How to Read an Earned Value (EV) Chart of a Construction Project

Summary

• Understanding Earned Value (EV) charts is essential for effective construction project management, as they provide insights into cost and schedule performance.

• The blog outlines how to read an EV chart, including metrics like Planned Value (PV), Earned Value (EV), and Actual Cost (AC), along with their implications for project status.

• It presents four scenarios based on the relationship between PV, EV, and AC, illustrating various project conditions such as being ahead or behind schedule and under or over budget.

Table of Contents:

1. What is an Earned Value Chart?

2. Key Metrics Explained

• Planned Value (PV)

• Earned Value (EV)

• Actual Cost (AC)

3. How to Read an EV Chart

• Identifying the Axes

• Plotting the Metrics

• Analyzing Variances

• Performance Indices

4. Scenarios in Construction Projects

• Ahead of Schedule and Under Budget

• Ahead of Schedule and Over Budget

• Behind Schedule and Under Budget

• Behind Schedule and Over Budget

5. The Importance of Monitoring Project Health and How Steer Can Help

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Understanding how to read an Earned Value (EV) chart is crucial for managing construction projects effectively. This analysis provides insights into project performance concerning cost and schedule, allowing project managers to make informed decisions. Below, we explore how to interpret an EV chart and discuss various scenarios that may arise during a project.

What is an Earned Value Chart?

An Earned Value chart is a graphical representation that displays key metrics of Earned Value Management (EVM) over time, allowing project managers to assess performance against the planned schedule and budget. The chart typically includes three critical lines:

• Planned Value (PV): This represents the budgeted amount allocated for the work scheduled to be completed by a specific date, as outlined in the bill of quantities.

• Actual Cost (AC): This indicates the actual expenses incurred for the work completed up to that date, derived from the logs of materials used and other resources utilized.

• Earned Value (EV): This reflects the budgeted amount for the actual work that has been completed, as reported in the accomplishment reports.

These metrics provide a comprehensive view of project health, highlighting variances in cost and schedule.

Importance of Earned Value Charts

The significance of an Earned Value chart in construction project management lies in its ability to:

• Track Performance: It allows for real-time monitoring of project progress, helping identify potential delays or cost overruns early.

• Facilitate Decision-Making: By providing clear data points, it supports timely and informed decisions regarding resource allocation and project adjustments.

• Enhance Communication: The visual nature of the chart makes it easier to communicate project status to stakeholders, ensuring everyone is aligned on expectations.

Data Points in the Chart

X-Axis

The X-axis typically represents time, which can be divided into days, weeks, or months depending on the project's duration. This timeline allows for tracking progress over the life of the project.

Y-Axis

The Y-axis usually indicates monetary values (dollars), showing how much budgeted value has been planned, spent, or earned at any point in time.

How to Read an Earned Value Chart

Reading an Earned Value chart involves analyzing the relationships between the three key metrics:

1. Identify Lines

Look for the lines representing PV, AC, and EV. Each line will indicate how much value was planned, how much was actually spent, and how much value has been earned.

2. Assess Variances

Schedule Variance (SV) can be determined by comparing EV and PV:

• If EV > PV: The project is ahead of schedule.

• If EV < PV: The project is behind schedule.

Cost Variance (CV) can be assessed by comparing EV and AC:

• If EV > AC: The project is under budget.

• If EV < AC: The project is over budget.

3. Analyze Performance Indices:

Calculate the Schedule Performance Index (SPI) using SPI= EV / PV:

• SPI > 1 indicates better than planned performance.

4. Calculate the Cost Performance Index (CPI) using CPI=EV/AC:

• CPI > 1 suggests cost efficiency.

5. Forecast Future Performance:

Use trends from the chart to predict future performance. If current variances continue, you can estimate final costs and completion dates based on historical data.

Scenarios in Construction Projects

Let’s take a look at some scenarios, incorporating four examples of curves that describe the Planned Value (PV), Earned Value (EV), and Actual Cost (AC) for an example construction project.

1. Ahead of Schedule and Underbudget

In this scenario, the EV curve is above the PV curve, indicating that the project is progressing faster than planned. Meanwhile, the AC curve is below the EV curve, showing that costs are lower than expected.

Example: If PV is $600,000 at a certain point in time, and EV is $700,000 while AC is only $500,000:

SV:  SV=EV−PV=700,000−600,000=+100,000 (Ahead of schedule)

CV: CV=EV−AC=700,000−500,000=+200,000 (Under budget)

This scenario is ideal for project managers as it indicates both efficient progress and cost savings.

2. Ahead of Schedule and Over Budget

Here, the EV curve is still above the PV curve, indicating that work is being completed faster than planned. However, the AC curve lies above the EV curve, suggesting that costs have exceeded expectations.  

Example: If PV is $600,000 at a specific time, and EV is $700,000 while AC is $800,000:

SV: SV=EV−PV=700,000−600,000=+100,000 (Ahead of schedule)

CV: CV=EV−AC=700,000−800,000=−100,000 (Over budget)

While the project is progressing well in terms of schedule, managers must investigate why costs are higher than anticipated.

3. Behind Schedule and Underbudget

In this case, the EV curve falls below the PV curve, indicating that work is not being completed as planned. However, the AC curve remains below the EV curve, suggesting that actual spending is less than what has been earned.

Example: If PV is $600,000 and EV is only $500,000 while AC stands at $400,000:

SV: SV=EV−PV=500,000−600,000=−100,000 (Behind schedule)

CV: CV=EV−AC=500,000−400,000=+100,000 (Under budget)

This scenario provides an opportunity to reassess project timelines without immediate financial strain.

4. Behind Schedule and Over Budget

In this final scenario, both the EV curve and AC curve fall below the PV curve. This indicates that not only is progress lagging behind schedule but also that costs have exceeded what has been earned.

Example: If PV is $600,000 while EV is only $400,000 and AC has risen to $500,000:

SV:  SV=EV−PV=400,000−600,000=−200,000 (Behind schedule)

CV:  CV=EV−AC=400,000−500,000=−100,000 (Over budget)

This scenario signals a critical need for intervention to get both schedule and costs back on track.  

Understanding these scenarios helps project managers identify their current standing in terms of cost and schedule performance. By leveraging tools like Steer’s project financial management software—featuring real-time charts and graphs including detailed Earned Value analysis—managers can gain valuable insights into their projects’ overall health.

For more information on how Steer can enhance your construction management efforts and help you maintain control over your projects, visit www.steerplatform.com.

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Image from Freepik.