Using EVM to Manage Fixed Priced Construction Contracts

Pinnacle has worked across many industries to implement Earned Value Management (EVM). One trend we are seeing in the Private Sector is the use of EVM to maximize profit on Fixed Price contracts.

One of the most interesting areas is the use of EVM in Construction. While many organizations use some variant of EVM, they may call it something else, or they may simply not be using it at all. Some types of construction projects really rely on Change Management much more than EVM or Project Management to make projects profitable.

Other types of projects truly are Fixed Price and EVM is essential to managing Profit. This is especially true when projects require the use of new technologies, either software or hardware, as a core part of the project.

We have supported of number of clients that manage construction projects complicated by new technology. These projects often are waiting for products that have not even been released at the time the contracts have been signed.

Hardware, such as RFID readers, seem to be less complicated than Software for these projects. Software Project Management can be very different than Construction Project Management. One critical part of EVM is setting up Measures of Performance for work packages. When a software team is using Agile Project Management a Construction Project Manager may become absolutely perplexed when trying to determine progress.

Pinnacle has worked with groups within companies to help them build out estimating and measurement methods that support Construction Project Managers in tracking Earned Value on the Software Development portions of their projects. This often involves either instituting a new PM / EVM approach by the Software Development group; or translating their current Performance Measurement techniques into terms a Construction PM can use.

PM in Software Development has evolved rapidly over the past 10 years. While Earned Value is not a common term in this "industry" Performance Measurement certainly is. Using an Agile burndown chart is becoming common in measuring progress. This is often a more accurate method than typical Construction EV techniques.

In addition to aligning estimating, planning and measurement of performance companies must also use PM and EVM tool that support and simplify EVM. Adding an EVM Engine like, Primavera Earned Value or Deltek Cobra will help simplify this process and make it repeatable across projects. The tools must be integrated with Scheduling tools such as Primavera P6, and Microsoft Project or Microsoft Project Server. And of course they must be supported by good scheduling techniques.

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