Assessment of value management by using earn value technique in construction industry

Abstract

Value management (VM) is a structured and analytical process that seeks to achieve value for money by providing all necessary functions at the lowest cost consistent with required levels of quality and performance. The value methodology (VM), a systematic and structured approach, improves projects, products, and processes. VM is used to analyze manufacturing products and processes, design and construction projects, and business and administrative processes. VM helps achieve balance between required functions, performance, quality, safety, and scope with the cost and other resources necessary to accomplish those requirements. The proper balance results in the maximum value for the project. On the other hand the earned value (EV) technique is a crucial technique in analyzing and controlling the performance of a project which allows a more accurate measurement of both the performance and the progress of a project. Earned value management (EVM) has provided methods for predicting the final cost for projects. Earned value project management is a well-known management system that integrates cost, schedule and technical performance. However, many potential users in the construction industry are reluctant to employ VM because of a lack of tools to assess the effectiveness of VM studies. It appears that performance measurement of VM studies is rarely conducted due to the lack of rigorous models. Therefore, organizations have no clear way of knowing whether adequate returns have been achieved on their investment in VM studies. Without a reasonable assessment of the effectiveness of VM studies in achieving clients’ target, it is also difficult to know what changes can be made to obtain further benefits. The objective of this study is to improve the capability of value management system by providing a reliable clear-cut picture of the actual situation and forecasting method of the project by using EV technique and use those in VM in order to achieve the predicted function with lower cost while maintaining or improving the schedule performance. In nutshell, the project evaluated the key performance indicators and identified the most practicable ones through questionnaire survey. Afterword the application of earned value management as a key performance indicator is illustrated by using automatic Excel software.