Cost Controlling Using Earned Value Analysis in Construction Industries

Abstract

Most of the construction projects suffer from cost and time overruns due to a multiplicity of factors. Earned value management (EVM) is a project performance evaluation technique that has origins in industrial engineering, but which has been adapted for application in project management. The earned value analysis gives indications of project performance to highlight the need for eventual corrective action. This study is to present and discuss the main parameters involved in the calculation of Earned Value Analysis (EVA) in the cost management of civil construction projects. The purpose of this dissertation is in 3-fold. Firstly, Earned Value Analysis software is developed in Visual studio 2008, SQL Server 2005, .Net (C# language). Next Comparison of selected parameters between M.S Project 2007, Primavera P6 and developed software is done. Therefore, it can be concluded that the software could be used in a wide range of projects for Earned Value Analysis calculation. Earned Value analysis is a method of performance measurement. Earned Value is a program management technique that uses in to indicate what will happen to work in the future. Earned Value is an enhancement over traditional accounting progress measures. Traditional methods focus on planned accomplishment (expenditure) and actual costs. Earned Value goes one step further and examines actual accomplishment. This gives managers greater insight into potential risk areas. With clearer picture, managers can create risk mitigation plans based on actual cost, schedule and technical progress of the work. It is an early warning program/project management tool that enables managers to identify and control problems before they become insurmountable. It allows projects to be managed better - on time, on budget. Earned Value Management System is not a specific system or tool set, but rather, a set of guidelines that guide a company's management control system. In the case of cost overrun, project management team may execute a value engineering program for cost reduction either reducing scope and quality in some sections of project or providing additional budget to cover overrun cost. Similarly, for time overrun case, the may plan some program such as fast tracking or time crashing for time reduction. Therefore, the role of EVM as well as correct and on time forecasting is very important to achieve project goals. This research includes implementation and improvement on EV to achieve a forecasting EAC based on statistical and econometrics techniques and traditional EV indexes as well. This paper discusses effectiveness of developed software of Earned Value Analysis with MS Project and Primavera P6.

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