May 2024
by Ryan Craaybeek, Director, Solutions Consultant at Contruent
Are you looking for simple and achievable EVM for your capital construction projects?
It’s long been established that using earned value management (EVM) metrics is the most effective way to track and gain deeper insights into large capital project performance and progress, providing opportunities for better control and outcomes.
While there has been increased adoption of EVM practices over the years, some companies are hesitant. There’s a common perception that this methodology is too difficult to get the hang of and, therefore, too challenging to implement.
The truth is that a successful EVM practice isn’t as hard to achieve as some might be inclined to believe. It takes having the right process and technology in place.
How Software Streamlines EVM and Optimizes Its Benefits
Cost controls professionals find that technology—specifically cost management software—makes EVM more doable. Let’s take a look at the key software functionalities needed to support a solid EVM practice and how they benefit cost management.
Data capture. A system should provide easy methods to capture the data needed to support EVM. Whether manually inputting data, importing datasets (via smart mapping import), or establishing an automated integration via APIs, the system must make it easy for teams to capture data. Software that provides multiple data-capturing methods and integrates with existing project schedules and budgets enables EVM to harness all that data to reflect a more accurate, comprehensive picture of overall performance and progress.
Automatic calculation. The software calculates all data as it comes in, delivering the key EVM metrics managers need to make assessments and decisions throughout construction—including cost performance index (CPI), schedule performance index (SPI), cost variance (CV), schedule variance (SV), estimate to complete (ETC) and estimate at completion (EAC).
Because these metrics are so responsive to changes and risk factors, project team members gain real-time visibility into what’s happening, making it easier to use EVM to detect and address issues as they develop.
Progress calculation and context. Effective cost management depends on accurate progress tracking. There are multiple methods to calculate and track progress that are familiar within the industry: rules of credit, physical completion, etc. Flexible cost management software adapts to these methods without requiring learning a new method.
EVM can use the results of any of these methods to calculate work completed and compare it against planned value and actual cost. Then, cost curves, when applied at any cost breakdown level, can be compared against these EVM calculations to see how well they align and how the trajectory plays out.
Cost management software streamlines these processes, helping improve cost forecast accuracy by ensuring consistency in data so forecasts aren’t thrown off while showing where deviations are that require risk adjustment.
Dynamic reports. Construction managers need instant cost insights that require visibility into planned, incurred, accrued, actual and forecasted costs. What happened today with incurred costs? What are specific metrics (SPI, CPI, SV, CV, ETC, EAC) revealing about costs by period? What about costs to date? Are there any variances? If so, what’s the root cause and corrective action?
The software’s dynamic reports and dashboards answer these kinds of questions. Drilling down to the real-time metrics in these reports offers a deeper look into what’s behind the different data points. Understanding and accessing the details—including deviations, patterns and trends—provides the needed foundation and context for more productive communication and informed decision-making around managing project costs.
Choosing Cost Management Software that Supports EVM
No technology is one-size-fits-all. Each construction company will have its desired or necessary functionalities and business goals to fulfill. To get the most out of an investment in cost management software, prioritize features and capabilities that your projects require and make the most sense for the size and type of projects you manage. What do you need the software to simplify? Enable you to do? Empower you to accomplish?
Essential features. Look for software with cloud-based accessibility (along with a companion mobile app) and a user-friendly interface. Consider scalability if you manage large or complex projects with growing data demands or anticipate expanding your portfolio.
Pre-built reports. Out-of-the-box cost management/EVM reporting options can be valuable if you need turnkey reports (with the added ability for user-defined customization) or an EVM dashboard analytics tool for quick analysis and decision-making.
Integrated EVM functionalities. When selecting the appropriate solution, the real difference maker is investing in a purpose-built project cost management system with capabilities specific to the core functional areas of EVM, such as procurement, contract/purchase order management, change management and more. It’s one thing to manage costs. However, having the means to relate that cost management back to these functional areas helps you more easily understand what’s driving cost issues so that appropriate decisions and actions can be taken.
EVM constantly captures data from these areas to calculate real-time performance metrics. Being able to look at these metrics allows you to identify an area of concern, drill down to see its associated information (such as contracts and newly approved change orders) and how it impacts the schedule and budget. So, in one register, teams gain the critical visibility they need to review performance, spot trouble areas, investigate and answer the question “Why?”
The software closes the gap between understanding EVM and empowering you to use its insights for better cost control. And in doing so, your cost management practices become more advanced.
This is what you can achieve with a cost management solution like Contruent Enterprise. Find out how we can help you control capital project costs so you can reach your business outcomes faster. To learn more, request a demo today.