Project Planning Control 4 E Part 10 ppsx

Cost control and EVATable 27.6 Value hours Actual hours 249 Table 27.5 shows the progress after a 16-week period, but in order to obtainthe value hours and hence the cost value of Catego

Cost control and EVA

Table 27.6

Value hours

Actual hours

249

Table 27.5 shows the progress after a 16-week period, but in order to obtainthe value hours (and hence the cost value) of Category D it was necessary tobreak down the manhours into work packages which could be assessed forpercentage completion Thus, in Table 27.6, the pipelines A and B wereassessed as 35% and 45% complete, respectively, and the pump and tankconnections were found to be 15% and 20% complete, respectively Once thevalue hours (3180) were found, they could be multiplied by the average costper man hour to give a cost value of £14 628

Table 27.7 shows the summary of the four categories An adjustment shouldtherefore also be made to the value of plant utilization Category C since thetwo are closely related The adjusted value total would therefore be as shown

in Column V

Project Planning and Control

With a true value of expenditure to date of £104 048, the percentagecompletion in terms of cost of the whole site is therefore:

104 048

202 000 × 100 = 51.5

It must be stressed that the % of cost completed is not the same as the %completion of construction work It is only a valuation method when thematerial and equipment are valued (and paid for) in their month of arrival orinstallation

When the materials or equipment are paid for as they arrive on site(possibly a month before they are actually erected), or when they are supplied

‘free issue’ by the employer, they must not be part of the value or % completecalculation

It is clearly unrealistic to include materials and equipment in the % completeand efficiency calculation as the cost of equipment is not proportional to the cost

of installation For example, a carbon steel tank takes the same time to lift ontoits foundations as a stainless steel tank, yet the cost is very different! Indeed, insome instances, an expensive item of equipment may be quicker and cheaper toinstall than an equivalent cheaper item, simply because the expensive item may

be more ‘complete’ when it arrives on site

All the items in the calculations can be stored, updated and processed bycomputer, so there is no reason why an accurate, up-to-date and regularprogress report cannot be produced on a weekly basis, where the action takesplace – on the site or in the workshop

Clearly, with such information at one’s fingertips, costs can truly becontrolled – not merely reported!

Cost control and EVA

It can be seen that the value hours for erection work are only 3180against an actual manhours usage of 3500 This represents an efficiency ofonly

3180

3500 × 100 = 91% approx

An adjustment should therefore also be made to the value of plant utilizationi.e 12 000 × 91% = 10 920 The adjusted value total would therefore be asshown in column V

251

Figure 27.18

Project Planning and Control

The SMAC system described on the previous pages was developed in 1978

by Foster Wheeler Power Products, primarily to find a quicker and moreaccurate method for assessing the % complete of multi-discipline, multi-contractor construction projects

However, about 10 years earlier the Department of Defense in the USAdeveloped an almost identical system called Cost, Schedule, Control System(CSCS) which was generally referred to as Earned Value Analysis (EVA) Thiswas mainly geared to the cost control of defence projects within the USA, andapart from UK subcontractors to the American defence contractors, was notdisseminated widely in the UK

While the principles of SMAC and EVA are identical, there developedinevitably a difference in terminology and methods of calculating the desiredparameters The most important change is the introduction of twoparameters

1 The Cost Performance Index (CPI), which is the Earned Value Cost/ActualCost or BCWP/ACWP;

2 The Schedule Performance Index (SPI), which is the Earned Value Cost/Planned Cost or BCWP/BCWS

The set of curves and key in Figure 27.18, page 251, taken from BS 6079(Guide to Project Management) show clearly the EVA terms and their SMACequivalents The curves also show how the Cost Variance and ScheduleVariance are obtained and how the Schedule Performance Index (SPI) based

on cost differs from the SPI based on time

The Estimated Cost of Completion (EAC) is calculated in SMAC bydividing the Actual by the % complete, i.e Actual/% complete

In EVA the EAC is calculated by dividing the Budget at completion by theCPI, i.e BAC/CPI

The results of these two methods is of course the same as shown below:

EAC = Actual/% complete = Actual × Budget/Value = BAC × ACWP/BCWPtherefore EAC = BAC/CPI, since ACWP/BCWP = 1/CPI

In 1996 the National Security Industrial Association (NISA) of Americapublished their own Earned Value Management System (EVMS) whichdropped the terms such as ACWP, BCWP and BCWS used in CSCS andadopted the simpler terms of Earned Value, Actual and Schedule instead In all

252

Cost control and EVA

probability the CSCS terminology will be dropped in favour of the moreunderstandable EVMS terminology

Figure 27.19 clearly shows the earned value terms in both English (in bold)

and EV jargon (in italics).

Integrated computer system

Until 1992, the SMAC system was run as a separate computer program inparallel with a conventional CPM system Now, however, with thecooperation of Claremont Controls, utilizing their ‘Hornet’ program andCogeneration Investments Limited (part of British Gas), a completelyintegrated computer program is available which, from one set of input data,

entered into the computer on one input screen, calculates and prints out the CPM and SMAC results on one sheet of paper as well as drafting the network

(of approx 400 activities) in arrow diagram format on A1 or A0 paper Thenetwork can also be produced in precedence format but this may require alarger sheet The only weekly update information required is the time sheetwhich records the very minimum details required to control site progress, i.e.the activity number, the manhours expended that week and the assessment ofthe % complete (to the nearest 5%) of only those activities worked on duringthat week The computer program does the rest

Provided that all the subcontractors return their information regularly and ontime, the weekly information produced enables the project manager to see:

1 The manhours spent on any activity or group of activities;

2 The % complete of any activity;

3 The overall % complete of the total project;

4 The overall manhours expended;

5 The value (useful) hours expended;

6 The efficiency of each activity;

7 The overall efficiency;

8 The estimated final hours for completion;

9 The approximate completion date;

10 The manhours spent on extra work;

11 The relationship between programme and progress;

12 The relative performance of subcontractors or internal subareas ofwork

The system can of course be used for controlling individual work packages,whether carried out by direct labour or by subcontractors, and by multiplying

253

Project Planning and Control

254

Figure 27.19

Cost control and EVA

the total actual manhours by the average labour rate, the cost to date is

immediately available The final results should be carefully analysed and canform an excellent base for future estimates

As previously stated, apart from printing the SMAC information and theconventional CPM data, the program also produces a computer drawnnetwork This is drawn on a grid with the activity numbers being in effect thegrid coordinates This has the advantage of ‘banding’ the activities intodisciplines, trades or subcontracts and greatly facilitates finding any activitywhen discussing the programme with other parties Unlike a normal arrow

diagram, where the vertical grid lines are on the nodes, they are in this case

between the nodes so that the coordinates are in effect the activity number as

in a precedence diagram The early and late start and finish dates are inserted

in the event nodes from the input data When the new % complete figures areinserted during regular updating, the early start and finish dates areautomatically adjusted to reflect the progress Critical activities are shown by

a double line on the network

A more detailed description of the ‘Hornet’ program is given in Chapter30

255

Worked examples

The previous chapters describe the various ods and techniques developed to produce mean-ingful and practical network programmes In thischapter most of these techniques are combined intwo fully worked examples One is mainly of acivil engineering and building nature and theother is concerned with mechanical erection –both are practical and could be applied to realsituations

meth-The first example covers the planning, hour control and cost control of a constructionproject of a bungalow Before any planning work

man-is started, it man-is advantageous to write down thesalient parameters of the design and construction,

or what is grandly called the ‘design andconstruction philosophy’ This ensures thateveryone who participates in the project knowsnot only what has to be done but why it is beingdone in a particular way Indeed, if the design and

construction philosophy is circulated before the

programme, time- and cost-saving suggestionsmay well be volunteered by some recipientswhich, if acceptable, can be incorporated into thefinal plan

Worked examples

Example 1 Small bungalow

Design and construction philosophy

1 The bungalow is constructed on strip footings

2 External walls are in two skins of brick with a cavity Internal partitionsare in plasterboard on timber studding

3 The floor is suspended on brick piers over an oversite concrete slab.Floorboards are T & G pine

4 The roof is tiled on timber-trussed rafters with external gutters

5 Internal finish is plaster on brick finished with emulsion paint

6 Construction is by direct labour specially hired for the purpose Thisincludes specialist trades such as electrics and plumbing

7 The work is financed by a bank loan, which is paid four-weekly on thebasis of a regular site measure

8 Labour is paid weekly Suppliers and plant hire are paid 4 weeks afterdelivery Materials and plant must be ordered 2 weeks before siterequirement

9 The average labour rate is £5 per hour or £250 per week for a 50-hour

working week This covers labourers and tradesmen

257

Figure 28.1 Bungalow (six rooms)

Project Planning and Control

10 The cross-section of the bungalow is shown in Figure 28.1 and thesequence of activities is set out in Table 28.1, which shows thedependencies of each activity All durations are in weeks

The activity letters refer to the activities shown on the cross-sectiondiagram of Figure 28.1, and on subsequent tables only these activity letterswill be used The total float column can, of course, only be completed whenthe network shown in Figure 28.2 has been analysed (see Table 28.1)

Table 28.2 shows the complete analysis of the network including TLe(latesttime end event), TEe(earliest time and event), TEb(earliest time beginningevent), total float and free float It will be noted that none of the activities havefree float As mentioned in Chapter ??, free float is often confined to thedummy activities, which have been omitted from the table

26

25 23 9

27 15

9

31

31 29 14

34 22

23

5

27 14

34 23

Project Planning and Control

To enable the resource loading bar chart in Figure 28.3 to be drawn it helps

to prepare a table of resources for each activity (Table 28.3) The resources aredivided into two categories:

Worked examples

The advantage of network analysis with its float calculation is nowapparent Examination of the network shows that in weeks 27 and 28 thefollowing operations (or activities) have to be carried out:

Activity S Plumbing and heating 3 men for 4 weeks

The first step is to check which activities have float Consulting Table 28.2reveals that Q (Plastering) has 2 weeks float and R (Electrics) has 1 weekfloat By delaying Q (Plastering) by 2 weeks and accelerating R (Electrics) to

be carried out in 2 weeks by 3 men per week, the maximum total in any week

is reduced to 6 Alternatively, it may be possible to extend Q (Plumbing) to 4weeks using 2 men per week for the first two weeks and 1 man per week forthe next two weeks At the same time, R (Electrics) can be extended by oneweek by employing 1 man per week for the first two weeks and 2 men per

Resource B Tradesman

Project Planning and Control

week for the next two weeks Again, the maximum total for weeks 27–31 is

6 tradesmen

The new partial disposition of resources and revized histograms after thetwo alternative smoothing operations are shown in Figures 28.5 and 28.6 Itwill be noted that:

1 The overall programme duration has not been exceeded because the extradurations have been absorbed by the float

2 The total number of man weeks of any trade has not changed – i.e Q(Plastering) still has 6 man weeks and R (Electrics) still has 6 manweeks

If it is not possible to obtain the necessary smoothing by utilizing andabsorbing floats the network logic may be amended, but this requires a carefulreconsideration of the whole construction process

262

Figure 28.3

Total labour curve

Labourers Tradesmen

Worked examples

263

Figure 28.4

Figure 28.5

Project Planning and Control

No of men

Worked examples

The next operation is to use the SMAC system to control the work onsite Multiplying for each activity the number of weeks required to do thework by the number of men employed on that activity yields the number ofman weeks If this is multiplied by 50 (the average number of workinghours in a week), the man hours per activity are obtained A table can now

be drawn up listing the activities, durations, number of men and budgethours (Table 28.4)

As the bank will advance the money to pay for the construction in weekly tranches, the measurement and control system will have to be set up

four-to monifour-tor the work every 4 weeks The anticipated completion date is week

34, so that a measure in weeks 4, 8, 12, 16, 20, 24, 28, 32 and 36 will be

required By recording the actual hours worked each week and assessing the

percentage complete for each activity each week the value hours for eachactivity can be quickly calculated As described in Chapter 27, the overallpercentage complete, efficiency and predicted final hours can then becalculated Table 28.5 shows a manual SMAC analysis for four sample weeks(8, 16, 24 and 32)

In practice, this calculation will have to be carried out every week eithermanually as shown or by computer using a simple spreadsheet It must beremembered that only the activities actually worked on during the week inquestion have to be computed The remaining activities are entered as shown

in the previous week’s analysis

For purposes of progress payments, the value hours for every 4-week period

must be multiplied by the average labour rate (£5 per hour) and, when added

to the material and plant costs, the total value for payment purposes isobtained This is shown later in this chapter

At this stage it is more important to control the job, and for this to be doneeffectively, a set of curves must be drawn on a time base to enable all thevarious parameters to be compared The relationship between the actual hoursand value hours gives a measure of the efficiency of the work, while thatbetween the value hours and the planned hours gives a measure of progress.The actual and value hours are plotted straight from the SMAC analysis, butthe planned hours must be obtained from the labour expenditure curve (Figure28.4) and multiplying the labour value (in men) by 50 (the number of workinghours per week) For example, in week 16 the total labour used to date is 94man weeks, giving 94 × 50 = 4700 man hours

The complete set of curves (including the efficiency and percentagecomplete curves) are shown in Figure 28.7 In practice, it may be more

265