Last edited 22 Feb 2016

Earned value for construction contracts

Earned value analysis is a technique used to assess project progress by comparing the amount and cost of work that was planned to have been done by a particular stage with the amount that has actually been done and what it has actually cost. This gives a good indication of how the project is progressing compared to what was planned and enables forecasts to be made about the eventual cost and time that will be required to complete the project.

Typically earned value analysis is carried out for each of the packages that make up the project. Actual outputs are measured against planned outputs (often on a weekly basis) using the units that individual companies use to price and measure work. This provides an opportunity to investigate discrepancies and take remedial action where necessary. It also provides a fairly accurate insight into the financial wellbeing of package contractors and provides early warning of a shortage of resources or of an inefficient use of resources.

The key is to measure actual resource against planned resource using the production units by which estimates have been produced in order to price a tender. This can be:

  • Hours worked per week.
  • Number of workers per week.
  • Volume of say concrete per week per person.
  • Units fixed per week per person.

These items can be plotted weekly to alert the user to trends and allow them to investigate causes. Furthermore it provides an overall general picture of labour productivity for each monitored operation.

Carrying out this sort of analysis requires that project planning is broken down into packages and that tender documentation is drafted to require contractors to supply the information required.

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