Project Management: Using Earned Value Analysis (EVA) to Monitor a Project's Progress

Article excerpt

BACKGROUND INFORMATION

Environmental Services is a general contracting company based in Virginia Beach, Virginia. The company performs general contracting work mainly in the area of construction and facility maintenance. The company executes approximately 10-30 projects at any given time and each project is managed by a project manager (PM). Most federal government contracts are awarded to the company on a fixed cost basis. Also, most Environmental Services' projects are awarded on a "design-bid-build" basis. That is, the company bids on the projects after the design has been completed by the federal government or other governmental agency. Environmental Services is not involved either directly or indirectly in any design aspects of the project.

The general contracting organizations like Environmental Services that work on fixed cost "design-bid-build" projects can only be profitable by completing projects on time and within budget. However, in construction projects, cost and/or schedule overruns could occur due to a variety of internal and/or external factors. These overruns can quickly wipe out profit margins and may result in a loss. Project losses generally are the result of problems of a few activities in a project which may impact other activities and hence, the entire project may be impacted negatively. It is not possible to avoid all schedule or cost overruns (such as those due to inclement weather), but proper project monitoring can reduce the impact of these overruns.

ANALYSIS OF PROJECT MANAGEMENT PROBLEMS

There are two main categories of factors that can create risk in a construction project during its monitoring and controlling phase. These categories are internal and external factors. Internal factors include scheduling conflicts, lack of subcontractor supervision, insufficient labor and/or supervisor training, improper match between labor skills and the tasks assigned, and changes in key personnel. It is important that the project management recognizes a problem and takes corrective action in a timely manner. For example, scheduling conflicts could be resolved by rescheduling (if time permits), supporting an activity with additional labor, or resource leveling. The lack of subcontractor supervision or improper supervision could be resolved with the proper training of management or by providing support to the subcontractor as needed. Similarly, when there is a change in the key personnel, management needs to find an effective replacement quickly. Tools like EVA provide necessary information to management regarding the project status while requiring proper documentation of project parameters at select time intervals or other milestones. These tools and techniques (like EVA) are used at the monitoring and controlling stage of a project life cycle, hence, should not to be confused with project scheduling techniques like PERT, CPM, etc. which are used at the planning stages of a project life cycle.

External factors could be more serious since contractors have little or no control over these factors. Problems may arise due to delay by an external organization or due to natural causes like rain, snow, wind, etc. External organizations may include subcontractors, suppliers, and project owners. Subcontractors' internal problems can have a direct impact on a project. For example, labor disputes at a subcontractor's business may force a company to miss completion dates, potentially delaying a project. Suppliers could have similar problems as subcontractors. Delays in material supply can also cause significant cost and schedule overruns. Project managers should have the ability to spot these problems early and to take corrective action. Providing extra labor or financing to fix the subcontractor problem could avoid bigger delays and losses to the entire project. Furthermore, project owners can also increase general risk by changing task requirements (scope creep). The change in one task could result in a much larger cumulative impact of the project cost and time. …