Summary of PDCA Analysis by Earned Value Method

(Construction Project Management - Part V)

The essence of PDCA analysis using EVM method in project management may be summarized in following procedures:

• Probabilistic planning and scheduling; delineation of planned value region
• Calculation and depiction of early start and late start schedules
• If inventory is not Just-in-Time, probabilistic or deterministic inventory flow analysis to calculate planned costs
• Continuous measurement of earned value and actual cost, such that curves are differentiable and slopes can be calculated
• Superposition of inventory flow on earned value to identify earned costs
• Comparison of earned values to planned values; (for no deviations thereof,) actual cost to planned cost; (and for deviations thereof,) actual cost to earned cost
• Formulation of delay or cost recovery curves by proposing suitable recovery slopes
• Analysis of proposed recovery curves for inequalities defined by smeared planned value region, float adjustment and cash flow constraints
• Forecast of projected delay and cost over-run based on approved recovery curves

Intensive application of EVM analysis requires mathematical formulation of work values and costs that are amenable to calculations at all stages of analysis. Value is associated with the numerous works in the project and cost is associated with the numerous resources that contribute to various works. Accordingly, each work package in the WBS should allow following mathematical operations:

• Scheduling for a planned value of work in a given duration; calculation of effort of each resource required for this planned value.
• Execution of certain earned value of work over a control period mutually exclusive of other work packages in proportion to the actual effort of resources employed during the control period.
• Measurement of actual resource efforts in the control period and earned value of executed work.
• Assessment of deviation between planned value and earned value over the control period and attribution of the deviation to deviation in resource effort.

The resources that contribute to a work package in foregoing formulations are always complementary. No resource can independently affect quantum of work. Resources jointly act in functional combinations to produce a quantum of work. Hence, value of a work in unit time depends on the cost of the set of relevant resources and effort of each resource contributing to produce unit work in unit time. When resource supply is enhanced during a work with an intention to expedite a work, such enhancements has to be uniform on all resources in accordance with the functional combination of resources in the work. Increasing one resource without proportionately increasing others would not result in meaningful transactions vis-à-vis increase of work performed and/or reduction of work duration.

In economic terms, two or more resources are said to be complementary if they are used together during consumption. In construction, most resources are complementary in specific contribution ratios in activities. Three types of complementary resources can be identified in economics (of construction):

1. Perfect Complements: Bolts-nuts and Machines-operators are complementary resources in all instances with fixed mutual contributions. For many practical purposes, two or more perfect complements may be consolidated as a single composited resource. However, during definition perfect complements may have distinct units and distinct values.
2. Imperfect Complements: Majority of construction resources fall into this category, because complements combine in different non-fixed ratios in different consumption events. Relative proportions of resources may vary in reality and consumption occurs with non-fixed contributions.
3. Non-mutual Complements: This type of complementarities occur when consumption of one resource requires a complementary contribution of another, but consumption of second resource does not require a contribution of first. For instance, when a process consumes a labour day, tool-days are also simultaneously consumed. A labourer may use different tools on different days; hence, consumption of a particular tool-day does not necessarily indicate a labour day.