The earned value management (EVM) principal is believed to have been used first by the United States Federal Government to better manage and understand major aerospace contracts in the 1960s.
Definitions of EVM can vary, but it is essentially a process that enables companies to compare the amount earned on a project to the amount budgeted, whether this be for labour, costs, equipment, materials or other variables.
The principal calculates a project’s “per cent complete” by adding the value earned and the project’s overall progress, multiplied by the project’s budgeted amount. It is used by stakeholders as a key performance indicator for projects.
As a major worldwide software company, InEight has been working on software tools incorporating elements of EVM on infrastructure projects for over 30 years.
As the demand for larger, smarter infrastructure grew across the globe, InEight created a dedicated EVM tool to keep infrastructure projects on track.
Rick Deans, Executive Vice President, Industry Engagement at InEight, has been with the company for 22 years, working in the infrastructure sector.
He says the InEight EVM tool is the result of everything the company has learnt about project costs, forecasting and software tools for the past three decades.
“Civil infrastructure is really where InEight got its start. These types of projects are where we have our roots and everything we have learnt is incorporated into this modern EVM product,” Mr. Deans says.
As infrastructure projects get larger and more complex, there is an increasing need for accountability across all levels of the project’s delivery to ensure it can be finished on time and on budget.
InEight tools incorporate EVM on a daily basis. Initially, work plans can be created before the start of a shift to understand what crew is working and the amount of equipment, work hours and materials that should be used.
“When contractors collect digital data we can use the numbers for a lot of things. That might seem like a big ask for people in the field to collect this data, but from our experience it’s no different than what they do with a paper time sheet,” Mr. Deans says.
“This way, the daily plan is already compared against the overall work plan and the original project assumptions to determine if there is going to be any variance. Then, actual productivity can be compared against the plan and everyone from the foreman up to the project manager can instantly see how that day’s work compares against the budget and also how it affects the forecast.”
InEight’s interpretation of EVM is that everyday business executives should be able to make good decisions based on accurate data reporting without having to employ a team of EVM specialists.
“A large part of EVM is understanding how much should have been spent in terms of cost, work hours, materials or equipment hours to achieve a specific amount of work,” Mr. Deans says.
“You get a much clearer picture of the actual performance of the project and its team when you can quantify actions and use those quantities for reporting.”
The daily field capture shows stakeholders the daily progress and any notes that crew has put into the system, which would usually be any issues or progress updates.
“Our tools have been made fit for purpose on construction sites. A big part of the daily field capture is done on mobile devices, and this syncs up with InEight web-based tools,” Mr. Deans says.
He says EVM is a good way for contractors to see how everyday works are affecting the initial cost estimates.
“If you think about all of the decisions that are made daily on these projects, each one of those has ramifications, and EVM can help workers to identify issues before they become a major problem,” Mr. Deans says.
“If there is an issue on site, many times we leave the jobsite and don’t learn about the issue until much further down the track. EVM solutions can help us identify these events so they can be solved while people are still mobilised on site.”
In future, contractors can use this data as the basis for another similar piece of work.
“It can really help to decrease the variance between estimate and actual values, especially when you have gone through a few project cycles,” Mr. Deans says.
For project owners, EVM allows increased visibility. Owners can see how the project is performing in cost and scheduling areas.
Owners and contractors can then collaborate to predict any changes and adjustments that need to be made to ensure the project is completed as planned.
“At the end of the day, project management is really resource management, so EVM provides the ability to see how some activities are performing so that managers can divert or borrow those resources from over-performing activities and put them on some of the underperforming activities,” Mr. Deans says.
“Without a dedicated earned value management system these decisions are probably still being made daily, but they aren’t data-driven decisions. When decisions are data-driven, they are justifiable and definable at any stage.”
InEight’s tool can be used in two different ways, from the bottom up or the top down, on any project.
These two methods can then be combined on the same project for increased accuracy.
“A top-down estimate relies on historical values. For example, a contractor might know how much it costs to move each cubic metre of earth so they can come up with a rough cost by looking at similar projects that have been completed,” Mr. Deans says.
“Top-down starts at a high level and doesn’t necessarily have a lot of supporting detail but it is a good early indicator that will be refined as the project goes on.”
Mr. Deans explains the bottom-up estimate as one that is implemented at a point where the contractor or owner has a good understanding of the overall scope.
“Before the project, a contractor might have said we think it’s going to be $500,000 to do this work. But starting from the bottom up, the project is further along, so now the user can model the productivity assumptions, understand what sort of equipment and materials are needed, and create that estimate from the bottom up to come up with a more refined number.”
He says it’s important to incorporate both estimates on a project. When the estimate becomes more refined, it will give a more accurate budget and keep everyone on track as the project progresses.
“One of the things we hear from our customers is that if you are diligent with EVM, it’s easy to identify tasks that are out of scope. You can get on the site and help with other new tasks so you can prioritise jobs appropriately and deliver to the outcomes promised long before shovels are in the ground,” Mr. Deans says.
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