Estimated Cost at Completion: Integrating Risk into Earned Value Management

Abstract

Earned value management (EVM) is an industry standard for monitoring the performance of ongoing projects. The performance baseline is set up in the planning phase to measure any time and cost deviations during project execution. Based on the current progress, an estimate at completion (EAC) is forecasted. Traditionally, EVM only focuses on the project schedule (SPI) and cost (CPI), and does not address other important aspects of health and safety, stakeholder satisfaction, and quality. Despite its superior formulation, EVM forecasts are still influenced by project risks and uncertainties, leading to inconsistency between EAC results obtained through standard formulae. In order to estimate better EAC, a framework is developed that incorporates various key performance indicators into the risk performance index (RPI). Using SPI, CPI, and RPI, an integrated model is developed and a number of case studies are run to validate it. The findings indicate a better EAC when compared to traditional methods. Introducing performance indicators to measure key aspects of the project will provide the stakeholders a better monitoring and decision-making tool.