The fundamental error in many of the answers below is confusing schedule activities with EVM work packages. These are fundamentally different concepts and you cannot run an effective EVM system is a scheduling tool. I've published two blogs on this, see:
hit the problem with EVM when trying to mirror total budget cost. Classical EV is actually Earned Cost (or Earned Budget). There are lots of budget elements that cannot be reflected in any "earned" system - risk allowances. contingency, escalation, currency fluctuations, management reserve, P&OH, changes etc. Likewise actual cost has always bothered me after many years struggling with company accountancy and payment systems.
Try other Earned Functions - schedule, duration, quantity, resource etc. At least these are more understandable to the project team
Depending on the type of Contract (Lump Sum, cost reimbursable, unit rate, and or combination, etc) and type of contingency (wet weather, cost inflation, Provisional Sum, scope creep, location, environment, safety, etc..) and some contract it is already built in the rates. You have to read the contract and (client/ company) procedure for EVM to understand how they manage contingency in EVM.
Now I understand the general conditions (overhead) part.
But as far as contingency (although I also didn't distinguish and asked it together with GC in my previous message) , now, another question. If we did not spend contingency or spent it less than planned, (which is a good thing, which means we were able to save money) we are not entering progress of contingency spending - which means it will look like we did not earn value. So it is as if, we are punishing ourselves for doing something good. In other words, why do we record it as earned value when we spend contingency?
Member for
19 years
Member for19 years
Submitted by Rodel Marasigan on Thu, 2021-07-08 08:10
Yes you are correct. Plan Value (PV) are the distributed plan of BAC also known as BCWS. For every cost spend on the project towards the project life cycle the actual cost up to data date = Actual Value also known as ACWP.
Ex: for this period they earned progress by puring concrete and completed other work. (say EV=20%). For project overhead your EV is based on parameter setup to calculate EV% for POH (Ex: total time spend / total duration = say 15%). The Earned Value (EV) also known as BCWP is the total accomulated progress to date up to data date. (See example below)
CBS (high level sample)
PROJ Total: 1m
Proj OH: 0.35m x 15% (EV) = 0.05m
SOW : 0.60m x 20% (EV) = 0.12m
Contigency: 0.05 = say 0% nothing has been spend against the budget and forecast.
Then, GC and contingency, since they are part of BAC, it means they are also part of the "value" in earned value, although they are not part of the scope like painting a wall? That is where I was getting confused.
So for example when we pour concrete in the field, lay utlities in the ground, we earn some value and make progress in the S curve. I understand that part..... But since we are saying GC is part of BAC, it means, when we spend GC, that still cause progress in S curve .. correct? So spending GC and contingency are also part of that "value" in earned value, alhough they are not part of scope like for example pouring the concrete of the 5th floor slab of the building we build as our project correct?
Member for
19 years
Member for19 years
Submitted by Rodel Marasigan on Thu, 2021-07-08 02:26
The total project budget cost is the Budget At Completion (BAC) of EVM which composed of all cost belong to the project (Project Overheads, office cost, staff salaries, Plant & Equipment, hires, expenses, indirect labour, labour, material, contingencies…etc). The breakdown is defined on the Cost Breakdown Structure (CBS). To answer your question, the Project overhead, contingencies and other cost you are looking for is part of BAC. See below chart for better understanding.
Thanks, so on the S curve (cumulative cost vs time), where , which part, do contingency and general conditions belong to? That is my main question. I mean where exactly on the S curve would we show contingency and general conditions or what component on S curve do they belong to? (since they are not part of scope)
Member for
19 years
Member for19 years
Submitted by Rodel Marasigan on Wed, 2021-07-07 08:30
Yes, all Project Overheads, buffer or contingencies (Staff salaries, Office cost, hire, rentals, travel, IT, cars. Etc) are included. The use of Cost account (CBS), to breakdown the project cost including expenses, commodities, indirect labour, direct, equipment, etc.... All of these are defined and forecast accordingly. Depending on the company procedure of EVM and type of software used. In P6 environment these Project overheads cost is usually defined in Expenses module. Other company use a simple excel spreadsheet or cost and accounting software for EVM.
Member for
24 years 9 monthsHi Polat,The fundamental
Hi Polat,
The fundamental error in many of the answers below is confusing schedule activities with EVM work packages. These are fundamentally different concepts and you cannot run an effective EVM system is a scheduling tool. I've published two blogs on this, see:
1. EVM - Six things people don't get!
2. Sizing EVM work packages.
Member for
20 years 5 monthsHi Polat,hit the problem with
Hi Polat,
hit the problem with EVM when trying to mirror total budget cost. Classical EV is actually Earned Cost (or Earned Budget). There are lots of budget elements that cannot be reflected in any "earned" system - risk allowances. contingency, escalation, currency fluctuations, management reserve, P&OH, changes etc. Likewise actual cost has always bothered me after many years struggling with company accountancy and payment systems.
Try other Earned Functions - schedule, duration, quantity, resource etc. At least these are more understandable to the project team
Member for
4 years 6 monthsOk thanks
Ok thanks
Member for
19 yearsHi Polat,Depending on the
Hi Polat,
Depending on the type of Contract (Lump Sum, cost reimbursable, unit rate, and or combination, etc) and type of contingency (wet weather, cost inflation, Provisional Sum, scope creep, location, environment, safety, etc..) and some contract it is already built in the rates. You have to read the contract and (client/ company) procedure for EVM to understand how they manage contingency in EVM.
Member for
4 years 6 monthsOkNow I understand the
Ok
Now I understand the general conditions (overhead) part.
But as far as contingency (although I also didn't distinguish and asked it together with GC in my previous message) , now, another question. If we did not spend contingency or spent it less than planned, (which is a good thing, which means we were able to save money) we are not entering progress of contingency spending - which means it will look like we did not earn value. So it is as if, we are punishing ourselves for doing something good. In other words, why do we record it as earned value when we spend contingency?
Member for
19 yearsYes you are correct. Plan
Yes you are correct. Plan Value (PV) are the distributed plan of BAC also known as BCWS. For every cost spend on the project towards the project life cycle the actual cost up to data date = Actual Value also known as ACWP.
Ex: for this period they earned progress by puring concrete and completed other work. (say EV=20%). For project overhead your EV is based on parameter setup to calculate EV% for POH (Ex: total time spend / total duration = say 15%). The Earned Value (EV) also known as BCWP is the total accomulated progress to date up to data date. (See example below)
CBS (high level sample)
PROJ Total: 1m
Proj OH: 0.35m x 15% (EV) = 0.05m
SOW : 0.60m x 20% (EV) = 0.12m
Contigency: 0.05 = say 0% nothing has been spend against the budget and forecast.
EV = (0.05m+0.12m) = 0.17m
PV = Todate PV
AV = Actual Cost Todate
EAC = AV + ETC (Estimate to complete)
Member for
4 years 6 monthsThen, GC and contingency,
Then, GC and contingency, since they are part of BAC, it means they are also part of the "value" in earned value, although they are not part of the scope like painting a wall? That is where I was getting confused.
So for example when we pour concrete in the field, lay utlities in the ground, we earn some value and make progress in the S curve. I understand that part..... But since we are saying GC is part of BAC, it means, when we spend GC, that still cause progress in S curve .. correct? So spending GC and contingency are also part of that "value" in earned value, alhough they are not part of scope like for example pouring the concrete of the 5th floor slab of the building we build as our project correct?
Member for
19 yearsHi Polat,The total project
Hi Polat,
The total project budget cost is the Budget At Completion (BAC) of EVM which composed of all cost belong to the project (Project Overheads, office cost, staff salaries, Plant & Equipment, hires, expenses, indirect labour, labour, material, contingencies…etc). The breakdown is defined on the Cost Breakdown Structure (CBS). To answer your question, the Project overhead, contingencies and other cost you are looking for is part of BAC. See below chart for better understanding.
[[wysiwyg_imageupload:7818:]]
Member for
4 years 6 monthsThanks, so on the S curve
Thanks, so on the S curve (cumulative cost vs time), where , which part, do contingency and general conditions belong to? That is my main question. I mean where exactly on the S curve would we show contingency and general conditions or what component on S curve do they belong to? (since they are not part of scope)
Member for
19 yearsHi Polat,Yes, all Project
Hi Polat,
Yes, all Project Overheads, buffer or contingencies (Staff salaries, Office cost, hire, rentals, travel, IT, cars. Etc) are included. The use of Cost account (CBS), to breakdown the project cost including expenses, commodities, indirect labour, direct, equipment, etc.... All of these are defined and forecast accordingly. Depending on the company procedure of EVM and type of software used. In P6 environment these Project overheads cost is usually defined in Expenses module. Other company use a simple excel spreadsheet or cost and accounting software for EVM.