Earned Value in Practice ?

In reply to your comment the following is my understanding of EV.

1. In EPC Projects, most of works are in lump-sump contract b/w main contr and vendors or subcontrs, so working budget are fixed. EV and AC will always have same value anytime and there will no CV and EAC. Earned Value concept doestn’t works well in this case.
{Very interesting, first of all do you paid all your money to all your contractor at once. If not how you determinate the % you should issue to them. I suppose some sort of weighted payment system or monthly payment. "That is EV" Secondly, EV not always equal to AC because AC = AC (Contractor) + AC (Internal Cost ie project management) If your are a main contractor you should manage your cost more closely since you have to under every sub-contract progress than EV is a tools that give a good indication of progress.)

2. In my opinion, EV concept requires a very detailed planning (level 5) in order to create a reliable baseline. You can’t judge this is over-run or delay while the baseline is bias. It means you will have a unique cost distribution curve for each activities and, it is really not practical.(If you set up an milestones plan for each of your contractor with a payment attach that should be give you a cash flow so that you can manage your poroject $ and Plan. You don’t need so much details but at least a manageable level enable you update the schedule in a resonable time)

3. Enforce to make cost based activities in a complex schedule is not easy because it’s not easy to merge schedule WBS with Cost Account Codes. (It is true that WBS is different to CBS however, if you manage your contractors with milestone plan that attached to deliverable that should be quit simple to book your cost to the correspondin CBS-Cost Account Codes)

I still stand that schedule and cost should be in separate system. I understand that there should be some interface b/w them but not as ideal as EV concept mention.
(If you seperate the two that means $ remaining to spend is not related to time. And your estimate is not base on your WBS. As a result, there may be a mismatch between your time and $ require. Especially if your project is run under a tight budget with finance cost as part of your expenses, if your seperate the two you might find it difficult to manage your cash flow. Of course you can request all the funding upfront, but there is a cost attached to have all these funding sitting there doing noting)

I guess you might reconsider the way that you should use EV as a tool to help to Manage your projects.

Dear Wong,

I want to counter your reply for no. 1 first. We pay our subcontractors based on their monthly progress or target milestones (depend on contract payment terms). Say our contract with them was $1M, current progress is 25%, and PV (or BCWS) is 30%. I will calc and have EV=250,000 ; AC=250,000 ; and PV=300,000. We can see that we can measure SV (Sch Var) but not CV, anytime. So how can we anticipate budget increase (EAC) in the case like this ?

Besides, we don’t combine project mgt and other overhead with direct cost, indirect cost has their own pool.

Your advise pls..

It depend also from which side You are.
As Client Ok You pay a fixed sum, as Contractor may be Your cost may be higher for a lot of reason up to loose all Your profits.
But also like a Client You should be interested as if a contractor start, for any reason, to loose money You can have a product at less quality, may be the contractor may give up, You may wait several claims for the most smallest things, etc ...
So I think in any case is good to have the system set up, just to check how much the project is healthy.