How can a project be 90%, 0% and 20% complete in terms of progress, all at the same time? You may think I’ve gone completely mad and yet, I can show you, that all three these figures were simultaneously accurate at the time! Here’s what happened – let’s see if you can work it out?
The contract value was 10 million and the duration 10 months. It involved building works of 1 million and a piece of equipment that’s worth 9 million.
In month 2 of the project, the equipment is delivered but building work hasn’t started yet. The 9 million is certified and paid to the contractor.
What is the progress % complete on this project?
I hope you didn’t take too much time out of your day to work it out.
Bar the wide-ranging opinions on the certification of material on site (MOS), the project is basically 90% complete in terms of value. It is 0% complete in terms of effort and it’s 20% complete in terms of time elapsed.
Let’s look at each of these variables in isolation:
1 TIME ELAPSED
What really ruins a lovely project meeting for me is when someone proclaims: “The time elapsed Mr Contractor is already 50%, and yet we have only spent 20% of the budget! Explain this variance! “
It begs the question, what does time-elapsed measure or tell us?
Well it’s amazingly simple. Take a look at your watch or computer clock for a moment. It ticks by with due regularity. When you tell someone that 50% of the time has elapsed on a project, you are in fact stating, to my sheer amazement I must add, that time goes by with due regularity on a project. Thank you, now that we have a firm grasp of the obvious, let’s move on.
Time elapsed is not an effective project performance measurement tool. It has no direct relationship to progress on a construction site whatsoever except at the start and finish of the project’s duration.
It’s like having a broken watch, your time will read correctly, twice during a 24-hour cycle. Is it an accurate watch? No, of course not. Can you use it effectively in arriving timeously for meetings? Definitely not.
A contractor can decide to dilly-dally for 9 months of a 10-month project and then, complete everything in the last month. If, at this 9-month point, we have a metric that says 90% of time has elapsed, yet progress is 0% on site, it is nonsensical and imprudent. Why? Because it’s two different variables with no comparative value (except at 0% and 100%). It says nothing about variance. Also, the harm here is that external stakeholders assume it says everything about variance and that’s usually the inference drawn. Stakeholders assume that the project is 90% behind schedule as they measure variance between time elapsed and actual progress.
What is the variance between planned and actual in this example? The answer is 0%. The contractor planned to dilly-dally for 9 months and planned to complete 100% of the work only in month 10. Therefore, our planned progress in month 9 was 0%. Our actual progress is also 0%. Therefore, we have a variance between planned and actual of (0%-0%=0%) 0%. This would inform us that this project is 100% on time as planned!
2 MEASURE THE VALUE OR EFFORT
In this instance our lovely and amicable project meeting is again turned into a shouting match when someone, usually the QS, proclaims: “We’ve only spent 3 million on the project, that is 30% of the value but the contractor claims they have progressed 50% on programme. Explain the variance!”
Let’s get something clear – Actual value of work certified and the actual effort on site (manhours) are also two completely different variables. We are again fooled into believing they are somehow comparable due to the broken watch theory – at 100% value certified we should be about 100% complete. But for everything in between 0% and 100% these two metrics can follow vastly different paths.
To prove the point, consider our initial example. The value certified on this particular project is 90% (9 million of 10 million budget). The manhours expended are 0. Therefore, progress on the schedule will be 0%. Although the example is theoretical, it simply proves the disconnect between the two variables and anyone assuming they are connected is setting themselves up for trouble.
Yes, we have to agree that value and manhours could under normal project circumstances have some relation to each other and comparing them to each other can possibly raise a flag in terms of progress. However, it needs to be done with careful consideration as there are numerous factors which influence this connection:
Many bills of quantities are riddled with provisional sums, budgetary allowances, and contingency amounts. Doing a quick calculation on 5 of our current projects these amount to an average of 42% of the Contract sum! Contingencies and Budgetary allowances alone accounts for 5-10%.
Standard systems of measurement and contractual provisions which drives the valuation of interim payment claims sometimes differ significantly from the operational implementation of the project. Think advanced payment provisions, payment milestones etc, which are completely removed from the actual work achieved on site.
What is the solution? We still have a project that is 20%, 90% and 0% complete at the same time and we have to agree all 3 variables are correct in isolation. How do you explain to the lawyers, accountants, and external stakeholders that their project is 20, 90 and 0% complete in month 2?
3 HOW TO MEASURE PROGRESS EFFECTIVELY
The answer to this conundrum is not that difficult.
When we look at the following variables of our project, what is the missing link?
Time elapsed = 20%
Value completed = 90%
Effort completed = 0%
We are only considering 3 actual values. What is missing is the planned equivalent of each of these.
Once we quantify the planned of each, we can make sense of the data as shown below:
We now have meaningful data. The idea is to keep comparisons horizontally between the planned and actual of each variable.
The moment you try to make a vertical comparison is when the trouble starts. For instance, we cannot compare the actual value with the actual effort, nor can we compare actual time elapsed with actual effort and so on. This is like trying to compare apples with pears.
4 ENTER EARNED VALUE
If you never fully understood Earned Value, now is your chance. Earned value creates a link between the Value and Effort variables. It essentially assigns a monetary value to the effort. A cost loaded construction schedule on a project will achieve this. Once you’ve created a cost-loaded schedule, you would be able to connect value with effort and measure both in one go.
For those projects without a linked construction schedule, be careful with comments about a perceived connection, you are essentially tampering with the doorknob to a room full of criticism, mockery, and scorn.
I apologise in advance for any professionals who got hurt during the reading of this article.
5 About the Author
Kobus le Roux is the Managing Director of Le Roux Consulting (Pty) Ltd, a boutique construction consultancy specialising in project scheduling, forensic delay analysis, construction dispute assistance and MS project training.
We are launching courses in Pipeline Design and Business & Project Development soon. Sign up and will notify you.