURE PROJECTS: A CASE STUDY OF AMHARA

ROAD WORKS ENTERPRISE (ARWE) CONSTRUCTION PROJECTS

By


A Thesis submitted to the school of Research and Graduate Studies of Bahir Dar Institute

of Technology, BDU in partial fulfillment of the requirements for the degree of Master of

Science in Construction Technology and Management in the Faculty of Civil and Water

Resource Engineering.

Advisor Name: Asregedew Kassa Woldesenbet, Ph.D., P.E.

Co-Advisor Name: Habtamu Lulseged (MSc.)

Bahir Dar, Ethiopia

July 30, 2019

ii

© 2019


ALL RIGHTS RESERVED

iv

ACKNOWLEDGEMENTS

Above all, I would like to say Glory to God for what he has done for me and giving me all

the strength to accomplish this task and throughout my life.

Next, I would like to express my gratitude and deep appreciation to my advisor, Asregedew

Kassa Woldesenbet, Ph.D., P.E. for his valuable comment, constructive suggestions and

insightful guidance during prepared this thesis paper.

I would like also to thank all Amhara Road Works Enterprise staffs and in particular Ato

Asmamaw and Ato Gebeyaw, for their keen interest and contributions for facilitating and

cooperation by providing the necessary information and data required for this thesis. It is

also my pleasure to thank all of the professionals in Consulting firms, Contractors and Client

representatives who made this thesis possible by responding to questionnaires.

I want to also acknowledge Bahir Dar University, Institute of Technology, School of Civil

and Water Resource Engineering for the financial assistance and Madda Walabu University

for sponsoring me to enroll in the MSc program.

Finally, I thank my parents and siblings as they have been involved in many ways in my

learning process, inspiration of the thesis result and their kindness and generosity.

v

ABSTRACT

The construction industry in Ethiopia is one of the major sectors that considering the rapid

growth, where public and private sectors are investing substantial amount of resource.

However, the performance of construction projects is non optimum. The causes for this

low performance may be attributed to improper planning, execution and monitoring

according to the required guidelines and best-practices in modern construction

management. So to achieving better performance, this study examines the applicability of

Earned Value Management (EVM) technique in measuring the performance and

forecasting of infrastructure projects as alternative means. EVM is a project monitoring

and controlling technique which integrates technical performance, cost, and schedule.

This paper investigates the usage and level of awareness of EVM through expert analysis

using questionnaire survey. The study revealed that key players in Bahir Dar construction

industry have very low usage and low level of awareness. A relatively low number of

stakeholders have applied some parts of EVM concepts in construction projects. The study

identified as potential barriers in using Earned Value. Few of this barriers are lack of EVM

expertise and experience, minimal awareness of EVM including training, low familiarity

with the EVM techniques and poor understanding of EVM. In addition, the application of

the technique is illustrated using two case studies on ongoing infrastructure projects.

Finally, the paper recommends a set of practices to overcome barriers and facilitate the use

of EVM. Thus, EVM can be a useful tool to monitor project status and forecast by

integrating cost and time.

Keywords: Project management, EVM, Earned value, Performance Evaluation, control

system

vi

TABLE OF CONTENTS

DECLARATION.............................................................. Error! Bookmark not defined.

ACKNOWLEDGEMENTS ............................................................................................ iv

ABSTRACT ........................................................................................................................v

TABLE OF CONTENTS ................................................................................................ vi

LIST OF ABBREVATIONS .............................................................................................x

LIST OF FIGURES ........................................................................................................ xii

LIST OF TABLES ......................................................................................................... xiii

CHAPTER ONE ................................................................................................................1

INTRODUCTION..............................................................................................................1

1.1. General ..................................................................................................................1

1.2. Statement of the Problems.....................................................................................2

1.3. Research Questions ...............................................................................................4

1.4. Objectives of the Study .........................................................................................4

1.4.1. General Objective ......................................................................................... 4

1.4.2. Specific Objectives ....................................................................................... 4

1.5. Theoretical Framework .........................................................................................5

1.6. Scope of the Study.................................................................................................5

1.6.1. Content Scope ............................................................................................... 5

1.6.2. Geographical Scope ...................................................................................... 6

1.7. Significance of the Study ......................................................................................6

1.8. Expected Result .....................................................................................................6

1.9. Structure of the Thesis...........................................................................................6

CHAPTER TWO ...............................................................................................................8

LITERATURE REVIEW .................................................................................................8

2.1. Introduction ...........................................................................................................8

2.2. Earned Value Management (EVM).......................................................................8

2.3. Origins and Evolution of EVM ...........................................................................10

2.3.1. History of EVM development ..................................................................... 10

vii

2.3.1.1. Industrial Engineering Origins ................................................................ 10

2.3.1.2. Program Evaluation and Review Technique ........................................... 11

2.3.1.3. Cost/Schedule Control Systems Criteria (C/SCSC) ................................ 11

2.3.1.4. EVMS Standard....................................................................................... 11

2.4. EVM Terminology ..............................................................................................13

2.4.1. Key Parameters of EVM ............................................................................. 14

2.4.2. Performance Measure ................................................................................. 15

2.4.3. Predicting the Future with EVM ................................................................. 17

2.5. Earned Value Method..........................................................................................22

2.6. Project Management ............................................................................................23

2.7. Construction Project Management ......................................................................24

2.7.1. Project Time management .......................................................................... 25

2.7.2. Project Cost Management ........................................................................... 26

2.8. Traditional Cost Management vs. Earned Value ................................................27

2.8.1. Simple Deviation Analysis ......................................................................... 27

2.9. EVM and the Project Management Process ........................................................28

2.9.1. Project Planning Process ............................................................................. 30

2.9.2. Project Execution Process ........................................................................... 30

2.9.3. Project Monitoring and Controlling ............................................................ 30

2.10. Construction Performance Measure Using Earned Value Technique .................32

2.11. Current Status of Earned Value Management (EVM) ........................................34

2.12. Early Warning Tool .............................................................................................35

2.13. Problems Associated with Earned Value ............................................................36

2.14. Implementation Requirements and Benefit of the EVM .....................................38

2.15. Research Gap.......................................................................................................41

2.16. Summary of Literature Review ...........................................................................42

CHAPTER THREE .........................................................................................................43

METHODOLOGY ..........................................................................................................43

viii

3.1. Introduction .........................................................................................................43

3.2. Research Design ..................................................................................................43

3.2.1. Survey Research Design ............................................................................. 44

3.2.2. Case Study .................................................................................................. 44

3.3. Sampling Technique ............................................................................................45

3.4. Methods of Data Collection and Source of Data.................................................45

3.4.1. Literature Review........................................................................................ 46

3.4.2. Questionnaire Survey Method .................................................................... 46

3.4.3. Interview Method ........................................................................................ 46

3.5. Data Analysis ......................................................................................................46

3.5.1. Analysis of Quantitative Data ..................................................................... 46

3.5.2. Analysis of Qualitative Data ....................................................................... 47

3.6. Measurement of Variables ..................................................................................47

3.7. Reliability Test ....................................................................................................48

CHAPTER FOUR ............................................................................................................49

DATA ANALYSIS AND DISCUSSION ........................................................................49

4.1. Introduction .........................................................................................................49

4.2. Interview Result and Discussion .........................................................................49

4.3. Survey Result and Discussion .............................................................................52

4.3.1. Section A: Background Information ........................................................... 52

4.3.2. Section B: Earned Value Survey ................................................................. 57

4.3.3. Section C: Respondents Level of Agreement ............................................. 61

4.4. Practical Application of Earned Value Management ..........................................67

4.4.1. Methodology ............................................................................................... 68

4.4.2. Case Study One ........................................................................................... 68

4.4.3. Case Study Two .......................................................................................... 81

CHAPTER FIVE .............................................................................................................87

CONCLUSIONS AND RECOMMENDATIONS .........................................................87

ix

5.1. Findings ...............................................................................................................87

5.2. Recommendations ...............................................................................................90

5.3. Suggestions for Future Research .........................................................................90

Bibliography .....................................................................................................................91

APPENDIX .......................................................................................................................97

Appendix A: Survey .......................................................................................................98

Appendix B: The results of reliability test (Cronbach's Alpha) of questionnaire ........104

Appendix C: Interview Guide ......................................................................................107

Appendix D: Results of Practical Application .............................................................108

Appendix E: EVM Acronyms ......................................................................................112

Appendix F: ANSI/EIA-748 EVMS Criteria ...............................................................113

Appendix G: ANSI/EIA-748 EVMS Criteria in Five categories .................................115

x

LIST OF ABBREVATIONS AC Actual Cost

ACP Accomplishment/ Cost Procedure

ACWP Actual Cost of Work Performed

ANSI/EIA American National Standards Institute/Electronic

Industries Alliance

ARBDSWE Amhara Road and Building Design and Supervision

Works Enterprise

ARRTO Amhara Rural Road Transport office

ARWE Amhara Road Works Enterprise

APM Association of project management

ATC Actual time expended for the work to date

BAC Budget at completion

BCWP Budgeted Cost of Work Performed

BCWS Budgeted Cost of Work Schedule

CBC Cumulative Budgeted Cost

CPI Cost Performance Index

CPM Critical Path Method

CSF Critical Success Factors

CSPC Cost and Schedule Planning and Control

C/SCSC Cost & Schedule Control Systems Criteria

CV Cost Variance

DOD Department of Defense

EAC Estimate at completion

EACt Estimate at Completion time

ED Earned duration

ERA Ethiopian Roads Authority

ES Earned Schedule

xi

ETC Estimate to Complete

EV Earned Value

EVA Earned Value Analysis

EVM Earned Value Management

EVMS Earned Value Management System

GDP Gross Domestic Product

LSE London School of Economics

MoWUD Ministry of Works and Urban Development

MS Mean Score

NDIA National Defense Industry Association

PCWR Planned Cost of Work Remaining

PERT Program Evaluation and Review Technique

PMB Performance Measurement Baseline

PMBOK Project Management Body of Knowledge

PMI Project Management Institute

PMP Project Management Program

PMs Project Managers

PV Planned Value

RM Risk Management

SPI Schedule Performance Index

SPSS Statistical Package for Social science

SV Schedule Variance

SWOT Strengths, Weaknesses, Opportunities, Threats

TCPI To Complete Performance Index

TV Time Variance

WBS Work Breakdown Structure

VAC Variance at Completion

xii

LIST OF FIGURES

Figure 1. 1 Framework showing relationship between EVA and project performance...... 5

Figure 2. 1 EVM progress timeline....................................................................................13

Figure 2. 2 EVM and the basic project management process ........................................... 32

Figure 2. 3 EVM performance measure ............................................................................ 16

Figure 2. 4 EVM graph including trend analysis .............................................................. 20

Figure 3. 1 Research Methodology Flow chart ..................................................................44

Figure 4. 1 Firms Years since Establishment.....................................................................53

Figure 4. 2 Firms Classification ........................................................................................ 54

Figure 4. 3 Respondents’ Age ........................................................................................... 54

Figure 4. 4 Respondents’ Gender...................................................................................... 55

Figure 4. 5 Techniques used to Track Project Costs and progress ................................... 57

Figure 4. 6 Respondents’ Recommendation to Measure Performance on Construction

Projects .............................................................................................................................. 58

Figure 4. 7 Participant Opinion on the Value of EVM ..................................................... 58

Figure 4. 8 Participant Reasons for Using EVM .............................................................. 59

Figure 4. 9 Participant Reasons not using EVM ............................................................... 59

Figure 4. 10 Project Cost Monitoring Method of Participants ......................................... 60

Figure 4. 11 Earned Value as a new Estimate Value on Top of Plan Value and Actual

Cost ................................................................................................................................... 61

Figure 4. 12 Project Location Map ................................................................................... 69

Figure 4. 13 S-Curve for the Cumulative Cash Flow ....................................................... 71

Figure 4. 14 Graphical Analysis of Cumulative Planned Value, Earned Value and Actual

cost (As of July 30, 2018) ................................................................................................. 72

Figure 4. 15 Cumulative Cost Variance at Various Status Months .................................. 74

Figure 4. 16 Cumulative Cost Performance Index at Various Status Months .................. 74

Figure 4. 17 Cumulative Schedule Variance at Various Status Months ........................... 77

Figure 4. 18 Cumulative Schedule Performance Index at Various Status Months ........... 78


Cost (As of August 30, 2018) ........................................................................................... 82

Figure 4. 20 Graphical Representation of Cumulative Cost &Schedule Performance Index

........................................................................................................................................... 83

Figure 5. 1 SWOT analysis of EVM ..................................................................................89

xiii

LIST OF TABLES

Table 2. 1 Interpretation of basic EVM performance measures ....................................... 17

Table 2. 2 Forecasting indicators by EVM Technique ..................................................... 19

Table 2. 3 Overview EVM metrics ................................................................................... 21

Table 2. 4 EVM and basic project management questions ............................................... 22

Table 2. 5 EVM and project management process ........................................................... 29

Table 2. 6 Problems Related to EVM Implementation .................................................... 38

Table 2. 7 Differences with EVA and without EVA ........................................................ 41

Table 3. 1 Interpretation of Alpha..................................................................................... 48

Table 4. 1 Respondents Interview Result in Percentage ................................................... 51

Table 4. 2 Questionnaire Response Rate .......................................................................... 53

Table 4. 3 Respondents’ Position in the Company ........................................................... 55

Table 4. 4 Respondents’ level of education ...................................................................... 56

Table 4. 5 Experience of the Respondents’ ...................................................................... 56

Table 4. 6 Participants Level of Agreement on their Knowledge about EVM ................. 62

Table 4. 7 The Level of Organization able to provide up-to Date Information ................ 63

Table 4. 8 Contribution of using EVM for Project Control Purpose ................................ 63

Table 4. 9 Barriers of Company to Practice EVM ............................................................ 64

Table 4. 10 Success Factors for EVM Implementation .................................................... 65

Table 4. 11 Cronbach's Alpha for each section of the questionnaire ................................ 67

Table 4. 12 Cumulative Earned Value (EV) Cost Analysis .............................................. 73

Table 4. 13 Cumulative Earned Value Schedule Analysis ............................................... 76

Table 4. 14 Problems encounter on the project ................................................................. 79

Table 4. 15 Project Comparative Findings ....................................................................... 80

Table 4. 16 Cumulative Earned Value Analysis ............................................................... 81

Table 4. 17 Cumulative EVM Performance Indexes ........................................................ 83

Table 4. 18 Cumulative Cost and Schedule Analysis ....................................................... 84

Table 4. 19 Project Comparative Findings ....................................................................... 85

Table B- 1: SPSS result of reliability test for contribution of using EVM for project

control purpose.................................................................................................................104

Table B- 2: SPSS result of reliability test (Cronbach's Alpha) for Barriers of Company to

Practice EVM .................................................................................................................. 105

Table B- 3: SPSS result of reliability test (Cronbach's Alpha) for Success Factors for

EVM Implementation ..................................................................................................... 106

1

CHAPTER ONE

INTRODUCTION

1.1. General

The construction industry in Ethiopia is one of the major sectors that considering the rapid

growth, where public and private sectors are investing substantial amount of resource.

According to Zewdu and Aregaw (2015), the GDP contribution of the industry has raised

to 5.6% and approaches to sub-Saharan average of 6%. However, the performance of the

industry is non optimum when it comes to construction project management practices. It is

said to harbor many inefficiencies and ineffectiveness in its delivery system and processes

(MoWUD, 2001). These inefficiencies result in a significant impact on the country’s socio-

economic growth.

Solomon (2015) argues that one of the causes for the inefficiencies is the lack of proper

planning, execution and monitoring of projects according to well-accepted guidelines of

construction management. This attributes to the lack of trained personnel, non-appreciation

of the importance of proper planning and monitoring schemes to improve performance and

the lack of appropriate guidelines in the managing various processes.

Solomon (2015) describes that the most commonly used way of evaluation of projects with

respect to time and cost are direct deviation analysis and Earned Value Analysis (EVA)

technique. This study assesses the applicability of EVM technique in measuring the

performance and forecasting of infrastructure projects. Naderpour and Mofid (2011) state

that Earned Value Analysis (EVA) is a technique that can effectively monitor and control

construction projects by integrating cost, time and technical performance and act as project

control method. EVA allows the calculation of cost and schedule variances and

performance indices and forecast project cost and schedule duration. Khamidi et al. (2011)

also argue that EVA is a worldwide technique adopted by many developed countries

including United States, United Kingdom, Australia and South Korea.

2

According to PMI (2005), Earned Value Management (EVM) is one of the most effective

performance measurement and feedback tools for managing projects. It enables managers

to close the loop in the plan-do-check-act management cycle. EVM has been called

‘‘management with the lights on’’, because it can help clearly and objectively illuminate

where a project is and where it is going as compared to where it was supposed to be and

where it was supposed to be going. It focuses on project evaluation and control system,

measuring project progress performance against a project plan to ensure that the project is

completed on time, within budget and meet users need. A good project evaluation and

control system should also provide project managers with advance warning of potential

problems and indications of project performance, before it is too late to correct them (PMI,

2005). Thus, EVM is a powerful quantitative technique for objectively monitoring project

progress.

1.2. Statement of the Problems

Project managers are always looking forward to see projects perform well with success.

This involves finishing projects on time, within budget, meeting end product specifications,

customer needs & requirements and management objectives (Cooke-Davies, 2003).

However, this is not the case as complains of exclusion are still reported. According to

Muhwezi and Otim (2014), the delays and cost overrun are attributed to poor project

management, inaccurate estimation, inappropriate construction method and delayed

payments.

The main reason that initiated this research is the finding of a recent study at the London

School of Economics (LSE) in UK that reported the management practice in Africa is poor

as compared to Europe and North America. According to the report, Ethiopia is the second

from last followed by Mozambique (Matters, 2014), which indicates that the management

practice in Ethiopia is even far behind from those poor performing developing countries in

Africa. Typically, Tadesse A. (2016) states the level of construction project management

practice in terms of adapting general project management procedures, project management

functions, tools & techniques to be unsatisfactory. Particularly the level of practice in terms

3

of time, cost and risk management are the most challenging issues for construction industry

professionals in managing their day to day’s activities in Ethiopia.

In the same way Pär Karlsson (2011) Ethiopian construction companies often have no well-

developed methods to control their projects. Project control is not prioritized and problems

are solved as when it is occurring rather than by controlling the project to avoid problems.

This causes several problems in the Ethiopian projects that could have been avoided if an

efficient project control were conducted.

In this regard clients, consultants and contractors in the Ethiopian construction industry

have continuously focused their attention in adapting EVM. However, its application for

project evaluation and control technique has not well-developed in Ethiopia, specifically

in Bahir Dar. Thus, this study examines the practical application of Earned Value

Management (EVM) technique in measuring the performance and control system of

ongoing road infrastructure construction projects constructed by Amhara Road Work

Enterprise. Based on a review of certain documents and preliminary interview with few

project managers in Bahir Dar, implementing and maintaining accurate monitoring and

control system is one of the challenges faced by management in road infrastructure

projects. Currently, the industry uses both simple deviation analysis and partially

implement Earned Value Analysis for monitoring and controlling project costs.

In simple deviation analysis, graphic presentation of costs and benefits over time are

represented, while in EVA, existing performance measuring techniques used on

construction projects practice, is the difference between the amounts of work executed to

the amount of total expense in order to indicate profit and loss. This only considers cost

component. Typically, EVM adds schedule and a third parameter on the amount of work

accomplished or the value of work performed, referred as Earned Value. Comparing the

EV to the plan value and actual cost, a project manager can identify whether a project is

ahead or behind schedule and over budget or under budget at any time. Besides, current

practices do not relate any current performance trend to forecast future performances. Thus,

the usage of project performance monitoring and forecasting tool has been limited. Because

of this limitation, this study focuses on evaluating the concept of Earned Value Analysis

4

for monitoring and controlling of projects. It also examines factors that hinders its adoption

in Bahir Dar Road constructions.

1.3. Research Questions

In relation to the above highlighted focus area, the study tries to address the following

research questions:

1. What are the current management (monitoring and controlling) practices method

and their drawback?

2. What factors hinder the use and application of EVM in Bahir Dar Road

Construction Projects?

3. What are the critical success factors (CSF) for EVM implementation?

4. What is the relationship between Earned Value Management (EVM) technique and

performance of Amhara Road Work Enterprise infrastructure construction project?

1.4. Objectives of the Study

1.4.1. General Objective

The general objective of this study is to examine the applicability of EVM

technique in measuring the performance and forecasting of infrastructure projects

both time and cost.

1.4.2. Specific Objectives

The study also achieves the following specific objectives:

Determine current monitoring and controlling practices of construction project

management method and major drawbacks in the context of EVM techniques

Identify factors that hinder the usage and application of EVM.

Identify critical success factors for EVM implementation

Assess the relationship between EVM technique and performance of project in Amhara

Road Work Enterprise.

5

1.5. Theoretical Framework

According to Ng shi cia (2015) analyzed related to independent variable which is EVA and

dependent variable is cost performance in construction project. But in this research, it was

developed the independent variable is Earned Value Analysis, while the dependent

variables are key performance indicators of construction projects focus on two dimensions

namely cost and time performance. The relationship between EVA and project

performance in construction project is shown in Figure 1.1.

Independent variable Dependent variable

Figure 1. 1 Framework showing relationship between EVA and project performance

1.6. Scope of the Study

1.6.1. Content Scope

The scope of this research focuses on examining the relationship between EVM technique

and project performances. The variables and case study considers the relationship between

EVM techniques and performance of infrastructure construction projects constructed by

Amhara Road Works Enterprise (ARWE).

Earned Value Analysis Performance of Construction

Project

Implementation of EVA in Construction

Project

Early Warning Tools

Project Status Indicator

Earned Value Forecasting

Parameter

Performance of Construction Project

Cost & Schedule Variance

Cost & Schedule Performance

Index

Estimate at Completion &

Estimate to Completion

6

1.6.2. Geographical Scope

The study is carried out within Bahir Dar city and is focused mainly on road infrastructure

construction projects.

1.7. Significance of the Study

This study will give construction sector a guideline on how to measure cost and time

performance and project progress using Earned Value Analysis. Implementing of EVA in

a construction project serves as a guidance in improving cost performance by providing

feedback. Timely and targeted feedback can enable project managers to identify problems

early and make adjustments to keep projects on time and budget. Thus, EVM uses

fundamental principle to project managers that shows patterns and trends in the past and

can be good predictors of the future. In addition, the study helps construction parties, policy

makers, government and other stakeholders use the findings to make improvement within

the industry and make good decisions.

This study can also help researchers explore challenges, barriers and application of EVM

techniques and make further investigation on the subject matter.

1.8. Expected Result

The study is expected to reach the objectives thereby increasing the usability of EVA in

Bahir Dar road construction projects. It is expected to provide a better view on the

relationship between Earned Value Analysis and performance. This study can also supply

a guideline to construction managers in measuring project performance and forecast using

Earned Value Analysis.

1.9. Structure of the Thesis

This research paper is organized into five chapters that will move the reader from an

introduction of Earned Value Management and the processes involved with establishing

this analysis tool and how it can be utilized using Amhara Road Works Enterprise

7

infrastructure projects. Projects from two Amhara Road Works Enterprise construction will

be utilized to highlight the analysis possibilities that could be realized. Finally, the research

wraps up with conclusions and recommendations for future research.

Chapter 1: Introduction to the subject of Earned Value Management, research questions,

objectives of this paper and purpose are outlined.

Chapter 2: In this chapter, the supporting literature review on EVM and closely related

topics and details including the evolution of Earned Value Management; the basic elements

involved in analyzing data and project management questions; and how EVM can answer

this question are addressed. This chapter also presents and outlines the steps required in

implementing an Earned Value Management System and performance measurement tools

for calculating and analyzing project data.

Chapter 3: Is dedicated to the methods undertaken in using Earned Value analysis.

Chapter 4: In this chapter, analysis of survey results on project management practitioners

experience on project control practices, attitudes towards EVM, barriers that could impede

the full implementation of the Earned Value approach and success factors to implement

EVM for this barriers. This chapter also assess the practical application of the methodology

identified in this paper is presented and reviewed along the relationship implication of

performance of road infrastructure construction project and Earned Value Management

techniques in the context of Amhara Road Work Enterprise construction projects.

Chapter 5: Finally, concludes the paper and recommends areas for future research.

8

CHAPTER TWO

LITERATURE REVIEW

2.1. Introduction

This chapter reviews relevant existing literature on EVM concept and its applicability of

EVM technique on measuring the performance of construction projects and overall project

management. The chapter is divided into different section in a sequential manner:

definition and origins of EVM, performance analysis and forecasting, how EVM can

answer project management questions, an outline of knowledge gaps and finally synthesis

of the literature review addressed by this study.

2.2. Earned Value Management (EVM)

Earned Value Management (EVM) is a technique that project management practitioners

have developed to measure project performance and progress based on a combination of

schedule, costs, and work performed with a focus on early warning of trends in either of

these areas. Through EVM’s advancement, various definitions have been provided by

various institutions, organizations and researchers. Some of important definitions of

Earned Value management referred in the published literatures are:

1. Project Management Institute (PMI) - PMI defines Earned Value management

(EVM) as “a management methodology for integrating scope, schedule, and

resources, and for objectively measuring project performance and progress.

Performance is measured by determining the budgeted cost of the work performed

(i.e. Earned Value) and comparing it to the actual cost of the work performed (i.e.

actual cost). Progress is measured by comparing the Earned Value to the planned

value” (PMI, 2004). This definition is actually quite limited, for EVM comprises

not only those three comparisons, but also the use of those three measures to create

variances, indicators, and forecasts of project performance and progress. Note that

9

PMI uses the term performance to describe the resource (cost) efficiency, and

progress to identify the schedule (time) efficiency.

A project evaluation and control system measure project progress performance

against a project plan to ensure that the project is completed on time, within budget

and to meet of users need. A good project evaluation and control system should be

also providing project managers with advance warning of potential problems,

before it is too late to correct them. EVM is a powerful quantitative technique for

objectively monitoring the physical project progress. It enables measuring actual

work performance and associated cost and time versus an agreed plan. It also gives

early indications of project performance to highlight the need for eventual

corrective action (PMI, 2005).

2. NASA defines it as “an integrated management control system for assessing

understand and quantifying what a contractor or filed activity is achieving with

program dollars. EVM provide project management with objectives, accurate and

timely data for effective decision making” (Henderson & Zwikael, 2008).

3. Association for Project Management (APM) – APM defines EVM as “a project

control process based on a structured approach to planning, cost collection and

performance measurement. It facilitates the integration of project scope, time and

cost objectives and the establishment of a baseline plan for performance

measurement.” (APM, 2006).

4. MS Project - The user guide for Microsoft Project defines Earned Value as “a

method for measuring project performance (Uyttewaal, 2003). It indicates how

much of the budget should have been spent, in view of the amount of work done so

far and the baseline cost for the task, assignment or resources”. Earned Value

analysis is a method of performance measurement and program management

technique that uses work in progress to indicate what will happen to work in the

future. It is also system for planning and controlling the project cost performances.

EVM establish work packages Earned Value base line by integrating project scope,

time schedule

5. Researchers - Englert and associates define it as “A method for measuring project

performance. It compares the amount of work that was planned with what was

10

actually accomplished to determine if cost and schedule performance is as

planned” (Englert and associates, 2000). Earned Value project management is well

known management system that integrates cost, schedule and technical

performance. It allows the calculation of cost and schedule variances and

performance indices and forecasts the project cost and schedule duration

(Naderpour and Mofid, 2011).

Richard states that "Earned Value Management is the use of an integrated

management system that coordinates work scope, schedule, and cost goals and

objectively measures progress toward these goals. Earned Value Management

(EVM) emphasizes the planning and integration of a program's technical

performance, cost, and schedule, to support program manager's decisions." Beside

it uses progress against previously defined work plans to forecast such important

concerns as estimated completion costs, finish dates, and the effectiveness of

corrective action plans. Earned Value is the measurement of what was physically

received for what was actually spent, or the value of work accomplished (Richard,

2001).

The most adopting definitions of EVM is it is a management methodology that combines

scope, schedule, and resource measurements to assess project performance and progress,

by the integration of the three key elements of projects which are schedule, work scope,

and cost.

2.3. Origins and Evolution of EVM

2.3.1. History of EVM development

2.3.1.1. Industrial Engineering Origins

EVM was initially conceived by industrial engineers in the USA, such as Fredrick W.

Taylor, Henry L. Gantt, and others in late 19th century (Fleming & Koppelman, 2005).

They compared ‘planned standards’ with ‘earned standards’ and ‘actual expenses’ in their

early concepts, and identified ‘cost variance’ as the difference between the actual costs of

performing work, and value of the achievements according to their estimated or budgeted

11

costs (Moski, 1951). The Earned Value approach was found to be more valuable in a

project environment – rather than ongoing operations (Fox, 1996).

2.3.1.2. Program Evaluation and Review Technique

PERT was introduced by the US Navy in 1958. The technique simulated development

planning with a logic diagram, and could assess statistical probability of achieving the

project plan objectives. Unfortunately, computers were not widely available to implement

the complex PERT calculations. The PERT approach was not as successful as the Critical

Path Method (CPM) which was being used in construction at the time. PERT/Cost in 1962

included calculation of actual cost, and comparison of that with the value of work

performed (now EV) to indicate cost status. It also compared value of work performed with

the cost and work value budget (now PV) to show schedule status (Paige H., 1963).

PERT/Cost was ultimately not widely adopted, but its underlying concepts became the

basis for EVM.

2.3.1.3. Cost/Schedule Control Systems Criteria (C/SCSC)

Initiated by US Air Force in 1965, C/SCSC included Earned Value methodology

(Christensen, 1990) . It was later developed by US Dept. of Defense (DoD) in 1967 and

applied to new weapons systems development, such as the Minuteman Missile program.

C/SCSC established 35 criteria or standards for compliance by industry contractors, and

provided DoD with some assurance of the final cost of new systems on open-ended

contracts. At the same time, corporations in the USA were investigating planning and

control systems such as Cost and Schedule Planning and Control (CSPC) (Saitow, 1969)

and the Accomplishment/ Cost Procedure (ACP) (Block, 1971) for reporting cost and

schedule to executive levels in meaningful ways. Both of these approaches have marked

similarities to EVM techniques.

2.3.1.4. EVMS Standard

The Earned Value Management System (EVMS) was developed by US industry

associations in 1996, with the National Defense Industry Association (NDIA) as the lead.

12

In the process, the team rewrote and simplified the 35 criteria in C/SCSC into 32 criteria,

but retained the essential components. Some key terms were renamed (e.g. BCWS to

Planned Value) in order to increase acceptance in industry. At the same time, many

practitioners and academics were documenting the costs and benefits of EVM.

(Christensen, 1998). The EVMS standards were issued (NDIA, 1998) by ANSI/EIA

(American National Standard Institute / Electronic Industry Association) and were

subsequently adopted by the Project Management Institute as a Practice Standard (PMI,

2005).

DoD came up with criteria for how to do cost and schedule control systems. As this was

documented and refined, it became widely accepted in the commercial world. In its current

state, it is an ANSI standard (748) – referred to as the Earned Value Management Systems,

or EVMS. EVMS has 32 guidelines that was summarized into five major areas:

1. Organization (5 guidelines)

2. Planning, Scheduling and budgeting (10 guidelines)

3. Accounting Considerations (6 guidelines)

4. Analysis and Management Reports (6 guidelines)

5. Revisions and Data Maintenance (5 guidelines)

The Project Management Institute (PMI) recently updated their Project Management to

include more of the EVM basics but did not include all 32 guidelines. It is often debated

whether all 32 guidelines are even needed to do EVM (Deltek, 2008). In place of these 32

criteria, the PMI-EVM provides in its Chapter 4 Guidance for the use of EVM Practices a

simplified set of ten practices in two groups (PMI, 2005). It shows the interdependence of

the fundamental practices of EVM and project management. Those are summarized as:

A. Establish a performance measurement baseline (PMB)

1. Decompose work scope to a manageable level

2. Assign unambiguous management responsibility

3. Develop a time-phased budget for each work task

4. Select EV measurement techniques for all tasks

13

5. Maintain integrity of PMB throughout the project.

B. Measure and analyze performance against the baseline

6. Record usage during project execution

7. Objectively measure the physical work progress

8. Credit EV according to EV techniques

9. Analyze and forecast cost/schedule performance

10. Report performance problems and/or take action

The project manager can use EVMS as a guideline to manage the project and Earned Value

Analysis technique to measure the project performance. Generally, EVM progress timeline

can be show in the following Figure.

PERT/Cost in 1962

C / SCSC ………..1967-1996

EVMS; ANSI / EIA Standard in 1998

Simplified EVM Terminology, published by PMI in 2000

Practice Standard for EVM published by the PMI in 2005

Figure 2. 1 EVM progress timeline

2.4. EVM Terminology

PMI (2005) classifies EVM terminology into two categories: (1) key parameters of EVM,

including Planned Value (PV), Earned Value (EV) and Actual Cost (AC), and (2) EVM

14

measures (variances, indices and forecasts). Key parameters are straightforward in their

formulation.

2.4.1. Key Parameters of EVM

2.4.1.1. Planned Value (PV)

It is also known as the Budgeted Cost of Work Scheduled (BCWS), represents an initial

estimate for planned work. It is the typical information provided on Project Budgets and

produced by estimating departments. It is provided by quite well established procedures to

evaluate planned costs and has been incorporated by EVM to enhance the set of tools their

practitioners are able to offer in their consulting work. It is based on a Project Breakdown

Structure that does not necessarily follow the set of operations that would flow on site. Site

planning will inform the expected amount of budgeted work that should be accomplished

according to a progress elapsed duration.

2.4.1.2. Earned Value (EV)

It is also known as Budgeted Cost of Work Performed (BCWP), represents the amount of

work that has actually been accomplished to date, expressed as the initial budget for that

work. For the moment, it should be mentioned that such figures of Planned and Earned

amounts to be called value should be at least correct in terms of estimating procedures.

Moreover, if it is to represent value for the client, this can only be accepted with the indirect

help from microeconomics: if it has rationally been accepted as the amount of money to be

paid for the project, total estimated price and value might be equated according to client’s

views.

2.4.1.3. Actual Cost (AC)

It is also known as the Actual Cost of Work Performed (ACWP), represents true cost of

work performed to date. In order to provide feedback information on actual costs, planning

and control systems should be equipped with company accounts linkages or other

mechanism to estimate and take notice of real costs (PMI, 2005), (Fleming and Koppelman,

2010). The timely evaluation of actual costs might prove to be a major burden to apply

15

EVM. It can be said that during the course of a project only estimates of real costs are

available, with their inherent probability nature in terms of accuracy.

2.4.2. Performance Measure

EVM measures, the second category of terms to be defined, make use of a combination of

previous key parameters.

2.4.2.1. Schedule Variance (SV)

Schedule Variance (SV) is calculated as SV= EV – PV. It represents how much the project

is ahead (SV>0) or behind (SV<0) schedule. As both EV and PV use cost estimates taken

from the initial budget, SV takes care of time performance. Notwithstanding, it might

happen that the project is taken as behind schedule (EV<PV) due to errors in the initial

budget. Suppose that a great number of out of schedule activities was performed but their

cost was underestimated and that overestimated scheduled activities were left behind. SV

calculations will inform that a great amount of costs should be already allocated, due to the

overestimated scheduled activities, what will not be compensated by the underestimated

out of schedule activities that were actually performed.

2.4.2.2. Cost Variance (CV)

Cost Variance (CV) CV is calculated as CV= EV – AC. It represents how much the project

is under (CV > 0) or over budget (CV < 0) (PMI, 2005); (Fleming and Koppelman, 2010).

It essentially measures cost variations, but is also subjected to errors for initial estimates in

connection to EV. As AC should be evaluating with real costs during various stages of

construction, there is a burden on the cost control system to produce such figures, what

might end up in calculating AC through another set of estimates of actual costs.

2.4.2.3. Schedule Performance Index (SPI)

Schedule Performance Index (SPI = EV/PV) represents the rhythm of production, i.e., the

rate of converting planned cost into Earned Value. It provides the same information as SV,

but now in relative terms. It varies around 1: SPI greater than one indicates that time

16

performance is better than expected. Sources of inaccuracy for this index are the same as

discussed for SV.

2.4.2.4. Cost Performance Index (CPI)

Cost Performance Index (CPI=EV/AC) represents how efficiently resources are being

used. CPI represents the rate of converting AC in EV (PMI, 2005), (Fleming and

Koppelman, 2010). A CPI smaller than 1 indicates that the project is heading to a cost

overrun, since what has been achieved do not correspond to what has been estimated, for

the same set of activities. The only explanation is that costs are increasing in comparison

with what has been estimated, or as before for CV, activities whose costs are added up to

comprise EV were overestimated in the initial budget. The following figure shows the

relationships among the basic EVM performance measures. These variances, indices, and

forecasts can be used to answer the key project management questions raised Table 2.4.

Figure 2. 2 EVM performance measure (Source: PMI, 2005)

The following Table 2.3 shows what EVM performance measures indicate about a project

in regard to its planned work schedule and resource budget.

17

Table 2. 1 Interpretation of basic EVM performance measures

2.4.3. Predicting the Future with EVM

All of the performance measures help PMs to monitor the progress of the project both from

a cost and schedule point of view. Therefore, EVM acts as an early warning system that

helps PMs to solve problems and exploit opportunities during project execution. Besides,

these measures and indicators are also used to make predictions about the future

performance of the project. However, the construction cost estimation practice in Ethiopia

clearly indicates that the knowledge and experience of construction cost estimation of the

contractors and consultants is very poor. This poor construction cost estimation practice

has contributed its own negative impact on development of the construction industry. Due

to this most contractors are delivering poor quality and delayed projects as well as suffering

bankruptcy. There are also cases whereby projects are executed at excessively higher

construction costs from time to time (Tadesse Y. , 2006). The next section will describe

how cost and time forecasts are made using EVM.

2.4.3.1. Cost forecasting

First of all, the predictive power of the cost performance measures is considered. Here the

focus lies on predicting the final cost of the project. This final cost will be referred to as

the Estimate at Completion (EAC). The EAC consists of the Actual Cost (AC), the cost

that has been spent so far and an estimate of the cost of the remaining work (Estimate to

Performance measures Schedule

Cost

SV>0& SPI>1.0 SV=0&SPI=1.0 SV<0 &SPI<1.0

CV>0 & CPI>1 Ahead of schedule

Under budget

On schedule

Under budget

Behind schedule

Under budget

CV=0 &

CPI=1.0

Ahead of schedule

On budget

On schedule

On budget

Behind schedule

On budget

CV<0 &

CPI<1.0

Ahead of schedule

Over budget

On schedule

Over budget

Behind schedule

Over budget

18

Completion, ETC). In some literature, ETC is also referred to as Planned Cost of Work

Remaining (PCWR). It can be calculated as follows:

𝐸𝑇𝐶 = ((𝐵𝐴𝐶 − 𝐸𝑉))/( 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒 𝑓𝑎𝑐𝑡𝑜𝑟)

Several different formulas exist to calculate the EAC, depending on the performance factor

that is used to calculate the ETC.

2.4.3.2. Duration forecasting

EVM provides an organization with the capability of practicing ‘‘management by

exception’’ on its projects. This practice contributes greatly to the efficiency and

effectiveness of project management, by allowing managers and others to focus on project

execution and invoke control actions only when and where they are needed (PMI, 2005).

EVM has also been used to predict the final duration of projects. This is done analogue to

forecasting the EAC. It can be calculated as follows:

𝐸𝐴𝐶𝑡 = (BAC/SPI )/(BAC/months)

Generally, in the following table the forecasting methods can be summarized.

19

Table 2. 2 Forecasting indicators by EVM Technique (Source: PMI, 2005)

Indicator Equation Interpretation

Budget at

Completion

(BAC)

-

BAC represents total budget at completion; at

completion

PV=BAC

Estimate to

complete

(ETC)

𝐸𝑇𝐶 = 𝐵𝐴𝐶 − 𝐸𝑉 Cost to complete the project if all packages

remain achieving the goals of time and cost,

irrespective of what happened to EV

𝐸𝑇𝐶 =𝐵𝐴𝐶 − 𝐸𝑉

𝐶𝑃𝐼

Cost to complete the project assuming that

current cost performance will remain the same (as

occurred up to EV) throughout the rest of the

project

𝐸𝑇𝐶 =𝐵𝐴𝐶 − 𝐸𝑉

𝐶𝑃𝐼 ∗ 𝑆𝑃𝐼

Cost to complete the project assuming that

current performance cost and schedule

performance will remain the same as occurred up

to EV throughout the rest of the project

Estimate at

completion

(EAC)

𝐸𝐴𝐶 = 𝐴𝐶 +(𝐵𝐴𝐶 − 𝐸𝑉)

CPI

= 𝐵𝐴𝐶/𝐶𝑃𝐼

Future cost performance will be the same as all

past cost performance

EAC=AC+(BAC−EV)∗(ACi+ACj+ACk)

(EVi+EVj+EVk)

Future cost performance will be the same as the

last three measurement periods (i,j,k)

𝐸𝐴𝐶 = 𝐴𝐶 +(BAC − EV)

(CPI ∗ SPI)

Future cost performance will be influenced

additionally by past schedule performance

𝐸𝐴𝐶 = 𝐴𝐶 +(BAC − EV)

0.8 ∗ CPI + 0.2SPI

Future cost performance will be influenced

jointly in some proportion by both indices

Estimate at

completion

(EACt)

𝐸𝐴𝐶𝑡 = BAC/SPI

BAC/months

The estimated completion time for the project if

the work continues at the current rhythm

Variation at

completion

(VAC)

𝑉𝐴𝐶 = 𝐵𝐴𝐶 − 𝐸𝐴𝐶

Cash balance at completion

20

According to Richard states analyzing the cause of a variance, the project manager can

identify significant differences between the planned and actual cost performance.

Generally, a negative variance can be viewed as bad and a positive variance as good,

although this may not always be the case. For example, a positive variance may be caused

from the contractor's front-loading of schedule of values, thereby robbing resources

intended for later tasks. Another indicator of problems during variance analysis is if no

variances are reported over several periods. This can indicate a lack of tracking on the

contractor's part since it is difficult to forecast work with such accuracy. During analysis,

if the cumulative CV and SV both reflect negative trends, the task being performed may

be very complex, the contractor may have underestimated the scope of the task, or the

method of calculating Earned Value may not fully take credit for work as it is performed.

Positive values for both variances may be due to good contractor performance, a simple

task, or an overly generous contractor estimate for the effort (Richard, 2001).

Figure 2. 3 EVM graph including trend analysis (taken from the Earned Value

management: APM Guidelines, 2008)

21

The above Figure demonstrates the performance of the project using the Earned Value data

elements. It provides a quick view of project status and predicting trends and may be used

as bases for forecasting the project end conditions. It can also include if required the EAC

and the forecast completion date for the previous reporting periods. This include EVM

main variables, variances and forecasting simulations.

An overview of all EVM key parameters, performance measures and forecasting indicators

can be summarized in Table 2.7, which was found in the book “Measuring Time”

(Vanhoucke, 2010).

Table 2. 3 Overview EVM metrics (Source: Vanhouke Mario, 2010)

Earned Value key parameters

Planned value (PV)

Actual cost(AC)

Earned Value (EV)

Earned schedule (ES)

Earned Value Performance Measure

Cost performance index (CPI)

Cost variance (CV)

Schedule performance index

(SPI)

Schedule Variance (SV)

Schedule performance

index (SPI(t))

Schedule Variance (SV(t))

Translation to time units

Time variance (TV)

Earned duration(ED)

Earned Value Forecasting Indicators

Cost

Estimate at completion(EAC)

Duration

Estimate at completion

(EAC(t))

Duration

Estimate at completion

(EAC(t))

22

2.5. Earned Value Method

Earned Value method (EVM) is a systematic approach to the integration and measurement

of cost, schedule, and technical (scope) accomplishments on a project or task. It provides

both the government and contractors the ability to examine detailed schedule information,

critical program and technical milestones, and cost data. It supplies organizations with the

methodology needed to integrate the management of project scope, schedule, and cost

(PMI, 2005).

EVM focus on forecasting final costs and project duration, what is deemed crucial to alert

managers and enforce their reaction to overcome delays and cost overruns. Management

tools that might bring project again on schedule are not provided by the EVM technique,

but it might be taken that they do not exceed what is normally available in the manager’s

tool box. This is to say that the analysis of variations and a clear display of project goals

are the key elements to trigger standard management efforts that would naturally induce

appropriate decisions leading to project success (PMI, 2005), (Acebes et al., 2013). EVM

can play a crucial role in answering management questions that are critical to the success

of every project. The following Table 2.2 shows the relationship between those project

management questions and the EVM performance measures.

Table 2. 4 EVM and basic project management questions (Source: PMI, 2005)

Project management question EVM performance measures

How are we doing cost wise? Cost analysis & forecasting

o Are we under or over our budget? o Cost variance (CV)

o How efficiently are we using our resource? o Cost performance index (CPI)

o How efficiently must we use our remaining

resource?

o To complete performance index (TCPI)

o What is the project likely to cost? o Estimate at completion (EAC)

o Will we be under or over budget? o Variance at completion (VAC)

23

o What will the remaining work cost? o Estimate to complete (ETC)

How are we doing time wise? Schedule analysis & forecasting

o Are we ahead or behind schedule? o Schedule variance (SV)

o How efficiently are we using time? o Schedule performance index(SPI)

o When are we likely to finish work? o Time estimate at completion (EACt)

According to PMI (2005), if the application of EVM to a project reveals that the project is

behind schedule or over budget, the project manager can use the EVM methodology to help

identify:

Where problems are occurring?

Whether the problems are critical or not

What it will take to get the project back on track?

2.6. Project Management

The PMBOK have defined a project as “a temporary endeavor undertaken to create a

unique produce, service or result” (PMI, 2004) and “unique, transient endeavors

undertaken to achieve a desired outcome” (APM, 2006). Project Management is the

planning, organizing, directing, and controlling of company resources for a relatively short-

term objective that has been established to complete specific goals and objectives

(Kerzener, 2001).

Kerzner has defined a project more specifically, as “any series of activities and tasks that

(1) have a specific objective to be completed within certain specifications, (2) have defined

start and end dates, (3) have funding limits (if applicable), (4) consume human and non-

human resources, and (5) are multi-functional (i.e. cut across several functional lines)”

(Kerzner, 2003). Those five characteristics respectively lead to: dedicating resources for

their completion, time schedules for their organization, relationships between their

components, responses to their uncertainty and the communication between their

24

stakeholders. The study will examine all of those items in this thesis, through the lens of

project performance management.

Project management institute addresses EVM in its Chapter 7 on Project Cost

Management. The section on Cost Control identifies five tools and techniques: Cost

Change Control System; Performance Measurement Analysis; Forecasting; Project

Performance Reviews; Project Management Software; and Variance Management (PMI,

2004). Since all of those techniques are directly or indirectly related to Earned Value

methods.

2.7. Construction Project Management

According to Gower (2007) the purpose of project management is to “foresee or predict as

many of the dangers and problems as possible and to plan, organize and control activities

so that projects are completed successfully in spite of all the risks”. This need plans early

before resources committed there is need of organization to have management technique,

and the process must continue until all work is finished. So Earned Value management

technique to an organization may be able to help the organization. However, the level of

construction project management practice in terms of adapting general project management

procedures, project management functions, tools & techniques to be unsatisfactory in

Ethiopian construction industry (Tadesse A. , 2016). Particularly the level of practice in

terms of safety, risk and time management was found to be very low. This result also

agreed with Hailemeskel, who states from the Ethiopian construction industry context of

management control practice of the researcher conducted to the following conclusions

(Hailemeskel, 2013).

There is lack of modern Scheduling techniques, planning and evaluation practice at

project level.

Project management and control capability in terms of time, manpower, material,

finance, and quality control are not up to standard.

There is lack of knowledge for project control and management tasks.

25

There are no well-developed procedures, guidelines and standards for project

management

Besides Kerzner, state that “the project manager must control company project resources

within time, cost, and performance and most companies have six resources those are

Money, Manpower, Equipment, Facilities, Materials and technology” (Kerzner, 2003).

Even if Heagney argue that the role of the project manager is to help the team get the work

completed (Heagney, 2012).

2.7.1. Project Time management

PMI defines project time management as the effective and efficient use of time to facilitate

the execution of project, which starts from planning, scheduling and controlling the project

to achieve the time objectives (PMI, 2004). It includes the processes required to ensure

timely completion of the project (Duncan et al., 1990).

Techniques that are usually used in managing project time are as follow:

Critical Path Methods (CPM); Calculated a single, deterministic early and late

start and finish date for each activity based on specified, sequential network logic

and a single duration estimate. The focus of CPM is on calculating float in order to

determine which activities have the least scheduling flexibility (Clough, 2000).

Program Evaluation and Review Technique (PERT); uses sequential network

logic and weighted average duration estimate to calculate project duration.

Although there are surface differences, PERT differs from CPM primarily in that

uses the distribution’s mean (expected value) instead of money likely estimate

originally used in CPM (PMI, 2004).

Bar Chart; it’s the simplest project management technique for scheduling,

planning and controlling. It shows graphically or in tabular form the daily costs and

accumulated costs over a designated period. In projects of normal delivery or stable

performance, the general contractor creates the bar chart once an award is made and

each bar represents the beginning, duration and completion of some designated

26

segment of total project. Together, the bars make up a time schedule for the entire

job (Ritz 1994 & Degoff et, 1999).

2.7.2. Project Cost Management

Project cost management includes the processes required to ensure that the project is

completed within the approved budget (Duncan et al., 1990). Although management

discretion may occasionally dictate otherwise, an effort is usually made to achieve gains in

time with the least possible increase in project cost. If project management has to make

schedule adjustments at an additional cost, it is necessary to understand how the costs of

construction operations vary with time (Clough, 2000).

Two techniques that are usually used in managing project cost are as follow (Clough,

2000):

Cash Flow; One of managing cash flow activities is to make sure that there is still

enough money to cover the cost of performing project-employees’ payment,

charges for material, subcontractor invoices and others suitable with the established

estimation. The key to manage cash flow is to ensure that cash comes in balance

with what goes out. Key effective in cash flow control is aggressively addressing

negative cost variance and cost inefficiencies as soon as they are identified, rather

than hoping that things will get better as the project goes on. Even when projects

have only positive cash flow and cost variances, it is important not to let that flow

and variance become worse. A concentrated effort should be made to keep it that

way because as stated above it becomes difficult to get back on track.

Cost Plan; (Spinner, 1997) mentioned that the cost planning starts with the

proposal for the project. The cost section of a proposal may consist of tabulations

of the contractor’s estimated costs for such elements as labors, materials,

subcontractors, equipment and others. In addition, the proposal might also include

an amount for contingencies, to cover unplanned expenses. It can conclude that cost

plan is the task of allocating sums to the various project activities scheme from

starting the first task to finishing the last one.

27

Once the project starts, it is necessary to keep track of actual cost and committed cost so

that they can be compared to cumulative budgeted cost (CBC). After this has been done,

the project cost performance can be analyzed by looking at the total budgeted cost, the

cumulative budgeted cost, the cumulative actual cost and the cumulative Earned Value.

They are used to determine whether the project is being performed within budget and

whether the value of the work performed is in line with the actual cost. So in order to meet

this requirement EVM techniques fundamentally applicable.

2.8. Traditional Cost Management vs. Earned Value

Under what Fleming & Koppelman (2005) describe as traditional cost management, a two-

dimensional approach is employed: the simple relation of planned costs to the actual costs.

Using this approach, it is difficult if not impossible to determine the true cost performance,

since a comparison between the budgeted plan and actual costs can be faulty and

misleading. Beside these are Variance or Deviation Analysis based on direct differences or

Earned Value analysis between planned and actual conditions (Harrison, 1997). This study

called these two project performance analysis approaches as Simple Deviation Analysis

and Earned Value Deviation Analysis. Harrison presented the various and commonly used

simple deviation analyses and claimed that these are inadequate, often misleading and

sometimes meaningless.

2.8.1. Simple Deviation Analysis

Time Performance: Scheduled start or finish time against Actual start or finish time;

Schedule date of a milestone against Actual date when the milestone was reached;

Cost Performance: Budgeted cost against Actual Cost; Measured value against Actual

cost; Budgeted man-hour against actual man-hour; Budgeted unit cost against Actual unit

cost; Budgeted percentage completion against Actual percentage completion.

Harrison indicated that simple deviation analysis does not use sufficient information to

determine performances. Harrison generally put forward the following limitations in using

simple deviation analysis.

28

It is historic than forward looking.

It does not indicate performances clearly.

It is not sensitive enough for early gauging.

It does not use all the data available.

It requires considerable subjectivity for interpretation.

It falls short of integrating cost and time performance criteria.

It falls short of indicating accountability and responsibility.

In contrast, Earned Value project management adds a third dimension: the amount of work

accomplished or the value of the work performed. With this third dimension, a project

manager has a better measure of "what they got for what they paid." By comparing the

Earned Value to the planned cost for a given period, the project manager can now identify

whether the project is ahead or behind schedule. Similarly, by comparing the Earned Value

to the actual costs expended during a given period, a determination of whether the project

is underrunning or overrunning its budget can be made (Fleming & Koppelman, 2005).

2.9. EVM and the Project Management Process

EVM is a comprehensive methodology used to manage projected efforts. The methodology

addresses many project management areas, including project organization, planning,

scheduling and budgeting, accounting, analysis, reporting, and change control (Flemming,

1998). EVM also incorporates specific mechanics to include the use of the work breakdown

structure (WBS), performance curves (S-curves), as well as a defined set of performance

metrics. EVM is among the first project management methodologies to be codified by

national standards setting organizations (ANSI/EIA, 1998).

In order to meet the requirement of the project, project management process is

accomplished through the following sequential and intergraded project phases (PMBOK,

2008); (Williams, 2008), (Bower, 2007) and (PMI, 2005). Initiating, Planning, Executing,

Controlling and close out. The effective use of EVM requires that it is used on projects

where the principles of good project management, as outlined in A Guide to the Project

Management Body of Knowledge (PMBOK_ Guide), are being applied. To establish a

29

basic foundation for understanding EVM’s role in effective project management, it is

important that examine the relationship between EVM and the PMBOK_ Guide’s Project

Management Process Groups and Knowledge Areas. Project management is primarily a

matter of planning, executing, and controlling work (PMI, 2005). The following table

indicates the areas of project management to which EVM is fundamentally most applicable.

Table 2. 5 EVM and project management process (Source: PMI, 2005)

Knowledge Areas Process Groups

Initiating Planning Executing Controlling Closing

Integration Ҳ Ҳ Ҳ

Scope Ҳ Ҳ

Time Ҳ Ҳ

Cost Ҳ Ҳ

Quality

Human Resources

Communication Ҳ Ҳ Ҳ

Risk Ҳ Ҳ

Procurement Ҳ Ҳ

Key

One or more project management process where EVM is fundamentally applicable

One or more project management process for which EVM is of little significance

No project management process is mapped here

Project management institute states that, these criteria are very important, they shall be

read, studied and applied as key procedures to achieve success in the application of EVA.

Ҳ

30

2.9.1. Project Planning Process

In the planning process, the means for assessing physical work progress and assigning

budgetary Earned Value also needs to be established. In addition to routine project

management planning, Earned Value measurement techniques are selected and applied for

each work task, based on scope, schedule, and cost considerations. According to PMI

(2005), project planning is mostly a matter of determining:

What work must be done (scope) and in what pieces (work breakdown structure)

Who is going to perform and manage the work (responsibility assignment matrix)

When the work is going to be done (schedule)

How much labor, materials, and related resources the work is going to require

(cost).

2.9.2. Project Execution Process

In the project execution process, EVM requires the recording of resource utilization (i.e.,

labor, materials, and the like) for the work performed within each of the work elements

included in the project management plan. In other words, actual costs need to be captured

in such a way that permits their comparison with the performance measurement baseline.

Project execution is primarily a matter of doing the planned work and keeping workers and

managers informed (PMI, 2005).

2.9.3. Project Monitoring and Controlling

Project control focuses mostly on monitoring and reporting the execution of project

management plans related to scope, schedule, and cost, along with quality and risk. In other

words, project control is a process for keeping work performance and results within a

tolerable range of the work plan. In the project control process, EVM requires that physical

work progress be assessed and budgetary Earned Value be credited (using the selected

Earned Value measurement techniques), as prescribed in the project management plan.

With this Earned Value data, the planned value data from the performance measurement

baseline, and the actual cost data from the project cost tracking system, the project team

31

can perform EVM analysis at the control account and other levels of the project work

breakdown structure, and report the EVM results as needed (PMI, 2005).

Controlling is a combination of two elements: monitoring and taking corrective action

(PMI, 2004). PMI defines control as “comparing actual performance with planned

performance, analyzing variances, assessing trends to effect process improvements,

evaluating possible alternatives, and recommending appropriate corrective action as

needed.” Therefore, monitoring, controlling and evaluation is contingent of the

appropriateness of the plan (base line) against which performance is compared with. In this

regard, ERA’s practices, both in terms of its baseline establishment and performance

evaluation and taking corrective actions has considerable drawbacks when compared to

this best practices (Solomon, 2015). The key performance indicators used the planned

values against which performance is compared are not established systematically. Solomon

states in ERA’s case as well, although the contractors produce the work programs (with

associated resource deployments schedule) and reporting may reveal that such programs

are not being implemented, timely corrective actions are not taken.

The selection of a project control system is an important element in the management of a

project or program (Shtub et, 2005) and the lack of such systems has been identified with

a major role as a cause of project failures (De Falco & Macchiaroli,, 1998) . However,

EVM was developed by the US Department of Defense (DoD) as a project control system

that specifically integrated the time and cost dimensions. Abba, states that a work

breakdown structure (WBS) is used to provide the integration necessary between these two

very different dimensions (Abba, 1997). A WBS requires the hierarchic structuring of the

project using its major components and subcomponents. The lowest level of the WBS is

the work package, which comprises a set of related tasks to be performed by a single

organizational unit (PMI., 2001).

Some attention has been paid to determining the optimum size of such work packages (Raz

& Globerson, 1998) in order to maximize benefits while minimizing the necessary

administrative effort. As a performance management methodology, EVM adds some

critical practices to the project management process. These practices occur primarily in the

32

areas of project planning and control, and are related to the goal of measuring, analyzing,

forecasting, and reporting cost and schedule performance data for evaluation and action by

workers, managers, and other key stakeholders. See the following Figure 2.2

Figure 2. 4 EVM and the basic project management process (Source: PMI, 2005)

Once the project comes to an end, the closure must be planned and scheduled, monitored

and controlled-as if it is a project in its own right. This administrative closure work is

carried out in addition to the activities already planned to complete the production of

project deliverables (Frigenti and Comninos, 2002). It is also emphasized that both of these

plans need to be monitored and controlled to ensure timely and effective completion of the

project.

2.10. Construction Performance Measure Using Earned Value

Technique

EVA is a valuable technique to determine real gains and losses on projects and provides a

means to balance gains/losses and maximize the gains. EVA is a powerful tool to control

simultaneously physical and cost performance. It provides integrated schedule (time),

progress and cost management information related to scope and procurement, quality and

risks (Carlos, 2004). On the other hand, Kerzner considers EVA a relevant maturity

differential in project management. Managing costs using EVA is referred to as “managing

with open eyes” because the manager can clearly see what was planned, what was

performed and the actual costs. This is a powerful tool in the decision making process. In

Plan

Scope

Schedule

cost

Control

Measure

Analyze

report

Execute

Work

Record

33

the day-to-day activities of the project manager, EVA provides “alarm” signals and

facilitates decisions that keep the project on time and on budget (Kerzner Harold, 1998).

Kerzner (2003) recognizes the value of EVM as a risk monitoring tool. Specifically, “it

provides a basis to determine if risk handling actions are achieving their forecasted results”.

EVM allows the performance and progress of a project to be assessed at a single point in

time, usually repeated on a regular basis such as weekly or monthly. Projects are composed

of many activities (sometimes hundreds or thousands) with differing durations and start

times. Therefore, at any point during the project some activities have been completed, some

are underway, and some have not been commenced. The only possible exception arises

when a project is divided into separate phases that do not overlap, and the point of EV

assessment happens to coincide with the period of inactivity between those phases. At that

instant, it would be possible for no activities or work to be in progress.

Raveesh L. & Sundip S., (2015) states Earned value is a project control technique which

provides cost and schedule performance measurements. It compares actual

accomplishment of scheduled work and associated cost against an integrated schedule and

budget plan. EVM provides project managers and the organization with triggers or early

warning signals that allow them to take timely actions in response to indicators of poor

performance and enhance the opportunities for project success. Once a project has

advanced to a stage of performance, the consistent and constant flow of information on the

true status of the project is essential. The fundamental principle of EVM is that the patterns

and trends of performance, when compared against a soundly developed baseline, can be

excellent predictors of the future project performance. Feedback is critical to the success

of any project. Getting the relevant feedback in time enables project managers to identify

problems early and make adjustments that keeps a project on time and on budget. So one

of the most effective performance analysis and feedback tools for controlling construction

projects is EVM.

34

2.11. Current Status of Earned Value Management (EVM)

Ng shi cia (2015) express that nowadays, the EVM is an effective performance monitoring

tool and valuable in any type of projects. The EVM becomes the great need for current

project management environment because of cross-industry collaboration. EV practice has

adopted widely in defense, energy, product, and software development projects.

According to Kim et al., (2003) stated that 82% of project managers that has used the EVM

is accepted or strongly accepted the methodology. There are many EVM users either fully

or partially implemented or computerized to help the EVM processes. The EVM was

strongly accepted by the project manager is a proof that the EVM can effectively manage

well the project performance. Bower (2007) indicated in 1995 International Performance

Management Council was created by the defense departments of Australia, Canada, and

the USA to facilitate mutual development in the EVM field. Today, Australia and Canada

have adopted this technique by establishing the US similar EV criteria and industry

standards in government and private sectors (Bower, 2007). Furthermore, Japan joined the

EVM community through its Ministry of Construction (Song, 2010). In European

countries, the EVM techniques were widely adopted in UK and Sweden (Ng shi cia, 2015).

However, De Marco & Narbaev (2013) stated that the construction industry is still facing

difficulties to adopt the EVM in the project that can help managers to effectively monitor

the project and predicting the result of the project. In order to enhance the adoption of EVM

in the construction industry, the choice of EVM form with an appropriate selection of its

criteria is very important in order to monitoring and controlling the project well. There are

many proper selections of EVM practice standards such as PMI,2011, ANSI/IEA-748 (the

US National Defense Industrial Association), DoD's C/SCSC (the US DoD), and similar

EVM guides for the UK, Australia, and Canada (Song, 2010).

As a project management its application is not common in practical for project evaluation

and control technique in Bahir Dar construction industry. The study identifies the reasons

for this limited adoption, their practice to improvements of EVM and increase its

acceptance for the application of Earned Value concept. When the researcher conducted

35

preliminary interview with few road construction project managers in Bahir Dar there is

lacks of construction monitoring &controlling techniques. If this problem is not well

addressed, it may lead project delays, cash flow problems and does not meet users need

due to the lack of provide serviceability of the road on the schedule time. In order to solve

these problems, a substantial effort on managing the construction process must be provided

and could not be done without an effective performance monitoring tool. Widespread,

using of EVM techniques the study measures the performance of the project in progress,

and provides forecasts of the final results for two key dimensions of the project – time and

cost – at its completion. On that basis, EVM is useful control and communication technique

that should assist management in achieving the successful completion of the selection

project.

2.12. Early Warning Tool

Time and cost overrun usually occur in the beginning of the project but the project manager

do not realize until they cannot achieve the objective of the project (Alvardo and David,

2004). However, PMI states in order to minimize the time and cost overrun, EVA as a

project monitoring tool to monitor the progress of the projects. By using EVA, the project

manager can examine the true performance of the project to know the latest progress of the

project and identify the problem of the project. Earned Value provides an "Early warning"

signal for do corrective action. Early warning signal is given a notice to the project

managers when the project is in a trouble situation. This can provide alerts to the company's

management to avoid some crisis in the project.

Project managers can manage the project by referring the objective cost and time estimated

which can enhance the probability of the project success. Since Feedback is critical to the

success of any project. Timely and targeted feedback can enable project managers to

identify problems early and make adjustments that can keep a project on time and on

budget. Earned Value Management (EVM) has proven itself to be one of the most effective

performance measurement and feedback tools for managing projects (PMI, 2005). EVM

uses the fundamental principle that patterns and trends in the past can be good predictors

36

of the future. The Earned Value metrics are set up as a warning signal to detect in an easy

and efficient way in the project.

Furthermore, early warning signal can help the project team to reduce the risk or

uncertainty in the project. The project manager can have a clear picture about the current

stage of the project and know the current risk may occur in the project. The warning signal

can alert the project manager to do the contingency plan in order to mitigate the risk that

happen in the project. This can support by Ng shi cia (2015) as EVA act as an early warning

project management tools to identify the problem before loss control.

2.13. Problems Associated with Earned Value

There are numerous factors or resistance that could have slowed the adoption of EVM.

This resistance is associated with a perception that the planning work and control rise in an

unjustifiable way, when using EV techniques. Antvik states that the resistance comes from

a cultural process of informality in the control of projects (Antvik, 1998). Brandon (1998)

identified several reasons for the lack of EVM adoption outside government agencies. (1)

Minimal awareness of EVM in commercial and corporate circles, including training

courses; (2) Data acquisition (for obtaining percent complete and actual cost numbers)

requires significant resources and time; (3) EVM reporting has not been handled in an

easily implemented manner; and (4) Significant employee resistance problems have

surfaced when EVM is put in place.

There have been many studies about the utility of EVM. Thamhain evaluated the popularity

of different project management practices. He surveyed 400 professionals who lead 180

projects (as managers, directors, etc.) in Fortune-1000 companies. They were asked about

the popularity and value of various performance evaluation techniques. A significant group

(41%) of the respondents stated that they had used EVM. However, when he asked about

value of the technique they placed EVM at a level below almost all of the techniques listed

(Thamhain, 1998). In attempting reconcile this apparent contradiction, Thamhain states

that the low utilization can be attributed to these barriers:

37

Lack of comprehension of how the technique works

Anxiety concerning the adequate use of the tool

Use of the tool requiring a lot of work and time consumption;

Tools trimming creativity in the use of other strategic

Inconsistency of the tool in managerial procedures/business processes

Method of control as a threat, concerning the freedom of the team

Vague and inaccurate purpose and its benefit

High cost of its implementation

Unsuccessful prior experience in the use of other techniques

Low familiarity with the technique

Fleming and Koppelman found that difficulty in applying EVM is about an adequate work

breakdown structure (WBS). If the work is subdivided in small packages of work, it will

represent a high cost of control and a lot of paperwork (Fleming and Koppelman, 2009).

On the other hand, a badly stratified subdivision may represent an inaccuracy of data,

concerning real costs and deadlines. This confirmation may be proved in the low

application of the Earned Value analysis in technology and marketing areas, where the

creative work is the variant in a scope previously defined, making its application limited

and directly related to the stability of a defined scope (Peterson & Oliver, 2001). They state

that, the more short-term projects grow, with reduced team and a generically defined scope,

the more the Earned Value Analysis, is not viable, due to inaccurate projections,

consequence of a badly defined scope and to high costs noticed by the entrepreneurs.

In the same way, Earned Value analysis is an adequate tool for the generation of reports of

work done, but not a managerial tool. They stated that an Earned Value analysis shows

only the performance obtained until that point – not the future forecast of the project

(McKay.J., & Marshall. P,, 2001). On the other hand, the empirical studies revealed that a

number of factors may impede the implementation of EVM, which is stated by the

following researcher: (Association National Security Industrial, 1980); (Little Inc., 1983 );

(Kim et al., 2003); (Brock, 1983); (Butler et al., 1993); and (Fleming and Koppelman,

2010).

38

Table 2. 6 Problems Related to EVM Implementation

2.14. Implementation Requirements and Benefit of the EVM

Flemming (1998) identified some of the essential requirements for proper implementation

of EV on all projects. The most important requirement is to have a clearly defined Work

Scope at the onset through establishment of a detailed and priced Work Breakdown

Structure (WBS); then establish an integrated bottom-up plan with scheduled Work

Packages that have estimated costs and resources, and estimated completion duration; and

Project Control through Measurements against Schedule: Project’s schedule performance,

project’s cost efficiency, and forecasting the final cost periodically. On the other hand, the

accuracy of estimated data and actual data and the time intervals for measuring are of

Problems related to EVM

Items taken /adapted from

Ass

oci

atio

n N

atio

nal

Sec

uri

ty I

ndu

stri

al,

19

80

Lit

tle

Inc.

, 1

98

3 &

198

4

Kim

et

al.,

20

03

Bro

ck,

198

3

Bu

tler

et

al.,

19

93

Fle

min

g a

nd

Ko

pp

elm

an,2

009

&

20

10

Difficulty in adequate work breakdown

structure (WBS) to apply EVM

High cost, complicated and burdensome

paper work

Poor understanding of EVM

Distrust and conflict between project

managers, project consulting and

government

Pressures to report only good news

Contract in fixed price that makes EVM

less attractive to client

Unavailability of cost and schedule

integrated data

39

paramount importance to its successful application (Smith,Winter, Morris & Cicmil, ,

2006).

Christensen points out that implementing EVM requires a cultural change, which requires

time and effort. Key policies and knowledge regarding Earned Value methodology must

be taught by the organization in order to facilitate adoption (Christensen, 1998). Also

Wideman states that the Earned Value technique is conceptually attractive; however, it

requires a great deal of effort to maintain it. EVM therefore needs a qualified team not only

to understand its requirements, but also to provide reliable information and many project

managers don't believe that the significant cost of implementing EVM is worth the limited

benefit. (Wideman, 1999).

From those varied perspectives, it is evident that EVM presents some effective features;

however, it presents great difficulty in data collection or in the low speed of information

generation. Terrel M. et al., assert that in order to effectively implement EVM, information

about project resource usage must be clearly defined. Failure to obtain that data creates an

inaccurate performance measurement baseline (PMB), with little relationship to the actual

situation (Terrel M. et al., 1998). According to Fleming & Koppelman, a key success factor

is preparing a suitable work breakdown structure (WBS). If the work is subdivided

excessively, control will be expensive and cumbersome. On the other hand, they point out

that a badly stratified subdivision may present inaccurate data on real costs and deadlines

(Fleming & Koppelman, 2005).

One survey of the Hong Kong construction industry Deng & Hung indicated that only a

small percentage of construction projects implemented an integrated cost/schedule control

system (Deng, M. & Hung, Y., 1998). In the construction industry, Earned Value concepts

could be readily applied. Almost all construction work is routinely divided into identifiable

packages, most deliverables are tangible, and typically costs are carefully tracked. But it is

quite evident that Earned Value has not been widely accepted as the preferred means of

monitoring, controlling and reporting cost status on construction projects (True, 2003).

40

Once the EVM System is designed and implemented on a project, there are significant

benefits to the contractor and to the customer. Contractor benefits include increased

visibility and control to quickly and proactively respond to issues which makes it easier to

meet project schedule, cost, and technical objectives. Customer benefits include confidence

in the contractor’s ability to manage the project, identify problems early, and provide

objective, rather than subjective, contract cost and schedule status. Project Managers

(PMs) may be required to use Earned Value management as one tool to monitor progress

and to develop cost and schedule forecasts for active projects. It is also used the provision

of more accurate management and financial reports. These assist in the better management

of cash flow and in the reporting of results to shareholders.

According to Sparrow Earned Value analysis provides a supplementary benefit to the

project because it offers a forecast of its final results. It demonstrates emerging cost and

schedule trends at an early point in the project – when there is still the possibility of

implementing corrective actions (Sparrow, 2000). Kerzner Harold considers EVA a

relevant maturity differential in project management. Managing costs using EVA is

referred to as “managing with open eyes” because the manager can clearly see what was

planned, what was performed and the actual costs. This is a powerful tool in the decision

making process. In the day-to-day activities of the project manager, EVA provides “alarm”

signals and facilitates decisions that keep the project on time and on budget (Kerzner

Harold, 1998). Moreover, Christensen listed main benefits of Earned Value are EV

provides a single management control system providing reliable data, and an integration of

work, schedule, and cost using a Work Breakdown Structure. The system also provides a

database useful for comparative analysis (Christensen, 1998). Most important of all, it is

an early warning signal for cost and time performances with projections of final cost and

time. It can help identify, address, and resolve problems timely (Schulte, 2001).

In addition, contractors are encouraged to implement EV because it improves their cash

flow when applied appropriately. A regular monitoring by the parties will make the

assessment of the Contractor’s claim for payment more efficient and judicious. Moreover,

the application of EV is useful not only at the project level, but also at the whole business

level. EVM leads to successful portfolio management: failing projects may stop and

41

resources may be shifted to a more successful project. Several authors have advocated the

use of EVM techniques to provide the justification for claims related to cost adjustments

and scope changes. They further advise that, if claims cannot be resolved and legal

remedies are pursued, EVM appear consistent with legal standards for substantiating cost

claims (Kauffmann et al., 2002).

Besides, EVM offers the choice to integrate the Risk Management (RM) within the Earned

Value Management, insights of one can be used to inform the other (Hillson, 2004a,

October 2004). Earned Value also helps us mange by providing data to enable objective

measurement of project status, providing basis for estimating the final cost, predicting

when the project will be complete, supporting the effective management of resource and

providing a means of managing and controlling change (APM, 2013) .

Alberto et al. compares project management with EVA and without EVA as shown in the

following table (Alberto et, 2004).

Table 2. 7 Differences with EVA and without EVA

Without EVA With EVA

Blind management Management with open eyes

Cost, time and progress separated Integrated cost, time and progress

Planned values compared with actual cost Earned Value Analysis

2.15. Research Gap

This chapter introduce the research evaluation of project performance and forecasting in

the context of Earned Value Management (EVM) techniques. This research wants to add

the relationship implication of performance of road infrastructure construction project and

Earned Value Management techniques in the context of Amhara Road Work Enterprise

construction project. Practically the study address activity cost based wise as well as month

wise plan value on Amhara Road Work Enterprise construction project. However, this

study is relatively new in Ethiopian context because there is limited studies.

42

Different research studies conducted on EVM techniques in various developing and

developed countries. They recognized that Earned Value Management (EVM) is one of the

few management techniques that are unique to construction project management. Actually

EVM is a standard section in every project management course and textbook, even though

no more organizations had actually applied it to manage projects practically. To increase

its adoption, the study also assesses project management professionals and others that are

expected to have knowledge on EVM technique at his/her place of work both from project

and office in the context of road construction sector for the contribution of EVM. Led it to

investigate EVM further, and to identify not only significant issues that might be hindering

its adoption – but also sound and practical improvements that could increase its utilization

in Bahir Dar city road constructions.

2.16. Summary of Literature Review

Earned Value is an important tool for monitoring and controlling project performance. It

is also included in any set of best practices in project management. It is a methodology for

evaluating project performance and progress by integrating project scope, schedule, and

cost (APM, 2006). EVM has been widely applied in various industrial sectors and many

studies have been conducted on EVM and its application in the industry. This paper

provides an analytic of EVM studies and its applications. EVM studies published in a

number of sources are reviewed. The key issues reviewed include effective implementation

of EVM requirement and benefit, behaviors of cost performance index, cost control

techniques, schedule performance index and time control techniques.

43

CHAPTER THREE

METHODOLOGY

3.1. Introduction

Research methodology is a way to systematically solve the research problem and research

methodology shall identify the research basis, research hypothesis or questions, research

design and research analysis (Abraham, 2008). This chapter presents the methodology that

is adopted in the study. It describes and discusses the research design, sampling technique,

data collection and data analysis used during the study and measurement of variables.

3.2. Research Design

According to Sekaran (2003) research design shows the detail of the study in relation to

purpose of the study, type of investigation, and the extent of researcher interference,

measurement and measures, unit of analysis, sampling design, data collection method and

data analysis are integral to research design. The study adopts a mixed method approach.

Both quantitative and qualitative research methods are used to explain the phenomenon.

In this study a questionnaire will be designed to collect primary data from client

representative, contractors and consultant. Interviews method also employed. Lastly

discussions and recommendations is drawn (Figure 3.1).

44

Figure 3. 1 Research Methodology Flow chart

3.2.1. Survey Research Design

Survey Research design is a valuable tool for assessing opinions and trend. Often, it is a

low cost and its ease of accessing information, where data can be collected more than one

cases at a single point in time for collective use of both qualitative and quantitative data of

two or more variables (Magigi, 2015). The use of this tool is used for addressing specific

objectives one, two and three of the study. The data is collected by sending a structured

open-ended and closed questions to respondents including senior project managers,

Engineers, Architects and Quantity Surveyors data on road construction projects in Bahir

Dar city.

3.2.2. Case Study

Case study is a method for testing whether models, formula can be applied to phenomena

(Magigi, 2015). Two ongoing road projects were taken as sample case studies. The

45

information was gathered from tender document, bill of quantities, contract documents,

progress report and abstract sheets to provide necessary data for project cost and scheduling

activities which used to make suggestion toward the application of EVMS. This design is

in line with specific objective four.

3.3. Sampling Technique

Sampling is the process of selecting a sufficient number of elements from the population,

so that a study of the sample and an understanding of its properties or characteristics would

make it possible for us to generalize such properties or characteristics to the population

elements (Sekaran, 2003). Purposive sampling was used on road construction firms and

projects. It is technique in which researcher relies on choosing members of population to

participate in the study. Select projects managers and professionals from road construction

firms who are expected to have technical and specialized knowledge on EVM technique

and performance of infrastructure projects in Bahir Dar City. These include Engineers,

Architects and Quantity Surveyors from their respective professional bodies.

The study of sample size be comprised 7 main parties that participate on road construction

projects in Bahir Dar and it was distribute all of them based on Purposive sampling.

3.4. Methods of Data Collection and Source of Data

For this research, two types of data were gathered and used. The first is primary data, the

data which are obtained through questionnaires and interviews. Secondary data was

collected thorough literature review. It means data that are already available i.e. they refer

to the data which have already been collected and/or analyzed by someone else. These

different methods of data collection have been used in order that the data or information

obtained from one can be supplemented by the other whereby the collected data gives

multiple evidences.

46

3.4.1. Literature Review

In achieving the objectives of this study, the information regarding application of EVM,

how EVM techniques used measuring the performance and forecasting of construction

projects and how EVM answer basic project management questions were obtained from

various sources from international journal, international conference, reports and

published books.

3.4.2. Questionnaire Survey Method

Questionnaire provides first-hand information for the subject matter of a research as it is

focused on issues which further serves as a survey to understand the main concerns and

attitudes of respondents towards the problems (Kasiem, 2008). In this study, questionnaire

method was used to collect data on current practice and also the opinions of practitioners

towards EVM. Questionnaire is designed following up of in-depth assessment of literature

review, and distributed using purposive sampling technique.

3.4.3. Interview Method

The study also employed interview method. Interviews in this study helped the researcher

obtain more information from the Project Managers, Architect, Engineers and Quantity

Surveyor on the topic under investigation. This method also offers the researcher an

opportunity to adapt and clarify questions by using appropriate language, and clear doubts

and establish rapport and probe for more information (Sekaran, 2003).

3.5. Data Analysis

3.5.1. Analysis of Quantitative Data

Quantitative data measures phenomenon under study by using numerical or ranking scales

to measure quantities that are then analyzed using statistical analysis techniques. Statistical

package SPSS method was used to analyze the data. Descriptive statistics namely

frequency counts, percentages are used to analyze the respondents’ mean, while standard

47

deviation is used to analyze respondents’ opinions on the application of EVM to measure

construction project success.

In the analysis, ‘mean score’ method was adopted for the structured part of the

questionnaire, to establish the relative importance of factors based on frequencies of

occurrence. A five point Likert scales is used to calculate the mean score for each

contribution and barriers for EVM adoption.

The mean score (MS) for each potential factors are computed using the following

expressions (Abd Majid & McCaffer, 1997)

𝑀𝑆 = ∑(𝑓×𝑆)

𝑁………………………………….…Eqn. 1

Where: MS = Mean score,

f = frequency of response for each score,

S= score given to each factor (1 to 5), and

N= Total number of responses for each factor

3.5.2. Analysis of Qualitative Data

Qualitative data are analyzed using descriptive analysis. Responses from key information

have been collected related to current issues. The current issues which emerge in relation

to each guiding questions have been presented in the results, with selected participants

offered as illustrations.

3.6. Measurement of Variables

Data on the respondent’s views and opinions about EVM is obtained using scaled variables.

The responses to the questionnaire was based on Likert’s scale of five ordinal measures

which was from one 1 to five 5 arranged in ascending order according to the degree of

contribution to each question. A five point –Likert scale of strongly disagree, disagree, not

sure, agree and strongly agree is used to tap respondent’s perception on the study variables.

48

3.7. Reliability Test

Reliability: refers to whether the data collection techniques and analytic procedures would

reproduce consistent findings if they were repeated by another researcher. Reliability

mainly deals with the consistency, dependability and explicability of the results obtained

from a piece of research (Zohrabi, 2013.). Cronbach’s Alpha is used to assess the internal

consistency of a questionnaire or survey that is made up of multiple Likert type scales and

items.

Cronbach’s Coefficient Alpha

Developed by Lee Cronbach in 1951, measures reliability, or internal consistency. Therefor

Cronbach’s alpha tests to see if multiple-question Likert scale surveys are reliable

(Stephenie., 2017) .The normal range of Cronbach’s coefficient alpha value between 0.0

and + 1.0. Based on this, alpha for Likert scale questions are interpreting as follows in

Table 3.1:

Table 3. 1 Interpretation of Alpha

Cronbach’s alpha Internal consistency

α ≥ 0.9 Excellent

0.9 > α ≥ 0.8 Good

0.8 > α ≥ 0.7 Acceptable

0.7 > α ≥ 0.6 Questionable

0.6 > α ≥ 0.5 Poor

0.5 > α Unacceptable

http://www.statisticshowto.com/internal-consistency/

http://www.statisticshowto.com/likert-scale-definition-and-examples/

49

CHAPTER FOUR

DATA ANALYSIS AND DISCUSSION

4.1. Introduction

This chapter describes the results of interview, questionnaire survey and case study

concerning practices and opinion about EVM in Bahir Dar road construction projects and

key participants; contractors, consultants and clients.

4.2. Interview Result and Discussion

The researcher interviewed four professionals; 1 from client’s representatives Amhara

Rural Road Transport office (ARRTO), 2 from contractor’s representatives Amhara Road

Works Enterprise (ARWE) and Amhara Region Urban Development and Construction

(ARUDC), 1 from consultant’s representatives Amhara Road and Building Design and

Supervision Works Enterprise (ARBDSWE).

The study asked participants concerning what construction project management tools are

used in their projects and organization. It is found that all use WBS, which provides the

scope of project, detailing each task required to be performed. Most organizations require

a WBS to prior to commencing a work. The researcher identified that participants use

Critical Path Method and Gant chart.

Project managers need to monitor and control progress throughout the project. However,

project managers and organizations use simple deviation analysis and partially

implemented Earned Value analysis. EVA is a tool for managing the work during the

Execution phase of a project and used to allow the project manager to control the work that

takes place during that Execution phase, while simple deviation analysis represents graphic

presentation of the costs and benefits over the time preparing cash flow activities. The cost

management control practice considers comparing of actual to budgeted cost. In EVA, the

existing performance measuring techniques used on construction projects practice indicate

the profit and loss (cost variance) using the difference between the amount of work

50

executed to the amount of total expense. This is actually true and is the result of Earned

Value in its purest form, but practitioners only consider cost components since the two

major components of project performance are schedule (on time delivery) and cost (over

or under budget). In addition, other project performance and forecasting tools are not

practiced.

Most project managers indicate that the possible barriers of EVM technique in measuring

performance of a construction project in Bahir Dar include minimal awareness of EVM

and training; low familiarity with EVM techniques and lack of EVM expertise and

experience. Their recommendations with regard to these challenges is giving good project

management training for project managers and professionals. This training can include

guiding the actual implementation of an Earned Value System, procedures, more

specifically the details of the Earned Value system to fully understand its tool requirement

in their proper context as to when, why and how to use it. Respondents also indicated the

availability of a good project plan, good estimates of project costs, and even more

fundamentally, a good cost management system to track and report costs is crucial.

Respondents believe that the possible benefits of EVM technique in measuring

performance of a construction project is to indicate whether a project is over budget or

under budget. Professionals theoretically agree that EVM is a proper project management

practice as project management principles, but practically it is not used at a detailed level.

When asked about the reason for not implementing EV at a detail level on their projects,

the majority of responses reason out that they do not have detail knowledge about the tool

and it has never have been required by a Client. Moreover, it can be seen in the following

Table 4.1.

51

Table 4. 1 Respondents Interview Result in Percentage

Project management tools used ARWE ARRTO ARUDC ARBDSWE %

WBS 100

CPM 25

Gant chart 100

Monitor and control techniques used

Simple deviation analysis 100

Partially use of EVA tools 100

Fully use of EVA tools 0

Forecasting using EVA tools 0

Barriers of EVM technique implement in a

construction project

Minimal awareness of EVM and training 100

Low familiarity with EVM techniques 75

Lack of EVM expertise and experience 100

Respondents recommendations

Good project management training 100

Availability of a good project plan 100

Good estimates of project costs 100

Good cost management system 100

Benefits of EVM technique

To indicate whether a project is over budget or

under budget

100

Theoretically agree that EVM is a proper

project management practice

100

Reason for not implementing EV

practically at a detailed level

Do not have detail knowledge about the tools 100

It has never have been required by a Client 75

52

4.3. Survey Result and Discussion

After collecting the raw data of questionnaire, the data was entered into computer SPSS

software program to analyze the data. Section-A of the questionnaire identified the

background information (Company and Respondent Profile).

Section B indicates the opinions of respondents about Earned Value Management to

determine the level of awareness through project managers and other respondents in Bahir

Dar road construction. It was important to conduct a double phased study, including, a

preliminary interview before distributing the questionnaire to identify knowledge on EVM

techniques related to the subject (first stage) and distribute the survey based on the first

stage (second stage). The survey was restricted to information related to the subject of

EVM usage practically or theoretical learning through experience.

The researcher preliminary interviewed 55 respondents. From the total, 15 (27.27%) of the

respondents have never heard about the term Earned Value. One of the limitations

highlighted is related educational problem and the extent of not familiarity of non-users of

EV and its characteristics, which reflects a poor professional training to Bahir Dar road

practitioners.

Section C determines respondents’ level of agreement and knowledge related to EVM

techniques, organizations’ ability to provide up-to-date information, contribution of EVM,

barriers to practice EVM and success factors for the implementation of EVM.

4.3.1. Section A: Background Information

This section is designed to provide general information about the respondents and

organization in terms of type of organization, year of establishment, classification of

company, age, gender, position, educational qualification and experience of the

respondents.

53

4.3.1.1. Survey Response Rate

Out of the 40 questionnaires: 3 were distributed for clients (Employers), 12 for consultants

and 25 for contractors. From the distributed 40 questionnaires, 33 (82.5%) returned, which

is a valid response rate and high percentage from the total distributed questionnaire, while

5 (12.5%) is not returned on time and 2 (5%) did not appropriately complete the survey.

Table 4. 2 Questionnaire Response Rate

Respondents

Category

Number of questioners

Distributed

Number of questioners

Returned

Percentage of response

rate (%)

Client 3 3 100

Contractor 25 21 84

Consultant 12 9 75

Total 40 33 82.5

4.3.1.2. Respondents’ Organization Establishment

Out of the 33 respondents, 15.16% (5) of the respondents’ organization have 5 or less years

of establishment, 24.24% (8) are 5 to 10 years of establishment, and 36.36% (12) have

more than 10 years of experience. 24.24% (8) did not respond their year of establishment

(Figure 4.1).

Figure 4. 1 Firms Years since Establishment

36.36%

24.24% 24.24%

15.16%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Above 10 years 5-10 years Not respond Less than 5 years

54

4.3.1.3. Respondents’ Organization Classification

Figure 4.2 shows that 51.51 % (17) of the respondents’ firm are General contractor (GC)

at construction works, 24.24% (8) of the respondents Organizations are Road contractors

(RC), 6% (2) are other classification and 18.19% (6) did not respond their classification.

Figure 4. 2 Firms Classification

4.3.1.4. Respondents Age

Figure 4.3 shows that 4 (12.1%) were less than 25 years of age, 24 (72.7 %) were 26-35

years, 4 (12.1%) were 36-45 years and 1(3.1%) was between 46-55 year.

Figure 4. 3 Respondents’ Age

51.51%

24.24%

18.19%

6%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

GC RC Not respond Other

72.70%

12.10% 12.10%

3.10%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

26-35 years Less than 25 years 36-45 years 46-55 years

55

4.3.1.5. Respondents’ Gender

Figure 4.4 shows that 24 (72.7%) were male, while 8(24.2%) were female. 1(3.1%) missed

(not responding) on his/her gender.

Figure 4. 4 Respondents’ Gender

4.3.1.6. Respondents Position in the Organization/Company

Table 4.3 shows that 10 (30.3%) of the respondents are project managers, 17 (51.5%) are

engineers, 4 (12.1 %) are other, and 2 (6.1%) did not respond on their position. Architect

and Quantity surveyor respondents did not participate in the survey.

Table 4. 3 Respondents’ Position in the Company

Position Number Percent

Project manager 10 30.3

Engineer 17 51.5

Others 4 12.1

Not respond 2 6.1

Total 33 100

24.20%

72.70%

3.10%

Female Male Not respond

56

4.3.1.7. Educational Qualification of the Respondents

Table 4.4 shows that educational level of the respondents. 13 (39.4%) are Master’s degree

holders, and 19 (57.6%) have Bachelors, while 1 (3%) did not respond on his/her level of

education. Other levels of educations, PhD, diploma, certificate did not participate.

Table 4. 4 Respondents’ level of education

Level of education Number Percent

Masters 13 39.4

Bachelors 19 57.6

Not respond 1 3

Total 33 100

4.3.1.8. Respondents Experience

Professionals involved in this questionnaire survey had different level of experience. 27.3%

of professionals have less than 5 years of experience and 54.6% of professional have 5-10

years of experience. Therefore, the maximum number of respondents (54.6%) have in the

range of 5-10 years of experience. The other 12.1%, and 3% of the respondents have 11-

16yrs and above 17 years of experience respectively. While the remaining professional

participated in the questioner survey were not willing to give response on his experience.

Table 4. 5 Experience of the Respondents’

Experience (yrs.) Employer Contractor Consultant Total

No. % No. % No. % No. %

Less than 5 yrs. - - 7 33.3 2 22.2 9 27.3

5-10 years 1 33.3 12 57.1 5 55.6 18 54.6

11-16 years 1 33.3 1 4.8 2 22.2 4 12.1

Above 17 years 1 33.3 - - - - 1 3

Not respond - - 1 4.8 - - 1 3

Total 3 100 21 100 9 100 33 100

57

4.3.2. Section B: Earned Value Survey

The purpose of the survey is to elicit opinions from project management practitioners and

obtain a rough indication of the usage of EVM and attitudes towards it. In this section,

some observations are provided based on the survey response.

4.3.2.1. Techniques Used to Track Project Costs and Progress

Only 9.09% of participants reported using EVM to track project costs and progress. Even

these participants use it rarely. The most common techniques used to track project costs

are Gant chart (42.42%) and critical path method (36.36%). Gant charts are suitable for

representation of schedules, but as a planning technique it is not suitable for planning of

complex projects. It cannot identify and highlight the engineering critical tasks that need

special attention for preventing schedule slippages, time overrun, contractual dispute and

bottlenecks (Alvardo and David, 2004).

Figure 4. 5 Techniques used to Track Project Costs and progress

4.3.2.2. Recommendation to Measure Performance on Construction Projects

The study identified that almost half of the project respondents (48.48%) recommend EVM

is the best method to measure performance on construction projects.

42.42%

36.36%

9.09% 9.09%

3.03%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Gant chart CPM EVM Others PERT method

58

Figure 4. 6 Respondents’ Recommendation to Measure Performance on Construction

Projects

4.3.2.3. Participant Opinion on the Value of EVM

Participants believed that EVM is a valuable technique. 36.36% believe that EVM is

extremely valuable, while 63.63% believes it is suitable for projects.

Figure 4. 7 Participant Opinion on the Value of EVM

4.3.2.4. Reasons for using EVM within the Organization

In this question, only three respondents participated. These respondents identified that it is

required by client, voluntary use of managers, and used on trial bases.

48.48%

39.39%

9.09%

3.03%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

EVM Critical path

method

PERT method Gant chart

54.54%

36.36%

9.09%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Useful for most projects Extremely valuable Suitable for some projects

59

Figure 4. 8 Participant Reasons for Using EVM

4.3.2.5. Reasons for not using EVM within the Organization

81.81% of respondents identified that lack of proper training to project managers in the

application of EVM is the hindrance for its use, while 12.12 % argue that senior

management or clients do not require EVM reports or EVM use. Other reasons include

limited budget, schedule and partial costs where project managers have to deal, due to its

complexity.

Figure 4. 9 Participant Reasons not using EVM

3.03% 3.03% 3.03%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

Required by client Used voluntarily by

managers

Used on a trial

basis/occasionally

81.81%

12.12%9.09%

6.06% 6.06% 6.06% 6.06%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

No training Not

requested

No schedule Too complexNo budget Partial costs Not sure:

60

4.3.2.6. Project Monitoring Method of Participants

72.72% confirmed that the cost monitoring methods they use is comparing planned costs

against actual costs of their projects, but it is difficult to determine the true performance of

the project using this method. Monitoring and evaluation is contingent of the

appropriateness of the plan (baseline) against which performance is compared with. In this

regard, current practice both in terms of its baseline establishment, performance evaluation

and taking corrective actions has considerable drawbacks when compared to best practices

suggested in the literature. For instance, computations using simple analysis could not

address whether a project is on or above or below cost or time performances, and indicate

/predict/ the likelihood of completion cost and time. Thus, it is found that only some part

of the concept of EV is being used in Bahir Dar road construction projects, which indicates

the use at infancy stage.

Figure 4. 10 Project Monitoring Method of Participants

4.3.2.7. Earned Value as a new Estimate Value on Top of Plan Value and Actual

Cost

The study carried out almost all practitioners strongly agree or agree 93.93%, that EV is

necessary in cost estimating as a new estimate value on top of Plan Value and Actual Cost.

72.72%

15.15%12.12%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

By comparing only planned costs

against actual costs

By comparing Earned Value to

planned & actual cost

Not sure

61

In this approach Earned Value Analysis, project management focused on two major

principles; the integrative account of cost and time performance criteria. The Earned Value

is then used as a measure of project performance in terms of cost-schedule control system.

A concept developed from the triple constraints of planned value, Earned Value and actual

cost. This has improved the objective measurement level of simple deviation analysis

using more information’s on activities performed. Hence, the comparisons are made

between planned and Earned Values.

Besides, Earned Value provides estimated completion of the project (EAC and ETC) can

be computed using the three information and the total Budget at Completion (BAC).

Accordingly, these expressions can be used for computations (Table 2.4).

Figure 4. 11 Earned Value as a new Estimate Value on Top of Plan Value and Actual Cost

4.3.3. Section C: Respondents Level of Agreement

The study carried out a descriptive statistics analysis on various EVM principles and

respondents were to indicate the extent of use on a scale of 1-5 level of their agreement.

Scale: 1 “Strongly Disagree”, 2 “disagree”, 3 “not sure”, 4 “agree”, 5 “strongly agree”.

51.51%

42.42%

6.06%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Agree Strongly agree Neutral

62

4.3.3.1.Respondents Knowledge about EVM

Table 4.6 shows the descriptive statistics of the participants’ level of agreement on their

knowledge about EVM.

Table 4. 6 Participants Level of Agreement on their Knowledge about EVM

Participants level of agreement on their knowledge about EVM

Expert Knowledgeable Familiar Slightly

familiar

Not familiar

Frequ

ency

% Frequ

ency

% Frequ

ency

% Frequ

ency

% Frequ

ency

%

Strongly

Disagree

18 54.5 7 21.2 0 0 0 0 11 33.3

Disagree 13 39.4 15 45.5 3 9.1 2 6.1 22 66.7

Not sure 1 3.0 5 15.2 9 27.3 0 0 0 0

Agree 1 3.0 4 12.1 11 33.3 7 21.2 0 0

Strongly

Agree

0 0 2 6.1 10 30.3 24 72.7 0 0

Total 33 100.0 33 100.0 33 100.0 33 100.0 33 100.0

This results and findings show that most of the key players in construction industry have

slightly familiar on level of awareness of EVM. Cumulatively, 72.7% of the respondents

have strongly agree with slightly familiar on level of awareness of EVM. Whereas almost

all of those 54.5% of participants believed they were strongly disagree and 39.4% Disagree

on EVM expert. This indicates very low level of respondents’ awareness on EVM. This

finding opposes to the literature review where EVM is well-known worldwide technique

as project measurement method (Acebes et al., 2013).

4.3.3.2.Organization is able to provide up-to-date information

Table 4.7 shows the level of respondents’ organization ability to provide up-to-date

information on project cost and schedule in time. It can be seen that 57.6% are not sure to

provide up-to-date information, while 21.2% are agree and the rest 21.2% disagree and

strongly disagree on providing up-to-date information on project cost and schedule. For

63

schedule and cost estimates, a time-phased baseline schedule needs to be developed. For

any date within the project, it is necessary to know how much money should have been

spent by that time. Up-to-date information on costs will allow the project manager to know

how much money has been spent at any given time.

Table 4. 7 The Level of Organization able to provide up-to Date Information

Organization is able to provide up-to-

date information Frequency Percent

Not sure 19 57.6

Agree 7 21.2

Disagree 6 18.2

Strongly disagree 1 3

4.3.3.1. What Does Earned Value Analysis Provide? Contribution of using EVM for

Project Control Purpose

The study sought to establish what the benefits of using EVM in project control purpose.

The questions comprise of the application of EVM in construction project management.

The responses agreement shown in the Table 4.8.

Table 4. 8 Contribution of using EVM for Project Control Purpose

Contribution of EVM Mean Std. Deviation

EVM provides early warning of performance problems to take corrective

action 4.55 0.666

Increased project visibility 4.27 0.574

Increase confidence in contractors ability to manage project by identifying

problems early 4.03 0.467

EVM assists the project team to achieve cost objectives 4 0.559

Used provide the provision of more accurate management and financial

report 4 0.559

EVM improves project scope management 3.91 0.631

EVM improves communication among project team members 3.85 0.667

Improved estimating and planning 3.67 0.736

64

EVM assists the project team to achieve schedule objectives 3.52 0.566

To monitor progress and to develop cost and schedule forecast for active

project 3.52 0.619

Overall, EVM is cost effective tool for performance management 3.15 0.667

EVM offers choice to integrate risk management 3.12 0.6

Based on Table 4.8, the contributions of EVM in construction projects adopted by

respondents are EVM provides early warning of performance problems to take corrective

action (MS=4.55) and increased project visibility (MS=4.27). The EVM method, having

defined all the elements of project cost management into accurate data, that can understand

easily and get a correct visibility of what is happening on the project during different stage

of the project execution. This project visibility can provide a proper base for the

management to set their decisions based on the reliable findings which can lead them to

success. The third and fourth important benefit highlighted by the respondents is increase

confidence in contractors’ ability to manage project by identifying problems early

(MS=4.03), EVM assists the project team to achieve cost objectives (MS=4) and used

provide the provision of more accurate management and financial report (MS=4).

4.3.3.3.Why does no One Seem to Use Earned Value? What are the Barriers?

This questionnaire survey form was designed to achieve the second specific research

objective which is to identify the factors that hinders the usage and application of EVM

applied in Bahir Dar road construction projects. The respondent agreements are shown in

the Table 4.9.

Table 4. 9 Barriers of Company to Practice EVM

Barriers of company to practice EVM Mean Std. Deviation

Lack of EVM expertise and experience 4.82 .465

Minimal awareness of EVM including training 4.52 .508

Poor understanding of EVM 4.21 .740

Low familiarity with the EVM techniques 4.18 .635

65

Lack of management support 3.55 1.121

Earned Value requires more information 3.27 .801

It takes too long to manually produce reports 3.18 .917

Distrust and conflict between project managers, project consulting and

government 3.12 .820

Inability to find qualified resources 2.94 1.029

Pressures to report only good news 2.88 .857

Difficulty integrating cost, resource and schedule data concerning real cost

and deadlines 2.70 .951

Difficulty in adequate work breakdown structure (WBS) to apply EVM 2.70 .883

With such analysis the primary inputs into an Earned Value system are lack of EVM

expertise and experience (MS=4.82). This is the major barrier to using Earned Value.

Another obstacle is the Minimal awareness of EVM including training (MS= 4.52). The

low level of awareness of the key players on EVM may be due to the least training

application of the method in Bahir Dar road construction industry. They might have used

some parts of EVM concept indirectly by using other terms. Therefore, the key players do

not aware of the terms used in EVM.

4.3.3.4. What needs to be done? Success Factors for EVM Implementation

Table 4.10 shows the descriptive statistics of critical success factors to implement EVM.

This questionnaire survey form was designed to achieve the third specific research

objective which is to identify critical success factors for EVM implementation.

Table 4. 10 Success Factors for EVM Implementation

Success factors for EVM implementation Mean Std. Deviation

Provide reliable data on real costs and deadlines 4.73 0.452

Preparing suitable work break down structure (WBS) 4.67 0.479

Convincing project managers of the value and necessity of using Earned Value

in achieve project success 4.64 0.489

Adequate EVM training 4.48 0.712

Understanding its requirement 4.3 0.467

Top management support 4.06 0.704

66

EVM needs qualified team 3.85 0.508

Culture of the organization and top management leadership style 3.7 0.637

Maturity of the organization’s project management system 3.67 0.595

Convince management of the need to require project managers to be responsible

for costs on a project. 3.24 0.792

Buy in of EVM by the project management staff 3.12 0.781

The most important barrier to be overcome EVM Implementation is providing reliable data

on real costs and deadlines (MS=4.73) and preparing suitable work break down structure

(WBS) (MS=4.67) on a project are the major success factors to implement the usability of

EVM. More importantly, at a higher level, it allows for better management and use of

resources to meet key company goals and objectives. The absence of good cost

management stops us from achieving these important goals. As a result, it is suggesting

that to invest in the infrastructure company goals and objectives there should be make the

right data available to the right people at the right time. This is good management planning,

and is required for project management. A detailed plan must be required for all projects.

That detailed plan will include the WBS listing all tasks. For every task, someone must be

listed as the responsible individual. In other words, a detailed project schedule must be

provided.

Another high level barrier to overcome is convincing project managers of the value and

necessity of using Earned Value in helping them achieve project success (MS=4.64). If this

goal is not achieved, then the other barriers will not ever be addressed.

The other level of barrier to overcome is good project management training (MS=4.48) and

Understanding its requirement (MS=4.3). This training may include guiding the actual

implementation of Earned Value System, procedures, more specifically the details of the

Earned Value system and fully understand its tool requirement in their proper context as to

when to use them, why to use them and how to use them.

67

4.3.3.5.Reliability Test Results of Questioner using Cronbach’s Alpha (α)

Table 4.11 shows the results of Cronbach’s Alpha are in the range from 0.714 and 0.831.

In this Table the output of reliability statistics Cronbach’s alpha coefficient scores are

over 0.7, which shows high internal consistency and it indicates the questionnaire is

reliable. Generally, the range is considered as high; which ensures the reliability of each

section of the questionnaire.

Table 4. 11 Cronbach's Alpha for each section of the questionnaire

Section of questioner Cronbach's Alpha (α)

Section-C:- 3: Contribution of EVM 0.831

Section-C:- 4: Barriers of company to practice EVM 0.76

Section-C:- 5: Success factors for EVM implementation 0.714

4.4. Practical Application of Earned Value Management

This section examines and presents the results of a practical application of Earned Value

Management to Amhara Road Work Enterprise (ARWE) construction Projects. In

reviewing this application, projects were selected from two ongoing road construction

projects. This is to ensure or indicate the project performance and forecasting when a

project will be complete and the amount of budget required, to tell the project team in the

EVA criteria, benefit and procedures to implement EVA in the project management and

assess the practical relationship between EVM technique and project performance. Earned

Value provides an objective measurement of how much work has been accomplished on a

project. Using Earned Value process, management methods can readily compare how much

work has actually been completed against the amount of work planned to be accomplished.

All work is planned, budgeted, and scheduled in time-phased "planned value" increments

constituting a Performance Measurement Baseline (PMB).

68

4.4.1. Methodology

The intention of the section is to give a clear understanding of the approach in carrying out

Earned Value Analysis in projects. Critical data analysis was made and discussed in this

section. Data including project details and understanding of EVM tools were used. Earned

Value differs from the usual budget verses actual costs incurred, in that it requires the cost

of work in progress to be quantified. This allows the project manager to compare how much

work has been completed against how much expected to be completed at a given point. In

applying the metrics identified with Earned Value analysis, the following were calculated

for projects.

Methods for Cost Analysis and forecasting

Cost Variance (CV)

Cost Variance Percent (CV %)

Cost Performance Index (CPI)

Estimate To Complete (ETC)

Estimates at Completion (EAC)

Percentage completion of financial performance

Methods for Schedule Analysis and forecasting


Schedule Variance Percent (SV %)

Schedule Performance Index (SPI)

Estimates at Completion (EACt)

Percentage of schedule performance

4.4.2. Case Study One

4.4.2.1. Description of Project

Government of Federal Democratic Republic of Ethiopia represented by Ministry of

Industry and Ministry of Agriculture is working in partnership to establish an integrated

69

Agro industry park with an aim of transforming the agricultural sector. In this

establishment, Bure Integrated Agro-Industrial Park Road Construction is one of the

projects. The detailed engineering design, tender document preparation have been under

taken by Mahindra Consulting Engineers, whereas supervision work have been under taken

by Amhara Road and Building Design & Construction Supervision Works Enterprise and

the construction have been taken by Amhara Road Works Enterprise.

This project case study describes the Earned Value Management method on the

construction of Bure Agro Industry Park Road Construction Project. The project is located

in Amhara Regional State Bure City which is 400Km from North West of Addis Ababa

(Figure 4.12).

Figure 4. 12 Project Location Map

The project includes construction of infrastructure works such as, road, storm water, drain

and sewerage system for the contract price equivalent of 704,446,300.63 (ETB: Seven

Hundred four million Four Hundred forty-six thousand three hundred and 63/100)

including as corrected and modified in accordance with the instructions to bidders. The

total area of the project is 260.56 ha. The project works comprise the construction of

infrastructure such as:

70

Site grading for finished road level, construction of Road, footpaths & cycle tracks

Earthwork (excavation and embankment)

Sub base and base course

Asphalt concrete surfacing

Ancillary works

Construction of storm water drains & culverts

Providing sewer network systems

Internal power and street lighting

Taking care of the work until the issue of taking over certificate and rectification of

the defect during the defects of liability period.

4.4.2.2. Project Details

Project name: Burie Agro Industry Park Road Construction Project

Location: Burie

Client: Amhara Industry Park Corporation

Contractor: Amhara Road Works Enterprise (ARWE)

Consultant: Amhara Road and Building Design and Construction Supervision Works

Enterprise (ARBDCSWE)

Contract amount: 704,446,300.63 ETB

Contract Signing data: 18-07-2017 G.C

Site hand over date: 17-08-2017 G.C

Original completion date: 335 days

4.4.2.3. Current Problem on Case Study

After defining the case study and given the project details, it was discovered that EVA is

relatively a less common user for project performance measurement technique in Bahir Dar

road construction projects. At the time this project was awarded, it had limited usage of

project monitoring tool. Due to the lack of project management tool, Earned Value

71

Management system is tested in order to get an effective EVA on the construction project.

Using this tool will help distinguish and track the projects progress to perceive the amount

of work gotten from the amount spent.

4.4.2.4. Budget Allocation

In order to establish a time-phased budget for the project, the project cash flow report starts

from the duration period of October 2018. The contractor did not start the work based on

the contract time. Figure 4.13 indicates the trend of budgeted expenditure allocated for the

project over a period using the S curve.

Figure 4. 13 S-Curve for the Cumulative Cash Flow

4.4.2.5. EVM Applied to Case Study

According to Khamidi, et al. (2011), the use of Earned Value metrics can be used to observe

the performance management of an on-going project and see how well the project is being

managed.

-

100,000,000.00

200,000,000.00

300,000,000.00

400,000,000.00

500,000,000.00

600,000,000.00

700,000,000.00

800,000,000.00

900,000,000.00

O c t o N o v e D e c e m J a n u F e b r u M a r A p r i M a y J u n e J u l y

Res

ou

rce

in E

TB

Time in Month

PV

PV

72


cost (As of July 30, 2018)

Figure 4.14 shows the Earned Value graphical representation i.e. planned value (PV),

Earned Value (EV) and the actual cost (AC) of the project from October to July. It can be

seen from the above graph that the cumulative actual cost was less than the cumulative

planned value (PV) that indicates less money is being spent than budgeted and the Earned

Value (EV) remained less than the planned value (PV). Hence, the overall performance of

the project cost is favorable, but in schedule it remained unsatisfactory. This observation

derived from the graph because of the implementation of EVM could have resulted from

cost and schedule analysis.

4.4.2.6. Cost Analysis

The use of cost analysis empowers the project manager to gauge and monitor the project

progress in terms of cost. The EV cost analysis was being carried out as shown in the table

Octo Nove Decem Janu Febru Mar Apri May June July

PV 23,140,871. 43,746,188. 51,051,736. 136,072,118 339,324,130 486,698,533 715,812,316 762,684,389 797,707,611 810,512,068

EV 298,354.00 2,251,361.5 26,796,309. 32,920,230. 49,336,392. 77,215,718. 120,684,662 170,339,117 197,185,896 200,936,526

AC 987,880.15 3,855,498.3 19,564,551. 28,134,351. 45,872,204. 66,758,043. 91,285,492. 123,618,137 145,196,296 146,675,600

-

100,000,000.00

200,000,000.00

300,000,000.00

400,000,000.00

500,000,000.00

600,000,000.00

700,000,000.00

800,000,000.00

900,000,000.00

Res

ou

rce

in E

TB

Time in MonthPV EV AC

73

below, which shows the cost variance, percentage cost variance, cost performance index

and the progress made on the project.

Table 4. 12 Cumulative Earned Value (EV) Cost Analysis

S.No. Month EV cost analysis

CV CV% CPI % of Financial

performance

1 October -689,526.15 -231.1100739 0.30 0.04

2 November -1,604,136.76 -71.25185024 0.58 0.28

3 December 7,231,757.59 26.9878866 1.37 3.31

4 January 4,785,878.81 14.53780489 1.17 4.06

5 February 3,464,187.79 7.021566924 1.08 6.09

6 March 10,457,674.46 13.54345298 1.16 9.53

7 April 29,399,169.84 24.36031988 1.32 14.89

8 May 46,720,979.82 27.42821521 1.38 21.02

9 June 51,989,599.36 26.36577991 1.36 24.33

10 July 54,260,926.74 27.00401343 1.37 24.79

According to Alvardo and David (2004), time and cost overrun usually occur in the

beginning of the project, but the project manager does not realize until they cannot achieve

the objective of the project. This idea is supported by this case study. The project manager

shall examine the true performance of the project by using EVA, to know the latest progress

and identify the problem of the project and shall take corrective action.

The cost variance (CV) of the project is calculated by subtracting the EV from the AC. As

shown above, the CV consistently shows a negative value in October and November that

indicates unfavorable situation but in other months CV shows a positive value, which

portrays a favorable situation. This shows that the project is under budget in the sense that

the amount of money budget on the project is more than what was spent on the project. In

addition, CV can also be expressed in percentage by dividing CV by EV and multiplying

by 100. Graphically the cumulative CV can be shown in Figure 4.15.

74

Figure 4. 15 Cumulative Cost Variance at Various Status Months

The cost performance index (CPI) is an indicator that shows the efficiency of resource used

during the project duration as shown in Figure 4.16. This can be calculated as the ratio of

Earned Value to the actual cost of the project. For an ideal situation, it must be equivalent

to one or higher than one. In this case study, the CPI qualities are in the middle of 0.3 and

1.38. This demonstrates the project has a minimal cost effectiveness in the month of

October and November, while the other months demonstrate the project has cost

effectiveness. The graph shows values of CPI on the respective status months. Percentage

of financial performance can be calculated using the physical amount of work performed

to cumulative amount of budget at completion and multiplying by 100.

Figure 4. 16 Cumulative Cost Performance Index at Various Status Months

(10,000,000.00)

-

10,000,000.00

20,000,000.00

30,000,000.00

40,000,000.00

50,000,000.00

60,000,000.00

0 2 4 6 8 10 12

Res

ou

rce

in E

TB

Time in Month

CV

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

0 2 4 6 8 10 12

Val

ue

Time in Months

CPI

75

Cost analysis for this project has demonstrated that until the end of ten months’ cumulative

amount of money spent on the project is less than budgeted. It means that the project was

able to operate under budget, but as PV is above EV, it means that progress was slow. As

a consequence, SPI achieved a low performance (on average 0.25). Thus, the project was

not completed on time and it is affected by schedule performance which may be the cause

for cost overrun for the remaining works.

4.4.2.7. Cost Forecasting

Cost analysis for this project has demonstrated that the cumulative amount of money spent

on the project is less than budgeted. But this does not mean that the completion of overall

project performance will be cost effectiveness. Forecasting with EVM measures should

take project performance patterns and trends in to account. One consideration is schedule

performance. This project will be under performing in this regard, there may be reasons to

include the SPI in the forecasting calculation on the assumption that additional cost will be

incurred in attempt to recover and get the project back on schedule.

EVM provides an organization with the capability of practicing ‘‘management-by

exception’’ on its projects. Moreover, see Table 2.2 Forecasting indicators by EVM

technique. The implementation of Earn Value Management on this case study can also

show how much cost it will take to complete the project. The project shows poor

performing schedule performance. So future cost performance will be influenced

additionally by past schedule performance. To calculate the cost forecast at the end of the

ten month, here is a sample of the most common alternative ways of calculating the EAC.

𝐸𝐴𝐶 = 𝐴𝐶 + ((BAC − EV)/(CPI ∗ SPI))

= 146,675,600.2 + ((810,512,068.43 𝐸𝑇𝐵 − 200,936,527.0) ÷ (1.37 ∗ 0.25))

= 1,926,458,202.92 𝐸𝑇𝐵

Where BAC is the budget at completion of the project

EV is the Earned Value of the project

CPI is the recent cost performance index of the project

76

SPI is the recent schedule performance index of the project

To calculate Estimate to Complete (What will the remaining work cost) the project

assuming that current performance cost and schedule performance will remain the same as

occurred up to EV throughout the rest of the project.

𝐸𝑇𝐶 = (𝐵𝐴𝐶 − 𝐸𝑉 )/(𝐶𝑃𝐼 ∗ 𝑆𝑃𝐼)

= (810,512,068.43 𝐸𝑇𝐵 − 200,936,527.0 𝐸𝑇𝐵) ÷ (1.37 ∗ 0.25)

= 1,794,845,662.82 𝐸𝑇𝐵

4.4.2.8. Schedule Analysis

Schedule analysis in Earned Value management empowers the project manager to gauge

and forecast the project progress in terms of time. The EV schedule analysis was been

carried out monthly as shown in Table 4.13, which indicates the schedule variance,

percentage schedule variance, schedule performance index and the progress made on the

project.

Table 4. 13 Cumulative Earned Value Schedule Analysis

S.No Month Earned Value schedule analysis

SV SV% SPI % of schedule performance

1 October -22,842,517.08 -98.71 0.01 2.86

2 November - 41,494,826.69 -94.85 0.05 5.40

3 December -24,255,426.63 -47.51 0.52 6.30

4 January -103,151,887.99 -75.81 0.24 16.79

5 February -289,987,738.18 -85.46 0.15 41.87

6 March -409,482,815.75 -84.13 0.16 60.05

7 April -595,127,654.13 -83.14 0.17 88.32

8 May -592,345,272.17 -77.67 0.22 94.10

9 June -600,521,715.08 -75.28 0.25 98.42

10 July -609,575,541.45 -75.21 0.25 100.00

77

The schedule variance of the project is the difference between the Earned Value and the

planned value of the project, which is indicated as a negative value throughout the duration

of the project. This shows that the project is lagging behind schedule as planned. In

addition, time is being spent in contrast with the measure of work from the project and this

would affect the project negatively due to the late completion of the project. The SV can

also be expressed in percentage by dividing schedule variance (SV) by Planned value (PV)

and multiplying by 100 which lies between the ranges of -98.71% to – 47.51% which

indicates that the work percentage has not been completed with contrast with the schedule

plan of the project. Graphically the SV is shown in Figure 4.17.

Figure 4. 17 Cumulative Schedule Variance at Various Status Months

The Schedule performance index (SPI) is an indicator that shows the efficiency of the

project team during the project duration as shown above (Table 4.13). This can be

calculated as the ratio of the Earned Value to the planned value of the project. For an ideal

situation, it must be equivalent to one or higher than one. In this case study, the SPI qualities

are in the middle of 0.01 and 0.52. This demonstrates the project is lagging behind schedule

and not completed on time. This can be shown in the following figure.

(700,000,000.00)

(600,000,000.00)

(500,000,000.00)

(400,000,000.00)

(300,000,000.00)

(200,000,000.00)

(100,000,000.00)

-

0 2 4 6 8 10 12

Res

ou

rce

in E

TB

Time in Months

SV

78

Figure 4. 18 Cumulative Schedule Performance Index at Various Status Months

The graph shows months vs. value which indicates behavior of Schedule Performance

Index of construction work throughout the entire project lifecycle. It shows values of SPI

on the respective status months. All the values are less than 1 which shows that project is

delayed. The amount of percentage schedule performance analysis can be calculated by the

amount of plan value to the budget at completion and multiplying by 100.

4.4.2.9. Schedule Forecasting

Schedule analysis for this project has demonstrated that the task is lagging behind schedule

and not performing at most extreme effectiveness. The implementation of Earned Value

management on this case study can also show how long it would take to complete the entire

project using the trend analysis derived throughout the duration of ten months. To calculate

the schedule forecast in terms of time at the end of ten months, which is the estimate at

completion in terms of time is as shown below.

𝐸𝐴𝐶𝑡 = (𝐵𝐴𝐶 ÷ 𝑆𝑃𝐼) ÷ (𝐵𝐴𝐶 ÷ 𝑀𝑜𝑛𝑡ℎ𝑠)

𝐸𝐴𝐶10 = (810,512,068.43 𝐸𝑇𝐵 ÷ 0.25) ÷ (810,512,068.43 𝐸𝑇𝐵 ÷ 10)

= 40 𝑚𝑜𝑛𝑡ℎ

Where BAC is the budget at completion of the project

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0 2 4 6 8 10 12

Val

ue

Time in Month

SPI

79

SPI is the schedule performance index at the end of July month

Time represents the total amount of months planned for the project

Due to the less efficient performance of the project team, it was predicted that project

would fall behind the schedule and additional time is needed to complete the project.

Therefore, EACt demonstrates that if the present advancement pattern proceeds the project

will prone to complete in 40 months when contrasted with the initial completion time of

10 months.

The project performance indicators show that the project is behind the original schedule as

per the SPI calculations. The main reasons why this happen can be shown in the following

Table for each month.

Table 4. 14 Problems encounter on the project

Problems encounter Months

Oct

ob

er

No

vem

ber

Dec

emb

er

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

July

Lack of Machineries

Lack of Skilled Manpower; Office Team leader,

Office Engineer, Planning Engineer

Right of way problem (Electric Poles)

The client doesn’t give quarry site on Bure (sub-

base material) and Injibara (red ash)

Right of way problem (crusher site)

Consultant delay on sending design data for

structure

Lack of Skilled Manpower; (Electrician and

sanitary engineer)

Delay on supply mixers, vibrator, mold and

formwork

shortage of resource supply (Lime, aggregate for

structure) and laboratory equipment

80

shortage of resource supply (Material and mold

for structure)

Shortage of Grader and Shower Truck

Shortage of resource supply (Material and

Machineries) (Shortage of Mixer, Vibrator,

Labor, Nail, Wood, Timber, Cement, Sand,

Aggregate)

Shortage of resource supply (Material and

Machineries) (Shortage of Mixer, Vibrator,

Labor, Nail, Wood, Timber, Cement, Sand,

Aggregate) and excess Rain

4.4.2.10. Case Study One Analysis

Generally, the analysis status before and after applying EVA in terms of benefits and

project variables are listed in the Table 4.15. It shows the data resulting before applying

EVA and afterwards and was generated by the contrast of calculation. Before applying

EVA, there was no accessible information on SPI and CPI in light of the fact that the

immediate connection between time and cost execution was missed. At the end of ten

months, the project is under budget, but the forecasting completion of overall project cost

will be non-effective as it is behind schedule. As for the whole project, it will have a cost

overrun and delay in schedule.

Table 4. 15 Project Comparative Findings

Item Status before applying EVA Status after applying EVA

Project budget 810,512,068.43 ETB 810,512,068.43 ETB

Cost variance (CV) Planned values compared with

actual cost

Earned Value compared with

actual cost

Cost performance index (CPI) Not available 1.37

Schedule performance index (SPI) Not available 0.25

Estimate at Completion (EAC) Not available 1,926,458,202.92 ETB

Estimate to Complete (ETC) Not available 1,794,845,662.82 ETB

Estimate at Completion time (EACt) Not available 40 months

81

4.4.3. Case Study Two

4.4.3.1. Project Details

Location: Bahir Dar

Project: Getermenged –Airport Asphalt Widening Road Project

Client: Bahir Dar Industry Development & City Service Office

Contractor: Amhara Road Works Enterprise

Consultant: Amhara Road and Building Design and Construction Supervision Works

Enterprise

Contract amount: 216,051,863.11 ETB

Commencement Date: March 03, 2018

Project Completion: - June 07, 2019

4.4.3.2. EVM Applied to Case Study

This case study has been identified therefore, EVM was been applied to this project to

monitor the progress of the project. The EVM analysis of this project is as shown below:

4.4.3.3. Earned Value Analysis:

Table 4. 16 Cumulative Earned Value Analysis

S.No. Month Earned Value (EV) Analysis

PV AC EV

1 May 2,234,778.70

0.00 0.00

2 June 11,229,101.75

286,220.42 0.00

3 July 20,810,148.46

704,017.92 2,282,800.67

4 August 26,660,644.33

3,368,835.81 4,083,530.68

82


Cost (As of August 30, 2018)

The Earned Value Analysis Table 4.16 and graphical Figure 4.19 above was used to

monitor the performance management of a construction project in order to observe how

well the project is being managed. This shows the Earned Value graphical representation

i.e. planned value (PV), Earned Value (EV) and the actual cost (AC) of the project from

May to August. It can be seen from the above graph that the actual cost was less than the

planned value (PV) that indicates less money is being spent than budgeted and the Earned

Value (EV) less than the planned value (PV) that indicates the actual amount of work

performed is less than the plan value. Hence, the overall performance of the project is under

budget but it is affected by schedule performance. This observation derived from the graph.

May June July August Septe Octo Nove Decem Janu Febru March April May2

PV 2,234,77 11,229,1 20,810,1 26,660,6 39,811,8 55,797,1 65,363,7 79,640,2 105,095, 145,060, 168,775, 181,351, 187,871,

EV - - 2,282,80 4,083,53

AC - 286,220. 704,017. 3,368,83

-

20,000,000.0

40,000,000.0

60,000,000.0

80,000,000.0

100,000,000.0

120,000,000.0

140,000,000.0

160,000,000.0

180,000,000.0

200,000,000.0R

eso

urc

e in

ET

B

Time in Month

PV

EV

AC

83

4.4.3.4. Performance Analysis Index

Table 4. 17 Cumulative EVM Performance Indexes

S.No. Month Performance analysis index

CPI SPI

1 May 0 0

2 June 0 0

3 July 3.24 0.11

4 August 1.21 0.16

The cost performance index (CPI) is an indicator that shows the efficiency of resource used

during the project duration as shown above. This can be calculated as the ratio of the Earned

Value to the actual cost of the project. For an ideal situation, it must be equivalent to one

or higher than one but in this case study, the CPI qualities are zero at May and June means

the contractor was not mobilizing any activity. While at July and August demonstrates the

project has cost effectiveness. This demonstrates that project performance is acceptable.

Figure 4. 20 Graphical Representation of Cumulative Cost &Schedule Performance Index

The Schedule performance index (SPI) is an indicator that shows the efficiency of the

project team during the project duration as shown above. This can be calculated as the ratio

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

M A Y J U N E J U LY A U G U S T

Val

ue

Time in Month

SPI CPI

84

of the Earned Value to the planned value of the project. For an ideal situation, it must be

equivalent to one or higher than one. In this case study, the SPI qualities are in the middle

of 0 and 0.11. This demonstrates the project is lagging behind schedule and will not

completed on time.

4.4.3.5. Cost and Schedule Analysis

The cost variance (CV) of the project is calculated by subtracting the EV from the AC. As

been shown above, the CV consistently shows a negative value in June that indicates

unfavorable situation but in month July and August CV shows a positive value, which

portrays a favorable situation. This shows that the project is under budget in the sense that

the amount of money budget on the project is more than what was spent on the project. In

addition, CV can also be expressed in percentage by dividing CV by EV and multiplying

by 100.

Table 4. 18 Cumulative Cost and Schedule Analysis

S.No. Month Cost and Schedule analysis

CV CV% SV SV%

1 May 0 0 -1,809,499.95 -100

2 June -286,220.42 - -10,779,227.58 -100

3 July 1,578,782.75 69.12 -18,052,878.2 -88.77

4 August 714,694.87 17.5 -22,078,048.64 -84.39

As shown in the above table, the schedule variance of the project is the difference between

the Earned Value and the planned value of the project, which is indicated above as a

negative value throughout the duration of the project. This shows that the project is lagging

behind schedule as planned. In addition, time is being spent in contrast with the measure

of work really gotten from the project and this would affect the project negatively due to

the late completion of the project. The SV can also be expressed in percentage by dividing

schedule variance (SV) by Planned value (PV) and multiplying by 100 which lies between

85

the ranges of -100 % to -84.39 % which indicates that the work percentage has not been

completed with contrast with the schedule plan of the project.

It has been shown that at month May and June the SPI and CPI is zero. In case of that when

we combined the cumulative amount of CPI and SPI, to forecast future and remaining work

cost there may be a problem to estimate reliable data, using the systems of EAC and ETC.

In case, this study has not been analysis for future predictions.

Main problems that was encounter in the project are lack of skilled manpower; office team

leader, office Engineer, planning Engineer, insufficient machineries and excess rain.

4.4.3.6. Case Study Two Analysis

Generally, the analysis status before and after applying EVA in terms of benefits and

project variables are listed in the Table below:

Table 4. 19 Project Comparative Findings

Item Status before applying EVA Status after applying EVA

Project budget 187,576,040.3 ETB 187,576,040.3 ETB

Cost variance (CV) Planned values compared with

actual cost

Earned Value compared with

actual cost

Cost performance index (CPI) Not available 1.21

Schedule performance index (SPI) Not available 0.16

The Table above shown the data resulting before applying EVA and afterwards and was

generated by the contrast of calculation. Before applying EVA, there was no accessible

information on SPI and CPI in light of the fact that the immediate connection between time

and cost execution was missed. The conclusion was that the project had under budget and

a good preformed but it is affected by schedule performance. As for the whole project, it

had a bad effect of schedule performed and may delay the project.

86

4.4.3.7. Result Analysis on Case Studies

Earned value management was being applied to the case studies and the results gotten can

be seen in the section above. Earned value analysis, cost analysis, schedule analysis, cost

forecasting and schedule forecasting have been used to analysis the values gotten from the

project to identify the projects current situation and also look into the projects future. So

Earned value management not only gives a detailed insight to how well the project is going

but it also helps the project team understand/asses the status of the project and predict the

future performance of the project.

The results of EVA of the two case studies where by in both case study 1 and 2, it was

observed that the actual cost was under Earned Value for most of the months which

represent that a good performance of CPI in an average of both above 1.00. This means

that both projects were able to operate under budget. But as PV is above EV though all

months it means that the progress was slow. As a result of this, SPI achieved a low

performance on both cases an average of below 1.00 which represent delay for total project

duration. In the same way future cost performance is additionally influenced by badly past

schedule performance due to late completion of the project which will be one of the cause

for cost overrun.

87

CHAPTER FIVE

CONCLUSIONS AND RECOMMENDATIONS

5.1. Findings

This study reveals that the most key players in construction industry have limited

awareness of EVM and is not practiced by most project managers. EVM is an important

tool for monitoring and controlling project performance, which is best practiced in the

construction industry. This paper has identified reasons why EVM is not practiced; barriers

for its use and success factors for EVM implementation to overcome the barriers.

A comprehensive literature review and detail analysis of Earned Value Management

(EVM) was conducted in order to test its use in construction projects. From the survey

result it was found that EVM provides five main benefits: EVM allows early warning of

performance problems to take corrective action, increase project visibility, increase

confidence in contractors’ ability to manage project by identifying problems early, assists

the project team to achieve cost objectives and provides more accurate management and

financial report. Current practice of planning, scheduling and monitoring projects is not

explicit enough from EVM point of view. These difficulties were addressed and the

concept was introduced based on the Earned Value survey.

The study identified possible constraints and difficulties in Bahir Dar road construction

projects, which hinders EVM’s implementation. These include lack of EVM expertise and

experience, minimal awareness of EVM including training, low familiarity with the EVM

techniques and poor understanding of EVM. To overcome the barriers for EVM

implementation, five critical success factors were determined: providing reliable data on

real costs and deadlines, preparing suitable WBS, convincing project managers of the value

and necessity of Earned Value in achieve project success, adequate EVM training and

understanding its requirement.

The results in this study also examined the practical application of Earned Value

Management in practice. Case studies confirm that the feasibility of introducing EVM into

88

two infrastructure construction projects for performance reporting and evaluation appears

is suitable as monitoring and control techniques of project cost. This technique can

facilitate the continuity of project and identify project’s up to date progress. However, it

was not able to provide exact value and forecast the projects future whether the project is

over or under budget and above or behind schedule.

From the analysis and results obtained, it can be concluded that monitoring and control is

of great importance in project management. Monitoring and control helps project managers

get better results from projects by ensuring the project is on track and identifying any

irregularities that could occur in the project. From the two case studies the data and

calculated results can be concluded that:

Currently both projects are lagging behind the schedule, but are under budget.

At the beginning stage of both projects, the critical activities were not closely

monitored, which seems to be one of the reason for delay of the project.

The delay in completing the activities, will likely lead to increase cost of the project.

So it is recommended that, the project needs immediate attention to get it back on

track.

The overall aim of this research which is to analysis the use of Earn Value Management as

a trend analysis tool in monitoring and control project has been satisfied from the case

study analysis. Implementing Earned Value Management into the project has given a

clearer insight to the project by showing the project status in terms of cost and time and

forecasting when the project would be finished and how much the project still requires.

89

Figure 5. 1 SWOT analysis of EVM

To summarize EVM and its features from the literature and analysis point of view, a SWOT

analysis (strengths, weaknesses, opportunities, threats) was carried out. Different factors

identified in this thesis that either contribute or hamper the implementation of EVM were

grouped in this analysis. The result can be seen in Figure 5.1. The purpose of this analysis

is to give the reader an overview of meaningful factors of EVM in the context of the

literature and help to evaluate whether the benefits can be considered to be greater than the

potential risks of the investment.

Strengths

• Integrate cost, time and scope

• Variety of indicator

• Early warning signs of poor performance

• Forecasting

• Ability to compare performance between projects

• Tool especially for project mangers

Weaknesses

• Requires accurate scheduling andresource planning (bottom up plannedWBS)

• Integration to level of effort work

• Estimating EV is difficult in various ofactivities

• Earned value may not provid exact upto date progress and forecast

Opportunities

• Improving scheduling and planning support other project actions

• One clear direction to develop current monitoring practices

• Utilization of all EVM indicators

• Progress data of complex activities

Threats

• Misinterpretation of indicators

• Overwhelming data acquisition

• If not implemented well, can be morenuisance than helpful tool

• Development of other models like Monte Carlo Simulation

EVM

90

5.2. Recommendations

Based on the study findings, the following points are suggested in order to enhance the

awareness and increase the level of application on EVM for Bahir Dar road construction

projects.

1. It is recommended that much efforts to be made in order to enhance the awareness

and increase the level of application on EVM among the key players in Bahir Dar

road construction industry.

2. The study recommends that the project management team assess the progress of the

implementation of the project and comparing the expected progress with the actual

progress.

3. In the same way it recommends that project managers deploy EVM tools in projects

so as to monitor and control the performance and progress of the project as well as

identify problems in advance.

4. One of the characteristics of EV is adequate tool for portfolio management. Thus,

it would be encouraged that government and clients in general do mandate for the

use of EV by the contractor.

5.3. Suggestions for Future Research

It is recommended that similar studies can be performed to increase EVM adoption and

evaluate the project performance of infrastructure projects, by providing wide scope for

project management software and increase sample size which could produce pictorial

representation of EVM parameters.

91

Bibliography Abba. (1997). Earned Value Management: Reconciling government and commercial

practices. Program Manager.

Abd Majid & McCaffer. (1997). Assessment of Work Performance of Maintenance

Contractors in Saudi Arabia, Journal of Management in Engineering.

Abraham. (2008). Kothari as cited in Abraham, (2008). Kothari, C.R. (2004). Research

methodology, Methods and Techniques. New Age International Limited

Publishers.

Acebes et al. (2013). Beyond Earned Value Management: A Graphical Framework for

Integrated Cost, Schedule and Risk Monitoring. Procedia - Social and Behavioral

Sciences, .

Alberto et, .. (2004). The use of earned value analysis (EVA) in the cost management of


Alvardo and David. (2004). “Assessing the performance of construction projects

:implementing earned value management at the general service administration

”journal of facilities management.

Amin M.E. (2005). Social Science Research: Conception, Methodology and Analysis.

ANSI/EIA. (1998). American National Standards Institute/Electronic Industries Alliance

(1998). ANSI-EIA-748-98,Earned Value Management Systems. Arlington, VA:

Electronic Industries Alliance; USA.

Antvik, L. C. (1998). Earned Value Management: A 200 Year Perspective. Paper presented

at the29th Annual Project Management Institute Seminars & Symposium, Long

Beach, CA.

APM. (2006). APM Body of Knowledge (5th ed.). High Wycombe, Buckinghamshire, UK:

Association for Project Management.

APM. (2013). Earned Value Management handbook, APM: princes risborough.

Association National Security Industrial. (1980). Cost Schedule Systems Conpendium.

Washington, DC.

Bhosekar and Gayatri. (2012). Cost Controlling Using Earned Value Analysis in

Construction Industries. International Journal of Engineering and Innovative

Technology (IJEIT).

Block. (1971). Accomplishment/Cost: Better project control. Harvard Business

Review(May-June).

Bower. (2007). New Directions in Project Performance and Progress Evaluation. School

of Construction, Property and Project Management. Melbourne: RMIT University.

92

Brandon, D. M. (1998). Implementing Earned Value Easily and Effectively. Project

Management Journal,.

Brock. (1983). “Earned value: burden or benefit?” The Measurable News, Sept, 12-13.

Butler et al. (1993). “Cost and schedule control at besselaar.” Proc., Proj. Manage.

Institute.

Carlos. (2004). The use of Earned Value Analysis (EVA) in the cost management of


Christensen. (1990). The Role of Analysis in CSCSC. Program Manager, 19(July-August).

Christensen. (1998). The Costs and Benefits of the Earned Value Management Process.

Acquisition Review Quarterly (Fall 1998).

Clough. (2000). Clough, R. H., Sears, G. A., and Sears, S. K. (2000). Construction Project

Management 4th edition. John Wiley & Sons, Inc., USA.

Cooke-Davies. (2003). The maturity of project management in different industries: An

investigation into variations between project management models. International

Journal of Project Management.

De Falco & Macchiaroli,. (1998). Timing of project control activities in project planning.

International Journal of Project Management.

De Marco & Narbaev. (2013). Earned value-based performance monitoring of facility

construction projects. Journal of Facilities Management.

Degoff. (1999). Degoff, R. A., and Friedman H. A. (1999). Construction Management,

Basic Principle for Architects, Engineers and Owners. A Wiley Series in

Construction Management and Engineering.

Deltek. (2008). What are the biggest perceived issues with EVM? And what is the solution

for each issue?

Deng, M. & Hung, Y. (1998). Integrated cost and schedule control: Hong Kong

perspective.Project Management Journal,.

Duncan et al. (1990). J.M (1990) in Xiao, H., and Proverbs, D. (2002b).The Performance

of Contractors in Japan, The UK ant The USA: An Evaluation of Construction

Quality. International Journal of Quality and Reliability Management.

Englert and associates. (2000). Earned value management. Case study using Microsoft

project.

Fleming & Koppelman. (2005). Earned Value Project Management, 3rd edition. Newton

Square, PA: Project Management Institute (PMI).

Fleming and Koppelman. (2009). The Two Most Useful Earned Value Metrics: the CPI

and the TCPI).

93

Fleming and Koppelman. (2010). Earned Value Project Management, 4th ed, Proj.

Manage. Institute.

Flemming. (1998). Cost / Schedule Control Systems Criteria. The Management Guide to

C/SCSC. England: Probus Publishing Company, 1988.

Fox. (1996). Roots of Earned Value System. The Measurable News.

Frigenti and Comninos. (2002). The Practice of Project Management: a guide to the

business-focused approach. Kogan Page, London.

Gower. (2007). Project Management, Project and Programme Management Resources for

Students (9 ed.).

Hailemeskel, T. (2013). Management Control of Projects in Construction Industry

Ethiopian Context.

Harrison, F. L. ( 1997). Advanced Project Management: A Structured Approach England:

Gower Publishing Limited Company.

Heagney. (2012). Fundamentals of Project Management (4th ed.). New York: American

Management Association.

Henderson & Zwikael. (2008). “Does project performance Exist ? Are-examination of CPI

and Evaluation of SPI(t) stability”. Crosstalk-the journal of Defense Software

Engineering .

Hillson. (2004a, October 2004). Earned Value Management and Risk Management: A

Practical Synergy. Paper presented at the PMI Global Congress North America,

Anaheim, CA, USA.

Kasiem, S. (2008). Study of the problems of construction conditions of contract for public

worksin Ethiopia. Master’s Thesis, Addis Ababa University.

Kauffmann et al., P. K. (2002). Using Earned Value Methods to SubstantiateChange-of-

Scope Claims. Engineering Management Journal,.

Kerzener. (2001). Project Management: A system approach to planning, scheduling and

controlling (7th edn), London, John Wiley and Sons, Inc.

Kerzner. (2003). Project Management: A Systems Approach to Planning, Scheduling and

Controlling (8th ed.). Hoboken, NJ, USA: John Wiley & Sons.

Kerzner Harold. (1998). Project Management, A Systems Approach to Planning,

Scheduling and Controlling, Harold Kerzner, 6ª Edição, Van Nostrand Reinhold,

1998.

Khamidi et al. (2011). Application of Earned Value System on an Infrastructure project: A

Malaysian Case Study. 2011 International Conference on Management and Service

Science.

94

Kim et al. (2003). A model for effective implementation of Earned Value Management

methodology. International Journal of Project Management.

Little Inc. (1983 ). Survey relating to the Implementation of Cost/Schedule Control System

Criteria within the Department of Defense and Industry, Phase I and II: A Report

for the Assistant Secretary of Defense.

Lynn, M. R. ( 1986). Determination and quantification of content validity. Nursing

Research.

Magigi. (2015). The case study approach.

Matters. (2014). “Manufacturing report 2014,”.

McKay.J., & Marshall. P,. (2001). The Dual Imperatives of Action Research. Information

Technology& People,.

Moski. (1951). Cost Control Fundamentals. In Plant Executives' Handbook. New York:

McGraw-Hill Publishing Co.

MoWUD. (2001). Study for Capacity Building of the Construction Industry Ethiopia,

Ministry of Works and Urban Development, Addis Ababa (Amharic).

Muhwezi Acai & Otim. (2014). An Assessment of the Factors Causing Delays on Building

Construction Projects in Uganda. International Journal of Construction Engineering

and Management.

Naderpour and Mofid. (2011). Improving construction management of an educational

center by applying earned value management technique prociedia.

NDIA. (1998). ANSI/EIA-748 Guide: Earned Value Management System (Standard):

American National Standard Institute/Electronic Industry Association.

Ng shi cia. (2015). The contribution of Earned Value Analysis for cost controlling of


Paige H. (1963). How PERT-Cost Helps the General Manager. Harvard Business

Review(Nov-Dec).

Pär Karlsson. (2011). Project Management in Sweden and Ethiopia, Potential

improvements in Project Management methods.

Peterson & Oliver. (2001). EV-Lite: Earned Value Control for Fast Paced Projects. Paper

presented at the 32th Annual Project Management Institute Seminars and

Symposium, Nashville, TN.

PMBOK. (2008). A guide to the Project Management Body of Knowledge, Newtown

Square: Project Management Institute, Inc.

PMI. (2004). A Guide to the Project Management Body of Knowledge (3rd ed.). Newtown

Square, PA: Project Management Institute.

95

PMI. (2005). Practice Standard for Earned Value Management. Newtown Square, PA:

Project Management Institute.

PMI. (2011). A Guide to the Project Management Body of Knowledge ( PMBBOK Guide

3rd Edition). Newtown Square, PA. USA: Project Management Institute. inc.

PMI. (2001). Practice Standard for Work Breakdown Structures. Newtown Square, PA,

USA: Project Management Institute.

Raveesh L. & Sundip S. (2015). Project Performance Evaluation by Earned Value

Analysis.

Raz & Globerson. (1998). Effective Sizing and Content Definition of Work Packages.

Project Management Journal.

Richard. (2001). Analysis and Application of Earned Value Management to the Naval

Construction Force.

Ritz 1994 & Degoff et, .. (1999). Ritz, G. J. (1994). Total Construction Project

Management. Mc Graww-Hill, Printed in Singapore. Degoff, R. A., and Friedman

H. A. (1999). Construction Management, Basic Principle for Architects, Engineers

and Owners. A Wiley Series in Construction Managem.

Saitow. (1969). CSPC: Reporting project progress to the top. Harvard Business

Review(Jan-Feb).

Schulte. (2001). What is the Health of my Project? The Use and Benefits of Earned Value.

White Paper Library, Welcom.

Sekaran. (2003). Research Methods For Business - A Skill-Building Approach (4nd ed.).

New York: John Wiley & Sons, Inc.

Shtub et, a. B. (2005). Project Management: Processes, Methodologies, and Economics (2

ed.). New York, NY: Prentice Hall.

Smith,Winter, Morris & Cicmil, . (2006). Winter, M.; Smith, C.; Morris, P.; Cicmil, S.

(2006) Directions for futureresearch in project management: the main findings of

a UK governmentfunding.

Solomon, S. (2015). The Management of Construction Processes in Developing Countries:

A Case Study of the Ethiopian Roads Authority.

Song. (2010). Earned Value Management-A Global and Cross-Industry Perspective on

Current EVM Practice. ISBN 978-1-935589-8, Project Management Institute,

Newtown Square, PA.

Sparrow, H. (2000). EVM = Earned Value Management Results in Early Visibility and

ManagementOpportunities. Paper presented at the 31st Annual Project

Management Institute Seminars andSymposium, Houston, TX.

96

Spinner. (1997). Spinner, M. P. (1997). Project Management Principles and Practice.

Prentice- Hall, Ohio.

Stephenie. (2017). Available at: http://www.statisticshowto.com/cronbachs-alpha-spss/.

Tadesse, A. (2016). Assessment on Performance and Challenges of Ethiopian Construction

Industry.

Tadesse, Y. (2006). MSc thesis on construction cost estimation guideline for local

contractors in Ethiopia. AAU.

Terrel M. et al., B. A. (1998). Evaluating Project Performance Tools: A CaseStudy. Paper

presented at the 29th Annual Project Management Institute Seminars

andSymposium, Long Beach, CA.

Thamhain, H. J. (1998). Integrating Project Management Tools with the Project Team.

Paperpresented at the 29th Annual Project Management Institute Seminars and

Symposium, LongBeach, CA.

True, L. (2003). Do you really know your construction costs? Journal of Construction

Accounting &Taxation,.

Uyttewaal. (2003). Dynamic Scheduling with Microsoft Office Project.

Vanhoucke, M. (2010). Measuring Time, Improving Project Performance Using Earned

ValueManagement. Springer.

Wideman, R. M. (1999). Cost Control of Capital Projects and the Project Cost Management

SystemsRequirements (2nd ed.). Vancouver, BC: AEW Services and BiTech.

Williams. (2008). The Principles of Project Management. VIC Australia: Site Point Pty

Ltd.

Zewdu and Aregaw. (2015). “Causes of Contractor Cost Overrun in Construction Projects:

The Case of Ethiopian Construction Sector.

Zohrabi. (2013.). Mixed Method Research: Instruments, Validity, Reliability and

Reporting Findings.

97

APPENDIX

98

Appendix A: Survey

Research Title: Application of Earned Value Management (EVM) on Performance

Evaluation of Infrastructure Projects: A Case Study of Amhara Road Works Enterprise

(ARWE) Construction Projects.

Dear Respondent: -

I am a postgraduate student in Construction Technology & Management in Bahir Dar

Institute of Technology, Faculty of Civil & Water Resource Engineering. At present, the

construction industry in Ethiopia is the major sector and developing tremendously where

public and private sectors are investing huge amount of resources. However, during

construction, it has been observed that various factors may lead to time and cost overrun.

Thus, it has become a major problem to complete projects on time and within the estimated

budget.

Therefore, this questionnaire survey is designed to evaluate the utilization of Earned Value

Management (EVM) to monitor projects as part of my master’s thesis. This survey is

intended to help the researcher get information on the current practices and drawbacks to

adopt the standard practices of EVM technique in measuring performance and forecasting

of road projects by knowing factors that hinder the usage and application of EVM in Bahir

Dar.

The purpose of this study is purely academic and the information given will be treated with

the highest degree of confidence. You have been selected as a key respondent for this study.

Kindly, complete the questionnaire to enable the researcher complete the study.

Please tick the answer which represents your opinion on the subject. If you have questions

related to the study, please don’t hesitate to contact me at +251918618384 or through email

address [email protected].

I appreciate your participation in this effort.

Thank you for your collaboration.

99

SECTION A: Background Information

1. Name of company (Optional) _____________________________________

2. Type of Organization: Contractor ___ Consultant ___ Owner ____ Other ____

3. Year of establishment: _______________________

4. Classification: GC ____ BC ____ RC_____ Grade ____Other ____

Please tick or circle the appropriate number.

1 AGE

Less than 25 years 26-35 years 36-45 years 46-55 years 56 years & above

1 2 3 4 5

4 EDUCATION QUALIFICATION

PhD Masters Bachelors Diploma Certificate Others specify

1 2 3 4 5 6

SECTION B: Multiple Choice - circle the letter/s that best indicates your opinion.

1. How do you track Project Costs/Progress?

a. Gant chart

b. Critical path method

c. PERT method

d. EVM Earned Value Management

e. Other ______________________

___________________________

2. Which technique do you recommend to measure performance on construction projects?

a. Gant chart

b. Critical path method

c. PERT method

d. EVM

e. Other ___________________

2 SEX

Female Male

1 2

3 TITLE

Project manager Architect Engineer Quantity surveyor Others specify

1 2 3 4 5

5 DURATION OF SERVICE

Less than 5 years 5-10 years 11-16 years Above 17 years

1 2 3 4

100

3. What is your opinion of the value of EVM?

a. Extremely valuable

b. Useful for most projects

c. Suitable for some projects

d. Not worth the effort

4. If EVM is used in your organization, identify one or more of these reasons:

a. Required by client

b. Required by project sponsors

c. Used voluntarily by managers

d. Used on a trial basis/occasionally

e. Not sure why it is used

f. Other _____________________

5. If EVM is not used in your organization, identify one or more of these reasons:

a. Not requested: Senior management or clients do not require EVM reports

b. Not successful: Earned Value techniques were tried in the past, and rejected

c. No training: Project managers are untrained in the application of EVM

d. Too complex: Earned Value procedures seem too complicated

e. No budget: Project budgets are not required by management or clients

f. No schedule: Project schedules are not required by management or clients

g. Partial costs: Project budgets do not cover the cost of all project resources or costs

h. Not sure: Uncertain, or other reasons

6. How do you monitor and control progress throughout a project, your project status

whether it is over budget or under budget and ahead of schedule or behind schedule?

a. By comparing only planned costs against actual costs

b. By comparing Earned Value (value of work performed) to planned & actual cost

c. Not sure

d. Others: specify __________________________________________________

7. How much do you agree that EV, as a new estimate value on top of Plan Value and

Actual Cost, is necessary in cost estimating?

a. Strongly agree

b. Agree

c. Neutral

d. Strongly disagree

e. Disagree

101

SECTION C: Respondents Level of Agreement

Please indicate the extent of use and level of agreement on various EVM principles on a

scale of 1-5 for the following questions.

Scale: 1 “Strongly Disagree”, 2 “disagree”, 3 “not sure”, 4 “agree”, 5 “strongly agree”.

1. How knowledgeable are you about EVM?

S.N Participants knowledge about EVM

techniques

Weighted value

1 2 3 4 5

1. 1 Expert

2. 2 Knowledgeable

3. 3 Familiar

4. 4 Slightly familiar

5. 5 Not familiar

2. How much do you agree that your organization is able to provide up-to-date

information on project cost and schedule in time?

3. The following are examples of EVM contribution. Based on your experience,

indicate your level of agreement on the contribution of EVM for project control.

S.N Contribution of EVM Weighted value

1 2 3 4 5

1. Increased project visibility

2. Improved estimating and planning

3. EVM provides early warning of performance problems to

take corrective action

4. EVM assists the project team to achieve cost objectives

S.N Weighted value

1 2 3 4 5

1 Organization is able to provide up-to-

date information

102

5. EVM improves communication among project team

members

6. EVM assists the project team to achieve schedule objectives

7. EVM improves project scope management

8. Overall, EVM is cost effective tool for performance

management

9. Increase confidence in contractors ability to manage project

by identifying problems early

10. To monitor progress and to develop cost and schedule

forecast for active project

11. Used provide the provision of more accurate management

and financial report

12. EVM offers choice to integrate risk management

13.

4. Following are list of barriers of company to adopt the practice of EVM for

measuring performance and forecasting construction projects. Which elements do

you think are the major barriers for a company to adopt efficient and effective

management practice of Earned Value Management?

S.N Barriers of company to practice EVM Weighted value

1 2 3 4 5

1. Lack of management support

2. Inability to find qualified resources

3. Difficulty integrating cost, resource and schedule data

concerning real cost and deadlines

4. It takes too long to manually produce reports

5. Pressures to report only good news

6. Difficulty in adequate work breakdown structure (WBS) to

apply EVM

7. Poor understanding of EVM

8. Distrust and conflict between project managers, project

consulting and government

9. Minimal awareness of EVM including training

10. Low familiarity with the EVM techniques

103

11. Lack of EVM expertise and experience

12. Earned Value requires more information.

13.

14.

15.

5. Following are list of Success factors for EVM implementation. Which elements do

you think are the major Success factors to implement the usability of EVM?

S.N Success factors for EVM implementation Weighted value

1 2 3 4 5

1. Convincing project managers of the value and necessity of

using Earned Value in achieve project success

2. Top management support

3. Convince management of the need to require project

managers to be responsible for costs on a project.

4. Buy in of EVM by the project management staff

5. Adequate EVM training

6. Culture of the organization and top management leadership

style

7. Maturity of the organization’s project management system

8. EVM needs qualified team

9. Understanding its requirement

10. Provide reliable data on real costs and deadlines

11. Preparing suitable work break down structure (WBS)

12.

13.

14.

15.

Thank you for your participation!

104

Appendix B: The results of reliability test (Cronbach's Alpha) of questionnaire

Table B- 1: SPSS result of reliability test for contribution of using EVM for project control

purpose

Reliability Statistics

Cronbach's Alpha N of Items

.831 12

Item-Total Statistics

Scale

Mean if

Item

Deleted

Scale

Variance if

Item

Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if

Item

Deleted

Increased project visibility 41.30 15.905 .591 .654 .811

Improved estimating and planning 41.91 16.523 .313 .320 .836

EVM provides early warning of

performance problems to take

corrective action

41.03 14.843 .712 .665 .799

EVM assists the project team to

achieve cost objectives

41.58 16.377 .497 .465 .818

EVM improves communication

among project team members

41.73 15.267 .619 .668 .807

EVM assists the project team to

achieve schedule objectives

42.06 17.934 .143 .301 .843

EVM improves project scope

management

41.67 15.542 .603 .785 .809

Overall, EVM is cost effective tool

for performance management

42.42 16.314 .404 .387 .826

Increase confidence in contractors

ability to manage project by

identifying problems early

41.55 15.943 .745 .748 .804

To monitor progress and to develop

cost and schedule forecast for

active project

42.06 16.934 .319 .464 .832

Used provide the provision of more

accurate management and financial

report

41.58 15.189 .789 .860 .796

105

EVM offers choice to integrate risk

management

42.45 17.131 .292 .328 .834

Scale Statistics

Mean Variance Std. Deviation N of Items

45.58 18.939 4.352 12

Table B- 2: SPSS result of reliability test (Cronbach's Alpha) for Barriers of Company to

Practice EVM



.760 12


Scale Mean

if Item

Deleted

Scale

Variance

if Item

Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if

Item

Deleted

Lack of management

support

38.52 21.195 .477 .444 .734

Inability to find qualified

resources

39.12 21.360 .521 .516 .726

Difficulty integrating

cost, resource and

schedule data concerning

real cost and deadlines

39.36 20.551 .686 .666 .703

It takes too long to

manually produce

reports

38.88 22.547 .457 .540 .735

Pressures to report only

good news

39.18 22.466 .513 .514 .729

Difficulty in adequate

work breakdown

structure (WBS) to apply

EVM

39.36 22.051 .547 .591 .724

Poor understanding of

EVM

37.85 24.508 .316 .394 .751

Distrust and conflict

between project

managers, project

consulting and

government

38.94 23.996 .336 .456 .750

Minimal awareness of

EVM including training

37.55 25.943 .226 .641 .758

Low familiarity with the

EVM techniques

37.88 27.172 -.031 .521 .780

106

Lack of EVM expertise

and experience

37.24 26.627 .110 .589 .765

Earned Value requires

more information

38.79 23.610 .401 .461 .743

Scale Statistics


42.06 27.371 5.232 12

Table B- 3: SPSS result of reliability test (Cronbach's Alpha) for Success Factors for EVM

Implementation



.714 11


Scale

Mean if

Item

Deleted

Scale

Variance

if Item

Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if

Item

Deleted

Convincing project managers of

the value and necessity of using

Earned Value in achieve project

success

39.82 10.028 .501 .419 .678

Top management support 40.39 9.121 .517 .574 .666

Convince management of the

need to require project managers

to be responsible for costs on a

project.

41.21 8.735 .525 .564 .663

Buy in of EVM by the project

management staff

41.33 11.354 -.028 .301 .765

Adequate EVM training 39.97 9.530 .405 .535 .687

Culture of the organization and

top management leadership style

40.76 9.752 .418 .601 .685

Maturity of the organization’s

project management system

40.79 9.672 .484 .434 .675

EVM needs qualified team 40.61 10.809 .225 .601 .711

Understanding its requirement 40.15 10.133 .494 .513 .680

Provide reliable data on real

costs and deadlines

39.73 11.017 .199 .560 .713

Preparing suitable work break

down structure (WBS)

39.79 10.360 .399 .624 .691

Scale Statistics


44.45 11.818 3.438 11

107

Appendix C: Interview Guide

Application of Earned Value Management (EVM) on Performance Evaluation of

Infrastructure Projects: A Case Study of Amhara Road Works Enterprise (ARWE)

Construction Projects.

INTRODUCTION: The purpose of the interview is to gather key information from the

project managers, Architects, Engineers and Quantity Surveyors about the application of

Earned Value Management (EVM) Technique to Measuring the Performance of a

Construction Project in Amhara Road infrastructure projects in Bahir Dar city. Here is list

of questions expected to be answered by respondent.

1. What are the existing performance measuring techniques used on the construction

projects?

2. How effective and efficient are they in measuring performance of a construction

project

3. What are the possible barriers of EVM Technique in measuring performance of a

construction project in Bahir Dar?

4. What are the likely recommendations with regard to the above challenges?

5. What are the possible benefits of EVM Technique in measuring performance of a

construction project in Bahir Dar?

6. What perception do professionals have on the EVM Technique in measuring

performance of a construction project in Bahir Dar?

7. Any general comment with regard to the application of EVM Technique on

measuring the performance of construction projects in Bahir Dar city?

Thank you!!!

108

Appendix D: Results of Practical Application

Figure A:Burie Agro Industry Park Road Construction Project Graphical Analysis of Cumulative Planned Value, Earned Value and Actual Cost (As of July 30)

Octo Nove Decem Janu Febru Mar Apri May June July

PV 23,140,871 43,746,188 51,051,736 136,072,118 339,324,130 486,698,534 715,812,317 762,684,390 797,707,611 810,512,068

EV 298,354 2,251,362 26,796,309 32,920,230 49,336,392 77,215,718 120,684,663 170,339,118 197,185,896 200,936,527

AC 987,880 3,855,498 19,564,552 28,134,351 45,872,204 66,758,044 91,285,493 123,618,138 145,196,297 146,675,600

-

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

900,000,000

Res

ou

rce

in E

TB

time

PV

EV

AC

109

Figure B: Burie Agro Industry Park Road Construction Project Cumulative cost and Schedule Variance

at Various Status Months

Figure C: Burie Agro Industry Park Road Construction Project Cumulative Cost and Schedule

Performance Index at Various Status

(700,000,000.00)

(600,000,000.00)

(500,000,000.00)

(400,000,000.00)

(300,000,000.00)

(200,000,000.00)

(100,000,000.00)

-

100,000,000.00

0 2 4 6 8 10 12

Res

ou

rce

in E

TB

Time in Months

SV CV

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

0 2 4 6 8 10 12

Va

lue

Time in month

SPI CPI

110

Figure D:Getermenged-Airport Asphalt Widening Road Construction Project Graphical Analysis of Cumulative Planned Value, Earned Value and Actual Cost (As of August

30)

May June July August September October November December January February March April May2

PV 2,234,778.7 11,229,101. 20,810,148. 26,660,644. 39,811,899. 55,797,199. 65,363,752. 79,640,207. 105,095,847 145,060,672 168,775,395 181,351,248 187,871,185

EV - - 2,282,800.7 4,083,530.7

AC - 286,220.4 704,017.9 3,368,835.8

-

20,000,000.0

40,000,000.0

60,000,000.0

80,000,000.0

100,000,000.0

120,000,000.0

140,000,000.0

160,000,000.0

180,000,000.0

200,000,000.0

Res

ourc

e

Time in Month

PV

EV

AC

111

Figure E: Getermenged-Airport Asphalt Widening Road Construction Project Cumulative Cost and Schedule

Performance Index at Various Status Months

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

M A Y J U N E J U LY A U G U S T

VA

LU

E

TIME IN MONTH

SPI CPI

112

Appendix E: EVM Acronyms

Table A.: Comparison of Earned Value Management acronyms (ANSI/EIA, 1998)

ANSI/EIA-748Standard DoD C/SCSC Standard Local name

Planned Value, PV Budgeted Cost of Work Scheduled,

BCWS

Planned

Actual Cost, AC Actual Cost of Work Performed,

ACWP

Expense

Earned Value, EV Budgeted Cost of Work Performed,

BCWP

Executed

Cost Performance Index, CPI Cost Performance Index, CPI -

Schedule Performance Index, SPI Schedule Performance Index, SPI -

Cost Variance Cost Variance Profit (Loss)

Schedule Variance Schedule Variance -

113

Appendix F: ANSI/EIA-748 EVMS Criteria

The criteria are: (ANSI/EIA, 1998)

1. Define authorized work

2. Identify Program Organization Structure

3. Company integration of EVMS subsystems with Work Breakdown Structure

(WBS)

4. Identify organization/function for overhead

5. Integrate WBS and Organization Breakdown Structure (OBS), create control

accounts

6. Sequential scheduling of work

7. Identify interim measures of progress, i.e. milestones, products, etc.

8. Establish time-phased budget

9. Identify significant cost elements within authorized budgets

10. Identify discrete work packages

11. All work package budgets and planning packages sum to control acct

12. Identify and control LOE budgets

13. Establish overhead budgets by organization element

14. Identify management reserve and undistributed budget

15. Reconcile program target cost goal with sum of all internal budgets

16. Record direct costs from accounting system

17. Summarize direct costs into WBS without allocation

18. Summarize direct costs into OBS without allocation

19. Record indirect costs

20. Identify unit costs, equivalent units’ costs or lot costs

21. Accurate material cost accumulation by control accounts; EV measurement at

right time; full accountability of material

22. Control account monthly summary, identification of Cost Variance (CV) and


23. Explain significant variances

24. Identify and explain indirect cost variances

114

25. Summarize data elements and variances thru WBS/OBS for mgmt.

26. Implement management actions as result of EVM analysis

27. Revise EAC based on performance data; calculate VAC

28. Incorporate authorized changes in timely manner

29. Reconcile budgets with prior budgets

30. Control retroactive changes

31. Prevent all but authorized budget changes

32. Document changes to Performance Measurement Baseline (PMB)

ANSI/EIA-748 EVMS Intent Guide [ANSI/EIA] defines in detail the management value

and intent for each of the 32 criteria listed above.

115

Appendix G: ANSI/EIA-748 EVMS Criteria in Five categories

Table B: Earned value management 32 criteria structured in five categories (ANSI/EIA,

1998)

Category General Content and

Description

Criteria

Numbers

Organization Define the work breakdown structure (WBS), the program

organizational structure and show integration with the host

organization for schedule and cost control.

1-5

Planning, scheduling and

budgeting

Identify the products, schedule the work according to work

packages and apply a time-phased budget to them and project

itself. Identify and control direct costs, overhead and time,

and

material items.

6-15

Accounting

considerations

Record all direct and indirect costs according to the WBS and

CAPs. Provide data necessary to support earned value

reporting and management.

16-21

Analysis and

management reports

Provide analysis and reports appropriate to the project. 22-27

Revisions and

data maintenance

Identify and manage changes, updating current scope,

schedule and budgets after changes are approved.

28-32

2020-03-15 application of earned value management …

Documents