Title: Earned Value/Progress Measurement, Integrated Cost and Schedule Control

Phase(s): Pre-Preliminary Engineering

Category: Management

Date: September 1999

1. Background

The Los Angeles Metro Rail project is being built in 3 phases. Minimum Operable Segment 1 includes 4.4 miles of a two-track rapid transit line, 5 stations, and a maintenance facility and rail vehicle storage yard. The grantee, Southern California Rapid Transit District (SCRTD) managed the early construction phase of the project that started in 1986.

In July 1990, management of the project was transferred to the Los Angeles County Transportation Commission (LACTC). At that time, the project was over budget and behind schedule. As planning for the second and third phases of the project was also underway, a need for a more focused project cost and schedule control mechanism than the one used in phase 1 became necessary.

LACTC saw merit in the Earned Value (EV) concept. This concept, first developed in the aerospace industry, has proven effective on other civil engineering projects across the nation. It provides the capability for the routine and in-depth analysis of project status from an integrated cost/schedule perspective. LACTC created a modified version of the aerospace model to be applied on subsequent Metro Rail projects. The implementation of the concept improved management of the project by allowing use of more effective project control information. As a consequence of the system’s employment, the second phase of the project came into operation on time and within budget.

The lesson learned is that the application and maintenance of these types of enhanced project control techniques should be implemented at the outset of any project with forethought and discipline to achieve maximum benefit over the life of the project.

Under the EV concept, the budgeted cost of work performed (often referred to as ‘Earned Value) provides a structured benchmark to assess progress throughout the life of the project. The process of establishing a structure for the collection of EV data is similar to budgeting and scheduling a series of tasks on a project. The use of a Work Breakdown Structure (WBS) to divide the work into elements, such that single or related groups of tasks under the control of a single authority, is generally an accepted practice under both EV and non-EV regimens. The WBS provides a structure by which cost, schedule and performance data (EV) can be summarized and analyzed.

These data elements, used in concert, provide for identification of incremental (monthly) deviations to plans and early warning of potential cost and schedule problems. The EV concept, used in conjunction with Critical Path Method or other logic driven scheduling method, provides an extremely effective set of management tools. It should be noted that like any effective management regimen, EV systems require routine maintenance of the plan by responsible managers.

2. The Lesson

An "Earned value" management control system provides an effective framework for developing management information in a manner that provides enhanced visibility so that managers can make better informed decisions. This, in turn, should lead to more efficient and effective project execution.

Adjunct or ancillary lessons that are equally important include the concepts that effective management control must:

• Be planned for and implemented with rigor and discipline early in the project, so that the process is instilled in the corporate culture
• Routinely involve management at all levels of Project activity
• Require routine reporting by responsible functional and line managers to maintain effective ‘checks and balances’
• Be subjected to routine audits and effectiveness reviews.

3. Applicability

A management control system should apply to simple, as well as, complex tasks/projects. EV has been proven effective in a broad spectrum of industries, including transit development and construction. Increasing complexity of the task or project will drive the level of formality and discipline required to effect adequate management control.

4. References

Specific applications, as well as further explanations of the information and its use can be found in a number of publications. One such publication is the Construction Industry Institutes’ (CII) Publication, "Project Control for Construction". There are several other CII publications that describe the application of the EV concept to specific situations. Other sources include professional organizations such as AACE International and PMI. Additionally, there are a number of internet sites that address the EV project management concept. Examples of these web sites are: Project Management Institute – www.pmi.org or Project Management Forum – www.pmforum.org