Is the Earned-Value Method an Enemy of Work Flow?

Yong-Woo Kim1 & Glenn Ballard2

1Ph.D Student, Constr. Engrg. And Mgmt. Program, Civil and Envir. Engrg. Dept., 215 McLaughlin Hall #1712, University of California at Berkeley, CA 94720, ywkim@uclink4.berkeley.edu
2Director of Research, Lean Construction Institute; Lecturer, Construction Engineering and Mangement Program, Civil and Envir. Engrg. Dept., University of California at Berkeley, 4536 Fieldbrook Road, Oakland, CA 94619, ballard@ce.berkeley.edu

Abstract

Project control tools are commonly used in the construction industry. Unfortunately, many projects run over budget and behind schedule, which suggests that there is something wrong in our project control system. The earned-value method (EVM) is a project control technique that provides a quantitative measure of work performance. It is considered the most advanced technique for integration of schedule and cost. Work flow can be defined as the movement of information and materials through a network of production units. Current construction control systems focus on local speed and cost rather than reliable release of work downstream; i.e., reliable work flow. This paper presents potential problems of the earned-value method with a brief review of the cost management concept. Traditional cost systems are reviewed in this paper from the viewpoint of work flow. Critique of the earned-value method includes: 1) While each cost account or activity is assumed to be independent in the earned-value method, they should be considered dependent. 2) Managers can manipulate work sequences when releasing work to the field and it is possible to release work assignments that are not shielded from uncertainty. 3) In order to make cost variance (CV) positive, managers try to decrease the actual cost of work performed (ACWP) as much as possible. Overload resulting from reduced capacity can make work flow less reliable, which in turn can impact the performance of downstream production units (PUs).

Keywords

Earned value, dependence, work flow, quality assignment

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Reference

Kim, Y. & Ballard, G. 2000, 'Is the Earned-Value Method an Enemy of Work Flow?' In:, 8th Annual Conference of the International Group for Lean Construction. Brigthon, UK, 17-19 Jul 2000.

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