Earned Value Based Project Controls for Industrial Projects - Roland Horat

Earned Value Based Earned Value Based Project Controls for Industrial ProjectsProject Controls for Industrial Projects

YOUR PRESENTERYOUR PRESENTERRoland Horat Roland Horat

Managing Director and Director Business, GlobalManaging Director and Director Business, GlobalSupertech Project Management (Australia)Supertech Project Management (Australia)

The presentation covers the practical aspects of setting up and managing an earned value based project control system. Reference is made to: the common WBS for Estimating and cost control, the methods of capturing actuals and measuring precent complete, using metrics and indicators to predict the estimate to complete, streamlining claims and payments, cash flow and integration of accounting practices.

©Supertech Project Management

About Supertech:About Supertech:We are an international company with offices in the UK, USA andWe are an international company with offices in the UK, USA and Australia. We specialise in the implementation of Australia. We specialise in the implementation of Earned Value based project controls and reporting systems. OuEarned Value based project controls and reporting systems. Our clients come from a range of industries and r clients come from a range of industries and include:include:

Water Supply Water Supply InfrastructureInfrastructureOil and Gas Oil and Gas MiningMining

Industrial Industrial Commercial Commercial BuildingBuilding

Our implementations are based on our inOur implementations are based on our in‐‐house developed EVEngine Project Control and Cost Engineering shouse developed EVEngine Project Control and Cost Engineering software , oftware , a Microsoft Excel Adda Microsoft Excel Add‐‐in product. in product.

Rail InfrastructureRail Infrastructure


The establishment of a The establishment of a Common Common Work Breakdown Structure WBS that defines:Work Breakdown Structure WBS that defines:

1.1. The level at which the estimate for the project is established, The level at which the estimate for the project is established, (By Facility, by Element of Cost (By Facility, by Element of Cost Labour, Material, Equipment, Consumables, Construction Support ELabour, Material, Equipment, Consumables, Construction Support Equipment, Overhead, Profit). quipment, Overhead, Profit). This typically would be at Outline Level 4 (Variable depending oThis typically would be at Outline Level 4 (Variable depending on the complexity of the project) n the complexity of the project)

2.2. The level at which, on approval of the cost estimate, the projecThe level at which, on approval of the cost estimate, the project is to be cost managed and t is to be cost managed and controlled. Typically this is at Level 3 (Variable depending oncontrolled. Typically this is at Level 3 (Variable depending on the complexity of the project) for the complexity of the project) for Government Agency work. This level also applies to industrial prGovernment Agency work. This level also applies to industrial projects managed under ojects managed under Engineering, Procurement and Contract Management (EPCM) and isEngineering, Procurement and Contract Management (EPCM) and is controlled using controlled using Cost/Contract Account (CA) groupings (Not WBS) represented by trCost/Contract Account (CA) groupings (Not WBS) represented by trade work packages such as ade work packages such as earthworks, civil , structural, mechanical and plate work, pipiearthworks, civil , structural, mechanical and plate work, piping, instrumentation and control.ng, instrumentation and control.

3.3. The level at which the project schedule is developed and maintaiThe level at which the project schedule is developed and maintained for the purposes of:ned for the purposes of:

a)a) Modelling resource usage and cash flow during the estimating phModelling resource usage and cash flow during the estimating phase to help establish the ase to help establish the projectproject’’s overhead including cost of finance, s overhead including cost of finance,

b)b) Establishing the contracting strategy for the project, andEstablishing the contracting strategy for the project, andc)c) During execution phase, track and forecast actual and work to coDuring execution phase, track and forecast actual and work to completion against the mpletion against the

contract control baseline. contract control baseline.

PrePre‐‐requisites for a Successful EVPM Project Control System Implemenrequisites for a Successful EVPM Project Control System Implementation:tation:


Case Study to illustrate Schedule and Estimate Relationship Case Study to illustrate Schedule and Estimate Relationship Municipal Sewer Infrastructure Project comprising the construction of 3 KM of 3.5 meter diameter sewer mains, inspection and maintenance manholes with collecting branch sewers . The main sewer being constructed using a Tunnel Boring Machine (TBM) . EAC = $57,000,000.


The Estimate The Estimate ‐‐ Using a Municipal Sewer Infrastructure Project as the case study the table illustrates a typical Level 4 Detail, Level 3 Summary Estimate by Facility by Units of Quantity, Labour, Material, Plant and Subcontractor Costs using “Expert Estimator” estimating software.


The Schedule Corresponding Level 3 Estimate Summary The Schedule Corresponding Level 3 Estimate Summary ‐‐ using Microsoft Project Planning Software.

Note:Level 4 schedule detail does not always correspond with the Level 4 estimate .


Using Project Controls Practice During the Bid Phase of the ProUsing Project Controls Practice During the Bid Phase of the Project To:ject To:1. Model the Initial Project Cash Position to determine allowance for finance based on the commercial cash

position. 2. Determine the time phased requirements for labour, plant and equipment .3. Determine the target production required to meet the contract schedule .4. Resulting analysis can be used to revise the schedule timeline and price to mitigate exposure to risk.

1.1. Scheduling DataScheduling Data 2. Estimate Data2. Estimate Data

3. Expected Payment 3. Expected Payment ConditionsConditions

Special purpose reports and Special purpose reports and graphical data for determining graphical data for determining the Project Financial Position the Project Financial Position due to the contract payment due to the contract payment

schedule conditions.schedule conditions.


The resulting cash flow based the commercial contract schedule of payment conditions.


Cost due to the purchase of one TBM and Ancillary Equipment including Pipe on 60 day payment condition

Compare the EVPM calculated to the Commercial Cash Flow Compare the EVPM calculated to the Commercial Cash Flow


A big difference between $5.6 Million and $0.3 Million Negative Cash Flow adding to the project overhead and contractors price.

The solution to the Contractor’s cash flow problem:1.Negotiate an upfront payment with the client to cover the costs of the TBM and Pipe Supply.2.Negotiate more favourable overall payment terms to reduce the cost of finance and for the contractor to remain at the very least cash neutral

EVPM Based Cash Flow

Commercial Cash Flow


Use the EVPM based Labour Histogram to determine time phased lUse the EVPM based Labour Histogram to determine time phased labour requirements and the appropriate site abour requirements and the appropriate site facilities and supporting infrastructure for the labour. This facilities and supporting infrastructure for the labour. This could effect overheads and the final tender price.could effect overheads and the final tender price.


Case Study To Illustrate Schedule and Baseline Control Budget RCase Study To Illustrate Schedule and Baseline Control Budget Relationship elationship Construction of sewer emergency relief structure BAC = $2,094,255


Schedule and Baseline Control Budget Control Documents:Schedule and Baseline Control Budget Control Documents:

Estimate Summary Sheet, with the control budget line

items mapped to the corresponding schedule activities.

Corresponding Estimate Schedule with set Control Baseline

Corresponding EVEngine Project Control Sheet for making adjustments to schedule based %C to reflect Physical %C based on Accrued Actuals (AC) and the Estimate To Completion (ETC).


Baseline Control Budget EVPM Data settings at the beginning (OctBaseline Control Budget EVPM Data settings at the beginning (October 2009) of the ober 2009) of the project:project:

Baseline Data where the EAC = BACFor Cost and For Schedule.

Baseline Metrics, Indicators and Predictors are set so:EAC = BAC, PV = EV = AC Indicators are set to Zero


Baseline Control Budget EVPM Data settings at the beginning of tBaseline Control Budget EVPM Data settings at the beginning of the project:he project:

Commercial Metrics are set where the Profit P = the Planned Profit PP.

Commercial Metrics are set where the Profit P = the Planned Profit PP and Cost Variance CV = 0

Status of the Project in January 2010 A photographic record of Status of the Project in January 2010 A photographic record of progress progress


Corresponding schedule status to the photographic record.Corresponding schedule status to the photographic record.

Using the scheduling software we can undertake schedule variance analysis.


Using the Project Control SoftwareUsing the Project Control SoftwareCollect EVPM data then calculate metrics, indicators and predictors to evaluate valuate performance and undertake

contract administration .

1.1. Updated Updated Scheduling DataScheduling Data

2. Actual Costs as 2. Actual Costs as Accrued for the Accrued for the reporting periodreporting period

EVPM based performance EVPM based performance reports comprising metrics, reports comprising metrics, indicators and predictors.indicators and predictors.


Commercial cash flow position Commercial cash flow position based on scheduled payments based on scheduled payments

and revenue.and revenue.

Contract Administration with Contract Administration with respect to the calculation of respect to the calculation of Certificates of Claim and Certificates of Claim and

Payment.Payment.

Cost Performance Reporting to Cost Performance Reporting to Government Agency Government Agency

Requirements (Format 1 to 5), Requirements (Format 1 to 5), Cost Engineering ReportsCost Engineering Reports


EVEngine Project Control Software adjustments to imported actualEVEngine Project Control Software adjustments to imported actuals and s and estimates to complete for schedule of rates contracts estimates to complete for schedule of rates contracts

Post Accrued Actuals (AC) and adjust as required the Estimate to Completion (ETC).

Run EVPM Reports & Graphs for Metrics, Indicators and Predictors.

EVEngine Project Control Software Output EVEngine Project Control Software Output EVPM Based Summary Metrics, Indicators and Predictors as at Jan 2010.


EVPM Based Metrics, Indicators and Predictors.

Commercial Based Metrics and Indicators.

ES Based Metrics, Indicators and Predictors.


EVEngine Project Control Software Output EVEngine Project Control Software Output EVPM Based Summary Indicators as at Jan 2010.

EVEngine Project Control Software Output EVEngine Project Control Software Output Using EVPM to Undertake Certificate of Payments and Claims


EVEngine Project Control Software Output EVEngine Project Control Software Output Government Agency Report Contract Performance Report Format 2

Government Agency Report Contract Performance Report Format 3


1.1. PMI PMBOK PMI PMBOK ®® 2009 4th Edition 2009 4th Edition ––Project Management Body of Project Management Body of KnowledgeKnowledge

EVPM Governance, Standards and GuidelinesEVPM Governance, Standards and Guidelines

2. PMI PMBOK 2. PMI PMBOK ®® 2009 2nd Edition 2009 2nd Edition ––Earned Value GuidelinesEarned Value Guidelines


•• Mandatory for Professional EVPM.Mandatory for Professional EVPM.

•• EIAEIA‐‐748748‐‐B replaces EIAB replaces EIA‐‐748748‐‐A (R2002).A (R2002).

http://webstore.ansi.org/RecordDetail.aspxhttp://webstore.ansi.org/RecordDetail.aspx?sku=ANSI%2fEIA?sku=ANSI%2fEIA‐‐748748‐‐BB

24


Mandatory if working with US DoDMandatory if working with US DoD.

wiki.nasa.gov/cm/wiki/...wiki///1000921mainwiki.nasa.gov/cm/wiki/...wiki///1000921main_DoD_5000_2R.pdf_DoD_5000_2R.pdf

Many of the Google reference sites can no Many of the Google reference sites can no longer be accessed.longer be accessed.



Highly recommended.Highly recommended.

Available fromAvailable from

www.saiglobal.com/shop

•• PMI:PMI:http://www.pmi.org/Pages/default.asphttp://www.pmi.org/Pages/default.aspxx

•• College of Performance Management: College of Performance Management: http://www.pmihttp://www.pmi‐‐

cpm.org/pages/home/index.htmlcpm.org/pages/home/index.html©Supertech Project Management

Recommended EVPM Reference PublicationsRecommended EVPM Reference Publications

Best Results is to obtain Professional Advice Form An ExperienceBest Results is to obtain Professional Advice Form An Experienced Specialist Organization.d Specialist Organization.

•• Highly recommended book.Highly recommended book.•• Make sure you get Third Make sure you get Third

Edition.Edition.•• Available fromAvailable from

WWW.PMI.ORGWWW.PMI.ORG ORORWWW.AMAZON.COMWWW.AMAZON.COM

•• Highly recommended book.Highly recommended book.

•• Available from Turpin Available from Turpin Distribution Limited Distribution Limited www.apm.org.uk/EarnedVwww.apm.org.uk/EarnedValueManagement.aspalueManagement.asp

•• Highly recommended book.Highly recommended book.

•• Available from Supertech Available from Supertech Project Management Project Management www.suptec.com.auwww.suptec.com.au


Earned Value Based Earned Value Based Project Controls for Industrial ProjectsProject Controls for Industrial Projects

QUESTIONS AND ANSWERS ?QUESTIONS AND ANSWERS ?

ALL GRAPHS AND REPORTS PRODUCED USING SUPERTECHALL GRAPHS AND REPORTS PRODUCED USING SUPERTECH’’S EVENGINE MICROSOFT S EVENGINE MICROSOFT EXCEL ADDEXCEL ADD‐‐IN EVPM PROJECT CONTROL SOFTWAREIN EVPM PROJECT CONTROL SOFTWARE


For your complementary Earned Value Guide contact your nearest location.

To trial EVEngine register at http://evengine.net/

Earned Value Based Project Controls for Industrial Projects - Roland Horat

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