ESTIMATED COST AT COMPLETION: INTEGRATING RISK INTO EARNED VALUE MANAGEMENT

Abstract

Earned Value Management (EVM) developed in the 1960s is a technique used in monitoring the performance of ongoing projects. Performance Measurement Baseline (PMB) is setup at the start of the project and time and cost deviations in project performance are measured with reference to the PMB. Based on the current progress of the project, the estimated cost at completion is estimated. Project Risk Management (PRM) deals with the risks that may alter the project’s objectives which are mainly cost, time, quality and scope. Construction industry has lots of uncertainties so PRM has been identified as one of the most crucial techniques to accomplish project objectives. EVM only focuses on the project schedule (Schedule Performance Index) and cost (Cost Performance Index), and does not address other important aspects such as quality, safety, risk, customer satisfaction, etc. Introducing performance indices to measure other key aspects of the project will give the stakeholders a better monitoring and decision making capability. In order to estimate better EAC using EVM, a framework is developed that interconnects these various performance indices and uses their results to estimate project EAC. Also, critical success factors (CSFs) are identified for construction projects and a framework for their monitoring is established. Forecasting a better EAC during the construction period is achieved and validated using case studies.