Combination of Growth Model and Earned Schedule to Forecast Project Cost at Completion
Publication: Journal of Construction Engineering and Management
Volume 140, Issue 1
Abstract
To improve the accuracy of early forecasting the final cost at completion of an ongoing construction project, a new regression-based nonlinear cost estimate at completion (CEAC) methodology is proposed that integrates a growth model with earned schedule (ES) concepts. The methodology provides CEAC computations for project early-stage and middle-stage completion. To this end, this paper establishes three primary objectives, as follows: (1) develop a new formula based on integration of the ES method and four candidate growth models (logistic, Gompertz, Bass, and Weibull), (2) validate the new methodology through its application to nine past projects, and (3) select the equation with the best-performing growth model through testing their statistical validity and comparing the accuracy of their CEAC estimates. Based on statistical validity analysis of the four growth models and comparison of CEAC errors, the CEAC formula based on the Gompertz model is better-fitting and generates more accurate final-cost estimates than those computed by using the other three models and the index-based method. The proposed methodology is a theoretical contribution towards the combination of earned-value metrics with regression-based studies. It also brings practical implications associated with usage of a viable and accurate forecasting technique that considers the schedule impact as a determinant factor of cost behavior.
Get full access to this article
View all available purchase options and get full access to this article.
References
Alvarado, C. M., Silverman, R. P., and Wilson, D. S. (2004). “Assessing the performance of construction projects: Implementing earned value management at the General Services Administration.” J. Facil. Manage., 3(1), 92–105.
Anbari, F. T. (2003). “Earned value project management method and extensions.” Proj. Manage. J., 34(4), 12–23.
Bates, D. M., and Watts, D. G. (1988). Nonlinear regression analysis and its applications, Wiley, New York.
Bass, F. (1969). “A new product growth for model consumer durables.” Manage. Sci., 15(5), 215–227.
Bass’ Basement Research Institute (BBRI). (2010). “Mathematical derivation of the Bass model.” 〈http://www.bassbasement.org/BassModel〉 (Nov. 19, 2012).
Brown, T. W. (2002). “Forecasting research and development program budgets using the Weibull model.” M.S. thesis, Air Force Institute of Technology, Wright-Patterson Air Force Base, OH.
Cheng, M. Y., Peng, H. S., Wu, Y. W., and Chen, T.-L. (2010). “Estimate at completion for construction projects using evolutionary support vector machine inference model.” Automat. Construct., 19(5), 619–629.
Christensen, D. S., Antolini, R. D., and McKinney, J. W. (1995). “A review of estimate at completion research.” Cost estimating and analysis, Springer, New York, 207–224.
Christensen, D. S., and Heise, S. (1993). “Cost performance index stability.” Natl. Contract Manage. J., 25(1), 7–15.
De Marco, A., Briccarello, D., and Rafele, C. (2009). “Cost and schedule monitoring of industrial building projects: Case study.” J. Construct. Eng. Manage., 853–862.
De Marco, A., and Narbaev, T. (2013). “Earned value-based performance monitoring of facility construction projects.” J. Facil. Manage., 11(1), 69–80.
Fleming, Q. W., and Koppelman, J. M. (2002). “Earned value management: Mitigating the risks associated with construction projects.” Program Manage., 31(2), 90–95.
Fleming, Q. W., and Koppelman, J. M. (2004). “Sarbanes-Oxley: Does compliance require earned value management on projects.” Contract Manage., 33(4), 26–28.
Fleming, Q. W., and Koppelman, J. M. (2006). Earned value project management, 3rd Ed., Project Management Institute, Newtown Square, PA.
Henderson, K. (2004). “Further developments in earned schedule.” 〈http://www.earnedschedule.com/Docs/Further%20Developments%20in%20Earned%20Schedule.pdf〉 (Aug. 22, 2013).
Henderson, K., and Zwikael, O. (2008). “Does project performance stability exist? A re-examination of CPI and evaluation of SPI(t) stability.” 〈http://www.earnedschedule.com/docs/does%20project%20performance%20stability%20exist%20%20henderson%20zwikael.pdf〉 (Aug. 22, 2013).
Hines, W. W., and Montgomery, D. C. (1990). Probability and statistics in engineering and management science, 3rd Ed., Wiley, New York.
Khamidi, M. F., Ali, W., and Idrus, A. (2011). “Application of earned value management system on an infrastructure project: A Malaysian case study.” Proc., Int. Conf. Manage. Service Sci., International Association of Computer Science and Information Technology, Singapore, 1–5.
Kim, B. C., and Reinschmidt, K. F. (2010). “Probabilistic forecasting of project duration using Kalman filter and earned value method.” J. Construct. Eng. Manage., 834–843.
Lipke, W. (2003). “Schedule is different.” 〈http://earnedschedule.com/Docs/Schedule%20is%20Different.pdf〉 (Aug. 22, 2013).
Lipke, W., Zwikael, O., Henderson, K., and Anbari, F. (2009). “Prediction of project outcome: The application of statistical methods to earned value management and earned schedule performance indexes.” Int. J. Proj. Manage., 27(4), 400–407.
Minitab version 16 [Computer software]. Minitab, State College, PA.
Nassar, K. M., Gunnarsson, H. G., and Hegab, Y. M. (2005). “Using Weibull analysis for evaluation of cost and schedule performance.” J. Construct. Eng. Manage., 1257–1262.
Nystrom, T. D. (1995). “A comparative study of linear and nonlinear estimate at completion methods.” M.S. thesis, Air Force Institute of Technology, Wright-Patterson Air Force Base, OH.
Project Management Institute (PMI). (2008). A guide to the project management body of knowledge, 4th Ed., Newtown Square, PA.
Project Management Institute (PMI). (2011). Practice standard for earned value management, 2nd Ed., Newtown Square, PA.
Satoh, D. (2001). “A discrete bass model and its parameter estimation.” J. Oper. Res. Soc. Jpn., 44(1), 1–18.
Seber, G. A. F., and Wild, C. J. (1989). Nonlinear regression, Wiley, New York.
Shokri-Ghasabeh, M., and Akrami, N. (2009). “How does a new set of earned value management schedule control work? A case study in Iran.” Trans. Environ. Dev., 5(2), 136–145.
Singletary, M. R. (2006). “Assessing the financial feasibility of implementing wireless technologies for construction management.” M.S. thesis, Florida State Univ., Tallahassee, FL.
Tracy, S. P. (2005). “Estimate at completion: A regression approach to earned value.” M.S. thesis, Air Force Institute of Technology, Wright-Patterson Air Force Base, OH.
Trahan, E. N. (2009). “An evaluation of growth models as predictive tools for estimates at completion (EAC).” M.S. thesis, Air Force Institute of Technology, Wright-Patterson Air Force Base, OH.
Valle, J. A., and Soares, C. A. P. (2006). “The use of earned value analysis (EVA) in the cost management of construction projects.” Proc., Project Management Institute Global Congress, Newtown Square, PA, 1–11.
Vandevoorde, S., and Vanhoucke, M. (2006). “A comparison of different project duration forecasting methods using earned value metrics.” Int. J. Proj. Manage., 24(4), 289–302.
Zwikael, O., Globerson, S., and Raz, T. (2000). “Evaluation of models for forecasting the final cost of a project.” Proj. Manage. J., 31(1), 53–57.
Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 140 • Issue 1 • January 2014
Copyright
© 2013 American Society of Civil Engineers.
History
Received: Dec 10, 2012
Accepted: Aug 5, 2013
Published online: Sep 9, 2013
Published in print: Jan 1, 2014
Discussion open until: Feb 9, 2014
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.