Cost control; EVA 15 houses in 3 months

Importance of cost control

• It keeps the actual cost within the budget and avoids overrun.
• It shows variances early, so that corrective action can be taken.
• It helps to forecast the final cost and the cash needed.
• It increases profit, efficiency and the client's confidence.

Earned value analysis

Money is in Rs lakh (Rs 25,00,000 = Rs 25 lakh per house).

• BAC = 15 x 25 = Rs 375 lakh (Rs 3.75 crore)
• After 1 month: planned = 1/3 of the work (5 houses); completed = 4 houses; actual cost = Rs 96 lakh

$$\begin{aligned} PV &= \frac{1}{3} \times 375 = 125.00\\ EV &= 4 \times 25 = 100.00\\ AC &= 96.00 \end{aligned}$$

Calculation

$$\begin{aligned} SV &= EV - PV = 100.00 - 125.00 = -25.00\\ CV &= EV - AC = 100.00 - 96.00 = 4.00\\ SPI &= EV/PV = 100/125 = 0.800\\ CPI &= EV/AC = 100/96 = 1.042\\ EAC &= BAC/CPI = 375.00/1.0417 = 360.00\\ ETC &= EAC - AC = 360.00 - 96.00 = 264.00\\ VAC &= BAC - EAC = 375.00 - 360.00 = 15.00\\ \text{Forecast duration} &= 3/SPI = 3/0.800 = 3.75\ \text{months} \end{aligned}$$

Comment

• Schedule: SV is negative and SPI = 0.800, so the project is behind schedule. Only 80 % of the planned work is done. At this rate the work will take about 3.75 months instead of the planned 3 months.
• Cost: CV is positive and CPI = 1.042, so the project is under budget. Each Rs 1 spent gives Rs 1.04 of work.
• Forecast: if the present cost trend continues, the final cost will be Rs 360 lakh against the budget of Rs 375 lakh (variance at completion = Rs 15 lakh saving).

Answer: SV = -Rs 25 lakh, CV = Rs 4 lakh, SPI = 0.800, CPI = 1.042; the project is behind schedule and under budget.

Cost is favourable but progress is slow. Controlling statements: add resources or work extra shifts to recover the delay, remove bottlenecks (material, equipment, approvals), and keep the present cost discipline.

Five houses were planned in the first month, but only 4 were finished. The project is behind schedule (it needs about 3.75 months instead of 3), but the cost is slightly under budget.