Project Management: Using Earned Value Analysis (EVA) to Monitor a Project's progress.(Instructor's Note)
Maheshwari, Sharad, Credle, Sid Howard, Journal of the International Academy for Case Studies
This case illustrates one of several important project monitoring and controlling techniques available for project manager use in construction and other related fields. The case highlights that the lack of proper project monitoring could lead to cost and schedule run-ups that eventually could result in complete failure of a project and financial loss. The case illustrates how a project manager could use variance analysis as an effective tool for project monitoring and controlling. The problem presented originated from a real-life situation of an actual federal building contractor. In this particular scenario, the contractor had incurred losses as a result of project delays due to multiple business factors. The issue became problematic since the responsible project manager lacked knowledge of sophisticated project control and monitoring tools, and relied primarily on his memory and intuition-based physical assessments of activities. The case is an attempt to show that if an appropriate project monitoring technique, earned value analysis (EVA), had been used, this contractor potentially could have avoided losses or even made some profit. This case is appropriate for senior or graduate level courses in project management or operations management. The case will require an estimated 2-3 hours of classroom lecture time. Students might have to spend 4-6 hours of time depending upon their prior experience and knowledge of the project management environment.
A small federal government contractor, Environmental Services, is located in the Virginia Beach area of Virginia. It has incurred losses on some of its projects due to poor cost controls and schedule overruns. The company executes 10 to 30 small to medium-size projects at any given point of time. The company is growing and wishes to find a way to cut its losses due to cost and/or schedule overruns. These overruns occur due to several internal and external factors. The internal factors include the loss of key personnel, improper supervision, the lack of technical skills, poor understanding of the scope of projects, etc. External factors such as vendor delays, quality of supplies, unclear
designs, weather and similar factors may also cause a project activity to miss an established deadline or to cost more than the estimated budget. The company largely relies on the experience of the project managers to make a decision based on their assessment whenever a problem arises. Currently, there is no system in the company to keep track of the impact of cost and schedule overruns on a given project. The company recognizes profit or loss once projects are completed and final performance analysis is performed.
The company gave the task of establishing procedures and developing an ongoing monitor/control system to an outside consultant. The consultant reviewed several old projects and presented an analysis to the company. It was suggested that the company establish a proper mechanism for recording cost and budget details during the life of each project. Furthermore, it was suggested that the company use an Earned Value Analysis (EVA) tool to monitor the cost and schedule overruns and adjust project tasks, schedules and resources accordingly.
This case would be useful to demonstrate a monitoring and controlling technique of projects. While teaching project management to the business students, it can be compared with budget control techniques. It is one thing to set budgets; however, it is a very different thing to control budgetary expenditures. As we know that simply setting a budget for an organization can't guarantee a successful utilization of funds. Similarly, planning for a project is not sufficient to assure its successful execution. Most basic project management courses will teach planning techniques including scheduling tools like PERT, CPM, etc., however, without tools and techniques to monitor a project plan, it might be unrealistic to assume a successful execution of the project plan. …