Earned Value Reporting --- advanced

To improve productivity, you need to know how you are doing so you can confirm that you are improving.

Most contractor cost reporting systems report the quantity completed and how much has been spent.

These reports are very sufficient for tracking individual cost accounts. Knowing how many cubic yards of concrete have been poured and the labor $'s spent on that account is useful for idenifying issues and taking corrective action.

The only problem with quantity reporting is that it is difficult to summarize the results from many cost accounts and look at parts of the project or trends over many accounts. For example, CY of concrete and Tons of steel cannot be summarized

To be able to summarize, the recommended approach is to convert the quantity (CY, Tons, etc) to the "Earned Value" of the quantity completed. Earned Value can be reported in labor hours, labor cost($) or total cost ($). The Earned Value of a quantity is the "value" assigned to it in the cost estimate. If a cubic yard of concrete was estimated at 5 hours/CY then each CY of concrete has a value of 5 hours.

Earned Value = quantity completed x Estimated Unit rate

an alternate calculation of Earned Value is based on the % complete

Earned Value = Total Estimated Cost x % complete

When all quantities are converted to the same "value" then they can easily be summarized and reported.

On the chart above, there are three values plotted
Planned = the estimated value based on the cost estimate and the schedule
Earned = the quantity completed to date converted to Earned Value
Actual = the actual cost spent to date.

Comparing Earned and Planned is a measure of schedule progress (ahead/behind schdule)

Earned < Planned = behind schedule

Comparing Earned and Actual Values is a measure of cost performance (over/under budget)

Also, the ratio of Actual and Earned Values is a reliable productivity index

Actual/Earned > 1.0 Low productivity (spent more than earned)

Actual/Earned = 1.0 Actual productivity = estimate

Actual/Earned < 1.0 High productivity (earned more than spent)